Holding

The DMRC’s panel does not fall within the categories of ineligible arbitrators under the amended Section 12, so the petition is dismissed, but the Court orders DMRC to prepare a broader panel and delete the restrictive sub‑clauses of Clause 9.2 of the SCC.

Summary

M/s. Voestalpine Schienen GmbH (petitioner) entered into a contract with Delhi Metro Rail Corporation Ltd. (DMRC) for supplying rails. Disputes arose over payments and liquidated damages, and the parties invoked an arbitration clause that required DMRC to prepare a panel of serving or retired engineers from government departments or public sector undertakings, from which each side would select arbitrators. The petitioner challenged the validity of this panel under the amended Section 12 of the Arbitration and Conciliation Act, 1996, arguing that such persons were ineligible to act as arbitrators. The Supreme Court held that the amended provision seeks to ensure neutrality, but the individuals on DMRC’s list were not covered by the ineligibility categories in the Seventh Schedule and no justifiable doubt of bias was shown. Consequently, the petition for appointment of an arbitrator was dismissed, but the Court directed DMRC to prepare a broader, more diverse panel and to delete restrictive sub‑clauses in the contract to allow parties to choose arbitrators from the entire list.

Issues considered

The panel of arbitrators prepared by DMRC violates Section 12(5) and the Seventh Schedule of the Arbitration and Conciliation Act, 1996 as amended in 2015.
Whether the court should intervene to modify the arbitration clause and order a broader panel of arbitrators.
Whether the petition under Section 11(6) and (8) for appointment of an arbitrator is maintainable.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(6), s. 11(8), s. 12(1), s. 12(5)

Subjects

ArbitrationIndependence of arbitratorImpartiality of arbitratorSection 12Arbitrator eligibilityGovernment contractsNeutralityNatural justiceArbitration clause amendmentSeventh Schedule

Judgment

[2017] 1 S.C.R. 798

A MIS. VOESTALPINE SCHIENEN GMBH
V.

DELHI METRO RA!L CORPORATION LTD.
(Arbitration Petition (Civil) No. 50of2016)
B FEBRUARY I 0, 2017
[A. K. SIKRI AND R. K. AGRAWAL, JJ.]
Arbitration and Conciliation Act, 1996 - ss. 12(as amended),
JI (6), (8) - Arbitration clause providing for appointment of
arbitrators from a panel of arbitrators prepared by public sector
c company-Delhi Metro Rail Corporation (DMRC) - Challenge to,
on the ground that panel of arbitrator violates s. 12 - Held: Section
12 was amended with the objective to induce neutrality of arbitrators,
viz. their independence and impartiality - Independence and
impartiality of the arbitrator are the hallmarks of any arbitration
D proceedings - Rule against bias is one of the fundamental principles
of natural justice - When arbitrator is appointed in terms of contract
and by the parties to the contract, he is independent of the parties
- Non-independence and non-impartiality of such arbitrator would
render him ineligible to conduct the arbitration - On facts, not a fit
case for exercising the jurisdiction to appoint and constitute the
E
arbitral tribunal - As per the amended provision, employees or ex-
employees or in any way related to the DMRC would be ineligible
to act as an arbitrators - No such case made out by the petitioner -
Though choice was given by DMRC to the opposite party to choose
an arbitrator but the choice is limited from the panel prepared by
F DMRC - Thus, it is imperative to have a much broad based panel,
so that there is no misapprehension that principle of impartiality
and independence would be discarded - DMRC to prepare a broad
based panel.
Dismissing the arbitration petition, the Court
G HELD: 1.1 Independence and impartiality of the arbitrator
are the hallmarks of any arbitration proceedings. Rule against
bias is one of the fundamental principles of natural justice which
applied to all judicial and quasi judicial proceedings. It is for this
reason that notwithstanding the fact that relationship between
H . the parties to the arbitration and the arbitrators themselves are
798
MIS. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 799
RAIL CORPORATION LTD.

contractual iu nature and the source of an arbitrator's appointment A
is deduced from the agreement entered into between the parties,
notwithstanding the same non-independence and non-impartiality
of such arbitrator (though contractually agreed upon) would
render him ineligible to conduct the arbitration. The genesis
behind this rational is that even when an arbitrator is appointed
B
in terms of contract and by the parties to the contract, he is
independent of the parties. Functions and duties require him to
rise above the partisan interest of the parties and not to act in, or
so as to further, the particular interest of either parties. After all,
the arbitrator has adjudicatory role to perform and, therefore, he
must be independent of parties as well as impartial. [Para 19) c
[824-C-E)
1.2 Independence and impartiality are two different
concepts. An arbitrator may be independent and yet, lack
impartiality, or vice versa. Impartiality, as is well accepted, is a
more subjective concept as compared to independence. D
Independence, which is more an objective concept, may, thus,
be more straightforwardly ascertained by the parties at the outset
of the arbitration proceedings in light of the circumstances
disclosed by the arbitrator, while partiality will more likely surface
during the arbitration proceedings. [Para 21) [825-B)
E
1.3 Various contingencies mentioned in the Seventh
Schedule render a person i1,1eligible to act as an arbitrator. Entry
No. 1 provides 'that where the arbitrator is an employee,
consultant, advisor or has any other past or present business
relationship with the party, would not act as an arbitrator. The
amended .provision puts an embargo on a person to act as an F
arbitrator, who is the employee of the party to the dispute. It also
deprives a person to act as an arbitrator if he had been the
consultant or the advisor or had any past or present busine~.
relationship with DMRC. N<> such case is made out by the
petitioner. [Para 23) (825-E-P; 826-A) G
1.4 Section 12 of the Arbitration and Conciliation Act, 1996
has been amended by the Amendmcni Act, 2015 with the objective
to induce neutrality of arbitrators, viz., their independence and
impartiality. The amended provision is enacted to identify the
'circumstances' which give rise to 'justifiable doubts' about the
H
800 SUPREME COURT REPORTS [2017] l S.C.R.

A independence or impartiality of the arbitrator. If any of those
circumstances as mentioned therein exists, it would give rise to
justifiable apprehension of bias. The Fifth Schedule to the Act
enumerates the grounds which may give rise to justifiable doubts
of this nature. Likewise, Seventh Schedule mentions those
circumstances which would attract the provisions of sub section
B
(5) of Section 12 and nullify any prior agreement to the contrary.
It is relevant to mention that only if an arbitrator is an employee,
a consultant, an advisor or has any past or present business
relationship with a party, he is rendered ineligible to act as an
arbitrator. Likewise, that person is treated as incompetent to
c perform the role of arbitrator, who is a manager, dkector or part
of the management or has a single controlling i.nfluence in an
affiliate of one of the parties if the affiliate is directly involved in
the matters in dispute in the arbitration. A comprehensive list is
enumerated in Schedule 5 and Schedule 7 and admittedly the
persons empanelled by the respondent are not covered by any of
D
the items in the said list. [Para 24) [826-B-E]
1.5 It cannot be said that simply because the person is
retired officer from the government or other statutory corporation
or public sector undertaking and had no connection with DMRC
(party in dispute), he would be treated as ineligible to act as an
E · ·arbitrator. Had this been the intention of the· 1egislature, the
Si;vent~ Schedule would have covered such persons as well. Bias .
or even- real likelihood of bias cannot be attributed to such highly
qualified and experienced persons, simply on the ground that
they served the Central Government or PSUs, even when they
F had no connection with DMRC. The very reason for empanelling·
these persons is to ensure that technical aspects of the dispute
are suitably resolved by utilising their expertise when they act
as arbitrators. The Law Commission had proposed the
incorporation of the Schedule which was drawn from the red and
orange list of IBA guidelines· on conflict of interest in international
G arbitrl!tion with the observation that the same would. be treated
as the· guide 'to determine whether circumstances exist which
give rise to such justifiable d<;rnbts'. Such persons do not get
covered by red or orange list of IBA guidelines either. [Para 25)
J8.26-F-H; 827-AJ
H
M/S. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 801
RAIL CORPORATION LTD.

1.6 DMRC forwarded the list of all 31 persons on its panel A
thereby giving a very wide choice to the petitioner to nominate
its arbitrator. They are not the employees or ex-employees or in
any way related to the DMRC. In any case, the persons who are
nltimately picked np as arbitrators will have to disclose their
interest in terms of amended provisions of Section 12 of the Act.
B
Therefore, it is not a fit case for exercising the jnrisdiction to
appoint and constitute the arbitral tribunal. [Para 26] [827-B-C]
1.7 Even when there .are number of persons empanelled,
discretion is with the DMRC to pick five persons therefrom and
forward their names to the other side which is to select one of
these five persons as its nominee (though in this case, it is now c
done away with). Not only this, the DMRC is also to nominate its
arbitrator from the said list. Above all, the two arbitrators have
also limited choice of picking upon the third arbitrator from the
very same list, i.e., from remaining three persons. This procedure
has two adverse consequences. In the first place, the choice given D
to the opposite party .is limited as it has to choose one out of the
five names that are forwarded by the other side. There is no free
choice to nominate a person out of the entire panel prepared by
the DMRC. Secondly, with the discretion given to the DMRC to
choose five persons, a room for suspicion is created in the mind
of the other side. that the DMRC may ·have picked· up its own E
favourites. Such a situation has to be countenanced. Therefore,
Sub-clauses (b) & (c) of Clause 9.2 of SCC need to be deleted
and instead choice should be given to the parties to nominate
any person from the entire panel of arbitrators. Likewise, the
two arbitrators nominated by the parties should be given full F
freedom to choose third arbitrator from the whole panel. [Para
2 7] [827-D-G]
1.8 As per Clause 9.2(<1) uf the GCC/SCC, the DMRC
prepares the panel of 'serving or retired engineers of government .
departments or public secto; umiertakings'. It is not nnderstood
G
as to why the panel has to be limited to the said category of
persons. Keeping in view the sl';rit of the amended provision
and in order to instill confidence in the mind of the oth~r party, it
is imperative that panel should be broad based. Apart from serving
or retired engineers of government departments and public sector
undertakings, engineers of prominence and high repute from H
802 SUPREME COURT REPORTS [20 I 7] I S.C.R.

