Arbitrator must be independent of parties, says Delhi court

A Delhi court has held that an arbitrator must be “independent of parties as well as impartial”, and that an award passed by the one appointed solely by one party is invalid and liable to be set aside.

District Judge Sanjiv Jain observed while hearing a plea filed by a company, Bansal Brothers, against the Union of India in a dispute regarding a tender for the construction of a road at Kendriya Vidyalaya, Narela.

The court accepted the arguments advanced by advocate Namit Saxena, appearing for Bansal Brothers, that the neutrality of the arbitrator and his independence and impartiality is critical.

“The genesis behind this rationale is that even when an arbitrator is appointed in terms of the 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 to further, the particular interest of either party. After all, the arbitrator has an adjudicatory role to perform, and therefore, he must be independent of parties as well as impartial,” the judge said.

The court said in an order passed earlier this month that any quasi-judicial process, including the arbitration process, must be by the principles of natural justice. According to the petition, the Union of India had invited tenders for the supply of good earth and the laying of water-bound macadam (WBM) for the construction of the road at Kendriya Vidyalaya at A-5, Pocket-11, Narela, Delhi in 2017, which was finally awarded to Bansal Brothers. As disputes cropped up about payment to be made, the matter was referred to arbitration, the petition said.

The appointment of the arbitrator was done unilaterally by the Union of India who passed the award against the Bansal Brothers, it said.

The court allowed the plea, saying that the award passed by the arbitrator was patently illegal.

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