Person Ineligible For Being Appointed As Arbitrator Can’t Nominate Sole Arbitrator: Supreme Court Reiterates

The appeals before the Apex Court arose from an order of the Delhi High Court rejecting the petition filed by the appellant, under Section 14(2) of the Arbitration and Conciliation Act, 1996 , for termination of the mandate of the sole arbitrator appointed by the Managing Director of the respondents.

The Division Bench of Justice Manoj Misra and Justice Ujjal Bhuyan held, “In TRF (supra), this Court had held that if a person cannot be appointed an arbitrator being ineligible by operation of law, he cannot nominate another as a sole arbitrator. The Constitution Bench has upheld the view taken in TRF (supra). In such circumstances, since managing director of a company would be ineligible for being appointed as an arbitrator in view of Section 12 (5) read with paragraph 5 in the Fifth Schedule to the 1996 Act, he would be ineligible to nominate a sole arbitrator.”

Advocate Ashish Batra represented the Appellant while Senior Advocate Anil K. Airi represented the Respondent.

Factual Background

The sole arbitrator was nominated by the Managing Director of the respondents as per the Arbitration agreement. By relying upon the judgment of the Apex Court in TRF Ltd. vs. Energo Engg. Projects Ltd. (2017), petitions were filed before the High Court to terminate the mandate of the sole arbitrator nominated by the Managing Director in terms of the arbitration clause and for appointment of an arbitrator by the Court.The High Court rejected the petitions against which the appeals came to be filed before the Apex Court.

Reasoning

The Bench noted that in TRF (supra), it was held that if a person cannot be appointed an arbitrator being ineligible by operation of law, he cannot nominate another as a sole arbitrator. The Constitution Bench in Central Organization for Railway Electrification (forshort ‘CORE’) vs. ECI SPIC SMO MCML (JV) A Joint Venture Company (2025) had upheld the view taken in TRF (supra).

The Bench thus held that a managing director of a company would be ineligible for being appointed as an arbitrator and he would also be ineligible to nominate a sole arbitrator.

Allowing the appeals, the Bench terminated the mandate of the sole arbitrator nominated by the Managing Director. “In consequence, we refer the matter to the Delhi International Arbitration Centre for nominating a suitable Arbitrator for resolution of the dispute inter se the parties”, it ordered.

Cause Title: Bhayana Builders Pvt. Ltd. v. Oriental Structural Engineers Pvt. Ltd. (Neutral Citation: 2025 INSC 1073)

Appearance

Appellant: Advocates Ashish Batra, Rohan Sharma, Ambika, Karan Sharma, AOR M/S. Karanjawala & Co.

Respondent: Senior Advocate Anil K. Airi, Advocate Ravi K Chandna, AOR Mohit D. Ram, Advocates Monisha Handa, Rajul Shrivastav, Nayan Gupta

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