A private sector should also be included. Likewise panel should
comprise of persons with legal background like judges and lawyers
of repute as it is not necessary that all disputes that arise, would
be of technical nature. There can be disputes involving purely or
substantially legal issues, that too, complicated in nature.
Likewise, some disputes may have the dimension of accountancy
B
etc. Therefore, it would also be appropriate to include persons
from this field as well. [Para 28] [827-H; 828-A-C]
1.9 Time has come to send positive signals to international
business community, in order to create healthy arbitration
environment and conducive arbitration culture in this country.
c Further, as highlighted by the Law Commission also in its report,
duty becomes more onerous in Government contracts, where one
of the parties to dispute is the Government or public sector
undertaking itself and the authority to appoint the arbitrator rests
with it. In the instant case also, though choice is given by DMRC
D to the opposite party but it is limited to choose an arbitrator from
the panel prepared by the DMRC. It, therefore, becomes
imperative to have a much broad based panel, so that there is no
misapprehension that principle of impartiality and independence
would be discarded at any stage of the proceedings, specially at
the stage of constitution of the arbitral tribunal. DMRC is directed
E
to prepare a broad based panel on the said lines, within the
stipulated period. [Para 29] [828-D-E)
Datar Swittchgears Ltd. v. Tata Finance Ltd. & Anr.
(2008) 8 SCC 151; Punj Lloyd Ltd. v. Petrone! MHC
Ltd. (2006) 2 SCC 638; Union of India v. Bharat
F Battery Manufacturing Co. (P) Ltd. (2007) 7 SCC 684
: [2007) 8 SCR 993; Deep Trading Co. v. Indian Oil
Corporation (2013) 4 SCC 35 : [2013) 2 SCR 470;
Union of India v. Singh Builders Syndicate (2009) 4
SCC 523 : [2009] 3 SCR 563; Northern Eastern
G Railway v. Tripple Engineering Works (2014) 9 SCC
288 : [2014] 6 SCR 1143; Union of India v. Uttar
Pradesh State Bridge Corporation Ltd. (2015) 2 SCC
52 - referred to.
Jivraj v. Hashwani (2011) UK SC 40 - referred to.
H
MIS. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 803
RAIL CORPORATION LTD.

Fouchard, Gaillard, Goldman on International A
Commercial Arbitration 575 Emmanuel Gaillard &
John Savage eds., 1999 - referred to.
Case Law Reference
(2008) 8 sec 151 referred to Para 18
B
(2006) 2 sec 638 referred to Para 18
[2007] 8 SCR 993 referred to Para 18
[2013] 2 SCR 470 referred to Para 18
[2009] 3 SCR 563 referred to Para 18
c
[2014] 6 SCR 1143 referred to Para 18
(2015) 2 sec 52 referred to Para 18
CIVIL ORIGINAL JURISDICTION: Arbitration Petition (Civil)
No. 50 of2016.
D
Gopal Jain, Sr. Adv., Ajay Bhargava, Ms. Vanita Bhargava,
Jeevan B. Panda, Kudrat Dev, Mis. Khaitan & Co., Advs. for the
Petitioner.
Mukul Rohtagi, AG, Ms. Shashi Kiran, Dr. Salish Chandra, Advs.
for the Respondent. E
The Judgment of the Court was delivered by
A. K. SIKRI, J. l. The petitioner, which is a Company
incorporated under the laws of Austria, with its registered office in that
country, has its branch office in DLF City, Gurgaon, Phase-II, India as
well. It is engaged, inter alia, in the business of steel production with the F
use of advance technology, like Rolling Technology and Heat Treatment
Technology, as well as manufacturing, producing and supplying rails and
related products. It claims to be a European market leader and innovation
pioneer with a worldwide reputation which has played a decisive role in
the development of modern railway rails. The respondent, Delhi Metro
G
Rail Corporation Ltd.. (DMRC) awarded the contract dated 12'h August,
2013 to the petitioner for supply of rails. Certain disputes have arisen
between the parties with regard to the said contract inasmuch as the
petitioner feels that respondent has wrongfully withheld a sum of euro
5,31,276/- (Euro Five Lakhs Thirty One Thousand Two Hundred and
H
804 SUPREME COURT REPORTS (2017] I S.C.R.

A Seventy Six only) towards invoices raised for supply oflast lot of3000
MT of rails and has also illegally encashed performance bank guarantees
amounting to EURO 7,83,200/- (Euro Seven Lakhs Eighty Three
Thousand Two Hundred only). Respondent has also imposed liquidated
damages amounting to EURO 4,00, 129.397/- (Euro Four Hundred
Thousand One Hundred Twenty Nine and Cent Three Hundred Ninety
B
Seven Only) and invoked price variation clause to claim a deposit of
EURO 4,87,830/- (Euro Four Lakhs Eighty Seven Thousand Eight
Hundred Thirty). Not satisfied with the performance of the petitioner,
the respondent has suspended the business dealings with the petitioner
for the period of six months. The petitioner feels aggrieved by all the
c aforesaid actions and wants its claims to be adjudicated upon by an
Arbitral Tribunal, having regard to the arbitration agreement between
the parties as contained in Clause 9.2 of General Conditions of Contract
(GCC) read with Clause 9.2 of Special Conditions of Contract (SCC).
2. It may be pointed out, at the outset, that arbitration agreement
D between the parties, as contained in the aforesaid clause of the contract
is not in dispute. It may also be pointed out that Clause 9.2(A) of the
SCC prescribes a particular procedure for constitution of the Arbitral
Tribunal which, inter alia, stipulates that the-respondent shall forward
names of five persons from the panel maintained by the respondent and
the petitioner will have to choose his nominee arbitrator from the said
E panel. As per the events mentioned in detail hereinafter, the respondent
had, in fact, furnished the names of five such persons to the petitioner
with a request to nominate its arbitrator from the said panel. However, it
is not acceptable to the petitioner as the petitioner feels that the panel
prepared by the respondent consists of serving or retired engineers either
F of respondent or of Government Department or Public Sector
Undertakings who do not qualify as independent arbitrators. According
to the petitioner, with the amendment of Section 12 of the Arbitration
and Conciliation Act, 1996 (hereinafter referred tu as the 'Act') such a
panel, by Amendment Act, 2015, as prepared by the respondent, has lost
its validity, as it is contrary to the amended provisions of Section 12 of
G the Act.For thisTeason, the petitioner has preferred the instant petition
under Section 11 (6) read with Section 11 (8) of the Act for appointment
of sole arbitrator/arbitral tribunal under Clause 9.2 of GCC read with
Clause 9 .2 of SCC of the Contract dated August 12, 2013.
3. With the aforesaid preliminary introduction reflecting the nature
H
MIS. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 805
RAIL CORPORATION LTD. [A. K. SIKRI, J.]

of these proceedings, we may take note of the relevant and material A
facts in some detail. Around January, 2013, the respondent had floated a
tender for the procurement of8000 Metric Tons (MT) "Head Hardened
Rails of certain specifications for Delhi Metro, Phase-III projects and
invited bids from the eligible bidders. The petitioner was one such bidder
whose bid was ultimately accepted after tender evaluation process
B
undertaken by the respondent. It resulted in the signing of contract
agreement dated August 12, 2013 between the parties for the supply of
the aforesaid material. As per the petitioner, it has duly delivered the
rails in three lots of 3000MT, 3000MT and 2000MT rails on January n,
2014, January 19, 2014 and August 03, 2014 respectively at sea port at
Mumbai, which delivery, according to the petitioner, was well within the c
agreed time limits. However, after the delivery of the aforesaid rails at
Mumbai, inland transport thereof from Mumbai to Respondent's depots
at Delhi was delayed due to various reasons. As per the petitioner, these
reasons are not attributed to it and it cannot be faulted for the same.
However, the respondent treated it as default on the part of the petitioner
D
and imposed liquidated damages vide its letter dated September 21, 2015.
The respondent als.o called upon the petitioner to submit its final bill so
that the liquidated damages could' be set off against the said bill. This
was the starting point of dispute 'between the parties, as the petitioner
refuted the allegations of the respondent and questiohed the imposition
of liquidated damages as well as calculations thereof. Correspondence E
ensued and exchanged between the parties but it may not be necessary
to state the same in detail here as that would be the subject matter of
adjudication before the arbitral tribunal. Suffice it to state that respondents
also encashed the bank guarantee and raised claims against the petitioner
as balance amount due from the petitioner. On the other hand, the
F
petitioner states that it is the respondent which has to pay substantial
amounts to the petitioner and a glimpse of the claims of the petitioner
has already been indicated above.
4. One thing is clear, there are disputes.between the parties giving
rise to claims and·counter claims against each other and these pertain to
and arise out ofcontract dated August 12, 2013. In view of these disputes G
and after receipt of communication dated April· 28, 2016 whereby
respondent had taken a decision to suspend business dealings with the
petitioner for a period of six months, and feeling aggrieved thereby, the
petitioner issued a legal notice dated May 11, 2016 through his advocates
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806 SUPRE.ME COURT REPORTS [2017] J S.C.R.

