What is unilateral appointment of an arbitrator?

Unilateral appointment of an arbitrator refers to a situation where one party to a dispute, typically a government agency or a public sector entity, either directly appoints the sole arbitrator or creates a panel of arbitrators from which the opposing party is restricted to make a choice. This setup undermines the balance and fairness expected in arbitral proceedings because it restricts the other party's ability to participate equally in the appointment process, leading to justified concerns about bias or conflict of interest.

Is unilateral appointment of arbitrator valid under Indian law?

Under current Indian jurisprudence, unilateral appointment of arbitrators by an interested party is considered invalid and unenforceable. The Supreme Court in its landmark Constitution Bench judgment in CORE-II (2024) held that such clauses violate the principle of equal treatment of parties under Section 18 of the Arbitration and Conciliation Act, 1996, as well as the constitutional guarantee of equality before law under Article 14 of the Constitution. The Court emphasized that allowing one party to have exclusive control over the appointment process compromises the neutrality of arbitration.

What does the Arbitration and Conciliation Act, 1996 say about arbitrator appointment?

The Arbitration and Conciliation Act, 1996 recognizes the principle of party autonomy and allows parties to agree on the procedure for appointing arbitrators under Section 11. However, this autonomy is subject to statutory safeguards. Section 12(5), introduced through the 2015 amendment, automatically disqualifies any person from being appointed as an arbitrator if their relationship with the parties falls within the prohibited categories listed in the Seventh Schedule, even if the parties had previously agreed otherwise. Section 18 further reinforces the requirement that both parties be treated equally throughout the arbitration process, including the constitution of the tribunal.

How does party autonomy affect arbitrator appointments?

While party autonomy is a foundational element of arbitration, it is not absolute and must yield to the statutory requirements of fairness and equality. The Supreme Court has clarified that even if parties agree to a particular appointment process, such agreement cannot override the mandatory provisions of the Arbitration Act, particularly Section 12(5) which ensures independence and impartiality, and Section 18 which mandates equal treatment of parties. Therefore, any exercise of autonomy that disproportionately benefits one party or undermines impartiality is invalid in law.

What are the grounds to challenge an arbitrator’s appointment?

An arbitrator’s appointment can be challenged if there are circumstances that give rise to justifiable doubts about the arbitrator’s independence or impartiality. Section 12(1)(a) of the Act requires disclosure of any direct or indirect relationships or interests that might influence the arbitrator’s objectivity, and such circumstances are assessed based on the criteria listed in the Fifth Schedule. If an arbitrator falls within any of the ineligibility categories mentioned in the Seventh Schedule, their appointment is automatically invalidated under Section 12(5), irrespective of party agreement.

What is the difference between independence and impartiality of an arbitrator?

Independence refers to the absence of any external relationship, financial or professional, between the arbitrator and either party that could affect the arbitrator’s judgment. Impartiality, on the other hand, relates to the arbitrator’s internal mindset and whether they hold any bias or predisposition in favor of or against any party. Both elements are essential to a fair arbitration process and are recognized under Indian law as distinct but complementary requirements. Even the appearance of bias or partiality, if based on reasonable grounds, can render an arbitrator ineligible to serve.

Can one party appoint the sole arbitrator without the other party’s consent?

Indian law, as interpreted by the Supreme Court in cases such as TRF Ltd. and Perkins Eastman, unequivocally prohibits the appointment of a sole arbitrator by a party that has an interest in the dispute, without the consent or equal participation of the other party. Such a process is deemed to create a legitimate apprehension of bias and goes against the core principles of impartiality and natural justice. Any award passed by an arbitrator appointed unilaterally in such a manner is likely to be challenged and declared void.

What is the role of Section 18 in arbitration?

Section 18 of the Arbitration and Conciliation Act, 1996 plays a pivotal role in ensuring procedural fairness by mandating that both parties in arbitration must be treated with equality and given a full opportunity to present their case. The Supreme Court has affirmed that this principle applies not only during the conduct of arbitral proceedings but also at the stage of appointment of arbitrators. Any deviation from equal treatment during appointment—such as denying one party a meaningful role—violates Section 18 and renders the arbitration process vulnerable to judicial scrutiny.

