Abstract

“This blog examines the Supreme Court’s landmark Constitution Bench judgment in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), which declared unilateral appointment of arbitrators in public-private contracts unconstitutional. It explores the legal evolution leading to the verdict, its grounding in Article 14 and the Arbitration and Conciliation Act, 1996, and its sweeping implications for public sector dispute resolution practices. The post further analyzes high court reinforcements and proposes systemic reforms to align arbitration in India with global standards of fairness, impartiality, and institutional credibility.”

Introduction

Arbitration has emerged as a preferred mechanism for commercial dispute resolution in India, offering parties a quicker, more flexible, and cost-effective alternative to traditional litigation. With the liberalisation of the Indian economy and an increase in cross-border investments, the reliance on arbitration has grown significantly, particularly in infrastructure, energy, and public-private partnership (PPP) projects.

However, the neutrality and fairness of arbitration proceedings have increasingly come under scrutiny—especially in cases where one party, often a government or public sector entity, retains the power to unilaterally appoint the sole arbitrator. Such arrangements raise concerns over bias, procedural fairness, and the integrity of the arbitral process.

In a landmark decision, the Supreme Court’s Constitution Bench in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV)^[1] held that unilateral appointment clauses in public-private contracts violate Article 14 of the Constitution and are impermissible under the Arbitration and Conciliation Act, 1996. This judgement marks a decisive shift in India’s arbitration jurisprudence toward party equality and institutional integrity.

This piece analyses the judgement, its constitutional grounding, and its implications for arbitration clauses in public contracts going forward.

^[1] Central Organisation for Railway Electrification v. M/s ECI SPIC SMO MCML (JV), 2024 INSC 857 (Ind.)

Setting the Context: What is Unilateral Appointment?

Unilateral appointment of arbitrators refers to a contractual arrangement where one party—typically a dominant public authority or PSU—reserves the exclusive right to appoint the sole arbitrator in case of a dispute. This practice has historically been embedded in standard form contracts involving government departments, railways, and other public bodies, purportedly for administrative convenience and cost control.

Such clauses raise serious concerns regarding impartiality and independence, as they confer a procedural advantage on the appointing party. The Supreme Court has consistently emphasised that “justice must not only be done but must also appear to be done”, especially in the context of adjudicatory processes like arbitration. In TRF Ltd v. Energo Engineering Projects Ltd.,^[1]  the Court held that a person who is ineligible to act as an arbitrator under Section 12(5) of the Arbitration and Conciliation Act, 1996, also cannot nominate another arbitrator, thereby invalidating indirect unilateral control.

This doctrine was further strengthened in Perkins Eastman Architects DPC v. HSCC (India) Ltd,^[2] where the Supreme Court categorically held that a party interested in the outcome of the dispute cannot unilaterally appoint a sole arbitrator, as such appointments undermine the principle of neutrality under Section 12(5) read with the Seventh Schedule of the Act.^[3]

Moreover, Section 12(5) of the Arbitration and Conciliation Act, inserted by the 2015 Amendment,^[4] mandates that any person with a specified relationship with a party is ineligible to act as arbitrator unless both parties waive the restriction in writing after the dispute arises.

Thus, while unilateral appointments may have once been standard practice in public contracts, judicial scrutiny over the past decade has laid the groundwork for their eventual constitutional invalidation.

^[1] TRF Ltd. v. Energo Eng’g Projects Ltd., (2017) 8 SCC 377 (Ind.)

^[2] Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760 (Ind.)

^[3] Arbitration and Conciliation Act, No. 26 of 1996, § 12(5) & sched. VII (Ind.)

^[4] Id.

The Trigger: Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV)

The Constitution Bench judgement in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), delivered in November 2024, arose from a long-standing legal conflict over unilateral appointments in government contracts. The dispute stemmed from a standard-form agreement between CORE—a PSU under the Ministry of Railways—and a consortium led by ECI-SPIC-SMO-MCML for railway electrification works. The contract contained an arbitration clause authorising CORE to appoint the sole arbitrator from a panel of its own officers.^[1]

The respondent consortium objected to this appointment, arguing that such unilateral power violates the principles of natural justice, particularly nemo judex in causa sua (no one should be a judge in their own cause). They relied on the Supreme Court’s earlier ruling in Perkins Eastman Architects DPC v. HSCC (India) Ltd.,^[2] which held that unilateral appointments by interested parties are impermissible under Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996.