A calling upon the respondent to withdraw the suspension orders with a
threat to resort to legal proceedings ifthe same was not done within a
period of seven days. The respondent did not succumb to the said demand
and this inaction provoked the petitioner to approach the High Court by
filing Writ Petition no. 5439of2016 challenging respondent's action of
suspending business with the petitioner . In this petition, order dated
B
June 03, 2016 has been passed by the Delhi High Court thereby directing
the respondent to keep its decision of suspension with the petitioner, in
abeyance.
5. The petitioner states that thereafter it invoked the dispute
resolution clause and made efforts to amicably resolve the dispute.
c However, the said attempt failed and on June 14, 2016, the petitioner
invoked the arbitration clause.
6. At this juncture, we would like to reproduce Clause 9.2 of
GCC as well as Clause 9.2 of SCC.

D "9.2. If, after twenty-eight (28) days from the commencement
of such informal negotiations, the parties have failed to resolve
thefr dispute or difference by such mutual consultation, then either
the Purchaser or the Supplier may give notice to the other party
of its intention to commence arbitration, as hereinafter provided,
as to the matter in dispute, and no arbitration , as hereinafter
E provided, as to the matter in dispute, and no arbitration in respect
of this matter may be commenced unless such notice is given.
Any dispute or difference in respect of which a notice ofintention,
to commence arbitration has been given in accordance with this
Clause shall be finally settled by arbitration. Arbitration may be
commenced with this Clause shall be finally settled by arbitration.
F
Arbitration may be commenced prior to or after delivery of the
Goods under the Contract Arbitration proceedings shall be
conducted in accordance 'with the rules of procedure specified
in the SCC"
9 .2. The rules of procedure for arbitration proceedings pursuant
G
to GCC Clause 9.2 shall be as follows:
ARBITRATION & RESOLUTION OF DISPUTES:
The Arbitration and Conciliation Act- 1996 of India shall be-
applicable. Purchaser and the supplier shall make every necessary
H effort to resolve amicably by direct and informal negotiation any
1!
-ii

MIS. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 807
RAIL CORPORATION LTD. [A. K. SIKRI, J.]

disagreement or dispute arising between them under or in A
connection with contract.
Arbitration: If the efforts to resolve all or any of the disputes
through conciliation fails, then such, disputes or differences,
whatsoever arising between the parties, arising but of touching
or relating to supply/manufacture, measuring operation or effect B
of the Contract or the breach thereof shall be referred to
Arbitration, in accordance with the following provisions:
(a) Matters to be arbitrated upon shall be referred to a sole
Arbitrator where the total value of claims does not exceed Rs.
1.5 million. Beyond the claim limit of Rs. 1.5 million. Beyond the c
claim limit of Rs. 1.5 million, there shall be three Arbitrators.
For this purpose the Purchaser will make out a panel of
engineers with the requisite qualifications and professional
experience. This panel will be of serving or retired
engineers "Government Departments or of Public Sector .
Undertakings; D
(b) For the disputes to be decided by a sole Arbitrator, a 'list of
three engineers taken the aforesaid panel will be sent to the
supplier by the Purchaser from which the supplier will choose
one;
(c) For the disputes to be decided by three Arbitrators, E
the Purchaser will make out a list of five engineers from
the aforesaid panel. The supplier and Purchaser shall
choose one Arbitrator each, and the two so chosen shall
choose the third Arbitrator from the said list, who shall
act as the presiding Arbitrator; F
(d) Neither party shall be limited in the proceedings before such
Arbitrators(s) to the evidence.or the arguments put before the
Conciliator;
(e) The Conciliation and Arbitration hearings shall be held in
Delhi only. The language of the proceedings that of the documents G
and communications shall be English and the awards shall be
made in writing. The Arbitrators shall always give item-wise
and reasoned awards in all cases where the total claim exceeds
Rs. One mill ion; and
(f) The award of the sole Arbitrator or the award by majority of H
r
II 808 SUPREME COURT REPORTS (20 I 7] I S .C.R. • 809
MIS. VOE;.')I'ALPINE
Ii l
!
SCHIENEN GMBH v. DELHI METRO
RAIL CORPORATION LTD. [A. K. SIKRI, J.]

A
• be and shall be binding on all
three Arbitrators as the case miiy
I\ arbitral tribunal comprising of three members under Section 11 (6) read A
i' parties." with Section 11(8) of the Act for adjudication of the disputes between
I\
7. As per the aforesaid procedure, having regard to the quantum the parties.
!I of claims and counter claims, three arbitrators are to constitute the arbitral I 0. The respondents have contested the petition by filing its
:I tribunal. The agreement further provides that respondent would make
detailed reply, inter alia, taking upon the position that in view ofthe specific
ii out a panel of engineers with the requisite qualifications and professional
:i B agreement between the parties containing arbitration clause, which B
I' experience, which panel will be of serving or retired engineers of
;I govern1nent departments or public sector undertakings. From this panel,
prescribes the manner in which arbitral tribunal is to be constituted, present
petition under Section 11(6) of the Act is not even maintainable. The
the respondent has to give a list of five engineers to the petitioner and
respondent maintains that arbitration agreement as per which arbitral
both the petitioner and the respondent are required to choose one arbitrator
.tribunal is to be constituted from the panel prepared by the respondent
each from the said list. The two arbitrators so chosen have to choose
c the third arbitrator from that very list, who shall act as the presiding
does not offend provisions of Section 12 of the Act as maintained in the c
year 2015. It is submitted that the agreement valid, operative and capable
arbitrator.
of being performed and the arbitrators proposed by the respondent are
i 8. In the letter dated June 14, 2016; addressed by the petitioner not falling in the category of 'prohibited clause' as stipulated in under
to the respondent while invoking arbitration, the petitioner took the stand Section 12(5) of the Act read with clause I of the 7'' Schedule thereto.
th~t appointment of the arbitral tribunal as per the aforesaid clause from ·As per the respondent, since the arbitration involves adjudication of
D a panel of five persons comprising of serving or retired engineers of technical aspects, the respondents have proposed the panel of retired D

I
government departments or public sector undertakings, if followed, would
lead to appointment of'ineligible persons' being appointed as arbitrators,
engineers of the government having requisite expertise to arbitrate the
sub-matter. They are neither serving nor past employees of the DMRC
I
I:
I in view of Section 12(5) of the Act read with Clause.:l·of:Seventh and have no direct or indirect relations with the DMRC. Therefore, they
:I:
Schedule to the same Act. The petitioner, thus, nominated a retired judge are capable ofarbitrating the subject matter without compromising their .ii
of this Court as a sole arbitrator and- requested the respondent for its !1
E ' - ' . ' '. - . " ". , ""
' - . ,
independence and impartiality. E I
consent. ~" t .·'. · ~ I _ti .

9. The respondent, vide its letter dated July08, 2016, stuck to the
procedure as prescribed forthe arbitration clause and asked the petitioner
11. In support of the aforesaid plea taken in the petition, Mr.
Gopal Jain, learned senior counsel appearing for the petitioner submitted
that the entire ethos and spirit behind the amendment in Section 12 by
I 11

to nominate an arbitrator from the panel of five persons which it forwarded Amendment Act, 2015 were to ensure that the arbitral tribunal consists !I

F to the petitioner. Thereafter vi de letter dated July 19, 2016, the respondent of totally independent arbitrators and not those persons who are connected
F
appointed one person as its nominee arbitrator from the said list of five with the other side, even remotely. He submitted that Respondent No. I,
persons who is a retired officer from Indian Railway Service of Engineers i.e., DMRC was public sector undertaking which had all the trappings of
(IRSE) and called upon the petitioner to appoint its nominee arbitrator the Government and, therefore, even those persons who were not in the
from the remaining panel of four persons. At this juncture, on August I 7, employment of DMRC, but in the employment of Central Government
2016 present petition under Section I I of the Act' was· filed by the or other Government body/public sector undertakings should not be
G petitioner for constitution of the arbitral tribunal by this Court with the permitted to act as arbitrators. He submitted that the very fact that the G
prayer that the arbitratornominated by the petitioner(i.e: a former Judge panel of the arbitrator consisted only of'serving or retired engineers of
of this Court) should be appointed as the sole arbitrator ifthe respondent Government departments or public sector undertaking' defied the
consents to it or any impartial and independent sole arbitrator if ' neutrality aspect as they had direct or indirect nexus/privity with the
appointment of the petitioner's nominee is objected to by the respondent. respondent and the petitioner had reasonable apprehension oflikelihood
H Alternate prayer is made for appointment of an indepen_dent and impartial of bias on the part of such persons appointed as arbitrators, who were
H
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II 808 SUPREME COURT REPORTS (20 I 7] I S .C.R. • 809
MIS. VOE;.')I'ALPINE
Ii l
!
SCHIENEN GMBH v. DELHI METRO
RAIL CORPORATION LTD. [A. K. SIKRI, J.]

