Can Railway, NBFCs and PSUs appoint arbitrators unilaterally?
NEW DELHI: The Supreme Court on Thursday said at a time when private investment in India is crucial to the country’s economy, the need of the hour is a robust, transparent and independent arbitration system to infuse confidence in the domestic and international investors.
This observation came from a five-judge bench comprising CJI D Y Chandrachud, and Justices Hrishikesh Roy, P S Narasimha, J B Pardiwala and Manoj Misra during the adjudication of a question that is of vital importance to investors’ confidence – can the railways, PSUs and NBFCs create a panel of arbitrators from which the opposite party is to choose from for adjudication of disputes arising from alleged contractual breaches.
Many private parties had questioned the impartiality and independence of the panel of arbitrators, which is put in place by the railways, PSUs and NBFCs, claiming that their autonomy of choosing an arbitrator was breached, rendering the arbitration process arbitrary or one-sided.
The CJI-led bench said it is of vital public importance that arbitration processes remain fair and private stakeholders’ interest and confidence in the arbitral proceedings is maintained without compromising on the government interests. “But the government’s interest is not that it should always get a favourable arbitral award,” the bench said.
Solicitor general Tushar Mehta said the railways and PSUs have hundreds of running arbitration proceedings involving thousands of crores of rupees at a time and for that purpose a panel of arbitrators with domain knowledge in needed to be in place without compromising on the integrity and capability of the persons included in the panel of arbitrators.
He said even the international arbitration laws validate one party appointing arbitrators if that is provided in the contract and a private party enters into an agreement on its own volition to take up the contracted work.
He said the Indian Arbitration Act also recognizes the creation of a panel by one party from which both sides to arbitral dispute can choose from. The SG said the Act amply provisioned for party autonomy in the arbitration process while ensuring its fairness.
He was supported by additional solicitor general K M Natraj, and senior advocates Guru Krishna Kumar and Madhavi Divan. The two senior advocates said that NBFCs face a huge number of defaulters in repayment of loans and do not respond to notices for arbitration. If arbitrators are not to be appointed by NBFCs unilaterally, then because of earlier judgments of the SC, the arbitral awards would be rendered null and void which would create a paradise for defaulters.
Arguments on the crucial issue of whether railways and PSUs can validly and unilaterally create a panel of arbitrators would be concluded on Friday.
NEW DELHI: The Supreme Court on Thursday said at a time when private investment in India is crucial to the country’s economy, the need of the hour is a robust, transparent and independent arbitration system to infuse confidence in the domestic and international investors.
This observation came from a five-judge bench comprising CJI D Y Chandrachud, and Justices Hrishikesh Roy, P S Narasimha, J B Pardiwala and Manoj Misra during the adjudication of a question that is of vital importance to investors’ confidence – can the railways, PSUs and NBFCs create a panel of arbitrators from which the opposite party is to choose from for adjudication of disputes arising from alleged contractual breaches.
Many private parties had questioned the impartiality and independence of the panel of arbitrators, which is put in place by the railways, PSUs and NBFCs, claiming that their autonomy of choosing an arbitrator was breached, rendering the arbitration process arbitrary or one-sided.
The CJI-led bench said it is of vital public importance that arbitration processes remain fair and private stakeholders’ interest and confidence in the arbitral proceedings is maintained without compromising on the government interests. “But the government’s interest is not that it should always get a favourable arbitral award,” the bench said.
Solicitor general Tushar Mehta said the railways and PSUs have hundreds of running arbitration proceedings involving thousands of crores of rupees at a time and for that purpose a panel of arbitrators with domain knowledge in needed to be in place without compromising on the integrity and capability of the persons included in the panel of arbitrators.
He said even the international arbitration laws validate one party appointing arbitrators if that is provided in the contract and a private party enters into an agreement on its own volition to take up the contracted work.
He said the Indian Arbitration Act also recognizes the creation of a panel by one party from which both sides to arbitral dispute can choose from. The SG said the Act amply provisioned for party autonomy in the arbitration process while ensuring its fairness.
He was supported by additional solicitor general K M Natraj, and senior advocates Guru Krishna Kumar and Madhavi Divan. The two senior advocates said that NBFCs face a huge number of defaulters in repayment of loans and do not respond to notices for arbitration. If arbitrators are not to be appointed by NBFCs unilaterally, then because of earlier judgments of the SC, the arbitral awards would be rendered null and void which would create a paradise for defaulters.
Arguments on the crucial issue of whether railways and PSUs can validly and unilaterally create a panel of arbitrators would be concluded on Friday.