October 16, 2023
The Delhi High Court recently delivered an important judgement upholding party autonomy in the appointment of arbitrators. In Taleda Square Pvt. Ltd. vs Rail Land Development Authority, the Court ruled that limiting a party's choice of arbitrator to a pre-selected panel infringes on party autonomy.
The dispute arose out of a lease agreement between Taleda Square and the Rail Land Development Authority (RLDA). The arbitration clause provided that each party could nominate one arbitrator from a list of names provided by RLDA, with the third arbitrator to be appointed by RLDA's Vice Chairman.
Taleda Square challenged this appointment procedure by invoking Section 11 of the Arbitration Act. It argued that limiting its choice to RLDA's pre-selected panel of arbitrators was against the principles laid down by the Supreme Court in Voestalpine Schienen v DMRC.
Justice Rekha Palli of the Delhi HC concurred with Taleda's arguments. She held that the panel offered by RLDA was restrictive and not broad-based enough. Limiting Taleda's choice to 5 names from RLDA's panel constrained party autonomy and room for suspicion that RLDA selected its own favorites.
The Court relied on the coordinate bench decision in Margo Networks v Railtel Corporation, which similarly struck down a railway panel appointment procedure on grounds of being restrictive. It distinguished the Supreme Court judgement in CORE v ECI-SPIC-SMO, noting that the case did not specifically consider panel appointment issues.
Ultimately, Justice Palli allowed Taleda Square's petition and appointed the entire three-member arbitral tribunal. This upholds the view that party autonomy requires each party to independently nominate its choice of arbitrator, instead of selecting from the other's pre-determined list.
This decision is a welcome endorsement of party autonomy in arbitration. It reiterates Indian courts' pro-arbitration approach and preference for minimal judicial interference under the 2015 Act. Parties should be given full freedom to nominate arbitrators of their choice. Restricting this power impinges on arbitrator neutrality and independence.
The Delhi HC's ruling brings clarity on balancing party autonomy with arbitral clauses restricting nomination powers. It will promote arbitrator independence and party confidence in the appointment process. This is a progressive step for arbitration and can facilitate India's evolution as an arbitration-friendly jurisdiction.