A
• be and shall be binding on all
three Arbitrators as the case miiy
I\ arbitral tribunal comprising of three members under Section 11 (6) read A
i' parties." with Section 11(8) of the Act for adjudication of the disputes between
I\
7. As per the aforesaid procedure, having regard to the quantum the parties.
!I of claims and counter claims, three arbitrators are to constitute the arbitral I 0. The respondents have contested the petition by filing its
:I tribunal. The agreement further provides that respondent would make
detailed reply, inter alia, taking upon the position that in view ofthe specific
ii out a panel of engineers with the requisite qualifications and professional
:i B agreement between the parties containing arbitration clause, which B
I' experience, which panel will be of serving or retired engineers of
;I govern1nent departments or public sector undertakings. From this panel,
prescribes the manner in which arbitral tribunal is to be constituted, present
petition under Section 11(6) of the Act is not even maintainable. The
the respondent has to give a list of five engineers to the petitioner and
respondent maintains that arbitration agreement as per which arbitral
both the petitioner and the respondent are required to choose one arbitrator
.tribunal is to be constituted from the panel prepared by the respondent
each from the said list. The two arbitrators so chosen have to choose
c the third arbitrator from that very list, who shall act as the presiding
does not offend provisions of Section 12 of the Act as maintained in the c
year 2015. It is submitted that the agreement valid, operative and capable
arbitrator.
of being performed and the arbitrators proposed by the respondent are
i 8. In the letter dated June 14, 2016; addressed by the petitioner not falling in the category of 'prohibited clause' as stipulated in under
to the respondent while invoking arbitration, the petitioner took the stand Section 12(5) of the Act read with clause I of the 7'' Schedule thereto.
th~t appointment of the arbitral tribunal as per the aforesaid clause from ·As per the respondent, since the arbitration involves adjudication of
D a panel of five persons comprising of serving or retired engineers of technical aspects, the respondents have proposed the panel of retired D

I
government departments or public sector undertakings, if followed, would
lead to appointment of'ineligible persons' being appointed as arbitrators,
engineers of the government having requisite expertise to arbitrate the
sub-matter. They are neither serving nor past employees of the DMRC
I
I:
I in view of Section 12(5) of the Act read with Clause.:l·of:Seventh and have no direct or indirect relations with the DMRC. Therefore, they
:I:
Schedule to the same Act. The petitioner, thus, nominated a retired judge are capable ofarbitrating the subject matter without compromising their .ii
of this Court as a sole arbitrator and- requested the respondent for its !1
E ' - ' . ' '. - . " ". , ""
' - . ,
independence and impartiality. E I
consent. ~" t .·'. · ~ I _ti .

9. The respondent, vide its letter dated July08, 2016, stuck to the
procedure as prescribed forthe arbitration clause and asked the petitioner
11. In support of the aforesaid plea taken in the petition, Mr.
Gopal Jain, learned senior counsel appearing for the petitioner submitted
that the entire ethos and spirit behind the amendment in Section 12 by
I 11

to nominate an arbitrator from the panel of five persons which it forwarded Amendment Act, 2015 were to ensure that the arbitral tribunal consists !I

F to the petitioner. Thereafter vi de letter dated July 19, 2016, the respondent of totally independent arbitrators and not those persons who are connected
F
appointed one person as its nominee arbitrator from the said list of five with the other side, even remotely. He submitted that Respondent No. I,
persons who is a retired officer from Indian Railway Service of Engineers i.e., DMRC was public sector undertaking which had all the trappings of
(IRSE) and called upon the petitioner to appoint its nominee arbitrator the Government and, therefore, even those persons who were not in the
from the remaining panel of four persons. At this juncture, on August I 7, employment of DMRC, but in the employment of Central Government
2016 present petition under Section I I of the Act' was· filed by the or other Government body/public sector undertakings should not be
G petitioner for constitution of the arbitral tribunal by this Court with the permitted to act as arbitrators. He submitted that the very fact that the G
prayer that the arbitratornominated by the petitioner(i.e: a former Judge panel of the arbitrator consisted only of'serving or retired engineers of
of this Court) should be appointed as the sole arbitrator ifthe respondent Government departments or public sector undertaking' defied the
consents to it or any impartial and independent sole arbitrator if ' neutrality aspect as they had direct or indirect nexus/privity with the
appointment of the petitioner's nominee is objected to by the respondent. respondent and the petitioner had reasonable apprehension oflikelihood
H Alternate prayer is made for appointment of an indepen_dent and impartial of bias on the part of such persons appointed as arbitrators, who were
H
810 SUPREME COURT REPORTS [2017] 1 S.C.R.

A not Iikely to act in an independent and impa1tial manner.
12. Mr. Mukul Rohatgi, learned Attorney General justifying the
stand taken by the respondent, with the aid of the provisions of the Act
and the case law, also drew attention to a subsequent development. He
pointed out that though in its earlier letter dated July 8, 2016 addressed
B by the respondent tu the petitioner, a list of persons was given asking the
petitiuPer to choose its arbitrator therefrom, the respondent has now
forwarded to the petitioner the entire panel of arbitrator maintained by
it. This fresh list contains as many as 31 names and, therefore, a wide
choice is given to the petitioner to nominate its arbitrator therefrom. It
was further pointed out that many panelists were the retired officers
c from Indian Railways who retired from high positions and were also
having high degree of technical qualifications and experience. The said
list included five persons who were not from railways at all but were the
ex-officers of the other bodies like, Delhi Development Authority (ODA)
and Central Public Works Department (CPWD). No one was serving
D or ex-employee of the DMRC. He further submitted that merely because
these person had served in railways or other government departments,
would not impinge upon their impa1tiality.
13. From the stand taken by the respective pa1ties and noted
above, it becomes clear that the moot question is as to whether panel of
arbitrators prepared by the respondent violates the amended provisions
E
of Section 12 of the Act. Sub-section (I) and sub-section (5) of Section
12 as well as Seventh Schedule to the Act which are relevant for our
purposes, may be reproduced below.
"Section 12(1 ), the following sub-section shal I be substituted,
namely:-
F
"( I) When a person is approached in connection with his possible
appointment as an arbitrator, he shall disclose in writing any
circumstances,-
(a) such as the existence either direct or indirect, of any
G past or present relationship with or interest in any of the
parties or in relation to the subject-matter in dispute,
whether financial, business, professional or other kind,
which is likely to give rise to justifiable doubts as to his
independence or impartiality; and

H (b) which are likely to affect his ability to devote sufficient time
M/S. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 811
RAIL CORPORATION LTD. (A. K. SIKRI, J.]

to the arbitration and in particular his ability to complete the entire · A
arbitration within a period of twelve months.
Explanation 1.-The grounds stated in the Fifth Schedule shall
guide in determining whether circumstances exist which give
rise to justifiable doubts as to the independence or impartiality of
an arbitrator. B
Explanation 2.-The disclosure shall be made by such person in
the form specified in the Sixth Schedule.";
(ii) after sub-section (4), the following sub-section shall be
inserted, namely:-
c
"(5) Notwithstanding any prior agreement to the contrary,
any person whose relationship, with the parties or counsel
or the subject-matter of the dispute, falls under any of the
categories specified in the Seventh Schedule shall be
· ineligible to be appointed as an arbitrator:
D
Provided that parties may, subsequent to disputes having arisen
between them, waive the applicability of this sub-section by an
express agreement in writing.
THE SEVENTH SCHEDULE
Arbitrator's relationship with the parties or counsel E
1. The arbitrator is an employee, consultant, advisor or
has any other past or present business relationship with a
party.
2. The arbitrator currently represents or advises one ofthe parties
or an affiliate of one of the parties. F

3. The arbitrator currently represents the lawyer or law firm
acting as counsel for one of the parties.
4. The arbitrator is a lawyer in the same law firm which is
representing one of the parties. G
5. The arbitrator is a manager, director or part of the management,
or has a similar controlling influence, in an affiliate ofone of the
parties ifthe affiliate is directly involved in the matters in dispute
in the arbitration.
6. The arbitrator's law firm had a previous but terminated 14 H
812 SUPREME COURT REPORTS [201 7] L S.C.R.

A involvement in the case without the arbitrator being involved
himself or herself.
" firm currently has a significant commercial
7. The arbitrator's law
relationship with one of the parties or an affiliate of one of the
parties.
B 8. The arbitrator regularly advises the appointing party or an
affiliate of the appointing party even though neither the arbitrator
nor his or her finn derives a significant financial income therefrom.
9. The arbitrator has a close family relationship with one of the
parties and in the case of companies with the persons in the
c management and controlling the company.
I 0. A close family member of the arbitrator has a significant
financial interest in one of the parties or an affiliate of one of the
parties.
I 1. The arbitrator is a legal representative of an entity that is a
D party in the arbitration.
I 2. The arbitrator is a manager, director or part of the
management, or has a similar controlling influence in one of the
parties.

E 13. The arbitrator has a significant financial interest in one of the
parties or the outcome of the case.
14. The arbitrator regularly advises the appointing party or an
affiliate of the appointing party, and the arbitrator or his or her
firm derives a significant financial income therefrom.
F Relationship of the arbitrator to the dispute
15. The arbitratqr has given legal advice or provided an expert
opinion on the dispute to a party or an affiliate of one of the
parties.
I 6. The arbitrator has previous involvement in the case.
G
Arbitrator's direct or indirect interest in the dispute
17. The arbitrator holds shares, either directly or indirectly, in
one of the parties or an affiliate of one of the parties that is
privately held.
H
M/S. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 813
RAIL CORPORATION LTD. [A. K. SIKRI, J.]

