In a recent decision, the Madras High Court held that the bar under the Seventh Schedule of the Arbitration and Conciliation Act on appointing sole arbitrators unilaterally is non-derogable. The Court made it clear that no exceptions can be made even for retired High Court judges. The decision was made in the case of Prime Store v. Sugam Vanijya Holdings.
The case involved a dispute between two parties over a lease deed agreement. They had opted for arbitration, and a retired Madras High Court judge, Justice A Ramamoorthy, was unilaterally appointed as the sole arbitrator. After the award was passed in favour of the respondents, Chennai Silks, the petitioner, claimed that since Justice Ramamoorthy had been appointed unilaterally, the entire proceedings should be held as invalid.
The respondents argued that Chennai Silks had participated in the proceedings and could not cry foul at a later stage. Besides, Justice Ramamoorthy was a retired judge, a neutral party with no biases, they argued.
However, the Court noted that the bar on unilateral appointment of sole arbitrators was a mandatory and non-derogable provision of the Act. It is applicable to any person, including a retired judge. The Court also made it clear that interested persons to a dispute would not only be ineligible to act as an arbitrator but also be proscribed from appointing an arbitrator to adjudicate the dispute.
The Court relied on the Supreme Court’s judgment in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd to hold that the disqualification under the Seventh Schedule would be applicable to any person, including a retired judge. The Court further added that if a retired judge acted as an advisor or gave an opinion in the matter, he would come under the category of disqualified persons, and the Act had not provided any special privileges for a retired judge.
The Court thus set aside the arbitral award under challenge and appointed retired judge, Justice N Kirubakaran, as the new arbitrator in the case.
The decision of the Madras High Court reinforces the principle that the bar under the Seventh Schedule of the Arbitration and Conciliation Act on appointing sole arbitrators unilaterally is non-derogable. It also highlights the importance of adhering to the provisions of the Act while appointing arbitrators. The decision makes it clear that even a retired judge cannot be appointed as an arbitrator unilaterally without obtaining the express agreement of the parties in writing, in terms of the proviso to Section 12(5) of the Act
