Impact of Supreme Court Decisions on Institutional Arbitration

Understanding Institutional Arbitration in India

Definition and Key Features of Institutional Arbitration

Institutional arbitration is a dispute resolution process administered and supervised by specialized arbitral institutions according to predefined arbitration rules. It involves comprehensive administrative support for the appointment of arbitrators, fixing arbitrators’ fees, managing procedural timelines, providing arbitration venues, and scrutinizing arbitral awards, thereby reducing the parties’ procedural responsibilities. Institutional arbitration operates within the legislative framework of the Arbitration and Conciliation Act, 1996 (“the Arbitration Act”) (amended in 2015 and 2019), particularly Sections 11 (Appointment of Arbitrators), 12 (Impartiality and Independence of Arbitrators), and Section 29A (Time Limit for Arbitration Proceedings).

Difference between Ad Hoc Arbitration and Institutional Arbitration

Under Indian law, Ad hoc arbitration is regulated by the parties themselves without the oversight of an arbitration institution, thus providing flexibility but limited administrative assistance; the procedures are determined either by mutual consent or as provided under Part I of the Arbitration and Conciliation Act, 1996. Conversely, Institutional arbitration follows established rules and procedures of arbitration institutions, ensuring structured proceedings, greater predictability, transparency, and procedural certainty, with administrative support that ensures compliance with Sections 11, 12, and 29A of the Arbitration Act.

Leading Arbitral Institutions in India – Examples and Roles

Prominent institutional arbitration centers in India include the Indian Institute of Arbitration and Mediation (IIAM), recognized for offering institutional arbitration services under the IIAM Arbitration Rules, with a panel comprising distinguished arbitrators. The Mumbai Centre for International Arbitration (MCIA) operates under MCIA Rules 2016, providing procedural clarity, timely award issuance, and international-standard arbitration facilities.

The Delhi International Arbitration Centre (DIAC), established under the aegis of the Delhi High Court, administers arbitration cases under the DIAC Arbitration Rules 2018, contributing significantly to reducing judicial backlog and providing reliable arbitration outcomes under judicial oversight.

The Scope and Future of Institutional Arbitration in India

Institutional arbitration in India operates under the Arbitration Act, significantly amended by the Arbitration and Conciliation (Amendment) Acts of 2015, 2019, and 2021. Institutional arbitration refers to arbitration administered by a specialized arbitral institution which manages procedural aspects such as appointment of arbitrators, fee schedules, hearing facilities, and procedural rules, distinct from ad hoc arbitration, which relies entirely on party arrangements.

Growth Trends and Potential of Institutional Arbitration in India

Institutional arbitration has witnessed substantial growth in India, particularly after comprehensive legislative reforms and proactive judicial interventions. According to the Arbitration Act, institutional arbitration offers several procedural advantages, including standardized arbitration rules, fixed timelines under Section 29A (inserted by the 2015 Amendment), and professional oversight which enhances predictability, transparency, and efficiency in dispute resolution.

The 2024 Constitution Bench judgment of the Supreme Court in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) has emphasized impartiality and equality in arbitral proceedings, further strengthening the credibility of institutional arbitration by restricting unilateral appointments and ensuring compliance with mandatory neutrality norms under Section 12(5) read with the Seventh Schedule of the Arbitration Act.

Further, the establishment of prominent institutions such as the IIAM, MCIA, and DIAC signifies growing institutional acceptance. Data from recent surveys indicates that domestic and international businesses are progressively selecting institutional arbitration clauses due to the clarity and enforceability provided by institutional rules.

Additionally, India’s potential as a hub for international arbitration has received recognition due to its pro-arbitration judiciary, English-speaking legal professionals, and cost-effective arbitration institutions compared to traditional arbitration hubs such as Singapore, London, and Hong Kong.