18. A close family member of the arbitrator has a significant A
financial interest in the outcome of the dispute.
19. The arbitrator or a close family memberofthe arbitrator has
a close relationship with a third party who may be liable to
recourse on the part of the unsuccessful party in the dispute.
Explanation l._:The term "close family inember" refers to a 13
spouse, sibling, child, parent or life partner.
.Explanation 2.-The te1m "affiliate" encompasses all companies
in one group of companies including the parent company.
Explanation 3.-For the removal of doubts, it is clarified that it
may be the practice in certain specific kinds of arbitration, such c
as maritime or·conimodities arbitration, to draw arbitrators from
a small, specialized pool. If in such fields it is the custom and
practice for parties frequently to appoint the same arbitrator in
different cases, this is a relevant fact to be taken into account
while applying the rules set out above.'." D
14. It is a well known fact that the Arbitration and Conciliation
Act, 1996 was enacted to consolidate and amend the law relating to
domestic arbitration, inter al ia, commercial arbitration and enforcement
of foreign arbitral awards etc. It is also an accepted position that while
enacting the said Act, basic structure of UNCITRAL Model Law was
E
kept in.mind. This became necessary in the wake of globalization and
the adoption of policy of liberlisation of Indian economy by the
Government of India in the early 90s. This model law ofUNCITRAL
provfdes the framework in order to achieve, to the maximum possible
exteni, uniform approach to the international commercial arb.itration. Aim
is to achieve convergence in arbitration law and avoid conflicting or F
varying provisions in the 16 arbitration Acts enacted by various countries.
Due to certain reasons, working of this Act witnessed some unpleasant
-~ .
developments and need was felt to smoothen out the rough edges
encountered thereby. The Law Commission examined various
shortcomings in the working of this Act and in its first Report, i.e, 176'"
G
Report ~ade various s~ggestions for amending certain provisions of the
Act. This exercise was again done by the Law Commission of India in
its Report No. 246 in August, 2004 suggesting sweeping amendments
touching upon various facets and acting upon most of these
recommendations, Arbitration Amendment Act of2015 was passed which
came into effect from October 23, 2015. H
814 SUPREME COURT REPORTS [2017] 1 S.C.R.

A 15. Apart from other amendments, Section 12 was also amended
and the amended provision has already been reproduced above. This
amendment is also based on the recommendation of the Law Commission
which specifically dealt with the issue of'neutrality ofarbitrators' and a
discussion in this behalf is contained in paras 53 to 60 and we would like
to reproduce the entire discussion hereinbelow:
B
"NEUTRALITY OF ARBITRATORS
53. It is universally accepted that any quasi-judicial process,
including the arbitration process, must be in accordance with
principles of natural justice. In the context of arbitration,
c neutrality of arbitrators, viz. their independence and
impartiality, is critical to the entire process.
54. In the Act, the test for neutrality is set out in section 12(3)
which provides - "An arbitrator may be challenged only if (a)
circumstances exist that give rise to justifiable doubts as to his
D independence or impartiality..."
55. The Act does not lay down any other conditions to identify
the "circumstances" which give rise to "justifiable doubts", and
it is clear that there can be many such circumstances and
situations. The test is not whether, given the circumstances, there
E is any actual bias for that is setting the bar too high; but, whether
the circumstances in question give rise to any justifiable
apprehensions of bias.
56. The limits of this provision has been tested in the Indian
Supreme Court in the context of contracts with State entities
F
naming particular persons/designations (associated with that
entity) as a potential arbitrator. It appears to be settled by a
·series of decisions of the Supreme Court (See Executive
Engineer, Irrigation Division, Puri v. Gangaram Chhapolia, 1984
(3) SCC 627; Secretary to Government Transport Department,
Madras v. Munusamy Mudaliar, 1988 (Supp) SCC 651;
G International Authority of India v. K.D. Bali and Anr, 1988 (2)
SCC 360; S. Rajan v. State of Kerala, 1992 (3) SCC 608; Mis.
Indian Drugs & Pharmaceuticals v. Mis. Jndo-Swiss Synthetics
Germ Manufacturing Co.Ltd., 1996 (I) SCC 54; Union oflndia
v. M.P. Gupta, (2004) 10 SCC 504; Ace Pipeline Contract Pvt.
Ltd. v. Bharat Petroleum Corporation Ltd., 2007 (5) SCC 304)
H
M/S. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 815
RAIL CORPORATION LTD. [A. K. SIKRI, J.]

that arbitration agreements in government contracts which A
provide for arbitration·by a serving employee of the department,
are valid and enforceable. While the Supreme Court, in Indian
Oil Corp. Ltd. v. Raja transport (P) Ltd., 2009 8 SCC 520 carved
out a minor exceptiomin situations when the arbitrator "was the
controlling or dealing authority in regard to the subject contract
B
or ifhe is a direct subordinate (as contrasted from an officer of
an inferior rank in some other depaitment) to the officer whose
decision is the subject matter of the dispute", and this exception
was used by the Supreme Court in Denel Propreitory Ltd. v.
Govt. of India, Ministry of Defence, AIR 2012 SC 817 and
Bipromasz Bipron Trading SA v. Bharat Electronics Ltd., (2012) c
6 sec 384, to appoint an independent arbitrator under section
11, this is not enough.
57. The balance between procedural fairness and binding nature
of these contracts, appears to have been tilted in favour of the
latter by the Supreme.Court, and the Commission believes the D
present position oflaw is far from satisfactory. Since the principles
of impartiality and independence cannot be discarded at any stage
of the proceedings, speCifically at the stage of constitution of the
arbitral tribunal, it would be incongruous to say that party
autonomy can be exercised in complete disregard of these
principles- even if the same has been agreed prior to the disputes E
having arisen between the parties. There are certain minimum
levels of independence and impartiality that should be
required of the arbitral process regardless of the parties'
apparent agreement. A sensible law cannot, for instance,
permit appointment of an arbitrator who is himself a party F
to the dispute, or who is employed by (or similarly
dependent on) one party, ~ven if this is what the parties
agreed. The Commission hastens to add that Mr. PK Malhotra,
the ex officio member of tne Law Commission suggested having
an exception for the State, and allow State parties to appoint
employee arbitrators. The Commission is of the opinion that, on G
this issue, there cannot be any distinction between State and
non-State· parties. The concept of party autonomy cannot be
stretched to a point where it negates the very basis of having
impartial ai1d independent adjudicators for resolution of disputes.
H
816 SUPREME COURT REPORTS [2017] I S.C.R.

A In fact, when the party appointing an adjudicator is the
State, the duty to appoint an impartial and independent
adjudicator is that much more onerous - and the right to
natural justice cannot be said to have been. waived .only on
the basis of a "prior" agreement between the parties at
the time of the contract and before arising of the disputes.
B
58. Large scale amendments have been suggested to address
this fundamental issue of neutrality of arbitrators, which the
Commission believes is critical to the functioning of the arbitration
process in India. Jn pa11icular, amendments have been proposed
to sections 11, 12 and 14 of the Act.
c 59.'The Commission has proposed the requirement of having
specific disclosures by the.arbitrator, at the stage of.his possible
appointment, regarding existence of any relationship or interest
of any kind which is likely to give rise tojustifiable doubts. The
Commission has proposed the incorporation of the Fourth
D Schedule, which has drawn from th.e Red and. Orange lists
of the IBA Guidelines on Conflicts of Interest in
International Arbitration, and which would be frea.ted as a
"guide" to determine whether circumstances exis.t which
give rise to suc!i justifiable doubts. On the other hand, in
terms of the proposed section 12 (5) of the Act.and the Fifth
E Schedule which incorporates the categories from the Red
list of .the IBA. Guidelines (as abo;ve), the person proposed
to be appointed .as an arbitrator shall be ineligible to be so
appointed, notwithstanding any prior agreement. to the
contrary. In the event such an ineligible person is purported to
F be appointed as an arbitrator, he shall be de jure deemed to be
unable to perform his functions, in terms. of the proposed
explanation to section 14. Therefore,. while the disclosure is
required with respect to a broader list of categories.(as set out in
the Fourth Schedule, and as baeyed on the Red and Orange lists
of the IBA Guidelines), the ineligibility to be appointed as an
G arbitrator (and the consequent de jure inability to so act)follows
from a smaller and more serious sub-set of situation.s (as set out
in the Fifth Schedule, and as based on the Red list of the IBA
Guidelines).
60. The Commission, however, feels that real and genuine party
H autonomy must be respected, and, in certain situations, parties
MIS. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 817
RAIL CORPORATION LTD. [A. K. SIKRI, J.]

should be allowed to waive even the categories of ineligibility as A
set in the proposed Fifth Schedule. This could be in situations of
family arbitrations or other arbitrations where a person commands
the blind faith and trust of the parties to the dispute, despite the
existence of objective "justifiable doubts" regarding his
independence and impartiality. To deal with such situations, the
B
Commission has proposed the proviso to section 12 (5), where
paities may, subsequent to disputes having arisen between them,
waive the applicability of the proposed section 12 (5) by an
express agreement in writing. In all other cases, the general rule
in the proposed section 12 (5) must be followed. In the event the
High Court is approached in connection with appointment of an c
arbitrator, the Commission has proposed seeking the disclosure
in terms of section 12 (I) and in which context the High Court or
the designate is to have "due regard" to the contents of such
disclosure in appointing the arbitrator."
16. We may put a note of clarification here. Though, the Law D
Commission discussed the aforesaid aspect under the heading "Neutrality
of Arbitrators", the focus of discussion was on impartiality and
independence of the arbitrators which has relation to or bias towards
one of the parties. In the field of international arbitration, neutrality is
generally related to the nationality of the arbitrator. In international sphere,
the 'appearance of neutrality' is considered equally important, which E
means that an arbitrator is neutral if his nationality is different from that
of the parties. However, that is not the aspect which is being considered
and the term 'neutrality' used is relatable to impartiality and independence
of the arbitrators, without any bias towards any of the parties. In fact,
the term 'neutrality of arbitrators' is commonly used in this context as F
well.
17. Keeping in mind the afore·quoted recommendation of the
Law Commission, with which spint, Section 12 has been amended by
the Amendment Act, 2015, it is manifest that the main purpose for
amending the provision was to provide for neutrality of arbitrators. In G
order to achieve this, sub-section (5) of Section 12 lays down that
notwithstanding any prior agreement to the contrary, any person whose
relationship with the parties or counsel or the subject matter of the dispute
falls under any of the categories specified in the Seventh Schedule, he
shall be ineligiblcto be appointed as an arbitrator. In such an eventuality,
.-. H
818 SUPREME COURT REPORTS [2017] I S.C.R.

