Bhayana Builders Pvt Ltd vs Oriental Structural Engineers Pvt Ltd

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No(s)……….. OF 2025 (Arising out of SLP (C) No(s).7161-7162/2018)

BHAYANA BUILDERS PVT. LTD. APPELLANT(S)

VERSUS

ORIENTAL STRUCTURAL ENGINEERS PVT. LTD. & ETC. RESPONDENT(S)

JUDGMENT

MANOJ MISRA, J.

1. Leave granted.

2. These appeals arise from an order dated

21.02.2018 passed by the High Court of Delhi at New

Delhi1 whereby the petition(s) (i.e., O.M.P. (T) (COMM)

No.101 of 2017 and O.M.P. (T) (COMM) No.105 of 2017)

filed by the appellant, under Section 14(2) of the

Signature Not Verified Digitally signed by Nirmala Negi Date: 2025.09.04 1 The High Court 16:20:02 IST Reason: SLP (C) No.7161-7162/2018 Page 1 of 5 Arbitration and Conciliation Act, 19962, for termination of

the mandate of the sole arbitrator appointed by the

Managing Director of the respondents was rejected.

3. Arbitration agreement under which the sole

arbitrator was nominated by the Managing Director of the

respondents reads thus:

“9.03 – Settlement of Disputes- Any dispute arising of this sub-contract work shall be settled in terms of this work order. In case of failure to settle amicably, the dispute shall be finally resolved in accordance with the Arbitration and Conciliation Act, 1996 by Sole Arbitrator to be nominated (including nomination of replacement of Arbitrator, if necessitated by vacancy of the post caused by any reason whatsoever) by the Managing Director of the First Party, New Delhi. The venue shall be New Delhi. This Work Order is governed as per the Law of India and the jurisdiction of New Delhi Courts shall apply.”

4. By relying upon the judgment of this Court in

TRF Ltd. vs. Energo Engg. Projects Ltd.3, petitions were

filed before the High Court to terminate the mandate of

the sole arbitrator nominated by the Managing Director in

terms of the aforesaid arbitration clause and for

appointment of an arbitrator by the Court.

2 1996 Act 3 (2017) 8 SCC 377 SLP (C) No.7161-7162/2018 Page 2 of 5

5. The High Court rejected the petitions against

which these appeals have been filed.

6. The learned counsel for the appellant submits

that now there is a Constitution Bench decision of this

Court in Central Organization for Railway

Electrification ( for short ‘CORE’) vs. ECI SPIC SMO

MCML (JV) A Joint Venture Company4, which has

affirmed the law laid down in TRF (supra) and Perkins

Eastman Architects DPC vs. HSCC (India) Ltd. 5,

declaring that a clause which allows one party to

unilaterally appoint a sole arbitrator gives rise to

justifiable doubts as to the independence and

impartiality of the arbitrator. Further, such a unilateral

clause is exclusive and hinders equal participation of the

other party in appointment process of arbitrators.

7. Accordingly, it has been prayed that the appeals

be allowed, the mandate of the sole arbitrator nominated

by the Managing Director in terms of Clause 9.03 be

terminated and an arbitrator be appointed.

4 (2025) 4 SCC 641 5 (2020) 20 SCC 760

SLP (C) No.7161-7162/2018 Page 3 of 5

8. The learned counsel for the respondents could not

dispute that the instant case is squarely covered by

Constitution Bench decision of this Court in ‘CORE

(supra).

9. We have considered the submissions.

10. 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.

Accordingly, we allow the appeals and terminate the

mandate of the sole arbitrator nominated by the

Managing Director of the respondents. 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.

SLP (C) No.7161-7162/2018 Page 4 of 5

11. Pending applications, if any, stand disposed of.

…................................... J.

(Manoj Misra)

................................................J. (Ujjal Bhuyan)

New Delhi;

August 18, 2025

SLP (C) No.7161-7162/2018 Page 5 of 5