How does the Supreme Court of India view unilateral appointment clauses?

The Supreme Court of India has taken a strong stance against unilateral appointment clauses, particularly in the CORE-II judgment delivered in 2024. The Court held that allowing one party—especially a party interested in the outcome of the dispute—to appoint the sole arbitrator or control the panel from which appointments are made is inconsistent with the principles of natural justice and constitutional equality. Such clauses were held to be arbitrary, discriminatory, and against the public policy of India, thereby rendering them unenforceable in law.

What is the recommended process for appointing arbitrators to ensure fairness?

To ensure fairness and compliance with statutory and constitutional mandates, arbitrators should be appointed through a mutually agreed and balanced process that gives equal voice to both parties. Panels, if used, must be broad-based and not curated solely by one party. Ideally, institutional arbitration mechanisms should be preferred, or independent third-party appointment methods should be employed. The Ministry of Finance has also suggested that government bodies should reassess their arbitration clauses, avoid rigid unilateral appointment provisions, and consider mediation for lower-value disputes to prevent unnecessary litigation and delays.

Unilateral Arbitrator Appointments: The Supreme Court’s Final Word

By – Asmita Narula and Debasmita Goswami

Introduction

The principle of party autonomy lies at the heart of arbitration, empowering parties to shape the framework of dispute resolution according to their mutual agreement. However, this autonomy is not absolute, particularly when it clashes with the equally important principles of fairness, impartiality, and equality. One area where this clash becomes particularly essential is the unilateral appointment of arbitrators. The legality of such appointments has been the subject matter of intense judicial scrutiny in India, especially in light of the statutory safeguards which aim to ensure a fair and balanced arbitral process.

This article critically analyses the legal framework and evolving jurisprudence on unilateral appointments, focusing on their compatibility with the doctrine of impartiality, the mandate of equal treatment of parties, and the broader objective of securing the independence and neutrality of arbitral proceedings.

The Legal Framework of Arbitration in India

The Arbitration and Conciliation Act, 1996

Arbitration is one of the oldest and most preferred forms of Alternate Dispute Resolution (ADR) Mechanism. The law on arbitration in India, both domestic and international, has been consolidated under the Arbitration and Conciliation Act, 1996 (“the Act”).

Party autonomy is the cornerstone and guiding spirit of arbitration, which has been engraved by the legislature in the various provisions of the Act itself. The Act envisages minimum judicial intervention in the arbitral proceedings¹. The parties have the freedom to mutually decide various aspects of the arbitration proceedings to suit their needs, including the procedure for appointment of arbitrator(s).

However, the principle of impartiality and independence of the arbitral process, specifically at the stage of constituting an arbitral tribunal, cannot be disregarded².

Unilateral appointment of arbitrator(s)

In November 2024, in a reference made to a larger Bench by a three-Judge Bench, the Supreme Court delivered a landmark judgment on the issue of unilateral appointment of arbitrator(s), including the process where a party is mandated to nominate an arbitrator only from a panel curated by the other party. This decision will have significant implications, particularly for Government undertakings and Public Sector Undertakings (“PSUs”) which regularly resort to arbitration for settlement of their disputes.

Before delving into the intricacies of this decision, it is imperative to understand the background of the reference to a larger Bench in light of Section 12 of the Act and the various judgments where such an issue has arisen in the past.

Reference to Larger Bench and the Role of Section 12

Section 12(1)(a) of the Act requires that a person, who has been approached for his possible appointment as an arbitrator, shall disclose in writingif there exists any past or present direct or indirect relationship with or interest in any of the parties or the subject-matter of the dispute, which is likely to raise a justifiable doubt on his independence or impartiality. The existence of any circumstances giving rise to such doubts is to be determined on the basis of the grounds provided in the Fifth Schedule³, which provides for 34 categories classified under 7 heads⁴.

By way of an amendment in the year 2015, Section 12(5) was inserted in the Act, which provides that irrespective of any prior agreement to the contrary, any person whose relationship falls under any of the categories in the Seventh Schedule shall be ineligible to be appointed as an arbitrator. The Seventh Schedule provides for 19 categories classified under 3 heads⁵. However, to preserve real and genuine party autonomy, parties have been permitted to waive the applicability of this provision by an express agreement in writing⁶. It was after this amendment that applications were filed seeking invalidation of appointment procedures which gave one party the dominance in appointing arbitrator(s).

