The appointment of the arbitrator(s) is governed by S.10-11 of the Arbitration and Conciliation Act, 1996. The framework prioritises party autonomy: parties are free to agree on the appointment procedure. Only when parties fail to agree or when the agreed procedure breaks down does the court/designated institution intervene.
Why: The choice of adjudicator is a core feature of arbitration. Unlike litigation where judges are assigned, parties invest trust in their chosen arbitrator. Independence and impartiality are therefore paramount.
Legal Framework
| Section | Content |
|---|---|
| S.10(1) | Parties free to determine number of arbitrators (must be odd) |
| S.10(2) | Default: sole arbitrator if parties fail to determine number |
| S.11(1) | Person of any nationality may be arbitrator (unless parties restrict) |
| S.11(2) | Parties free to agree on appointment procedure |
| S.11(3) | Default for 3 arbitrators: each party appoints one; two appointed arbitrators appoint presiding arbitrator |
| S.11(4) | If a party fails to appoint within 30 days of request, or two arbitrators fail to appoint presiding arbitrator within 30 days, appointment by designated institution |
| S.11(5) | Default for sole arbitrator: if parties fail to agree within 30 days of request, appointment by designated institution |
| S.11(6) | Where appointment procedure agreed fails, any party may request designated institution to take necessary measures |
| S.11(3A) (2019 Amendment) | Supreme Court/High Court to designate arbitral institutions for appointment |
| S.11(6A) (2015 Amendment) | Court/institution to confine examination to existence of arbitration agreement |
| S.12(1) | Arbitrator must disclose circumstances likely to give rise to justifiable doubts about independence/impartiality |
| S.12(5) + Fifth Schedule | Persons with specified relationships are ineligible for appointment |
| Seventh Schedule | Grounds for automatic disqualification |
Appointment Procedure
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A --> B{"fa:fa-question Procedure agreed?"}:::decision
B -->|Yes| C["fa:fa-users Follow agreed procedure"]:::process
B -->|No| D{"fa:fa-question Number of arbitrators?"}:::decision
C --> E{"fa:fa-question Procedure works?"}:::decision
E -->|Yes| F(("fa:fa-check Tribunal constituted")):::success
E -->|No| G["fa:fa-gavel S.11(6): Designated institution appoints"]:::document
D -->|3 arbitrators| H["fa:fa-users Each party appoints 1; two appoint presiding S.11(3)"]:::process
D -->|Sole| I["fa:fa-users Parties agree on sole arbitrator"]:::process
H --> J{"fa:fa-clock-o Appointed within 30 days?"}:::decision
I --> K{"fa:fa-clock-o Agreed within 30 days?"}:::decision
J -->|Yes| F
J -->|No| G
K -->|Yes| F
K -->|No| G
G --> F
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Independence and Impartiality (S.12)
| Requirement | Provision |
|---|---|
| Disclosure duty | S.12(1): Must disclose in writing any circumstances likely to give rise to justifiable doubts |
| Continuing obligation | S.12(2): Duty continues throughout proceedings (not just at appointment) |
| Challenge grounds | S.12(3): Lack of independence/impartiality or lack of agreed qualifications |
| Ineligibility | S.12(5): Person whose relationship with parties/subject-matter falls under Seventh Schedule cannot be appointed |
| Non-waivable | S.12(5) read with Seventh Schedule creates an absolute bar; cannot be waived even by party agreement (unless post-dispute written waiver) |
Fifth Schedule (illustrative grounds for challenge)
| Category | Example | Illustrated Scenario |
|---|---|---|
| Financial interest | Arbitrator holds shares in a party | Mr. Verma is appointed as arbitrator in a dispute where Infosys is a party. Mr. Verma owns 5,000 Infosys shares. He has a financial interest in Infosys doing well. Challengeable under Fifth Schedule. |
| Prior involvement | Arbitrator previously advised one party on the dispute | Advocate Sharma gave legal opinion to Party A on the same contract in 2022. In 2024, she is appointed as arbitrator in a dispute between A and B on that contract. She has prior involvement. Challengeable. |
| Relationship | Arbitrator is relative of counsel or party | The arbitrator's son is the advocate representing the claimant. Family relationship with counsel. Challengeable. |
| Employment | Arbitrator currently employed by one party | The CMD of NHPC is appointed as arbitrator in a dispute between NHPC and a contractor. CMD is an employee of NHPC (a party). Not just challengeable; INELIGIBLE under Seventh Schedule. |
| Repeat appointments | Same arbitrator repeatedly appointed by one party in unrelated matters | PSU "X" has appointed Justice (Retd.) Rao as arbitrator in 12 different disputes with 12 different contractors over 3 years. A pattern of repeat appointments by one party raises justifiable doubts about impartiality. Challengeable. |
Seventh Schedule (automatic disqualification)
| Ground | Illustrated Scenario |
|---|---|
| Arbitrator is an employee, consultant, or advisor of a party | The General Manager (Legal) of Coal India is proposed as sole arbitrator in a dispute between Coal India and a mining contractor. He is an EMPLOYEE of a party. Absolutely ineligible under S.12(5). Cannot be waived by prior agreement. Only a post-dispute written waiver works. |
| Arbitrator has a financial interest in the outcome | An arbitrator owns 30% equity in a company that is a party to the dispute. If the company wins, the arbitrator's shares increase in value. Direct financial interest. Ineligible. |
| Arbitrator has a relationship with counsel appearing in the proceedings | The arbitrator's daughter is the lead advocate for the respondent. Relationship with counsel. Ineligible. |
Recall Check
- What is the default number of arbitrators under S.10?
