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  • Preserving Equity: Ensuring Fairness Across the Arbitration Journey

    Published on May 24, 2024

                                                            ……By Mr. Rohit Gandhi, Advocate, New Delhi

    In a recent landmark ruling, the Delhi High Court, in the case of Margo Networks Pvt Ltd & Anr. v. Railtel Corporation of India Ltd (“Margo v. Railtel”), wielded its authority under Section 11 of the Arbitration and Conciliation Act, 1996 (“Act”) to underscore the pivotal significance of appointing arbitrators in an impartial and unbiased manner, devoid of any partiality towards either party involved.

    The crux of the case revolved around the arbitration clause embedded within a Request for Proposal (“RFP”), wherein the petitioner was granted the liberty to nominate one arbitrator from a panel provided by Indian Railways. Conversely, the respondent retained the authority to appoint the remaining arbitrators and designate the Presiding Arbitrator. Margo contested this mechanism, alleging it to be one-sided and in contravention of legal principles.

    The Court embarked on a meticulous analysis, drawing insights from various legal precedents, notably the case of Central Organization for Railway Electrification v. ECI (JV) which distinguished the CORE judgment, accentuating the necessity for a more expansive pool of arbitrators transcending solely retired railway or RailTel personnel.

    Underpinning the Requirement of Broad-Based Panels, the Court leaned on the wisdom gleaned from Voestalpine Schienen Gmbh v. Delhi Metro Rail Corporation Ltd., wherein it underscored the imperative of constituting diverse panels encompassing professionals from multifarious sectors, rather than being confined to government functionaries. The panel in the present case exclusively comprised ex-Railway and RailTel employees, thereby failing to satisfy this imperative criterion.

    Further buttressing its stance, the Court invoked the precedent set forth in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd., emphasizing the necessity of maintaining a counter-balanced approach in arbitrator appointments. However, the Court highlighted the deficiency in upholding the counter-balance principle in cases where one party exercises dominance in appointing the majority of arbitrators, as glaringly evident in Margo v. Railtel.

    Mr. Rohit Gandhi, a practicing advocate in New Delhi and former associate partner at Shardul Amarchand Mangaldas, provided a keen insight into a recent legal development involving the Delhi High Court. Based on compelling findings, the court exercised its authority under Section 11 of the Arbitration and Conciliation Act. In a bid to ensure fairness throughout the arbitration process, the court appointed two former Supreme Court judges as arbitrators. These esteemed arbitrators were given the important task of jointly selecting a third arbitrator, who would then oversee the arbitration proceedings. Mr. Gandhi further explained that he had been appointed as a mediator/conciliator by one of the entities of the Aditya Birla Group. His role was to facilitate a meeting of creditors. However, this appointment faced opposition from one of the creditors. The creditor argued that Mr. Gandhi’s involvement was a violation of the pre-existing arbitration agreement between the parties. Consequently, the parties invoked Section 11 of the Arbitration and Conciliation Act to address the dispute.

    This scenario underscores the critical function of Section 11 in the arbitration framework. It empowers the court to intervene and appoint arbitrators when parties are unable to agree on their own. The court’s decision to appoint former Supreme Court judges as arbitrators highlights the emphasis placed on impartiality and expertise in arbitration matters. By entrusting these judges with the responsibility of selecting the third arbitrator, the court aimed to reinforce the credibility and integrity of the arbitration process.

    Mr. Gandhi’s involvement in the Aditya Birla case illustrates the complexities that can arise in arbitration agreements. The objection raised by the creditor reflects the intricate nature of arbitration clauses and the potential for disputes even before the arbitration proceedings commence. The invocation of Section 11 by the parties signifies the importance of adhering to the agreed-upon arbitration framework and the necessity for judicial intervention when disputes over the arbitration process arise.

    In this context, the Delhi High Court’s proactive approach in appointing arbitrators demonstrates the judiciary’s role in upholding the principles of fairness and justice in arbitration. The selection of former Supreme Court judges as arbitrators is particularly noteworthy, as it underscores the court’s commitment to ensuring that arbitration proceedings are conducted with the highest standards of integrity and impartiality.

    Overall, Mr. Gandhi’s insights shed light on the vital role that Section 11 of the Arbitration and Conciliation Act plays in the arbitration landscape. It serves as a crucial mechanism for resolving disputes over the appointment of arbitrators, thereby safeguarding the arbitration process’s fairness and efficacy. The Delhi High Court’s decision in this case exemplifies how judicial intervention can enhance the arbitration process’s legitimacy and reliability, ensuring that parties receive a fair and just resolution to their disputes.

    In a resolute denouement, the Court’s decision resoundingly echoes the imperatives of upholding party equality through the prism of impartial arbitrator selection, thereby fortifying the edifice of fairness in arbitration proceedings. The said judicial pronouncement seamlessly aligns with antecedent rulings, which have consistently championed the cause of independence and neutrality in arbitrator appointments. It reaffirms India’s unwavering commitment to buttressing its legal framework with robust safeguards against the pernicious encroachment of biased adjudication, thereby mirroring the loftiest standards espoused by international arbitration conventions.

    DISCLAIMER:

    The information provided in this hotline is not intended as legal advice. Please refer to the detailed disclaimer below. This opinion offers general information as of the time of its preparation. It serves as a news update, does not assume responsibility for any loss resulting from actions taken or refrained from based on the materials herein. It is advisable to seek professional advice tailored to your specific circumstances. This opinion does not replace the necessity of consulting the original pronouncements.

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