Factors Promoting the Shift Towards Institutional Arbitration

Legislative Amendments and Government Initiatives

Significant legislative amendments to the Arbitration Act have been pivotal in promoting institutional arbitration:

• 2015 Amendment: Introduced Section 11(6A) limiting judicial scrutiny at the stage of arbitrator appointment; mandated timely arbitration under Section 29A; and added Section 12(5), ensuring arbitrator neutrality and independence through disclosures required under the Fifth and Seventh Schedules.
• 2019 Amendment: Established the Arbitration Council of India (ACI) under Part IA (Section 43A to 43M), tasked with grading arbitral institutions, promoting institutional arbitration, and setting standards for arbitrators and arbitral institutions.
• 2021 Amendment: Clarified automatic stay on arbitral awards under challenge (Section 36(3)) and removed uncertainties surrounding enforcement proceedings, thus providing commercial certainty.

The government initiatives complementing these legislative changes include:

• New Delhi International Arbitration Centre Act, 2019: Established NDIAC, aimed at developing India into a global arbitration center.
• Department of Legal Affairs (Ministry of Law and Justice) actively promotes institutional arbitration by endorsing model dispute resolution clauses and supporting international conferences to raise awareness about India’s arbitration capabilities.

Commercial Awareness and Judicial Support

Indian judiciary’s robust support has significantly contributed to institutional arbitration’s growth. Key Supreme Court decisions reflect clear judicial intent:

• In Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd. (2017), the Supreme Court upheld broad-based institutional arbitrator panels, thus legitimizing institutional mechanisms.
• In Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2019) and TRF Ltd. v. Energo Engineering Projects Ltd. (2017), the Supreme Court curtailed unilateral arbitrator appointments, promoting institutional frameworks as neutral alternatives.
• The 2024 Constitution Bench judgment unequivocally reaffirmed judicial support for impartial institutional arbitration, explicitly emphasizing Section 18 (equal treatment of parties) and Section 12(5) (arbitrator impartiality) of the Arbitration Act, thereby bolstering commercial confidence.

Awareness amongst businesses has also grown, particularly with multinational corporations demanding institutional arbitration clauses to mitigate litigation risks and uncertainties associated with ad hoc arbitrations. Enhanced commercial awareness arises from an understanding of enforceability, procedural predictability, and neutrality guaranteed by institutional rules and judicial precedents.

Challenges and Barriers in the Adoption of Institutional Arbitration

Despite progress, institutional arbitration in India encounters significant challenges:

• Institutional Credibility and Infrastructure: Most Indian arbitral institutions, barring a few, lack world-class infrastructure, technology-driven processes, and administrative sophistication. Credibility is crucial, as institutions compete internationally with established entities like SIAC, ICC, and LCIA.
• Cost and Time Concerns: While institutional arbitration is perceived to enhance efficiency, businesses express concerns regarding high institutional fees and prolonged procedural timelines compared to some flexible ad hoc arrangements. Despite Section 29A setting statutory timelines, practical delays persist due to procedural complexities.
• Limited Institutional Capacity: The availability of qualified arbitrators remains limited, impacting the reliability of institutions in handling high-value and complex disputes. Capacity-building initiatives and rigorous arbitrator training programs remain imperative.
• Perceived Judicial Interference: Despite legislative reforms restricting judicial intervention (Sections 5 and 34), businesses sometimes perceive persistent judicial interference, particularly at the enforcement stage under Section 36. Although recent judgments have minimized such interference, residual apprehensions persist in the market.
• Slow Adoption in Public Sector Contracts: Despite judicial nudges and legislative efforts, government contracts frequently retain ad hoc clauses or unilateral appointment provisions, restricting institutional arbitration adoption. The 2024 Constitution Bench judgment has addressed this concern, explicitly disallowing unilateral appointments, but widespread practical implementation remains awaited.
• Resistance from Traditional Legal Practice: Institutional arbitration requires practitioners to adapt to standardized rules and procedures, differing from traditional litigation or ad hoc arbitration practice, causing some resistance within the legal fraternity.