However, due to conflicting rulings from coordinate benches on whether unilateral appointments from PSU-created panels are valid if a list is provided to the opposite party, the matter was referred to a five-judge Constitution Bench. In particular, rulings such as Union of India v. Parmar Construction Company (2022)^[3] and Voestalpine Schienen GmbH v. DMRC (2017)^[4] provided divergent interpretations on panel-based appointments. ³ This divergence necessitated authoritative clarity.

Ultimately, the Constitution Bench was tasked with determining whether such clauses violate Article 14 of the Constitution and whether a PSU’s control over the selection process renders the arbitral forum structurally biased.^[5]

^[1] Id at 1.

^[2] Id at 2.

^[3] Union of India v. Parmar Constr. Co., (2022) 6 SCC 143 (Ind.)

^[4] Voestalpine Schienen GmbH v. Delhi Metro Rail Corp. Ltd., (2017) 4 SCC 665 (Ind.)

^[5] India Const. art.14.

The Supreme Court Verdict

In a landmark ruling, a five-judge Constitution Bench of the Supreme Court in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) held that unilateral appointment clauses—where one party has exclusive power to appoint the sole arbitrator—violate the principles of impartiality and equality enshrined in the Arbitration and Conciliation Act, 1996 and Article 14 of the Constitution.^[1]

The Court clarified that party autonomy under the A&C Act cannot override mandatory requirements such as independence and impartiality of the arbitral tribunal. It emphasised that the principle of equal treatment of parties, as embedded in Section 18 of the Act,^[2] applies not only to arbitral proceedings but also to the appointment stage. It further held that clauses permitting a government entity to unilaterally appoint arbitrators in public-private contracts result in a real likelihood of bias and procedural inequality.

Justice Chandrachud, writing for the majority, observed that such clauses are ex facie exclusionary and fall afoul of the nemo judex in causa sua principle, which is part of Indian public policy. He underscored that these clauses undermine the arbitral process by creating tribunals that cannot be seen as independent or impartial by the opposing party.

The Court relied on Section 12(5) and the Seventh Schedule, introduced via the 2015 Amendment, which automatically disqualifies arbitrators with certain relationships to the parties. The Court also took into account the 246th Law Commission Report, which had recommended curbing excessive party autonomy in the interest of fairness and neutrality in arbitration.^[3]

While the majority held that unilateral appointment clauses are invalid prospectively, Justices Roy and Narasimha wrote separate but concurring opinions. Justice Roy emphasised the sufficiency of the statutory framework in addressing impartiality concerns, cautioning against excessive reliance on constitutional law principles. Justice Narasimha added that courts must intervene only at the stage where such procedures are challenged under Sections 11, 14 or 34 of the Act, rather than declaring all such clauses void per se.^[4]

This decision reinforces the judiciary’s commitment to ensuring that arbitration in India meets international standards of fairness, integrity, and procedural justice.

^[1] Id.

^[2] Arbitration and Conciliation Act, No. 26 of 1996, § 12(5) (Ind.)

^[3] LAW COMM’N OF INDIA, GOV’T OF IND., REPORT NO. 246 ON AMENDMENTS TO THE ARBITRATION AND CONCILIATION ACT, 1996, (2014), https://cdnbbsr.s3waas.gov.in/s3ca0daec69b5adc880fb464895726dbdf/uploads/2022/08/2022081615.pdf

^[4] Arbitration and Conciliation Act, No. 26 of 1996, § 11, 14 & 34 (Ind.)

Judicial Reinforcement: Key High Court Decisions Post-SC Ruling

Following the Supreme Court’s landmark decision in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), the Delhi High Court has reinforced the principles established therein through subsequent rulings, emphasising the invalidity of unilateral arbitrator appointments without explicit written consent.

In Shakti Pump India Ltd v. Apex Buildsys Ltd,^[1] the Court addressed the unilateral appointment of an arbitrator by Apex Buildsys Ltd without obtaining a written waiver from Shakti Pump India Ltd, as mandated under Section 12(5) of the Arbitration and Conciliation Act, 1996. The Court held that such an appointment is void ab initio and that mere participation in arbitration proceedings does not constitute a waiver of the right to object. This decision underscores the necessity for an express written waiver to validate any unilateral appointment of an arbitrator.

