Introduction

Party autonomy reigns supreme in arbitration as the entire process of arbitration is grounded in giving the parties the freedom to choose anything and everything- from the procedure of arbitration to the laws regulating the dispute. However, the age-old debate of striking a balance between party autonomy, equality, and fairness at each stage of the arbitration was rekindled with the judgement of the Supreme Court (hereinafter, “SC”) in Veostalpine Schienen GmBH vs. Delhi Metro Rail Corporation (hereinafter, “Voestalpine”). ^[1] In Voestalpine, while dealing with appointment of an arbitrator by one party from a panel of arbitrators selected by the other party, the SC laid down that such quasi-unilateral appointments must be from a “broad-based panel”. Although the SC laid down some guiding principles of what elements must a broad-based panel comprise of and the High Courts have tried to bring in uniformity in the application of the principle, there still remains ambiguity surrounding the principle which this article aims to highlight.

Recent Judicial Decisions on the Broad-Based Panel Principle

In India, the Voestalpine decision was a watershed moment in the field of quasi-unilateral appointments. In this case, the Delhi Metro Rail Corporation (hereinafter, “DMRC”) (Employer) established a mechanism for appointing the arbitral tribunal, which comprised of the DMRC sending a list of five arbitrators to Voestalpine (Contractor), who had to choose their nominee arbitrator out of this list. The DMRC would then choose an arbitration nominee from the very same list. The two nominee arbitrators also had to select the third arbitrator from the same limited list of 5 names.

In its ruling, the SC criticised the method for limiting the other party’s selection to the five names proposed by the opposing party. The court ruled that such panels should be broad-based and stated that a broad-based panel should not only comprise of “serving or retired engineers of government departments and public sector undertakings” but should also include “engineers of prominence and high repute from private sector”, “persons with legal background like judges and lawyers of repute” and also people from fields of accountancy. This guarantees that the principles of impartiality and independence are not disregarded at any level of the arbitration, particularly during the formation of the arbitral tribunal.

Following Voestalpine, a multiplicity of decisions addressing these quasi-unilateral appointments of arbitrators have been delivered. In the case of ITD Cementation India Ltd. vs. Konkan Railway Corporation Ltd.,^[2] the Bombay High Court decided that a panel of four names consisting of individuals related to the respondent organisation was not broad-based. The Court ruled that a broad-based panel of arbitrators consisting of “engineers of prominence and high repute from the private sector, persons with a legal background such as judges and lawyers, and people with knowledge and expertise in accountancy, among other”, must be prepared, and suggested that “broad-based would mean at least eight to ten names under each category.”

In Simplex Infrastructures Ltd. vs. Rail Vikas Nigam Limited,^[3] it was ruled that a panel of twenty-six names with just nine officers who had not been related to railway entities and companies, and which did not have even a single individual with a background in law or accountancy, was not broad-based.

Not even a panel of thirty-seven names was considered to be broad based by the Delhi High Court in the case of Sms Ltd. vs Rail Vikas Nigam Limited,^[4] as twenty-nine out of the thirty-seven individuals on the panel were directly related to the railways and only eight were such who were former employees of entities other than the railways.

However, in a conflicting judgement of the Central Organisation for Railways vs. M/S EIC – SPIC – SMO – MCML (JV Company) (hereinafter, “CORE”),^[5] the SC did not flag any problems with a panel of four names being suggested for appointing a nominee arbitrator. While addressing the legal issue of the general manager’s ineligibility to designate a nominee arbitrator, the Court made no remark on the formation of a “broad-based panel” of arbitrators, despite the fact that the appointment procedure of the arbitral tribunal was clearly in violation of the principles outlined in Voestalpine. It is important to note that the CORE ruling came subsequent to the Voestalpine ruling and was delivered by a three-judge bench of the Supreme Court, while the Voestalpine ruling was delivered by a two-judge bench.

Further interpreting what constitutes a broad-based panel, the Delhi High Court in the case of Consortium of AutoMeter Alliance Ltd. and Canny Elevators Co. Ltd. vs. Chief Electrical Engineer,^[6] ruled that a panel with fifty-one members, including twenty-six retired judges, twenty-two public sector engineers, and three public sector accountants/financial professionals, constituted a broad-based panel. Even if the panel does not include experts such as attorneys of renown, accountancy or financial professionals, or private sector engineers, the court ruled that the fact that the respondent might have further broadened the panel’s scope cannot be used as a reason to conclude that the panel, which already consists of fifty-one names, is not broad-based.