Landmark Supreme Court Judgments Influencing Institutional Arbitration

The Arbitration Act, as amended by the Arbitration and Conciliation (Amendment) Acts of 2015 and 2019, provides the foundational framework for arbitration in India. Recent Supreme Court judgments have significantly influenced the appointment of arbitrators, ensuring adherence to principles of impartiality, independence, and fairness as envisaged by Sections 11, 12, and 18 of the Arbitration Act.

Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2019) – Impact on Sole Arbitrator Appointment

The Supreme Court in Perkins Eastman Architects DPC v. HSCC (India) Ltd. [(2019) SCC OnLine SC 1517] specifically dealt with unilateral appointments of sole arbitrators. The Court held that a party who has an interest in the dispute or its outcome cannot unilaterally appoint a sole arbitrator. The judgment emphasized the importance of the independence and impartiality of arbitrators as mandated under Section 12(5) of the Arbitration Act.

The Court observed: “The person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator.”

This landmark ruling prevents any interested party from controlling the arbitration process through unilateral arbitrator appointments, reinforcing fairness in institutional arbitration proceedings in India.

TRF Ltd. v. Energo Engineering Projects Ltd. (2017) – Appointment by Ineligible Persons

In TRF Ltd. v. Energo Engineering Projects Ltd. [(2017) 8 SCC 377], the Supreme Court interpreted Section 12(5) read with the Seventh Schedule of the Arbitration Act, which provides specific criteria for disqualification of arbitrators.

The arbitration clause in dispute allowed the Managing Director of one party (who was rendered ineligible under Section 12(5)) to appoint a sole arbitrator. The Supreme Court categorically held that once a person is rendered ineligible to act as an arbitrator under Section 12(5), such person cannot nominate or appoint another arbitrator. The Court invoked the common-law principle qui facit per alium facit per se (he who acts through another, acts himself).

This decision crucially clarified that if the appointing authority itself becomes ineligible to arbitrate under the Act, it cannot delegate the power of appointment to another person, thus safeguarding impartiality in arbitrations involving institutional entities or powerful contractual parties.

Voestalpine Schienen GmbH v. DMRC (2017) – Broad-Based Arbitrator Panels

The case of Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd. [(2017) 4 SCC 665] addressed concerns related to arbitrator appointments from limited panels curated by one party (especially government or public-sector entities).

In this judgment, the Supreme Court held that arbitrator panels curated by a single party must be broad-based and sufficiently inclusive to ensure impartiality and independence. The Court also clarified that the Seventh Schedule under Section 12(5) does not create a blanket prohibition against retired government employees serving as arbitrators, provided they meet the impartiality criteria.

The Supreme Court directed DMRC to constitute a comprehensive, diversified panel of arbitrators including experts from various sectors (e.g., private professionals, legal experts, accountants), thus ensuring fairness in institutional arbitration processes where public entities are involved.

Central Organisation for Railway Electrification (CORE) Case (2019) – Unilateral Appointment by Public Entities

In the case of Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) [(2019) SCC OnLine SC 1635], the arbitration clause permitted the General Manager (GM) of Railways to appoint arbitrators from a panel of retired railway officers.

The Court held this procedure valid, distinguishing it from the Perkins and TRF cases, on the ground that the power of unilateral appointment was counter-balanced by allowing the opposite party to select names from a broader panel. Specifically, the arbitration clause permitted the contractor to nominate at least two names, from which the GM would appoint at least one arbitrator, maintaining some parity in the appointment process.

However, this judgment raised concerns over impartiality in cases involving public entities, ultimately leading to a reference to a Constitution Bench due to conflicting views on unilateral appointments.

Recent Constitution Bench Judgment on Appointment of Arbitrators 

In a significant recent development (Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML, 2024 INSC 857), a Constitution Bench of the Supreme Court delivered a landmark judgment addressing key controversies around appointment procedures under institutional arbitration.

