Introduction:

A recent ruling by the Calcutta High Court in the case of M/s. Mehrotra Buildcon Pvt. Ltd. v South Eastern Railway addresses the appointment of a sole arbitrator. The petitioner, M/s. Mehrotra Buildcon Pvt. Ltd., sought the appointment of an arbitrator, contesting the restrictive clause in the General Conditions of Contract (GCC) imposed by the respondent, South Eastern Railway. The Court’s decision revolves around the unilateral nature of the clause, emphasizing the petitioner’s lack of freedom in appointing arbitrators as per the clause.

Arguments of Both Sides:

M/s. Mehrotra Buildcon Pvt. Ltd. contested the appointment mechanism outlined in clause 64(3)(b)(ii) of the GCC, highlighting the absence of their free choice in nominating arbitrators. The clause mandated the petitioner to select 2 arbitrators from a list of 4 provided by the respondent, with the final selection resting on the General Manager of the respondent, constraining the petitioner’s autonomy in the arbitration process. The petitioner argued that they vehemently disagreed with this unilateral appointment process, citing various apex court decisions that stressed the importance of mutual agreement in arbitrator selection.

On the other hand, South Eastern Railway defended the clause’s validity, relying on the contractual agreement between the parties. They contended that the clause, in line with the contract, aimed to ensure the appointment of retired Railway Officers of a certain rank, thus ensuring expertise in the subject matter.

Court’s Judgment:

The Calcutta High Court, in examining the case laws and the disputed clause, recognized the petitioner’s clear disapproval of the arbitration mechanism dictated by clause 64(3)(b)(ii) of the GCC. Emphasizing the necessity of consensus in arbitration matters, the Court deemed the clause as unilateral and against the principles enshrined in the Arbitration & Conciliation Act, 1996. The Court noted that coercing a party into arbitration, disregarding their lack of consent, contradicted the Act’s spirit. It further referenced prior Supreme Court decisions that stressed the need for a broad-based panel of arbitrators to ensure impartiality and independence. Consequently, the Court allowed the petitioner’s plea and appointed (Retd) Justice Ranjit Kr Bag as the sole arbitrator in the dispute, affirming the importance of freedom and mutual agreement in arbitrator appointments.