Retired Supreme Court Judges Appointed as Arbitrators by Delhi High Court in Margo Networks vs. RailTel Case

Retired Supreme Court Judges Appointed as Arbitrators by Delhi High Court in Margo Networks vs. RailTel Case

In a recent development, the Delhi High Court has appointed two former Supreme Court judges, Justice AK Sikri and Justice MR Shah, as arbitrators in a dispute between Margo Networks Private Limited, a private firm, and RailTel Corporation of India, a public sector enterprise. The case is titled Margo Networks Pvt Ltd & Anr v RailTel Corporation of India Ltd.

Justices Sikri and Shah will be responsible for jointly selecting the third arbitrator or presiding officer. If they are unable to reach an agreement on the choice of the third arbitrator, the disputing parties have the option to approach the Court for further resolution.

The High Court's order said: “The agreement between the parties contemplates a three-member Arbitral Tribunal. Accordingly, Justice (Retd) Dr. A. K. Sikri, Former Judge, Supreme Court of India, is appointed as the Petitioner’s nominee Arbitrator; Mr. Justice (Retd) MR Shah, Former Judge, Supreme Court of India is appointed as the nominee Arbitrator of the Respondent. The two arbitrators shall now concur to appoint the third Arbitrator/presiding Arbitrator within 30 days of the date of service of this order.”

Justice Sachin Datta of the Delhi High Court issued the order in response to a plea filed by Margo under Section 11 of the Arbitration and Conciliation Act of 1996. The plea sought the establishment of an independent arbitral tribunal consisting of three arbitrators to resolve the dispute with RailTel.

Margo took action on January 10, 2022, by issuing a demand-cum-invocation notice to RailTel, outlining specific claims. Alongside this, Margo also challenged clause 3.37 of the Request for Proposal (RFP), which governed the process for appointing an arbitral tribunal.

The petitioner Margo put forth an argument stating that the process outlined in clause 3.37 was one-sided, burdensome, and in violation of the legal principles established by the Supreme Court in the case of Voestalpine Schienen Gmbh vs. Delhi Metro Rail Corporation Ltd.

Margo expressed its intention to appoint its nominee arbitrator and made a formal request to RailTel, the respondent, to nominate its arbitrator as well. The proposed course of action was for the two appointed arbitrators to subsequently select the presiding arbitrator. This collective appointment of arbitrators would then constitute the arbitral tribunal responsible for resolving the disputes between the involved parties.

In response, RailTel insisted that the petitioner adhere strictly to clause 3.37 of the Request for Proposal (RFP) and appoint a nominee arbitrator from the panel maintained by Indian Railways. This panel consisted of 10 individuals, all of whom were former employees of either the Railways or RailTel.

Margo continued to argue that the clause in the Request for Proposal (RFP) was unjust. Nevertheless, RailTel remained firm in its position, insisting that Margo select an arbitrator from the designated panel. As a result, Margo decided to seek legal recourse by approaching the High Court, seeking relief from the dispute, and requesting the court's intervention in the matter.

Upon careful consideration of the case, Justice Datta observed that the panel of arbitrators provided to the petitioner was limited and did not meet the criteria of being "broad-based."

The Court held that in an appointment procedure where one of the contracting parties prepares a panel for arbitrator selection, it is essential for the panel to be adequately broad-based, aligning with the principle established in the Voestalpine case. Failing to meet this requirement, it becomes the Court's responsibility, under Section 11 of the Arbitration and Conciliation Act, to establish an independent and impartial Arbitral Tribunal, as mandated in the TRF and Perkins cases. The Court clarified that the judgment in the CORE case does not change this stance or alter the position regarding the need for a broad-based panel.

The Bench expressed that the panel put forward by RailTel had a negative impact on the validity of the appointment procedure outlined in clause 3.37. In light of this, the Court determined that it was essential to establish an independent tribunal to ensure a fair and impartial resolution of the dispute.

The Court additionally concluded that the appointment procedure failed to meet the required standards, as it did not effectively achieve the necessary "counterbalancing" of power between the nominating parties, as outlined in the Supreme Court's ruling in the Perkins case.

As a result, Justice Datta granted the petitioner's plea and proceeded to appoint the two former Supreme Court judges as arbitrators in the case.

Margo Networks was represented by advocates Kunal Tandon, Shashank Shekhar, and Aanchal Khanna during the proceedings in the High Court.

Additional Solicitor General (ASG) Chetan Sharma, along with advocates Yamandeep Kumar, Sabah Iqbal Siddiqui, RV Prabhat, Vinay Yadav, and Saurabh Tripathi, presented RailTel's case in the matter.