Supreme Court Rules Against Unilateral Appointment of Arbitrators by PSUs

Supreme Court Rules Against Unilateral Appointment of Arbitrators by PSUs
 

The Supreme Court of India ruled on Friday, 8^th November, that Public Sector Undertakings (PSUs) cannot unilaterally appoint arbitrators from their curated panels for disputes with private contractors.
 
The Constitution Bench, led by Chief Justice DY Chandrachud, emphasised the principle of equal treatment for both parties in arbitration proceedings.
 
The case arose from disputes in which PSUs were allowed to select arbitrators from their own panels.
 
The Court ruled that while PSUs may maintain such panels, they cannot compel the opposing party to choose an arbitrator from that list. This ruling aims to ensure fairness and impartiality in the arbitration process.
 
The majority judgment highlighted several key points. First, the Court affirmed that equal treatment applies throughout arbitration, including the appointment of arbitrators. A clause allowing one party to unilaterally appoint an arbitrator raises concerns about impartiality and violates Article 14 of the Constitution, which guarantees equality before the law.
 
The Court also ruled that in a three-member arbitration panel, mandating one party to choose the other party’s curated panel undermines equal participation.

The judgment clarified that these principles would apply prospectively, affecting future arbitrator appointments in three-member tribunals.
 
The decision is expected to promote fairness and transparency in arbitration, particularly in public-private contracts involving PSUs.
 

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