The appointment of Arbitrator is not only starting step in an Arbitration process, but also one of the most crucial step. This is so because the whole effectiveness of the Arbitration process revolves around the fact of whether or not the Arbitration panel appointed is independent and impartial. The Supreme Court on 16th May 2019in Bharat Broadband Network Limited case (BBNL), dealt with the interpretation of Section 12(5) of the Arbitration and Conciliation Act, 1996 (Act) and host of other related provisions. While doing so, the Supreme Court also analysed three earlier landmark judgments dealing with Impartiality and Independence of Arbitrators.
Before analysing judgment passed in BBNL case, it is essential to have a close look of brief factual matrix concerning this case:
- On 05.08.2013, BBNL floated tender inviting bids for a turnkey project for GPON and Solar Power equipment.
- United Telecoms Limited (UTL) was selected as L-1 bidder.
- On 30.09.2014, Advance Purchase Order was issued.
- On 03.01.2017, UTL asked for the appointment of Arbitrator to decide the dispute.
- On 17.01.2017, CMD, BBNL appointed a Sole Arbitrator.
- During the Arbitration Process, Supreme Court passed Judgment in TRF Limited, holding that Managing Director cannot appoint an arbitrator as he is one of the parties to the Arbitration.
- Because of TRF Limited Judgement, BBNL prayed to Sole Arbitrator that given TRF Judgment, he is de jureunable to perform the function of Arbitrator. Accordingly, he should withdraw as Arbitrator and let High Court appoint substitute Arbitrator.
- On 21.10.2017, this Application was rejected by the Sole Arbitrator.
- On 28.10.2017, BBNL filed Petition under Section 14 and 15 before Delhi High Court seeking the appointment of a substitute Arbitrator.
- On 22.11.2017, this Petition was rejected by Delhi High Court primarily on following grounds:
- BBNL who appointed Arbitrator is estopped from raising a plea that such Arbitration cannot continue; and
- UTL filed Statement of Claim without objecting/ reserving any objection about the appointment of Arbitrator.This would amount to express agreement in writing, therefore, wavier as per Section 12(5) of the Act.
The Supreme Court allowed the appeal and set aside the judgment passed by Delhi High Court, thereby, terminating the mandate of Sole Arbitrator. Apex Court further directed Delhi High Court to appoint substitute arbitrator with consent of both parties.