Key Judicial Precedents on Unilateral Appointments

Voestalpine Schienen GmbH v. DMRC (2017)

In Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd.⁷ (2017) (“Voestalpine case”), the issue before a two-Judge Bench of the Supreme Court was whether the procedure stipulated for the appointment of arbitrator(s) was violative of Section 12 of the Act. The Respondent was required to curate a panel of engineers of Government departments / PSUs from which the Petitioner was mandated to nominate its arbitrator. The Supreme Court came to a finding that the panel curated by the Respondent consisted of past and present Government employees however, that by itself did not make them ineligible and merely working in the Railways did not make them employees / consultants / advisors of the Respondent⁸. The court held that there is no embargo on retired government employees to serve as arbitrators and bias / real likelihood of bias cannot be attributed to such highly qualified and experienced persons only on the ground that they served the Government or PSUs.

The Court was however of the view that the choice given to the Petitioner by the Respondent was limited. Despite there being several persons on the panel, the discretion was with the Respondent to make a limited list for the Petitioner, which gave rise to suspicion that it may have picked its favourites. While upholding the appointment procedure, the Court observed that both the parties should have the freedom to nominate an arbitrator from the entire panel and not from a limited list. It further directed the Respondent to prepare a broad-based panel rather than limiting it to engineers.

The TRF and Perkins Line of Judgments

TRF Ltd. v. Energo Engineering Projects Ltd. (2017)

In TRF Ltd. v. Energo Engineering Projects Ltd.⁹ (2017) (“TRF case”), the question before a three-Judge Bench was different – whether a person, who was himself ineligible to act as an arbitrator under Section 12(5) of the Act, was eligible to nominate a sole arbitrator. The arbitration clause stipulated that a dispute between the parties shall be referred to sole arbitration of the Respondent’s Managing Director or his nominee. The Managing Director appointed a Former Judge of the Supreme Court as the sole arbitrator. The Supreme Court held that the ineligibility to act as an arbitrator under Section 12(5) of the Act also includes the ineligibility to appoint an arbitrator i.e., once the infrastructure collapses, the superstructure is bound to collapse.

This decision was however not sourced from any provision of the Act and was based on the maxim qui facit per alium facit per se (what one does through another is done by oneself). Further, there was no discussion on whether the nominated sole arbitrator was himself ineligible under Section 12(5) of the Act, against whose independence and impartiality no reasonable apprehension or justifiable doubt was raised.

Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2019)

Relying on the TRF case, in Perkins Eastman Architects DPC v. HSCC (India) Ltd.¹⁰ (2019) (“Perkins case”), where the arbitration clause provided that the sole arbitrator will be appointed by the Respondent’s CMD, a two-Judge Bench of the Supreme Court held that a person having an interest in the dispute cannot and should not have any role in determining the course of the dispute resolution by having the power to appoint an arbitrator. It was observed that the test to determine the possibility of bias is directly relatable to the interest which the person appointing an arbitrator has in the outcome of the dispute.

In the Perkins case, while analysing the decision rendered in the TRF case, the Court came to an important observation. A situation where both the parties are allowed to nominate their respective arbitrators was found to be acceptable for the sole reason that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter-balanced by equal power of the other party. However, if only one party is given this advantage, the choice will always have an element of exclusivity in determining or charting the dispute resolution course.

Revisiting CORE-I and the Emergence of Conflict

CORE-I (2019) – Supreme Court’s Initial Stand

In Central Organization for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) A Joint Venture Company¹¹ (2019) (“CORE – I”), the applicable portion of the arbitration clause stipulated that the tribunal would consist of three retired railway officers – (a) the Railways will share a list of at least four such officers, (b) the Respondent will suggest at least two names from this list as its nominees, (c) the General Manager will appoint at least one of them as the contractor’s nominee and will also appoint the other two arbitrators either from the list or otherwise. Relying on the Voestalpine case, the Court held that merely because the panel curated by the Railways consisted of retired Railway employees, it does not make them ineligible. The TRF case and Perkins case was distinguished on the ground that these decisions contemplated a situation where the other party was not given a choice to nominate an arbitrator so as to counter-balance any advantage to the Railways.