Key Findings and New Legal Principles from the 2024 Supreme Court Decision

The Constitution Bench provided a definitive interpretation of Sections 11, 12, and 18 of the Arbitration Act, holding:

1. Unilateral Appointment Invalidity: Any arbitration agreement or clause empowering one party, particularly one with a vested interest, to unilaterally appoint arbitrators or to curate restrictive panels violates principles of impartiality and equality enshrined under Sections 12(5) and 18 of the Arbitration Act.
2. Equality at the Appointment Stage: The Supreme Court categorically stated that the principle of equal treatment under Section 18 applies not only during arbitration proceedings but also at the appointment stage. The Court held that unequal bargaining power resulting in a biased appointment process is impermissible under Indian arbitration law.
3. Doctrine of Bias and Nemo Judex Rule: The Court explicitly reaffirmed the nemo judex in causa sua rule (no one shall judge their own cause), holding that any appointment procedure where the appointing authority is biased or holds an interest in the dispute outcome constitutes automatic disqualification under Section 12(5).
4. Mandatory Nature of Section 12(5): Clarifying the non-derogable nature of Section 12(5), the Court held that this provision overrides any prior agreement that conflicts with impartiality and independence. Parties can waive this provision only after the disputes have arisen, through explicit written consent as prescribed under the proviso to Section 12(5).

Supreme Court on Independence and Impartiality in Institutional Arbitration

1. Party Autonomy vs. Mandatory Legal Provisions in Arbitration

Party autonomy is a cornerstone of arbitration, giving parties freedom to design the procedure and select arbitrators. The Supreme Court has reiterated that this autonomy is “ingrained in the entire architecture” of the Arbitration and Conciliation Act, 1996. However, party autonomy is not absolute – it is subject to the Act’s mandatory provisions, which ensure fundamental fairness.

In particular, Section 18 (equal treatment of parties) and Section 12(5) (ineligibility of certain arbitrators) are non-derogable requirements that override any contrary agreement. The Supreme Court has emphasized that an arbitration clause violative of these mandatory norms cannot stand, no matter what the parties agreed.

In balancing party autonomy with mandatory law, the Court’s stance has evolved to prioritize independence and impartiality. For instance, an arbitration agreement cannot waive the equal treatment principle or permit obvious bias – any such clause would be void for contravening public policy and the Act’s spirit. Even before the 2015 amendments, Indian courts occasionally departed from the agreed procedure to secure an impartial tribunal, recognizing that arbitrator neutrality is essential to justice.

The Law Commission’s 246th Report (2014) criticized the then-prevailing practice (especially in government contracts) of unilateral or interested arbitrator appointments as undermining fairness. The Report noted that procedural fairness had too often been “tilted in favour” of binding contracts over impartiality and deemed the status quo “far from satisfactory”.

This prompted legislative changes to rebalance arbitration law in favor of integrity of the process. Consequently, the 2015 Amendment Act introduced objective conflict-of-interest criteria (Fifth and Seventh Schedules) to mandate neutral arbitrators, thereby limiting party autonomy where needed to uphold justice.

The Supreme Court’s jurisprudence post-amendment reflects this balance. In Central Organisation for Railway Electrification v. ECI-SPIC-SMO (2024, 5-judge bench), the Court affirmed that while parties are free to contract on many aspects, their autonomy “is subject to the mandatory provisions of the Arbitration Act”. Any appointment procedure that vests exclusive control in one party or otherwise defeats equality is invalid.

The Court held that the “principle of equal treatment of parties applies at all stages” of arbitration, including appointment of the tribunal. In essence, the freedom of contract in arbitration cannot override the rule that arbitrators must be independent and impartial – if a chosen procedure compromises these values, the courts will not enforce it. Party autonomy thus gives way to higher-order principles codified in the Act.

