Unilateral appointment of a sole arbitrator is void ab initio and violative of Article 14 of the Constitution.

The Petitioner, RailTel, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking an interim injunction to restrain the Respondent (CRIS) from encashing a Performance Bank Guarantee (PBG) and to stay the cancellation of a Purchase Order dated 12.02.2025

During proceedings, the Respondent informed the Court that the PBG had already been encashed on 18.03.2026, rendering the primary interim prayers infructuous

The Petitioner subsequently sought a referral to arbitration under Clauses 29.3 and 29.4 of the CRIS E-General Conditions of Contract (E-GCC)

However, Clause 29.4 stipulated that the Respondent (MD/CRIS) held the power to unilaterally appoint a Gazetted Railway Officer as the Sole Arbitrator

1. Whether the prayers seeking to restrain the encashment of the Performance Bank Guarantee survived after the bank had already honored the demand

2. Whether a contractual clause permitting the unilateral appointment of a sole arbitrator by one party is legally sustainable

3. Whether the Court can appoint an independent arbitrator and dispense with the formal requirements of Section 11 and Section 21 of the Act to avoid delay

The Court applied Section 9 of the Arbitration and Conciliation Act, 1996 regarding interim measures

Section 12(5) regarding the neutrality of arbitrators.

The Supreme Court’s decision in Central Organisation for Railway Electrification (CORE) v. ECI SPIC SMO MCML (JV) (2024), which established that unilateral appointment clauses hinder equal participation and violate Article 14 of the Constitution of India

The Delhi High Court Division Bench ruling in Mahavir Prasad Gupta and Sons v. Government of NCT Delhi (2025), which held that unilateral appointments of sole arbitrators are void ab initio and any proceedings arising therefrom are a nullity

The Court observed that since the PBG was already encashed, the interim protection sought under Section 9 was moot

Regarding the arbitration, the Court found Clause 29.4 of the E-GCC to be legally infirm as it allowed CRIS to unilaterally appoint the arbitrator, a practice now strictly prohibited by the Supreme Court to ensure impartiality and equal treatment

The Court reasoned that because both parties consented to the adjudication of disputes through arbitration, the commencement should not be delayed by procedural technicalities

Consequently, the Court exercised its discretion to dispense with the formal filing of a Section 11 application and the issuance of a Section 21 notice

The arbitration is to be conducted under the aegis of the Delhi International Arbitration Centre (DIAC)

The Section 9 petition was directed to be treated as an application under Section 17 before the newly appointed Arbitral Tribunal

The petition was disposed of with all rights and contentions of the parties left open for the arbitrator’s adjudication