It was held that in this case, the right of the General Manager to form the arbitral tribunal is counter-balanced by the Respondent’s power to choose any two names out of a list of four names and at least one person being appointed from the names chosen by it.

Union of India v. Tantia Constructions Ltd. (2021)

In Union of India v. Tantia Constructions Limited¹² (2021), the Appellant challenged the decision of the Calcutta High Court¹³ where the Court held that the provisions of Section 12(5) of the Act as well as the Seventh Schedule were squarely applicable to the arbitration clause of this case, which was similar to the arbitration clause in CORE – I. While upholding the decision of the Calcutta High Court, the three-Judge Bench prima facie disagreed with the ratio laid down in CORE – I and referred the issue to a larger Bench.

CORE-II (2024) – Constitution Bench Judgment

In its landmark judgment dated 08.11.2024 delivered in Central Organization for Railway Electrification v. M/s ECI SPIC SMO MCML¹⁴ (“CORE – II”), the Constitution Bench decided the issue of unilateral appointment of arbitrator(s). The majority judgment was delivered by the Chief Justice of India, Dr. D.Y. Chandrachud, for himself, Justice J.B. Pardiwala and Justice Manoj Mishra whereas Justice Hrishikesh Roy and Justice P.S. Narasimha delivered a partially dissenting opinion. The following issues were framed for determination:

Whether an appointment process, which allows a party who has an interest in the dispute to unilaterally appoint a sole arbitrator, or curate a panel of arbitrators and mandate that the other party select an arbitrator from this panel, is valid in law?
Whether the principle of equal treatment of parties applies at the stage of appointment?
Whether an appointment process in a public-private contract, which allows a government entity to unilaterally appoint a sole arbitrator or majority of the arbitrators, is violative of Article 14 of the Constitution?

Key Observations from the Majority Opinion

The following are some of the important observations made by the Supreme Court:

Statutory Principles vs Party Autonomy

The Act recognises and enforces mutual commercial bargains and understanding between the parties at all stages of the arbitration proceedings, including at the stage of appointment of arbitrator(s). However, party autonomy is not without its limits i.e., there are mandatory provisions.
Section 12(5) of the Act was introduced to provide for automatic ineligibility of a person to be appointed as an arbitrator, which overrides any prior appointment procedure agreed between the parties under Section 11(2) of the Act due to the non-obstante clause.
However, the proviso to the said provision allows the parties to waive its applicability, subject to two factors – (a) it can only be after the disputes have arisen, and (b) the parties must consciously abandon their existing legal right through an express agreement.

Equal Treatment Under Section 18

Section 18 of the Act provides for equal treatment of the parties. The first part of the said provision states that the parties shall be treated with equality. This principle has to be followed in all procedural contexts, including at the stage of appointment. Participation in the adjudicatory process is meaningless for a party against whom the arbitrator is already prejudiced.

Nemo Judex and Bias Doctrine

The principle of natural justice nemo judex in causa sua (no one shall be a judge in their own cause) applies to judicial, quasi-judicial and administrative proceedings. Arbitration is a quasi-judicial proceeding. A person who has an interest in the outcome of an issue that is to be resolved would be acting as a judge in their own cause.
The principle governing the doctrine of bias is that a member of a judicial body with a predisposition in favour of or against any party to a dispute or whose position in relation to the subject matter or a disputing party is such that a lack of impartiality would be assumed to exist should not be a part of a tribunal composed to decide the dispute.
Determination of bias does not depend on actual proof but on whether there is a real possibility of bias based on the circumstances – the real likelihood test to determine bias.
If a person having a financial interest in the outcome of the arbitral proceedings unilaterally nominates a sole arbitrator, it is bound to give rise to justifiable doubts on the independence and impartiality of the arbitrator – there may be a quid pro quo arrangement between the arbitrator and the party appointing him or there may be a fear of displeasure as the arbitrator owes his appointment to one party.

