Central Organisation for Railway Electrification Vs. ECI SPIC SMO MCML (JV) A Joint Venture Company
The Central Organisation for Railway Electrification (CORE) entered into a contract with ECI-SPIC-SMO-MCML (JV) for railway electrification work. Disputes arose during the execution of the contract, and as per the arbitration clause in the contract, disputes were to be referred to a tribunal of three arbitrators. The clause allowed CORE to nominate arbitrators exclusively from a panel of retired railway officers, raising concerns about impartiality and fairness. The Joint Venture objected, arguing that such an appointment process inherently favoured CORE and violated the principles of neutrality required under the Indian arbitration law.
The case reached the courts when the JV requested the appointment of an independent arbitrator, bypassing the contract’s arbitration clause. The High Court appointed an independent arbitrator, which CORE challenged in the Supreme Court.
The Supreme Court upheld the High Court’s decision, ruling that the arbitration clause, which allowed CORE to nominate arbitrators exclusively from a panel of retired railway officers, violated:
- Section 12(5) of the Arbitration and Conciliation Act, 1996, mandates the independence and impartiality of arbitrators.
- Section 18, which ensures equal treatment of parties during arbitration.
The Court emphasized that arbitration clauses in government contracts must ensure neutrality and cannot disproportionately favour one party. It declared the clause invalid and allowed the appointment of an independent arbitrator, setting a precedent for fairness in arbitration agreements involving public sector entities