2. Judicial Interpretation of Section 12(5) & Seventh Schedule

Section 12(5) of the Arbitration Act (inserted by the 2015 amendment) is a game-changer for arbitrator neutrality. It provides that “notwithstanding any prior agreement to the contrary,” if an arbitrator’s relationship to the parties or dispute falls under any category in the Seventh Schedule, that person is ineligible to be appointed.

The Seventh Schedule lists 19 grounds (drawn from the IBA Guidelines on Conflicts) that automatically disqualify an arbitrator – including if the arbitrator is a manager, employee, or consultant of one party, or has a significant past or present business relationship with a party. This provision is mandatory; an appointment made in violation of Section 12(5) is void ab initio, unless the disqualification is waived by express agreement in writing after the dispute arises (per the proviso to Section 12(5)).

3. Impact of Judicial Scrutiny on Arbitral Institutions’ Practices

The Supreme Court’s stringent scrutiny of arbitrator appointments has profoundly influenced how arbitral institutions and drafting authorities in India operate. Major arbitral institutions and frequent arbitration users (especially public-sector undertakings or “PSUs”) have had to adapt their appointment procedures to align with the evolving legal standards on independence and impartiality.

Government and PSU Arbitrations: Historically, many government contracts included arbitration clauses heavily skewed in favor of the government party. These practices were driven by a notion of party autonomy and convenience, but at the cost of neutrality. Over the years, courts and commentators criticized such clauses for “undermining the neutrality of the arbitration process.”

The Law Commission’s 246th Report (2014) specifically highlighted this issue and prompted the introduction of the Fifth and Seventh Schedules to curb conflicts of interest. After the 2015 amendments, many PSUs began re-assessing and overhauling their standard arbitration clauses.

Supreme Court judgments like Voestalpine (2017) provided a blueprint for acceptable practices. In Voestalpine, although the Court upheld the validity of a panel system, it laid down two key safeguards for panel-based appointments:

(1) The panel must be truly “broad-based,” comprising a diverse pool (including neutrals outside the control of the appointing party, e.g. private sector experts, lawyers, retired judges, etc.), and

(2) the other party must have a free choice from the entire panel, not a truncated subset chosen by the appointing party.

The Court even struck down the clause requiring DMRC (the PSU) to send a shortlist of 5 names – insisting that the counterparty should be able to select any from the full panel to dispel any apprehension that the PSU is picking its “favorites.” These guidelines were soon applied by High Courts.

However, some grey areas remained until recently. The Supreme Court’s 2020 CORE (Railway Electrification) decision had allowed a Railway’s panel procedure (where the General Manager curated the panel and had a hand in appointing all three arbitrators) on the reasoning that the contractor’s right to choose 2 names somewhat balanced the Railway’s advantage.

This led to uncertainty – institutions and PSUs wondered if having any degree of choice for the other side could salvage a one-sided clause. The 2024 constitution bench clarified that it does not: it overruled the lenient view and held the CORE-type procedure invalid for want of true equality.

The Court noted that CORE’s panel did not meet the Voestalpine criteria (it was not broad-based and still gave the Railways a predominant role). Now, it is settled that a party cannot be forced to select its arbitrator from a unilateral panel prepared by the opposing party.

In practical terms, government arbitral institutions and departments have been prompted to change their rules: many standard bidding documents and contracts have been revised to either provide for mutual appointment of arbitrators or to designate a neutral third-party institution (like an arbitral center or even the High Court) as the appointing authority, instead of an interested official.

The Supreme Court has explicitly observed that while PSUs may maintain panels of arbitrators for logistical convenience, “an arbitration clause cannot mandate the other party to select its arbitrator from the panel curated by [the PSU].” Such mandates are now deemed unconscionable and even violative of Article 14 of the Constitution in the context of public-private contracts.

Institutional Arbitration in India: Independent arbitral institutions (like the Indian Council of Arbitration (ICA), DIAC, MCIA, etc.) have generally aligned themselves with global best practices, which the Supreme Court’s decisions echo.

