SC commences hearing on whether person ineligible to be arbitrator can nominate another

New Delhi, Aug 28 (PTI) The Supreme Court on Wednesday commenced hearing arguments on the vexed legal question of whether a person ineligible to become an arbitrator can nominate another as one.

A five-judge constitution bench headed by Chief Justice D Y Chandrachud heard arguments relating to provisions of the Arbitration and Conciliation Act, 1996, including the one on appointment of arbitrators.

During the arguments, the bench, also comprising Justices Hrishikesh Roy, P S Narasimha, J B Pardiwala and Manoj Misra observed that the independence of an arbitral tribunal at the stage of composition was a matter of perception.

“So, when parties are entering upon arbitration, it is their perception of an independent adjudicator or lack of independence, which is crucial. So, you must create conditions which foster a sense of confidence in the process,” the CJI said.

Senior advocate N K Kaul, appearing for one of the parties, said if a person is incapable of or ineligible for being appointed as an arbitrator, they can’t nominate or provide a panel of arbitrators to deal with an issue.

Senior advocate Gourab Banerji, appearing for another party, stressed on the need to have a fair, independent and impartial arbitration tribunal.

“If you don’t have a fair, independent and impartial tribunal, then the consequences, whichever way it goes, are problematic,” he said, and referred to certain provisions of the Act.

The CJI observed, “If there is no arbitration agreement, the court can’t foist an arbitration on a party.”

During the day-long arguments, which remained inconclusive and would continue on Thursday, the Law Commission of India’s 246th report which dealt with amendments to the 1996 Act was also referred to.

Two references were made by three-judge apex court benches in 2021 for constitution of a larger bench to consider the issue.

The apex court had in 2017 and 2020 held that a person not eligible to become an arbitrator cannot nominate another person as one. However, in another matter in 2020, the top court had allowed the appointment made by a person who was ineligible to become an arbitrator.

The top court is now adjudicating the knotty issue.

The CJI had in June last year constituted a five-judge constitution bench to examine it.

On February 21, the Centre had told the apex court that an expert committee headed by former law secretary T K Vishwanathan has submitted its report on proposed reforms in the arbitration sector to the law ministry.

Amid a push for making India a hub of international arbitration, the government had set up an expert panel led by Vishwanathan to recommend reforms in the Arbitration and Conciliation Act in order to reduce the burden on courts.