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Court / Forum : Delhi High Court Citation : 2020 SCC OnLine Del 350 | (2020) 267 DLT 51 Coram : Justice Jyoti Singh Subject : Sections 12, 13, 14 and 15 of the Arbitration and Conciliation Act, 1996 Date of Decision : January 20, 2020
The petitioner and the respondent in the instant case had entered into a distribution agreement which provided for resolution of disputes by way of arbitration. Certain disputes arose amongst the parties, concerning the amount that the petitioner was to receive under the Agreement. The petitioner submitted that its efforts to resolve the dispute amicably failed and therefore, the petitioner invoked the arbitration clause of the Agreement.
When the petitioner nominated an arbitrator, the respondent disagreed to such nomination, relying on the Agreement to assert its right to unilaterally appoint an arbitrator. Therefore, the respondent's arbitrator was appointed, and the proceedings were commenced. As the proceedings were underway, the Supreme Court on November 26, 2019 delivered the judgment in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd., wherein it was held that the parties interested in the dispute, including the arbitrating parties, are ineligible to appoint the arbitrator unilaterally.
The petitioner contended that the facts of the instant case were squarely covered by the facts of the Perkins case. Therefore, the petitioner requested the arbitrator to not proceed with the arbitral proceedings, since the mandate of the arbitrator stood terminated de jure. The arbitrator in response to petitioner's request stated that she would continue the arbitral proceedings unless a judicial order to terminate the same was granted. Hence, the present petition was filed by the petitioner under S.14 and S.15 of the Arbitration Act, seeking a declaration that the mandate of the arbitrator appointed by the respondent stands terminated and another arbitrator be appointed.
Whether a Sole Arbitrator can be unilaterally appointed by either party?
Whether the decision applied to on-going arbitrations?
The Court reiterated that the Hon'ble Supreme Court, in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd., had stated that there could be two categories of cases, one where the managing director himself is made an arbitrator and second where the managing director unilaterally elects the arbitrator. Therefore, the Supreme Court held that all such parties who would be interested in the outcome of the case would be deemed ineligible for unilaterally appointing the arbitrator. Relying on this principle, the Court proceeded to hold that unilateral appointment of an arbitrator by an authority which is interested in the outcome of the decision is impermissible in law.
The Hon’ble High Court in the present case held that the decision in Perkins case, shall be applied to all the on-going arbitrations. Once the Supreme Court has laid the law under S.12(5) of the Arbitration Act, the mandate of the arbitrator is terminated de jure under S.14 of the Arbitration Act. Therefore, the decision in Perkins case will apply to on-going matters as well.