SC: PSUs can't unilaterally appoint sole arbitrators

NEW DELHI: In an important ruling on arbitration proceedings involving govt-run public sector undertakings, the Supreme Court on Monday ruled that PSUs cannot unilaterally appoint a sole arbitrator to decide their disputes with contractors nor can they ask opposite sides to choose from a curated panel of arbitrators.

A five-judge bench comprising CJI D Y Chandrachud, and Justices Hrishikesh Roy, P S Narasimha, J B Pardiwala and Manoj Misra said, "The principle of equal treatment of parties applies at all stages of arbitration proceedings, including the stage of appointment of arbitrators."

Writing the majority opinion, the CJI said, "A clause that allows one party to unilaterally appoint a sole arbitrator gives rise to justifiable doubts as to the independence and impartiality of the arbitrator. Further, such a unilateral clause is exclusive and hinders equal participation of the other party in the appointment process of arbitrators." Referring to contracts/agreements between PSUs and others providing for appointment of sole arbitrator by the concerned PSU or mandating other party to choose from a curated panel of arbitrators, the apex court bench said, "The Arbitration Act does not prohibit PSUs from empanelling potential arbitrators. However, an arbitration clause cannot mandate the other party to select its arbitrator from the panel curated by PSUs."

"Unilateral appointment clauses in public-private contracts are violative of Article 14 of the Constitution," the CJI said while making the judgement apply prospectively. Justices Roy and Narasimha wrote separate opinions while concurring with the core findings in the CJI's opinion. As the bench concluded the pronouncement, solicitor general in lighter vein said Justice Roy must not discontinue the tradition of saying the last word.

Justice Roy, referring to a book, said "Judges cook judgments. As in a cooked dish, there are sweet, sour and chilly hot tastes, my judgment is also sweet, sour and hot - agreeing with portions of the views of the CJI and Justice Narasimha."

SG pitched in and said the bitter taste is missing. Justice Roy said on the last day of the CJI on the bench, he would not like to bring in bitter taste. Praising the CJI's intellectual ability and hardworking nature, Justice Roy said he would receive sweets wherever he goes, within and outside India for his knowledge and ability.

Justice Narasimha said the CJI has extraordinary ability to listen to arguments, views and has mastered the art of remaining calm in all situations.