These institutions typically have rules ensuring arbitrator independence – e.g., requiring arbitrators to sign strict disclosure statements of any conflict (as mandated by the Act’s Fifth Schedule and Section 12(1)), and providing mechanisms to challenge arbitrators for bias. Post-2015, Indian institutions explicitly incorporated the Seventh Schedule restrictions into their appointment processes. For example, an institution will refuse to appoint an arbitrator who is disqualified under the Seventh Schedule, even if a party nominates such a person, because any resulting award would be vulnerable.

Moreover, after the Arbitration and Conciliation (Amendment) Act, 2019, the statute enabled High Courts and the Supreme Court to designate arbitral institutions to make appointments (Section 11(6)). This legislative move – encouraged by the judiciary – aims to professionalize the appointment process and remove it from possibly biased party control. Many High Courts have since designated reputed institutions (for instance, DIAC in Delhi, MCIA in Maharashtra, etc.) as appointing authorities for arbitrations under their jurisdiction.

These institutions, being neutral bodies, follow the law laid down by the courts: they ensure equal opportunity for both parties in the appointment and pick arbitrators only from rosters of qualified, neutral individuals. If a contract’s appointment procedure fails (whether due to deadlock or legal invalidity), the institution (or the Court) steps in to appoint an impartial arbitrator in line with Section 11 and the court rulings

The ripple effect of judicial scrutiny is also evident in international arbitrations seated in India. Parties increasingly prefer institutional rules (e.g., of ICC, SIAC, LCIA or domestic institutions) which have builtin safeguards for independence, rather than ad-hoc clauses that might run afoul of Indian law. International arbitral institutions have always had robust standards (e.g., ICC Rules empower the ICC Court to confirm arbitrators after considering conflicts, etc.), and Indian law now mirrors these standards.

This cross-pollination was acknowledged in the 2024 constitution bench judgment, which surveyed foreign laws: many countries like Germany, Netherlands, Spain, and Estonia have statutes allowing courts to override one-sided appointment clauses in favor of fairness. The Indian Supreme Court’s direction is consonant with those systems – for example, Spanish law mandates that party autonomy in appointment is subject to “no violation of the principle of equal treatment.”

Likewise, Indian arbitral institutions, to remain internationally credible, implement procedures ensuring neither party gets a “privileged position” in constituting the tribunal (a concept many European jurisdictions treat as invalid). As the Supreme Court observed, jurisdictions that ban unilateral appointments often “embed” that rule in legislation, removing ambiguity. In India, through a combination of legislative amendment and judicial interpretation, a similar clarity has been achieved – creating a level playing field.

In practice, major institutions have welcomed these developments as they bolster the legitimacy of arbitration. Experts note that the “playing field has been leveled” by recent judgments, fostering trust in institutional arbitration. Parties now know that an award is far less likely to be set aside for bias if an independent institution oversaw the appointments in compliance with the Supreme Court’s guidelines.

Arbitral centres have also expanded their panels to include diverse, reputed arbitrators (retired judges, academics, professionals) to offer truly neutral choices. Overall, judicial scrutiny has nudged India’s arbitral landscape towards greater professionalism and neutrality, which in turn attracts more users to institutional arbitration as opposed to ad-hoc processes that might end up in court over appointment disputes.

4. Doctrine of Bias and Nemo Judex Rule in Arbitrator Appointments

Underpinning the above legal changes is the fundamental doctrine of bias – captured in the Latin maxim nemo judex in causa sua (no one should be a judge in his own cause). Arbitration may be a creature of contract, but once constituted, an arbitral tribunal performs a quasi-judicial function and is expected to adhere to the principles of natural justice.

The Supreme Court has repeatedly affirmed that arbitrators must not only be unbiased in fact but also perceived to be unbiased by a reasonable observer. As the Court noted, “justice should not only be done but manifestly and undoubtedly be seen to be done.” Thus, any circumstance that gives rise to a reasonable apprehension of bias disqualifies an arbitrator.