Application to Three-Member Tribunals

A clause which allows one party to unilaterally appoint a sole arbitrator is exclusive and hinders equal participation of the other party in the appointment process. An arbitration is a judicial and adjudicative process where both parties ought to be treated equally. A three-member tribunal usually allows both the parties to nominate one arbitrator of their choice with the third arbitrator being appointed by a balanced process.
In the Voestalpine case and CORE – I, one party was mandated to nominate an arbitrator only from the panel curated by the other party, thereby restricting the freedom to nominate an arbitrator of its choice. This is against the principle of equal treatment of parties contained under Section 18 of the Act.

PSU Panels and Public Policy Concerns

Many PSUs constantly need the services of arbitrators as they are regularly involved in arbitration disputes. Thus, such PSUs maintain a panel of arbitrators with the sole objective of having a pool of qualified professionals, who have committed their time and consented to act as arbitrators for a fixed fee, ready.
There is no prohibition under the Act to maintain such a panel. The problem arises when the other party is mandated to select their nominee from this panel only. An arbitration clause cannot create such a mandate unless the party expressly waives the applicability of the nemo judex rule.
Article 14 of the Constitution enshrines the principle of equality of treatment i.e., the law must operate equally on all persons under like circumstances. Article 14 strikes at arbitrary actions and ensures fairness and equality of treatment. Violation of the principles of natural justice results in arbitrariness.
Unilateral appointment clauses in public-private contracts fail to provide the minimum level of integrity required in authorities performing quasi-judicial functions such as arbitral tribunals and also violates the nemo judex rule, which constitutes the public policy of India in the context of arbitration. Such clauses are violative of Article 14 of the Constitution for being arbitrary, in addition to Section 18 of the Act.

The Court clarified that the said decision qua three-member tribunals will apply prospectively to the appointments to be made after the date of the decision i.e., 08.11.2024. Notably, there is no such direction qua arbitration proceedings involving a sole arbitrator.

Diverging Opinions: Dissenting and Concurring Views

Justice Hrishikesh Roy’s Concurrence

Justice Hrishikesh Roy concurred with the majority view qua Section 18 of the Act, but he disagreed with invoking constitutional principles to reinforce this equality in the context of arbitration. He concurred with Justice P.S. Narasimha that public law principles evolved in Constitutional and Administrative law should not generally be imported to arbitration law.

Justice P.S. Narasimha observed that the obligation of the parties to constitute an independent and impartial arbitral tribunal arises from the Act itself and also from Section 23 of the Indian Contract Act, 1872 i.e., declaring an agreement opposed to public policy as void, and not from the constitutional and administrative laws. He however expressed his reservations about applying Section 18 of the Act to the stage of appointment of arbitrator(s) as, in his opinion, it only applies to the arbitral tribunal, that too during the proceedings.

Justice P.S. Narasimha’s Reservations

Justice Hrishikesh Roy observed that the interpretation that all unilateral appointments are automatically nullified under Section 12(5) of the Act would go beyond the legislative intent of the Act as it does not per se prohibit unilateral appointment of arbitrators. He opined that there is a difference between ‘ineligibility’ and ‘unilateral’ appointment.

Unilateral appointment of arbitrator(s) is permissible under the Act, provided that the nominated arbitrator is otherwise not disqualified under the Seventh Schedule, and the courts should interfere only when there is a complete lack of consensus between the parties. Concurring with this view, Justice P.S. Narasimha opined that the courts should examine the arbitration clause only when an application is filed before it for appointment or substitution of the arbitrator(s) and it is impermissible for the court to intervene at a stage prior to that to declare all agreements as void as an advance ruling.

Recent Developments and Judicial Reinforcement

Shakti Pump India Ltd. v. Apex Buildsys Ltd. (2025)

Recently, in Shakti Pump India Ltd. v. Apex Buildsys Ltd.¹⁵ (2025), the Delhi High Court rejected the contention that the participation of a party in the arbitral proceedings tantamounts to waiver of the unilateral appointment of the arbitrator in terms of proviso to Section 12(5) of the Act. The Court further reiterated that unilateral appointment of arbitrator cuts at the very root of the principles of independence and impartiality and is antithetical to the idea of equal treatment of parties by the arbitrator.

