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

The Petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking an interim injunction to restrain the Respondent 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 prayers infructuous

The Petitioner subsequently requested that the dispute be referred to arbitration in accordance with Clauses 29.3 and 29.4 of the Respondent’s E-General Conditions of Contract (E-GCC)

Clause 29.4 stipulated that the MD of the Respondent (CRIS) would unilaterally appoint a "Gazetted Railway Officer" as the Sole Arbitrator

1. Whether the prayers for interim relief against the encashment of the Bank Guarantee survived after the guarantee had been encashed

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

The Court primarily applied the Arbitration and Conciliation Act, 1996, specifically Sections 9 (interim measures), 11 (appointment of arbitrators), and 12(5) (independence of arbitrators)

It relied on the Supreme Court precedent in Central Organisation for Railway Electrification (CORE) v. ECI SPIC SMO MCML (JV) (2024), which held that unilateral appointment clauses in public-private contracts violate Article 14 of the Constitution and hinder equal participation

It further applied the Delhi High Court Division Bench ruling in Mahavir Prasad Gupta and Sons v. Government of NCT Delhi (2025), which established that unilateral appointments are void ab initio and any resulting award is a nullity

The Court observed that Clause 29.4 of the E-GCC was legally flawed as it granted the Respondent the exclusive power to appoint a sole arbitrator, which creates justifiable doubts regarding impartiality

Referring to the principle of "equal treatment of parties," the Court noted that such clauses are fundamentally contrary to the adjudicatory function of arbitral tribunals

Since the parties had mutually consented to the resolution of disputes via arbitration, the Court held that the commencement of proceedings should not be delayed by procedural technicalities

Consequently, the Court dispensed with the formal requirements of filing a Section 11 application and a Section 21 notice of invocation to expedite the process

To ensure a fair and independent adjudication, the Court exercised its authority to appoint a neutral arbitrator outside of the restrictive contractual panel

It ruled that the unilateral appointment provision in the E-GCC was invalid and appointed Hon’ble Mr. Justice Jayant Nath (Former Judge, Delhi High Court) as the Sole Arbitrator

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

The Court directed that the Section 9 petition be treated as an application under Section 17 to be decided by the learned Arbitrator

All rights and contentions of the parties were kept open