A i.e,, when the arbitration clause finds foul with the amended provisions
extracted above, the appointment of an arbitrator would be beyond pale
of the arbitration agreement, empowering the court to appoint such
arbitrator(s) as may be permissible. That would be the effect of non-
obstante clause contained in sub-section (5) of Section 12 and the other
party cannot insist on appointment of the arbitrator in terms of arbitration
B
agreement.
18. We may mention here that there are number ofjudgments of
this Court even prior to the amendment of Section 12 where courts have
appointed the arbitrators, giving a go-by to the agreed arbitration clause
in certain contingencies and situations; having regards to the provisions
c of unamended Section 11 (8) of the Act which, inter alia, provided that
while appointing the arbitrator, Chief Justice, or the person or the institution
designated by him, shall have regard to the other conditions as are likely
to secure the appointment of an independent and impartial arbitrator.
See Datar Switchgears Ltd. v. Tata Finance Ltd. & Anr. 1 , Punj Lloyd
D Ltd. v. Petrone/ MHB Ltd.' , Union of India v. Bharat Battery
Manufacturing Co. (P) Ltd., 3, Deep Trading Co. v. Indian Oil
Corporation', Union of India v. Singh Builders Syndicate' and
Northern Eastern Railway v. Tripp/e Engineering Works'. Taking
note of the aforesaid judgments, this Court in Union ofIndia and others
i: Uttar Pradesh State Bridge Corporation Limited- summed up the
E position in the following manner:
13. No doubt, ordinarily that would be the position. The moot
question, however, is as to whether such a course of action has
to be necessarily adopted by the High Court in all cases, while
dealing with an application under Section 11 of the Act or is
F there room for play in the joints and the High Court is not divested
of exercising discretion under some circumstances? If yes, what
are those circumstances? It is this very aspect which was
specifically dealt with by this Court in Tripple Engg. Works
[North Eastern Railway v. Tripple Engg. Works, (2014) 9 SCC
G '(2008)8SCC 151
'(2006) 2 sec 638
'(2007J 1 sec 684
'(2013)4 sec 35
' (2009) 4 sec 523
'(2014) 9 sec 288
H '(2015) 2 sec 52
M/S. VOESTALPJNE SCHIENEN GMBH v. DELHI METRO 819
RAIL CORPORATION LTD. [A. K. SJKRI, J.]

288: (2014) 5 SCC (Civ) 30]. Taking note of various judgments, A
the Court pointed out that the notion that the High Court was
bound to appoint the arbitrator as per the contract between the
parties has seen a significant erosion in recent past. In paras 6
and 7 of the said decision, those judgments wherein departure
from the aforesaid "classical notion" has been made are taken
B
note of. It would, therefore, be useful to reproduce the said
paragraph along with paras 8 and 9 herein below: (SCC pp. 291-
93)
"6. The 'classical notion' that the High Court while exercising
its power under Section 11 of the Arbitration and Conciliation
Act, 1996 (hereinafter for short 'the Act') must appoint the c
arbitrator as per the contract between the parties saw a
significant erosion in ACE Pipeline Collfracts (P) Ltd. 1(
Bharat Petroleum Corpn. Ltd. [(2007) 5 SCC 304], wherein
this Court had taken the view that though the contract
between the parties must be adhered to, deviations therefrom D
in exceptional circumstances would be permissible. A more
significant development had come in a decision that followed
soon thereafter in Union of India 1( Bharat Batte1y Mfg.
Co. (P) Ltd. [(2007) 7 SCC 684] wherein following a three-
Judge Bench decision in Punj Lloyd Ltd. v. Petrone/ MHB
Ltd. {Pun} Lloyd Ltd. v. Petrone! MHB Ltd., (2006) 2 SCC E
638], it was held that once an aggrieved party files an
application under Section 11 (6) of the Act to the High Court,
the opposite party would lose its right of appointment of the
arbitrator(s) as per the terms of the contract. The implication
that the Court would be free to deviate from the terms of the F
contract is obvious.
7. The apparent dichotomy in ACE Pipeline ((2007) 5 SCC
304] and Bharat Battery Mfg. Co. (P) Ltd. [(2007) 7 SCC
684] was reconciled by a three-Judge Bench of this Court in
Northern Railway Admn., Ministry of Railway v. Patel
G
Engg. Co. Ltd. [Northern Railway Admn., Ministry of
Railway v. Patel Engg. Co. Ltd., (2008) 10 SCC 240] ,
wherein the jurisdiction of the High Court under Section 11 (6)
of the Act was sought to be emphasised by taking into account
the expression 'to take the necessary measure' appearing in
sub-section (6) of Section 11 and by further laying down that H
820 SUPREME COURT REPORTS [2017] I S.C.R.

A
-
the said expression has to be read along with the requirement
of sub-section (8) of Section 11 of the Act. The position was
further clarified in Indian Oil Corpn. Ltd. v. Raja
Tramport (P) Ltd.[(2009) 8 SCC 520: (2009) 3 SCC (Civ)
460] Para 48 of the Report wherein the scope of Section 11
of the Act was summarised may be quoted by reproducing
B
sub-paras (vi) and (vii) herein below: (Indian Oil case [(2009)
8 sec 520: (2009) 3 sec (Civ) 460], sec p. 537)
'48.(vi) The Chief Justice or his designate while exercising
power under sub-section (6) of Section 11 shall endeavour
to give effect to the appointment procedure presc•ibed
c in the arbitration clause.
(vii) If circumstances exist, giving rise to justifiable doubts
as to the independence and impartiality of the person
nominated, or if other circumstances warrant appointment
of an independent arbitrator by ignoring the procedure
D prescribed, the Chief Justice or his designate may, for
reasons to be recorded, ignore the designated arbitratc.r and
appoint someone else.'
8. The above discussion will not be complete without
reference to the view of this Court expressed in Union of
E India v. Singh Builders Syndicate [Union ofIndia v. Singh
Builders Syndicate, (2009) 4 SCC 523 : (2009) 2 SCC
(Civ) 246] , wherein the appointment of a retired Judge
contrary to the agreement requiring appointment of specified
officers was held to be valid on the ground that the arbitration
F proceedings had not concluded for over a decade making a
mockery of the process. In fact, in para25 of the Report in
Singh Builders Syndicate [Union of India v. Singh
Builders Syndicate, (2009) 4 SCC 523 : (2009) 2 SCC
(Civ) 246] this Court had suggested that the Government,
statutory authorities and government companies should
G consider phasing out arbitration clauses providing for
appointment of serving officers and encourage
professionalism in arbitration.
9. A pronouncement of late in Deep Trading Co. v. Indian
Oil Corpn. [(2013) 4 SCC 35: (2013) 2 SCC (Civ) 449]
H followed the legal position laid down in Punj Lloyd Ltd.
MIS. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 821
RAIL CORPORATION LTD. [A. K. SIKRI, J.]

[Punj Lloyd Ltd. v. Petronet MHB Ltd., (2006) 2 SCC A
638] which in tum had followed a two-Judge Bench decision
in Datar Switchgears Ltd. v. Tata Finance Ltd. [~2000) 8
SCCI 51 J The theory of forfeiture of the rights of a party
under the agreement to appoint its arbitrator once the
prpceedings und.er Section 11 (6) of the Act had commenced
B
, , . came to be even more formally embed.ded in Deep Trading
.Co. [(2013) 4 SCC 35: (201J) 2 SCC (Civ) 449] subject, of
course, to the provisions of Section 11 (8), which provision
in any eve.nt, had be.en held in Northern Railway Adnm.
[Northern Railway Admn., Ministry of Railway v. Patel
Engg. Co. Ltd., (2008) I 0 SCC 240] not to be mandatory, c
' but only embodying a requirement of keeping the same in
.. i
· view at the time of exercise of jurisdiction under Section
11(6) of the Act."
(emphasis in original)
14. Speedy conclusion ofarbitration proceedings hardly needs
D
t6 be emphasised. It would be of some interest to note that
in England also, Modem Arbitration Law on the lines of
UNCITRAL Model Law, came to be enacted in the same year
' astheJndian.law which is known as the English Arbitration
• Act; 1996 and it became effective from 31-1-1997. It is treated
as the most .extensive statutory reform of the English E
arbhration law. Commenting upon the structure of this Act,
Mustill, and Boyd in their Commercial Arbitration, 2001
companion volume to the 2"' Edn., have commented that
· .this Actfs founded on fo~r pillars. These pillars are described
as: .
F
(a) The first pillar: Three general principles.
(b) Tlie .second pillar: The general duty of the Tribunal.
, (c) The third pillar: The general duty of the parties.
(d) The fourth pillar: Mandatory and semi- mandatory
G
· provisions. ·
.. Insofar as the first pillar is concerned,' itcontains three general
prin,ciples on "'.hich the entire edifice of the said Act is
~fru~!ured .. These principles are mentioned by an English
.·.court in its judgment in Deptt. of Economics, Pu/icy and
H
822 SUPREME COURT REPORTS [2017] I S.C.R.