The nemo judex rule has been directly applied by the Supreme Court to invalidate one-sided appointment clauses. The logic is simple: if one party gets to choose an arbitrator who will decide a dispute involving that party, it effectively makes that party “a judge in its own cause.” In Perkins (2019), the Court observed that a person who is interested in the outcome of the dispute should not have the power to appoint the sole arbitrator, since that “creates a possibility of bias”.

Even if the appointed arbitrator is theoretically neutral, the appointment process itself must be free from dominance by one side. A unilateral appointment by one party (especially the stronger or state party) was held to “hinder equal participation of the other party” and thus contravene basic fairness. The Court explicitly linked such clauses to the nemo judex rule: in the 2024 ECI decision, it said an appointment procedure giving one party exclusive control “violates the nemo judex rule which constitutes the public policy of India in the context of arbitration.”

The doctrine of bias in arbitration encompasses various forms: pecuniary bias (financial interest in the outcome), subject-matter bias (prior involvement in the case), personal bias (relationships with a party), etc. The Seventh Schedule largely codifies these. But beyond the black-letter categories, the Courts have kept the “reasonable apprehension of bias” test at the forefront. The Supreme Court has clarified that the test is not actual proof of bias, but whether the circumstances are such as to create a doubt in the mind of a reasonably informed third party.

This objective test mirrors the rule applied to judges. For arbitrators, given party autonomy, the parties could technically agree to even a potentially biased arbitrator – hence Section 12(5) permits waiver in writing after disputes arise. However, the nemo judex principle is so strong that the Court insists on a specific waiver; silence or prior contract is not enough.

Moreover, the Supreme Court recognizes the “doctrine of necessity” as a narrow exception to nemo judex. If an adjudicator’s involvement is unavoidable (for instance, all available individuals are somehow conflicted, or a statutory scheme mandates a particular official and no alternative exists), then the biased person may act out of necessity. However, in arbitration, the doctrine of necessity is seldom invoked because parties can almost always find an alternative neutral arbitrator when bias is known.

The 2024 constitution bench did hint that if parties deliberately wish to proceed with a particular arbitrator despite knowing a disqualifying bias, they must waive the nemo judex objection explicitly. This aligns with the proviso to Section 12(5). Essentially, after a dispute arises, the parties may waive the conflict and continue – for example, if they still trust a former employee arbitrator to be fair, they can jointly waive the bar in writing. But absent such clear waiver, the courts will enforce the bias rule strictly.

Another facet of the bias doctrine is evident in older case law. Prior to the 2015 amendments, the Supreme Court in Indian Oil Corp. v. Raja Transport (2009) had controversially allowed appointment of interested arbitrators on the reasoning that the named employee was not directly involved in the dispute and the commercial agreement to that effect should be honored.

That approach has been overtaken by the amendments and new jurisprudence. The Law Commission had noted a series of pre-2015 judgments upholding government officials as arbitrators (except in extreme cases where the official was the one whose decision was under challenge, etc.).

The Commission concluded that impartiality and independence were too compromised under that regime and needed strengthening. The post-2015 Supreme Court decisions reflect a decisive shift no longer is a biased arbitrator acceptable merely because the parties signed up for it.

Instead, the nemo judex rule has been elevated to a guiding doctrine in arbitration appointments, placing India on par with international standards of arbitrator neutrality. Arbitrators are treated almost like judges for purposes of bias – a point expressly made in the 2024 judgment, which noted that an arbitrator (even when party-appointed) is an adjudicator who “should be disinterested and unbiased.”

In practical terms, the Supreme Court now examines appointment clauses and arbitrator relationships with a “zero tolerance” for bias. If a clause allows one party’s employee or affiliate to act as arbitrator, the Court will apply Section 12(5) and void the appointment (or remove the arbitrator). If a procedure even creates a reasonable suspicion of bias – such as one party exclusively driving the appointment – the Court will step in under Section 11 to appoint a truly independent arbitrator (or direct an institution to do so).