Similarly, in Union of India v. M.V. Omni Projects (India) Ltd.,^[2] the Delhi High Court set aside an arbitral award on the grounds that the sole arbitrator was unilaterally appointed by the Union of India, violating Section 12(5) of the Act. The Court reaffirmed that any arbitral award rendered by an ineligible arbitrator appointed unilaterally is a nullity and liable to be set aside.

These decisions reflect a consistent judicial approach post the Supreme Court’s ruling, emphasising the importance of impartiality and equal participation in the appointment of arbitrators, thereby fortifying the integrity of the arbitration process in India.

^[1] Shakti Pump India Ltd. v. Apex Buildsys Ltd., 2025 SCC Online Del 1726 (Del. HC)

^[2] M.V. Omni Projects (India) Ltd. v. Union of India, 2024 SCC Online Del 8205 (Del. HC)

Impact on Public Sector Contracts and Government Practice

The Supreme Court’s Constitution Bench decision in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) has profound implications for public sector undertakings (PSUs) and government bodies. Historically, these entities often included arbitration clauses in their contracts that allowed them to unilaterally appoint arbitrators, typically from panels comprising current or former employees. Such practices were justified on grounds of administrative efficiency and subject-matter expertise. However, the Court held that unilateral appointments violate the principles of impartiality and equal treatment under Sections 12(5) and 18 of the Arbitration and Conciliation Act, 1996, as well as Article 14 of the Constitution.

As a result, PSUs and government departments must now revisit and amend their standard arbitration clauses to ensure compliance with the new legal framework. This includes eliminating provisions that allow unilateral appointments or require the opposing party to select arbitrators from a panel curated by the appointing entity. The Court clarified that while PSUs are not prohibited from maintaining panels of arbitrators, they cannot mandate the other party to choose from such panels unless there is an express written waiver after the dispute has arisen.

The shift away from unilateral appointments may initially pose administrative challenges, particularly in sectors where swift dispute resolution is critical. However, in the long term, this development is expected to enhance the fairness and neutrality of arbitral proceedings. By promoting balanced appointment procedures, the ruling aligns with international arbitration standards and is likely to bolster global investor confidence in India’s dispute resolution mechanisms.

Conclusion

While the Supreme Court’s ruling marks a definitive move toward strengthening procedural fairness in arbitration, it also presents significant structural challenges—particularly for government bodies and public sector undertakings. For decades, unilateral appointment provisions were embedded in public contracts as standard practice, often viewed as an administrative necessity. Now, with the legal position firmly outlawing such mechanisms, PSUs must overhaul their dispute resolution frameworks. The question remains whether these institutions are adequately prepared for such a transformation in terms of legal understanding, capacity, and resource allocation. Moreover, concerns have emerged regarding potential misuse of this judgement by parties seeking to delay or derail arbitration proceedings. By strategically withholding consent or disputing appointments, parties may attempt to protract litigation or avoid resolution altogether. This underscores the urgent need for clarity and discipline in implementing appointment procedures post-dispute.

To ensure meaningful compliance, institutional capacity-building and training within public entities will be essential. Standardisation of contract templates and arbitration clauses—developed in consultation with legal experts and arbitral institutions—can prevent inadvertent violations and ensure legal robustness. In the long run, these reforms will enhance efficiency and public trust. The Central Organisation for Railway Electrification decision has undoubtedly altered the arbitration landscape in India. It reaffirms the judiciary’s commitment to neutrality, transparency, and the core values of party autonomy. By eliminating the scope for bias in arbitrator appointments, it advances India’s ambition to emerge as a globally trusted arbitration hub.

Looking ahead, the transition from unilateral practices to fairer, consent-based appointments must be accompanied by systemic reform. Introducing government-approved model arbitration clauses, capacity-building programmes, and stronger institutional support can smoothen the shift and prevent procedural roadblocks. This moment is not just a judicial milestone—it is a call to recalibrate the ethos of arbitration in India towards one grounded in equal treatment, efficiency, and global credibility.