A Development of the City of Moscow v. Bankers Trust Co.
[2005 QB 207: (2004) 3 WLR 533: (2004) 4 All ER 746:
2004 EWCA Civ 314] In that case, Mance, L.J. succinctly
summed up the objective of this Act in the following words:
(QB p. 228, para 3 l)
B "31 . ... Parliament has set out, in the Arbitration Act, 1996,
to encourage and facilitate a reformed and more
independent, as well as private and confidential, systP,m of
consensual dispute resolution, with only limited possibilities
of court involvement where necessary in the interests of
the public and of basic fairness."
c
Section l of the Act sets forth the three main principles of
arbitration law viz. (i) speedy, inexpensive and fair trial by
an impartial tribunal; (ii) party autonomy; and (iii) minimum
court intervention. This provision has to be ap;ilied
purposively. In case of doubt as to the meaning of any
D provision of this Act, regard should be had to these principles.
15. In the book O.P. Malhotra on the Law and Practice of
Arbitration and Conciliation (3rd Edn. revised by Ms lndu
Malhotra), it is rightly observed that the Indian Arbitration
Act is also based on the aforesaid four foundational pillars.
E
l 6. First and paramount principle of the first pillar is "fair,
speedy and inexpensive trial by an Arbitral Tribunal".
Unnecessary delay or expense would frustrate the very
purpose of arbitration. Interestingly, the second principle
which is recognised in the Act is the party autonomy in the
F choice of procedure. This means that if a particular procedure
is prescribed in the arbitration agreement which the parties
have agreed to, that has to be generally resorted to. lt is
because of this reason, as a normal practice, the court will
insist the parties to adhere to the procedure to which they
G
have agreed upon. This would apply even while making the
appointment of substitute arbitrator and the general rule is
that such an appointment of a substitute arbitrator si1ould
also be done in accordance with the provisions of the original
agreement applicable to the appointment of the arbitrator at
the initial stage. [See Yashll'ith Constructions (PJ Ltd. v.
H Simplex Concrete Piles India Ltd. [(2006) 6 SCC 204]
M/S. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 821
RAIL CORPORAf!ON LTD. IA. K. SlKRI. J.]

However, this principle of party autonomy in the choice of
procedure has been deviated from in those cases where one
of the parties have committed default by not acting in
accordance with the procedure prescribed. Many such
instances where this course of action is taken and the Court
appoint the arbitrator when the persona designata has failed
B
to act, are taken note of in paras 6 and 7 of Tripple Engg.
Works {North Eastern Railway v. Tripple Engg. Works,
(2014) 9 SCC 288 : (2014) 5 SCC (Civ) 30] . We are
conscious of the fact that these were the cases where
appointment of the independent arbitrator made by the Court
in exercise of powers u'nder Section 11 of account of"default c
procedure". We are, in the present case, concerned with the
constitution of substitute Arbitral Tribunal wher~ earlier
Arbitral Tribunal has failed to perform. However, the above
principle of default procedure is extended by this Court in
such cases as well as is clear from the judgment in Singh
D
Builders Syndicate [Union of India v. Singh Builders
Syndicate, (2009) 4 SCC 523 : (2009) 2 SCC (Civ) 246].
17. In the case of contracts between g<'vernment
corporations/State-owned companies with private parties/
contractors, the terms of the agreement are usually drawn
by the government company or public sector undertakings. E
Government contracts have broadly two kinds of arbitration
clauses, first where a named officer is to act as sole arbitrator;
and second, where a senior officer like a Managing 9irector,
nominates a designated officer to act as the sole arbitrator.
No doubt, such clauses which give the Government a F
dominant position to constitute the Arbitral Tribunal are held
to be valid. At the same time, it also casts an onerous and
responsible duty upon the persona designata to appoint such
persons/officers as the arbitrators who are not only able to
function independently and impartially, but are in a position
to devote adequate time in conducting the arbitration. If the G
Government has nominated those officers as arbitra:ors who
are not able to devote time to the arbitration proceedings or
become incapable of acting as arbitrators because of frequent
transfers, etc., then the principle of "default procedure" at
least in the cases where Government has assumed the role H
,11
I
i ·]
! ~
1
824 SUPREME COURT REPORTS

'·
[2017] I S.C.R. r
I;
'ti
•.,
!'/t
•
MIS. VOESTALPINE SCHIENEN GMBH v. DELHI METRO
RAIL CORPORATION LTD. [A. K. SIKRI. J.]
825

,I A
1,
of appointment ofarbitrators to itself, has to be applied in tl1e
case of substitute arbitrators as well and the Court will step mind is indispensable in the exercise of judicial power, whatever the A
source of that power may be, and it is one of the essential qualities of an
iI in to appoint the arbitrator by keeping aside the procedure
which is agreed to between the parties. However, it will · arbitrator."
'I
depend upon the facts of a particular case as to whether 21. Independence and impa11iality are two different concepts.
·r' if
I i\~ - B such a course of action should be taken or not. What we An arbitrator may be independent and yet, lack impartiality, or vice versa.
,,
,,r: emphasise is that Court is not powerless in this regard." Impartiality, as is well accepted, is a more subjective concept as compared B
I " 19. Independence and impartiality of the arbitrator are the to independence. Independence, which is more an objective concept,
II ! may, thus, be more straightforwardly ascertained by the parties at the
' :;
I hallmarks of any arbitration proceedings. Rule against bias is one of the.
fundamental principles ofnaturaljustice which applied to all judicial and outset ofthe arbitration proceedings in light of the circumstances disclosed
''ji \!: c quasi judicial proceedings. It is for this reason that notwithstanding the by the arbitrator, while partiality will more likely surface during the
! !
,I! fact that relationship between the parties to the arbitration and the arbitration proceedings. c
I
I arbitrators themselves are contractual in nature and the source of an 22. It also cannot be denied that the Seventh Schedule is based
I arbitrator's appointment is deduced from the agreement entered into on !BA guidelines which are clearly regarded as a representation of
i between the parties, notwithstanding the same non-indepen.dence and international based practices and are. based on statutes, case law and I
I
l
D
non-impartiality of such arbitrator (though contractually agreed upon)
would render him ineligible to conduct the arbitration. The genesis behind
this rational is that even wl1en an arbitrator is appointed in terms of ·
juristic opinion from a cross-section on jurisdiction. It is so mentioned in
the guide! in es itself.
D IIIi
(: 23. Keeping in view the aforesaid parameters, we adve11 to the JI
'' contract and by the parties to the contract, he is independent of the I
pai1ies. Functions and duties require him to rise above the partisan interest facts of this case. Various contingencies mentioned in the Seventh
of the parties and not to act in, or so as to further, the particular interest Schedule render a person ineligible to act as an arbitrator. Entry no. I is
of either parties. After all, the arbitrator has adjudicatory role to perform highlighted bx the learned counsel for the petitioner which provides that 1111
E I.
and, therefore, he must be independent of parties as well as impartial. where the arbitrator is an employee, consultant, advisor or has any other
E
;p·![
• past or present business relationship with the party, would not act as an ·1 I,
The United Kingdom Supreme Court has beautifully highlighted this aspect
in Jirraj v. Haslma11i8 in the following words: arbitrator. What was argued by the learned senior counsel for. the
petitioner was that the panel of arbitrators drawn by the respondent (!1 !
i i:
"the dominant purpose ofappointing an arbitrator is the impartial consists of those persons who are government employees or ex-
F resolution of dispute between the parties in accordance with the
terms of the agreement and, although the contract between the
government employees. However, that by itself may not make such
persons ineligible as the panel indicates that these are the persons who
,I I:,
F
parties and the arbitrators would be a contract for the provision
,;1LI'
have worked in the railways under the Central Government or Central
of personal services, they were not personal services under the Public Works Department or public sector undertakings. They cannot
direction of the parties." be treated as employee or consultant or advisor of the respondent -
20. Similarly, Cour de cassation, France, in a judgment delivered DMRC. If this contention of the petitioner is accepted, then no person I
G who had earlier worked in any capacity with the Central Government or
I
in 1972 in the case of Consorts Ury', underlined that ;'an independent G
other autonomous or public sector undertakings, would be eligible to act
'(2011) UKSC 40,
as an arbitrator even when he is not even remotely connected with the I I
'FOUCllARD, GAILLARD, GOLDMAN ON INTERNATIONAL COMMERCIAL party in question, like DMRC in this case. The amended provision puts
i\RlllTRATION 575 (Emmanuel Gaillard & John Savage eds., 1999) (quoting Cour de
cassation [Cass.] [supreme court for judicial matters] 2e civ.,Apr. 13, 1972, JCP 1972.11, an embargo on a person to act as an arbitrator, who is the employee of \
17189(Fr.)). I
H the party to the dispute. It also deprives a person to act as an arbitrator 111
'1\
H

h,

~ :11 ·
l '
...__ --- - L
,11
I
i ·]
! ~
1
824 SUPREME COURT REPORTS

'·
[2017] I S.C.R. r
I;
'ti
•.,
!'/t
•
MIS. VOESTALPINE SCHIENEN GMBH v. DELHI METRO
RAIL CORPORATION LTD. [A. K. SIKRI. J.]
825