The rule nemo judex in causa sua thus operates not only to disqualify biased individuals, but also to invalidate biased procedures. By affirming that an “arbitration agreement is invalid if it gives one party a privileged position in matters of appointment,” the Supreme Court has given teeth to the nemo judex rule in Indian arbitration. This ensures arbitration remains a bona fide alternative to court litigation, upholding the same standards of fairness expected of courts.

Conclusion

Over the last decade, the Supreme Court of India has profoundly reshaped the arbitration landscape to fortify the pillars of independence and impartiality. Through authoritative judgments – from TRF and Perkins to the recent 5-judge bench in ECI (2024) – the Court has struck a careful balance between party autonomy and procedural fairness.

It has made clear that party autonomy ends where bias begins. Clauses or practices that were once common (like unilateral appointments by one party, or a small panel of arbitrators offered by one side) have been declared unlawful for violating the equality of parties and the nemo judex principle.

The Arbitration and Conciliation Act, 1996 – especially after the 2015 amendments – now embodies these judicially recognized norms, making independence and impartiality a non-negotiable attribute of any arbitral tribunal. The Supreme Court’s interpretations have effectively “crystallised” the law: an arbitrator must be neutral, and any agreement to the contrary is void.

This has had a salutary effect on institutional arbitration in India. Arbitral institutions and drafters of arbitration clauses have adjusted to this reality by promoting equal-party involvement in appointments, broad and diverse panels of arbitrators, and reliance on neutral appointing authorities.

The judiciary’s vigilance has, in turn, enhanced the credibility of Indian arbitral institutions domestically and globally. Parties can approach institutions like DIAC or MCIA with confidence that the tribunal constituted will meet the highest standards of impartiality – a confidence reinforced by the knowledge that courts will not hesitate to step in if those standards are compromised.

It is imperative that all stakeholders in arbitration continue to adapt to these evolving standards. Institutional rules should be periodically reviewed to ensure they comply with the latest legal pronouncements (for example, any rule or empanelment practice that could be viewed as giving one party an edge should be eliminated).

Appointments by institutions should meticulously honor the Section 12(1) disclosure requirements and Section 12(5) disqualifications – something most institutions already do as best practice. Parties, too, must draft arbitration clauses with an eye on these developments: a clause providing for, say, a retired High Court judge as mutual arbitrator (or referencing a reputed institution for appointment) is far more likely to be enforced than one naming a company’s Managing Director or a government Secretary.

The trend in Supreme Court jurisprudence makes one thing clear – Indian arbitration is aligning with global standards of fairness, and any remnants of parochial or one-sided procedures will be weeded out. This alignment is evidenced by the Court’s reference to international conventions and foreign laws that underscore equal treatment in appointments.

Supreme Court’s pro-activeness in enforcing independence and impartiality has cemented those values at the heart of institutional arbitration in India. Arbitration is meant to be a “credible and effective substitute to courts”, and that is only possible when arbitral tribunals are above reproach. The Court’s stance ensures that arbitration in India is not just speedier than courts, but also as fair and just as a court of law.

This ultimately strengthens the arbitration regime – awards from truly independent tribunals are less prone to challenge, and the overall system inspires trust. Indian arbitral institutions, by adapting to and internalizing these judicial standards, play a crucial role in this new era. They act as guardians of fairness in the first instance, reducing the need for court intervention. The synergy between progressive jurisprudence and responsive institutional practices bodes well for the future of arbitration in India.

With impartiality now firmly non-negotiable, Indian arbitration is on a solid footing to deliver justice that is not only swift and specialized, but also unbiased and equitable. Such an arbitration regime, constantly refined by Supreme Court guidance, indeed fulfills the promise of party autonomy within the bounds of law and public policy, giving parties the best of both worlds – freedom in designing dispute resolution, and assurance of a fair hearing.

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