Supreme Court Constitution Bench Defers Hearing on Whether Ineligible Person Can Appoint Arbitrator: AG Apprises Govt About Expert Committee

Supreme Court Constitution Bench Defers Hearing on Whether Ineligible Person Can Appoint Arbitrator: AG Apprises Govt About Expert Committee

The Constitution Bench of the Supreme Court decided to defer for two months i.e., on 13 September for hearing on the legal question whether a person who is ineligible to be an arbitrator can nominate another person as arbitrator.

A five-judge Constitution bench headed by Chief Justice of India (CJI) D Y Chandrachud took note of the submission by Attorney General (AG) R Venkataramani that an expert committee has been set up by the Centre to go into the functioning of the arbitration law in the country and recommend reforms in the Arbitration and Conciliation Act, 1996.

He requested the Constitution Bench to defer its present proceedings for a period of two months.

The AG told the five-judge bench that the expert committee formed on 14 June, 2023 has commenced the consultation process and would not take more than two months to submit its report to the government.

“The Attorney General states issues arising before the constitution bench would also come within the broad framework of the committee. After the report of the committee, the government will take a call if modification of legislation is warranted. Presently we direct those two references before the Constitution bench be deferred for two months. List on September 13, 2023," said the bench, also comprising Justices Hrishikesh Roy, P.S. Narasimha, Pankaj Mithal, and Justice Manoj Misra.

The five-judge constitution bench was formed to consider the questions, whether a person who is ineligible to be an arbitrator in a dispute can nominate another person to be an arbitrator.

In 2022, the issue was referred to a larger bench in view of the conflicting decisions rendered by two three-judge benches.

The Ministry of Law and Justice has set up a 16-member expert committee headed by former Secretary, Department of Legal Affairs, Dr. T.K. Vishwanathan, inter-alia, to suggest novel solutions to limit the requirements of parties to seek judicial intervention by approaching the court and to address the issue of expeditious attribution of finality to the award. The step was taken to limit the requirement for parties to seek judicial intervention by approaching Courts.

Thereafter, the Supreme Court agreed to defer the matter by two months. CJI DY Chandrachud, while dictating the order, said:

“We are informed that Union Govt has constituted an expert committee with a broad remit to consider the provisions of the Arbitration and Conciliation, 1996. The Attorney General submits that the issues which have been raised before constitution bench will also come within the remit of the committee. After report of the committee, the government will take a considered view on whether the modification of legislation is warranted. Mr Fali S Nariman has also joined in and made the same submission as has the other party. Hence, presently we direct that the two references before the Constitution bench be deferred by a period of two months. The Court shall be apprised on the next date of the progress which has been made following the constitution of the committee. List on September 13, 2023.”

The references were made in the cases of Central Organisation for Railway Electrification vs. M/s ECI SPIC SMO MCML (JV) A Joint Venture Company and JSW Steel Limited vs. South Western Railway & Anr.

The issue involved in the matter is whether a person, who is ineligible to be appointed as an arbitrator, can appoint an arbitrator.

Earlier, in 2017 in the case of TRF Ltd. Vs. Energo Engineering Projects Ltd, the Apex Court had first held that a person ineligible to be an arbitrator cannot nominate a person to be an arbitrator. A similar conclusion was reached by the Apex Court in Perkins Eastman Architects DPC v HSCC (India) Ltd in 2020.

However, in the case of Central Organisation for Railway Electrification vs. ECL-SPIC-SMO-MCML (JV), (2020) the Supreme Court permitted the appointment by an ineligible person as arbitrator on grounds that the facts of Energo Engineering and Perkins Eastmen did not apply to the case at hand.

This judgement was referred by the Karnataka High Court. Nevertheless, the same was appealed against before the Apex Court.

Further, in 2021, a three-judge’s bench led by Justice Nariman doubted the view in Central Organisation for Railway Electrification and requested a largen bench to adjudicate upon the issue in the case Union of India vs Tantia Constructions.

Later, a three-judge’s bench led by the then CJI UU Lalit also referred the issue to a larger bench in JSW Steel Limited v. South Western Railway & Anr.