,I A
1,
of appointment ofarbitrators to itself, has to be applied in tl1e
case of substitute arbitrators as well and the Court will step mind is indispensable in the exercise of judicial power, whatever the A
source of that power may be, and it is one of the essential qualities of an
iI in to appoint the arbitrator by keeping aside the procedure
which is agreed to between the parties. However, it will · arbitrator."
'I
depend upon the facts of a particular case as to whether 21. Independence and impa11iality are two different concepts.
·r' if
I i\~ - B such a course of action should be taken or not. What we An arbitrator may be independent and yet, lack impartiality, or vice versa.
,,
,,r: emphasise is that Court is not powerless in this regard." Impartiality, as is well accepted, is a more subjective concept as compared B
I " 19. Independence and impartiality of the arbitrator are the to independence. Independence, which is more an objective concept,
II ! may, thus, be more straightforwardly ascertained by the parties at the
' :;
I hallmarks of any arbitration proceedings. Rule against bias is one of the.
fundamental principles ofnaturaljustice which applied to all judicial and outset ofthe arbitration proceedings in light of the circumstances disclosed
''ji \!: c quasi judicial proceedings. It is for this reason that notwithstanding the by the arbitrator, while partiality will more likely surface during the
! !
,I! fact that relationship between the parties to the arbitration and the arbitration proceedings. c
I
I arbitrators themselves are contractual in nature and the source of an 22. It also cannot be denied that the Seventh Schedule is based
I arbitrator's appointment is deduced from the agreement entered into on !BA guidelines which are clearly regarded as a representation of
i between the parties, notwithstanding the same non-indepen.dence and international based practices and are. based on statutes, case law and I
I
l
D
non-impartiality of such arbitrator (though contractually agreed upon)
would render him ineligible to conduct the arbitration. The genesis behind
this rational is that even wl1en an arbitrator is appointed in terms of ·
juristic opinion from a cross-section on jurisdiction. It is so mentioned in
the guide! in es itself.
D IIIi
(: 23. Keeping in view the aforesaid parameters, we adve11 to the JI
'' contract and by the parties to the contract, he is independent of the I
pai1ies. Functions and duties require him to rise above the partisan interest facts of this case. Various contingencies mentioned in the Seventh
of the parties and not to act in, or so as to further, the particular interest Schedule render a person ineligible to act as an arbitrator. Entry no. I is
of either parties. After all, the arbitrator has adjudicatory role to perform highlighted bx the learned counsel for the petitioner which provides that 1111
E I.
and, therefore, he must be independent of parties as well as impartial. where the arbitrator is an employee, consultant, advisor or has any other
E
;p·![
• past or present business relationship with the party, would not act as an ·1 I,
The United Kingdom Supreme Court has beautifully highlighted this aspect
in Jirraj v. Haslma11i8 in the following words: arbitrator. What was argued by the learned senior counsel for. the
petitioner was that the panel of arbitrators drawn by the respondent (!1 !
i i:
"the dominant purpose ofappointing an arbitrator is the impartial consists of those persons who are government employees or ex-
F resolution of dispute between the parties in accordance with the
terms of the agreement and, although the contract between the
government employees. However, that by itself may not make such
persons ineligible as the panel indicates that these are the persons who
,I I:,
F
parties and the arbitrators would be a contract for the provision
,;1LI'
have worked in the railways under the Central Government or Central
of personal services, they were not personal services under the Public Works Department or public sector undertakings. They cannot
direction of the parties." be treated as employee or consultant or advisor of the respondent -
20. Similarly, Cour de cassation, France, in a judgment delivered DMRC. If this contention of the petitioner is accepted, then no person I
G who had earlier worked in any capacity with the Central Government or
I
in 1972 in the case of Consorts Ury', underlined that ;'an independent G
other autonomous or public sector undertakings, would be eligible to act
'(2011) UKSC 40,
as an arbitrator even when he is not even remotely connected with the I I
'FOUCllARD, GAILLARD, GOLDMAN ON INTERNATIONAL COMMERCIAL party in question, like DMRC in this case. The amended provision puts
i\RlllTRATION 575 (Emmanuel Gaillard & John Savage eds., 1999) (quoting Cour de
cassation [Cass.] [supreme court for judicial matters] 2e civ.,Apr. 13, 1972, JCP 1972.11, an embargo on a person to act as an arbitrator, who is the employee of \
17189(Fr.)). I
H the party to the dispute. It also deprives a person to act as an arbitrator 111
'1\
H

h,

~ :11 ·
l '
...__ --- - L
826 SUPREME COURT REPORTS [2017] 1 S.C.R.

A if he had been the consultant or the advisor or had any past or present
business relationship with DMRC. No such case is made out by the
petitioner.
24. Section 12 has been amended with the objective to induce
neutrality of arbitrators, viz., their independence and impartiality. The
B amenc'cd provision is enacted to identifythe 'circumstances' which give
rise to 'justifiable doubts' about the independence or impartiality of the
arbitrator. If any of those circumstances as mentioned therein exists, it
will give rise to justifiable apprehension of bias. The Fifth Schedule to
the Act enumerates the grounds which may give rise to justifiable doubts
of this nature. Likewise, Seventh Schedule mentions those circumstances
c which would attract the provisions of sub-section (5) of Section 12 and
nullify any prior agreement to the contrary. In the context of this case, it
is relevant to mention that only if an arbitrator is an employee, a
consultant, an advisor or has any past or present business relationship
with a party, he is rendered ineligible to act as an arbitrator. Likewise,
D that person is treated as incompetent to perform the role of arbitrator,
who is a manager, director or part of the management or has a single
controlling influence in an affiliate ofone of the parties ifthe affiliate is
directly involved in the matters in dispute in the arbitration. Likewise,
persons who regularly advised the appointing party or affiliate of the
appointing party are incapacitated. A comprehensive list is enumerated
E
in Schedule 5 and Schedule 7 and admittedly the persons empaneled by
the respondent are not covered by any of the items in the said list.
25. It cannot be said that simply because the person is retired
officer who retired from the government or other statutory corporation
or public sector undertaking and had no connection with DMRC (party
F in dispute), he would be treated as ineligible to act as an arbitrator. Had
this been the intention of the legislature, the Seventh Schedule would
have covert'J such persons as well. Bias or even real likelihood of bias
cannot be attributed to such highly qualified and experienced persons,
simply on the ground that they served the Central Government or PS Us,
G even when they had no ~onnection with DMRC. The very reason for
empaneling these persons is to ensure that technical aspects of the dispute
are suitably resolved by utilising their expertise when they act as
arbitrators. It may also be mentioned herein that the Law Commission
had proposed the incorporation of the Schedule which was drawn from
the red and orange list of IBA guidelines on conflict of interest in
H
MIS. VOESTALPINE SCHIENEN GMBH v. DELHI METRO 827
RAIL CORPORATION LTD. [A. K. SIKRI, J.]

international arbitration with the observation that the same would be A
treated as the guide 'to determine whether circumstances exist which
give rise to suchjustifiable doubts'. Such persons do not get covered by
red or orange list of IBA guidelines either.
26. As already noted above, DMRC has now forwarded the list
of all 31 persons on its panel thereby giving a very wide choice to the B
petitioner to nominate its arbitrator. They are not the employees or ex-
employees or in any way related to the DMRC. In any case, the persons
who are ultimately picked up as arbitrators will have to disclose their
interest in terms of amended provisions of Section 12 of the Act. We,
therefore, do not find it to be a fit case for exercising our jurisdiction to
appoint and constitute the arbitral tribunal.
c
2 7. Before we part with, we deem it necessary to make ce1tain
comments on the procedure contained in the arbitration agreement for
constituting the arbitral tribunal. Even when there are number of persons
empaneled, discretion is with the DMRC to pick five persons therefrom
and forward their names to the other side which is to select one of these D
five persons as its nominee (Though in this case, it is now done away
with). Not only this, the DMRC is also to nominate its arbitrator from
the said list. Aboye all, the two arbitrators have also limited choice of
picking upon the third arbitrator ftom the very same list, i.e., from
remaining three persons. This procedure has two adverse consequences. E
In the first place, the choice given to the opposite party is limited as it
has to choose one out of the five names that are forwarded by the other
side. There is no free choice to nominate a person out of the entire panel
prepared by the DMRC. Secondly, with the discretion givento the DMRC
to choose five persons, a room for suspicion is created in the mind of the
other side that the DMRC may have picked up its own favourites. Such F
a situation has to be countenanced. We are, therefore, of the opinion
that sub-clauses (b) & (c) of clause 9.2 ofSCC need to be deleted and
instead choice should be given to the parties to nominate any person
from the entire panel of arbitrators. Likewise, the two arbitrators
nominated by the parties should be given full freedom to choose third G
arbitrator from the whole panel.
28. Some comments are also needed on the clause 9.2(a) of the
GCC/SCC, as per which the DMRC prepares the panel of 'serving or
retired engineers of government departments or public sector
undertakings'. It is not understood as to why the panel has to be limited H
828 SUPREME COURT REPORTS [2017] l S.C.R.

A to the aforesaid category of persons. Keeping in view the spirit of the
amended provision and in order to instil confidence in the mind of the
other party, it is imperative that panel should be broad based. Apart
from serving or retired engineers of government departments and public
sector undertakings, engineers of prominence and high repute from private
sector should also be included. Likewise panel should comprise of persons
B
with legal background like judges and lawyers of repute as it is not
necessary that all disputes that arise, would be of technical nature. There
can be disputes involving purely or substantially legal issues, that too,
complicated in nature. Likewise, some disputes may have the dimension
of accountancy etc. Therefore, it would also be appropriate to include
c persons from this field as well.
29. Time has come to send positive signals to the international
business community, in order to create healthy arbitration environment
and conducive arbitration culture in this country. Further, as highlighted
by the Law Commission also in its report, duty becomes more onerous
D in Government contracts, where one of the parties to dispute is the
Government or public sector undertaking itself and the authority to appoint
the arbitrator rests with it. In the instant case also, though choice is
given by DMRC to the opposite party but it is limited to choose an arbitrator
from the panel prepared by the DMRC. It, therefore, becomes imperative
to have a much broad based panel, so that there is no misapprehension
E
that principle of impartiality and independence would be discarded at
any stage of the proceedings, specially at the stage ofconstitution of the
arbitral tribunal. We, therefore, direct that DMRC shall prepare a broad
based panel on the aforesaid lines, within a period of two months from
today.
F 30. Subject to the above, insofar as present petition is concerned,
we dismiss the same, giving two weeks' time to the petitioner to nominate
its arbitrator from the list of31 arbitrators given by the respondent to the
petitioner.
No costs.
G

Nidhi Jarn Arbitration Petition dismissed.