Arbitration clause permit unilateral appointment of sole arbitrator - not valid

Citation 

AIROnline 2023 SC 1102

(2024) 1 MLJ 369

SUPREME COURT

DHANANJAYA Y. CHANDRACHUD , C.J.I. and

J. B. PARDIWALA , J. and MANOJ MISRA , J.

Arbitration Petition - 43 of 2022 D/- 6 - 11 - 2023

Lombardi Engineering Limited v. Uttarakhand Jal Vidyut Nigam Limited

(A)Arbitration and Conciliation Act (26 of 1996), S.7, S.11(6), S.11(6A) (as Inserted By Amendment Act Of 2015) - Constitution of India, Art.14 - Condition in arbitration clause - Challenge against - Arbitration clause provided for a pre-deposit of 7% of total claim for invoking arbitration clause - Nothing had been provided how this amount of 7% was to be ultimately adjusted at the end of arbitral proceedings - If the claim of petitioner was ultimately

found to be frivolous, arbitral tribunal could always award costs as per S.31A - Such vague and ambiguous condition violates Art.14 - Further, for an arbitration clause to be legally binding it

has to be in consonance with the "operation of law" which includes Grundnorm i.e. Constitution

- Hence, plea of respondent that petitioner having consented to the pre-deposit clause cannot call it arbitrary was without any merit - Challenge was tenable - Aforesaid condition was liable to be ignored. AIR 2019 SC 2682-Relied on

 (Paras 66 , 68 , 84 , 102) 

(B)Arbitration and Conciliation Act (26 of 1996), S.7, S.11(6), S.12 - Appointment of sole arbitrator - Condition in arbitration clause - Challenge against - Via arbitration clause, discretion was vested with Principal Secretary/Secretary (Irrigation) to appoint a sole arbitrator

- Arbitration clause finds foul with amended provisions which provide for neutrality of arbitrators - Challenge was tenable - Aforesaid condition was liable to be ignored - Direction was issued to proceed to appoint an independent arbitrator. AIR 2017 SC 939-Relied on

 (Paras 91 , 102)