Unilateral Appointment of Sole Arbitrator Raises Justifiable Doubts; Mandatory Curated Panels Breach Equal Treatment: Constitution Bench Majority

Under Clause 64(3)(b) of the Railways' General Conditions of Contract, the Railways sent the contractor a panel of at least four retired railway officers; the contractor suggested at least two names, the General Manager appointed one as the contractor's nominee and also appointed the remaining arbitrators, including the presiding arbitrator (Chandrachud CJI, para 10). In CORE a three-Judge Bench upheld the clause as counter-balanced (Chandrachud CJI, para 11). In Tantia Constructions another three-Judge Bench prima facie disagreed and sought a larger Bench (Chandrachud CJI, para 12). The Union took no decision on its Expert Committee's recommendations, so the Constitution Bench heard the reference (Chandrachud CJI, para 13) on three framed issues (Chandrachud CJI, para 14).

Party autonomy is pre-eminent under the Arbitration Act but remains subject to mandatory principles (Chandrachud CJI, paras 23, 31). An arbitral tribunal performs a quasi-judicial function, and parties must participate equally at all stages, including appointment (Chandrachud CJI, paras 61, 75). A party interested in the dispute that unilaterally names a sole arbitrator can chart the course of the whole proceeding, creating a real possibility of bias (Chandrachud CJI, para 128). Such a clause is exclusive and hinders the other party's equal participation (Chandrachud CJI, para 129). A mandatory curated panel leaves no effective counter-balance, and the CORE clause, which also let the General Manager pick the presiding arbitrator, was unequal (Chandrachud CJI, paras 132, 135-136). PSUs may still empanel arbitrators, and the other party may expressly waive the nemo judex rule (Chandrachud CJI, para 137). Unilateral clauses in public-private contracts are arbitrary and violate Article 14 (Chandrachud CJI, para 163). Roy J. held that appointing an eligible arbitrator unilaterally is permissible and public law should not be imported (Roy J., para 43). Narasimha J. grounded the duty in Sections 23 and 28 of the Contract Act and refused an advance declaration of invalidity (Narasimha J., paras 2, 54).