Unilateral appointments under threat

The Supreme Court, in Perkins Eastman Architects DPC & Anr v HSCC (India), delivered a landmark judgment in November 2019, where it held that arbitration clauses that allow one party to unilaterally appoint a sole arbitrator would be invalid. Subsequently, Delhi High Court, in Proddatur Cable TV Digi Services v Siti Cable Network Limited, followed the law laid down by the Supreme Court’s two-judge bench decision in Perkins. The Supreme Court’s reasoning in the Perkins case requires reconsideration.

Disputes arose between the parties and, via a letter dated 26 June 2019, the chief managing director of the respondent, HSCC (India), was called on to appoint a sole arbitrator in accordance with clause 24 of the contract. No appointment of an arbitrator was made within 30 days, but a letter addressed by the chief general manager of the respondent, on 30 July 2019, appointed major general KT Gajria as the sole arbitrator.

The applicant, Perkins, filed an application under section 11(6) read with section 11(12)(a) of the Arbitration & Conciliation Act, 1996, before the Supreme Court to appoint an independent and impartial arbitrator, as the appointment of KT Gajria was beyond the prescribed period, and therefore the appointment was illegal.