(1.) In the present batch of appeals, this Court has to decide the contours defining the independence and impartiality of arbitral tribunals under the Arbitration and Conciliation Act 1996.[1] The Arbitration Act allows parties to agree on a procedure for appointment of arbitrators. The sanctity inhering in the arbitration agreement underscores the autonomy of parties to settle their disputes by arbitrators of their choice. However, the Arbitration Act subjects party autonomy to certain mandatory principles such as the equality of parties, independence and impartiality of the tribunal, and fairness of the arbitral procedure. The reference to the Constitution Bench raises important issues of the interplay between party autonomy and independence and impartiality of the arbitral tribunal.
(2.) The Law Commission of India in its 246th Report opined that party autonomy cannot be stretched to disregard the principles of impartiality and independence of the arbitral process, specifically at the stage of constituting of an arbitral tribunal.[2] Hence, the Law Commission suggested automatic disqualification of persons whose relationship with the parties falls under any of the categories specified by law. Following upon the recommendations of the Law Commission, Parliament enacted the Arbitration and Conciliation (Amendment) Act 2015[3] to incorporate Sec. 12(5)[4]. Sec. 12(5) renders a person whose relationship with the parties falls under any of the categories specified under the Seventh Schedule ineligible for appointment. Given the 2015 amendment, parties filed applications under Sec. 11(6) urging the invalidation of appointment procedures which gave one party dominance in appointing arbitrators.
(3.) In Voestalpine Schienen GmbH vs. Delhi Metro Rail Corporation Ltd.,[5] the arbitration clause required the Delhi Metro Rail Corporation[6] to prepare a panel of engineers comprising of serving or retired engineers of government departments or public sector undertakings. The clause further stated that matters where the total value was below Rupees 1.5 million should be referred to sole arbitrators, and those exceeding the amount shall be arbitrated before a panel of three arbitrators. The relevant clause for disputes to be decided by three arbitrators was thus:
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