Anything and everything that flows from such illegal appointment is also non est in law. Relying inter alia on CORE – II, the Court held that the unilateral appointment of arbitrator by the Respondent being void ab initio is liable to be terminated.

Challenges in the future

The decision of the Supreme Court is likely to primarily impact the Government undertakings and PSUs maintaining a panel of arbitrators as a matter of practice for arbitration.

Immediate Impact on Government and PSU Contracts

The unilateral appointment of arbitrators has been brought to an end by the majority decision of the Supreme Court and the arbitration clause contained in the contracts of such undertakings are now more susceptible to a challenge before the court.

Even though the Supreme Court has applied its decision to three-member arbitral tribunals prospectively, the courts are likely to be flooded with applications against appointment of arbitrators, particularly in those cases where no proceedings have commenced before the arbitral tribunal or barely any proceedings have taken place.

Need to Redraft Arbitration Clauses

The parties to public-private contracts will now be required to reconsider and redraft / amend the arbitration clause to provide a balanced procedure for appointment of arbitrator(s) and to avoid the procedure being declared as void, thereby disrupting the arbitration proceedings and prolonging the adjudication of disputes.

There is no prohibition on curating a panel of arbitrators; however, the other party cannot be mandated to nominate an arbitrator only from the said panel. The other party should be permitted to nominate an arbitrator of its choice either from the panel or from outside the panel. Moreover, such a panel should be broad-based.

Lack of Clarity on Sole Arbitrator Proceedings

Notably, the direction of prospective application of the decision has been given by the Supreme Court only qua three-member tribunals; however, the fate of arbitration proceedings being conducted by sole arbitrators is not clear.

Government’s Shift in Dispute Resolution Policy

Recently, in June 2024, the Ministry of Finance issued an Office Memorandum¹⁶ highlighting the need for the Government to reconsider its approach towards arbitration vis-à-vis other methods of dispute resolution in light of the enactment of the Mediation Act, 2023, and the decisions of the courts. The Government undertakings / PSUs have inter alia been discouraged from routinely opting for arbitration, particularly in cases where the value of the claim is less than Rs. 10 Crores. Thus, another concern arising out of this decision is that it may further dissuade the Government undertakings and PSUs from opting for arbitration.

Conclusion

The jurisprudence surrounding the unilateral appointment of arbitrators in India has significantly evolved to reinforce the foundational principles of equality, impartiality, and fairness in arbitration. While party autonomy remains a central tenet of the arbitral process, it cannot be exercised in a manner that compromises the neutrality and impartiality of the proceedings or undermines the right of the other party to equal participation.

The Supreme Court has, through a series of judgments, firmly established that any arbitration clause permitting one party exclusive control over the appointment process violates Section 18 of the Act and Article 14 of the Constitution of India. Going forward, the persons drafting the contract and the stakeholders must ensure that the process of appointment of arbitrator(s) is balanced and compliant with statutory and constitutional mandates to ensure the enforceability of arbitral awards.

FAQs

What is unilateral appointment of an arbitrator?

Unilateral appointment of an arbitrator refers to a situation where one party to a dispute, typically a government agency or a public sector entity, either directly appoints the sole arbitrator or creates a panel of arbitrators from which the opposing party is restricted to make a choice. This setup undermines the balance and fairness expected in arbitral proceedings because it restricts the other party’s ability to participate equally in the appointment process, leading to justified concerns about bias or conflict of interest.
Is unilateral appointment of arbitrator valid under Indian law?

Under current Indian jurisprudence, unilateral appointment of arbitrators by an interested party is considered invalid and unenforceable. The Supreme Court in its landmark Constitution Bench judgment in CORE-II (2024) held that such clauses violate the principle of equal treatment of parties under Section 18 of the Arbitration and Conciliation Act, 1996, as well as the constitutional guarantee of equality before law under Article 14 of the Constitution. The Court emphasized that allowing one party to have exclusive control over the appointment process compromises the neutrality of arbitration.
What does the Arbitration and Conciliation Act, 1996 say about arbitrator appointment?

