Unilateral Appointment of Arbitrators by Ineligible Persons is Prohibited Under Section 12(5) of the Act

The applicant entered into a works contract with the Union of India on June 3, 2019, governed by Bid Documents and General Conditions of Contract (GCC).

Disputes arose regarding contract execution, leading to the respondent's termination of the agreement.

While the contract contained an arbitration clause (Clause 27(2) read with Clause 70 of the GCC), the respondent failed to constitute a Dispute Resolution Board or appoint an arbitrator despite the applicant's legal notices dated April 12, 2025, and December 23, 2025.

The applicant filed this application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an independent arbitrator, arguing that a departmental or unilaterally nominated arbitrator is legally impermissible.

1. Whether an independent arbitrator can be appointed under Section 11(6) when one party challenges the appointment scheme based on Section 12(5) of the Act.

2. Whether a party to an agreement forfeits its right to control the appointment process by failing to act within the stipulated time after invocation.

Section 11(6) regarding the court's power to appoint arbitrators and Section 12(5) of the Arbitration and Conciliation Act, 1996, which renders individuals with specific relationships to the parties or subject matter ineligible to serve as arbitrators unless waived by express written agreement.

TRF Ltd. v. Energo Engineering Projects Ltd. and Perkins Eastman Architects DPC v. HSCC (India) Ltd., establishing that an ineligible person cannot nominate an arbitrator and that unilateral appointment by an interested party is impermissible.

Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) regarding the prospectivity of three-member tribunal rules.

SBI General Insurance Co. Ltd v. Krish Spinning, which limited the court's Section 11 scope to a prima facie examination of the agreement's existence.

The court reasoned that Section 12(5) was enacted to eliminate bias arising from one-sided contracts.

Since the applicant did not expressly waive the applicability of Section 12(5) via a written agreement—a requirement despite the word "may" in the proviso—the respondent's right to unilaterally appoint a departmental arbitrator or control the process was extinguished.

The court noted that once the respondent failed to respond to the invocation notices, they forfeited their contractual right to participate interpreted through the lens of Perkins Eastman, which guards against justifiable doubts of partiality.

Following SBI General Insurance, the court restricted its inquiry to the admitted existence of the arbitration agreement and the unresolved dispute, leaving substantive technical contentions for the arbitrator to decide.

The High Court exercised its jurisdiction under Section 11(6) and appointed Shri Sujoy Paul, Retired Chief Justice of the Calcutta High Court, as the Sole Arbitrator, with the arbitration to take place at Jabalpur.