Delhi High Court Rejects Unbalanced Arbitration Panel: Diversity Key For Fairness

Delhi High Court Rejects Unbalanced Arbitration Panel: Diversity Key For Fairness

The Delhi High Court, in a judgment delivered by Justice Dinesh Kumar Sharma, has ruled that a large number of names on an arbitration panel do not guarantee a "broad-based" selection process. The court emphasised the need for diversity in backgrounds when constituting such panels.

A dispute arose between two parties who had entered into an agreement in June 2016. When arbitration became necessary in March 2023, the respondent presented a panel of 23 names for the petitioner to choose their nominee arbitrator. However, the petitioner challenged the validity of this panel.

In response, the respondent requested the petitioner to select its nominee from a panel nominated by the respondent. However, when the parties failed to reach a mutual agreement on the arbitrator appointment, the petitioner approached the Court under Section 11(6) of the Arbitration and Conciliation (A&C) Act.

Regarding the submissions of the parties, the petitioner argued for the appointment of the arbitrator on specific grounds. They contended that the procedure outlined in the agreement could not be followed due to concerns about the composition of the panel. They highlighted that the panel, predominantly comprised of retired employees from a technical background, lacked diversity. Additionally, the petitioner noted that the panel was curated by the CMD of the respondent, further questioning the CMD's eligibility to serve as an arbitrator or appointing authority.

In contrast, the respondent countered the petitioner's arguments by asserting that the panel was indeed broad-based, featuring 23 experienced retired government employees. They emphasised that the inclusion of individuals with technical expertise was essential for handling the respondent's contracts effectively. Furthermore, the respondent cited a Supreme Court judgment in CORE, affirming the validity of appointments made from such panels.

The Court acknowledged the large number of names on the panel but noted the lack of diversity. A broad-based panel, according to the court, should not just be extensive in size but also reflect different backgrounds and expertise.

The Court concluded that the respondent's panel lacked this crucial element of diversity. Since the selection process was not broad-based, the Court exercised its authority under Section 11 of the Arbitration and Conciliation Act and appointed a sole arbitrator – Justice (Retd.) Kurian Joseph.