- Within what time period must a party appoint its arbitrator under S.11(3)?
- What is the effect of S.12(5) read with the Seventh Schedule?
Key Cases
TRF Ltd v Energo Engineering (2017) TRF-Ltd-v-Energo-Engineering-2017 Issue: Whether a person who is ineligible to be appointed as arbitrator (Managing Director of a party) can nominate another person as arbitrator. Rule: If a person is ineligible under S.12(5), they cannot nominate an arbitrator either; the power to nominate is derivative of the power to be appointed. Held: An ineligible person's nomination power stands extinguished. The court can appoint an independent arbitrator under S.11(6).
Perkins Eastman Architects v HSCC (2019) Perkins-Eastman-Architects-v-HSCC-2019 Issue: Whether a clause allowing one party (employer) to unilaterally appoint the sole arbitrator is valid. Rule: Equality between parties in appointment of arbitrators is a fundamental principle. A clause giving one party exclusive power to appoint the sole arbitrator violates party equality. Held: Unilateral appointment clauses (where one party alone appoints the sole arbitrator) are invalid. Court will appoint an independent arbitrator under S.11(6).
Distinctions
| Basis | Party-Appointed Arbitrator | Court/Institution-Appointed Arbitrator |
|---|---|---|
| Source | Chosen by the party | Designated by court or arbitral institution |
| Trigger | Agreed procedure | Failure of agreed procedure or no procedure |
| Independence | Must be independent (S.12); cannot be party's employee (Seventh Schedule) | Independently selected; no prior relationship |
| Challenge | Challengeable under S.12(3) | Less likely to face challenge |
| Time | Within agreed period or 30 days (S.11) | Within 30 days of request to institution (2019 Amendment) |
| Perception | May face perception issues | Generally perceived as more neutral |
Flashcards
Q: What is the default number of arbitrators if parties do not agree? A: One (sole arbitrator) under S.10(2).
Q: What is the 30-day rule in S.11? A: If a party fails to appoint its arbitrator within 30 days of receiving a request from the other party, or if the two party-appointed arbitrators fail to appoint the presiding arbitrator within 30 days, the appointment is made by the designated institution.
Q: Who makes appointments under S.11 after the 2019 Amendment? A: Arbitral institutions designated by the Supreme Court (for international commercial arbitration) or High Court (for other arbitrations). Not the Chief Justice directly.
Q: What did TRF Ltd v Energo Engineering (2017) hold? A: A person ineligible to be appointed as arbitrator (e.g., MD of a party) cannot nominate another person as arbitrator. The nomination power is derivative; it dies with the eligibility.
Q: What is the effect of the Seventh Schedule? A: Persons falling within the Seventh Schedule are automatically ineligible (S.12(5)). This disqualification cannot be waived by prior agreement; only a post-dispute written waiver is effective.
Q: Can parties restrict appointment to arbitrators of a specific nationality? A: Yes. S.11(1) permits appointment of any nationality unless parties agree otherwise. Parties may contractually restrict nationality in the arbitration clause.
Exam Scenario
A government contract between a PSU (Public Sector Undertaking) and a private contractor contains a clause: "In case of dispute, the CMD (Chairman & Managing Director) of the PSU shall appoint a sole arbitrator." A dispute arises. The private contractor objects to this clause as unilateral. Advise.
Approach: Apply Perkins Eastman Architects v HSCC (2019): a clause giving one party (here, the PSU through its CMD) the exclusive power to appoint the sole arbitrator violates the principle of equal treatment (S.18) and is invalid. Further apply TRF Ltd v Energo Engineering (2017): the CMD, being an employee/officer of the PSU (a party), is ineligible under S.12(5) read with the Seventh Schedule. If the CMD is ineligible to be appointed, he cannot nominate another person either. The arbitration clause is valid (separability under S.16), but the appointment mechanism has failed. The contractor should apply under S.11(6) to the designated institution (High Court/arbitral institution per 2019 Amendment) for appointment of an independent sole arbitrator.