Tying up the Loose Ends

From the above decisions, it is clear that courts have attempted to establish uniformity about what constitutes a broad-based panel. The emphasis has been placed more on the panel’s diversity, i.e., the inclusion of individuals from diverse areas, than on the panel’s size. This approach seems to have been taken keeping in mind the purpose of a broad-based panel: ensuring impartiality and neutrality of an arbitrator, by proposing names that are not related to any of the parties.

However, the Courts have failed to clearly establish the point at which a panel becomes sufficiently wide to fulfil the broad-based panel principle. ITD Cementation India Ltd. vs. Konkan Railway Corporation Ltd.^[7] lays down that a broad-based panel involves a person from each category mentioned in Voestalpine and must have “8-10 names in each category”. On the other hand, Consortium of AutoMeter Alliance Ltd. and Canny Elevators Co. Ltd. vs. Chief Electrical Engineer^[8] rules that a panel can be considered to be broad based even without including lawyers, accountants, engineers, etc. It further rules that the possibility of making a panel broader should not act as a ground to declare an already broad panel to be restrictive.

There is ambiguity with respect to the fact that how many members from each category must be there in the panel and whether individuals from each category must be present or not. Thus, until the law regarding the size and composition of a broad-based panel is explicitly established, the courts may conduct a number of attempts to mix and match different numbers, skills and professions of arbitrators to satisfy some undefined standard or test. This leads to ambiguity with respect to the law relating to the broad-based panels and is undesirable for a healthy arbitration culture in India.

In addition, the SC’s CORE judgement has added to this ambiguity. Delivered by a larger bench, the judgement contradicts the Voestalpine judgement. Fortunately, most of High Courts have followed Voestalpine and distinguished the CORE judgement on facts, stating that the legal question in CORE was related to the power of a court to appoint an independent arbitrator outside the procedure for appointment of arbitrator as agreed upon in the arbitration agreement. The question of whether a panel of four names is broad-based or not was never discussed in CORE. Nevertheless, such a situation lends uncertainty to the future judgements as till the judgement remains in operation, it opens an avenue for the judiciary to rely on it and change the course of precedents that have been adopted till now.  It further gives some amount of legitimacy to a restrictive panel by the highest court of appeal in the country.

The purpose of a uniform law is to state the conclusions that must arise from defined situations; however, this ambiguity gives courts and adjudicators discretion to follow precedents of their choice, rather than following a uniform law. This discretion jeopardises the larger objective of consistent and uniform enforcement of the broad-based panel principle. It further hampers the inherent purpose of arbitration as a quicker dispute redressal mechanism as it opens doors for parties to challenge arbitral tribunals in each and every dispute involving a panel of names. Such challenges are possible due to the absence of well-defined and precise guidelines for the constitution of a broad-based panel.

Conclusion

With the formulation of the broad-based panel principle, the SC has made a step toward fostering an arbitration friendly environment in India that ensures the neutrality and impartiality of the arbitral tribunal. It was a welcome measure that intended to secure the formation of a fair and impartial panel, therefore expediting the whole arbitration process by avoiding unnecessary challenges to the formation of the arbitration tribunal. However, uncertainties over the size and diversity of the panel, as well as the seldom followed yet conflicting ruling of CORE by a larger SC bench, remain obstacles to the objective of India being a hub for impartial, fair, and impartial arbitrations. The broad-based panel paradigm will be truly effective only when more clarity is brought upon the concept.

References

[1] Voestalpine Schienen GmbH vs. Delhi Metro Rail Corporation Ltd., AIR 2017 SC 939.

[2] ITD Cementation India Ltd. Vs. Konkan Railway Corporation Ltd. (2019) SCC Online Bom 5349.

[3] Simplex Infrastructures Ltd. vs. Rail Vikas Nigam Limited, 2018 SCC OnLine Del 13122.

[4] Sms Ltd. vs Rail Vikas Nigam Limited, (2020) SCC OnLine Del 77.

[5] Central Organisation for Railway Electrification vs. ECI-SPIC-SMO-MCML (JV) A Joint Venture Company, 2019 SCC OnLine SC 1635.

[6] Consortium of AutoMeter Alliance Ltd. and Canny Elevators Co. Ltd. vs. Chief Electrical Engineer, 2021 SCC OnLine Del 4042.

[7] Supra note 2.

[8] Supra note 6.