The Arbitration and Conciliation Act, 1996 recognizes the principle of party autonomy and allows parties to agree on the procedure for appointing arbitrators under Section 11. However, this autonomy is subject to statutory safeguards. Section 12(5), introduced through the 2015 amendment, automatically disqualifies any person from being appointed as an arbitrator if their relationship with the parties falls within the prohibited categories listed in the Seventh Schedule, even if the parties had previously agreed otherwise. Section 18 further reinforces the requirement that both parties be treated equally throughout the arbitration process, including the constitution of the tribunal.
How does party autonomy affect arbitrator appointments?

While party autonomy is a foundational element of arbitration, it is not absolute and must yield to the statutory requirements of fairness and equality. The Supreme Court has clarified that even if parties agree to a particular appointment process, such agreement cannot override the mandatory provisions of the Arbitration Act, particularly Section 12(5) which ensures independence and impartiality, and Section 18 which mandates equal treatment of parties. Therefore, any exercise of autonomy that disproportionately benefits one party or undermines impartiality is invalid in law.
What are the grounds to challenge an arbitrator’s appointment?

An arbitrator’s appointment can be challenged if there are circumstances that give rise to justifiable doubts about the arbitrator’s independence or impartiality. Section 12(1)(a) of the Act requires disclosure of any direct or indirect relationships or interests that might influence the arbitrator’s objectivity, and such circumstances are assessed based on the criteria listed in the Fifth Schedule. If an arbitrator falls within any of the ineligibility categories mentioned in the Seventh Schedule, their appointment is automatically invalidated under Section 12(5), irrespective of party agreement.
What is the difference between independence and impartiality of an arbitrator?

Independence refers to the absence of any external relationship, financial or professional, between the arbitrator and either party that could affect the arbitrator’s judgment. Impartiality, on the other hand, relates to the arbitrator’s internal mindset and whether they hold any bias or predisposition in favor of or against any party. Both elements are essential to a fair arbitration process and are recognized under Indian law as distinct but complementary requirements. Even the appearance of bias or partiality, if based on reasonable grounds, can render an arbitrator ineligible to serve.
Can one party appoint the sole arbitrator without the other party’s consent?

Indian law, as interpreted by the Supreme Court in cases such as TRF Ltd. and Perkins Eastman, unequivocally prohibits the appointment of a sole arbitrator by a party that has an interest in the dispute, without the consent or equal participation of the other party. Such a process is deemed to create a legitimate apprehension of bias and goes against the core principles of impartiality and natural justice. Any award passed by an arbitrator appointed unilaterally in such a manner is likely to be challenged and declared void.
What is the role of Section 18 in arbitration?

Section 18 of the Arbitration and Conciliation Act, 1996 plays a pivotal role in ensuring procedural fairness by mandating that both parties in arbitration must be treated with equality and given a full opportunity to present their case. The Supreme Court has affirmed that this principle applies not only during the conduct of arbitral proceedings but also at the stage of appointment of arbitrators. Any deviation from equal treatment during appointment—such as denying one party a meaningful role—violates Section 18 and renders the arbitration process vulnerable to judicial scrutiny.
How does the Supreme Court of India view unilateral appointment clauses?

The Supreme Court of India has taken a strong stance against unilateral appointment clauses, particularly in the CORE-II judgment delivered in 2024. The Court held that allowing one party—especially a party interested in the outcome of the dispute—to appoint the sole arbitrator or control the panel from which appointments are made is inconsistent with the principles of natural justice and constitutional equality. Such clauses were held to be arbitrary, discriminatory, and against the public policy of India, thereby rendering them unenforceable in law.
What is the recommended process for appointing arbitrators to ensure fairness?

To ensure fairness and compliance with statutory and constitutional mandates, arbitrators should be appointed through a mutually agreed and balanced process that gives equal voice to both parties. Panels, if used, must be broad-based and not curated solely by one party. Ideally, institutional arbitration mechanisms should be preferred, or independent third-party appointment methods should be employed. The Ministry of Finance has also suggested that government bodies should reassess their arbitration clauses, avoid rigid unilateral appointment provisions, and consider mediation for lower-value disputes to prevent unnecessary litigation and delays.