The evolution of arbitration law in India highlights the judiciary’s steadfast commitment to ensuring fairness, impartiality, and equality in arbitrator appointments. Over the years, courts have balanced the principle of party autonomy with the overarching need for neutrality, progressively refining the standards for arbitration. This journey began under the Arbitration Act of 1940 and has since culminated in the landmark ruling of the five-judge Bench in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (2024 INSC 857) which decisively addressed the contentious issue of curated arbitrator panels.
The judicial journey toward impartial arbitration began with the Supreme Court’s decision in Dharma Prathishthanam v. Madhok Construction (P) Ltd. [(2005) 9 SCC 686]. The Court invalidated unilateral appointments unless explicitly waived by the opposing party, emphasizing the fundamental principle that arbitration appointments must not confer undue advantage on any party. This judgment laid the foundation for ensuring fairness in appointments and marked the judiciary’s first significant intervention in arbitral neutrality. In SBP & Co. v. Patel Engineering Ltd. [(2005) 8 SCC 618], the Supreme Court clarified the judiciary's role in arbitrator appointments under Section 11. The Court acknowledged party autonomy as a cornerstone of arbitration but emphasized that it must be exercised within the bounds of fairness and neutrality. This oversight role became crucial as arbitration agreements often carried clauses favoring one party.
A significant shift occurred with the 2015 amendments to the Arbitration and Conciliation Act, introducing novel provisions. The landmark judgment in TRF Ltd. v. Energo Engineering Projects Ltd. [(2017) 8 SCC 377] interpreted Section 12(5) to bar ineligible individuals from not only acting as arbitrators but also appointing others in their place. The Court famously held, “once the infrastructure collapses, the superstructure is bound to collapse,” cementing the principle that the appointment mechanism itself must ensure impartiality. This decision became a bedrock for later rulings, signaling the judiciary’s intent to safeguard arbitral neutrality. Shortly thereafter, in Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd. [(2017) 4 SCC 665], the Court examined curated panels of arbitrators, particularly in government contracts. While permitting such panels in principle, it stressed the need for broad-based choices to avoid perceptions of bias. The Court’s reasoning resonated strongly in cases involving public sector undertakings, setting a precedent for balancing administrative convenience with fairness.
In HRD Corporation v. GAIL (India) Ltd. [(2018) 12 SCC 471], the Supreme Court introduced the “real likelihood of bias” test, emphasizing that even the perception of partiality could undermine trust in the arbitral process. This judgment reinforced the principle that fairness must be evident, both in appearance and substance.
The principles laid down in TRF and Voestalpine were further strengthened in Bharat Broadband Network Ltd. v. United Telecoms Ltd. [(2019) 5 SCC 755]. Here, the Court ruled that once an individual was rendered ineligible to act as an arbitrator under Section 12(5), they could not delegate the appointment power to another. This decision closed potential loopholes that could otherwise compromise neutrality. In Perkins Eastman Architects DPC v. HSCC (India) Ltd. [(2020) 20 SCC 760], the Court extended the principles of TRF and prohibited unilateral appointments even through indirect mechanisms. The judgment held that granting one party the sole authority to appoint an arbitrator inherently compromised fairness, further strengthening the foundation of impartial arbitration.
Despite these advancements, the issue of curated panels became contentious in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) [(2020) 14 SCC 712] (CORE I). A three-judge Bench upheld a clause allowing the General Manager of the Railways to curate a panel of arbitrators, reasoning that the contractor’s ability to choose from this panel ensured balance. However, the judgment faced criticism for granting one party excessive control over the process, leading to its referral to a larger Bench in Union of India v. Tantia Constructions Ltd. [(2011) 15 SCC 786]. The controversy over curated panels was further explored by the Delhi High Court in Proddatur Cable TV Digi Services v. SITI Cable Network Ltd. [2020 SCC OnLine Del 350] and Taleda Square Pvt. Ltd. v. Rail Land Development Authority [2023 SCC OnLine Del 6321]. Both judgments invalidated clauses that granted disproportionate control to one party, reiterating the judiciary’s insistence on fairness and equality in arbitrator appointments.
The five-judge Bench in CORE II conclusively addressed these lingering issues. The Court ruled that arbitration clauses allowing one party to disproportionately control the appointment process violated Sections 12(5) and 18 of the Act, as well as Article 14 of the Constitution. It emphasized that equal treatment and neutrality are non-negotiable principles that extend to all stages of arbitration. Recognizing the potential disruption to ongoing arbitrations, the Court applied its ruling prospectively under Article 142, safeguarding existing cases from invalidation.
The journey from Dharma Prathishthanam to CORE II represents a transformative arc in Indian arbitration jurisprudence, where the judiciary has persistently refined and upheld the principles of neutrality, fairness, and equality in arbitrator appointments. By addressing the evolving complexities of arbitration agreements, the courts have harmonized the essential tenets of party autonomy with the need for procedural integrity. The CORE II judgment marks a pivotal moment, unequivocally affirming that even in public-private contracts, no party can unilaterally dominate the appointment process, thereby fortifying trust in the arbitral framework.
This landmark ruling not only aligns Indian arbitration law with global best practices but also instills greater confidence among domestic and international stakeholders. As arbitration continues to gain prominence as a preferred dispute resolution mechanism, the emphasis on neutrality and impartiality underscores India’s commitment to fostering an ecosystem where justice is not only delivered but perceived as fair and unbiased. Looking forward, the principles established through these judgments will serve as a robust foundation, ensuring that arbitration remains a credible, impartial, and effective alternative to traditional litigation. This legacy strengthens India’s position as a competitive hub for arbitration on the global stage.
About the author: Rishabh Gandhi is an Arbitration lawyer and former trial court Judge. Gandhi is also the founder of Rishabh Gandhi and Advocates.
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