In a blow to the practice of appointing continuing or retired officers as arbitrator by various organizations, the Delhi High Court struck down such practice in light of the recent Arbitration and Conciliation (Amendment) Act, 2015.
The Court said, “In the present case, the suggestion of the respondent to appoint its own employee who is either present employee or retired employee, the request cannot be accepted as the arbitration is invoked after amended Act has come into operation. In case the said request is allowed, the very purpose of amending the Act would be defeated.”
The Court also allowed for a new arbitration for a fresh dispute to ensure fairness and compliance of the Arbitration and Conciliation (Amendment) Act, 2015. Section 12(5) of the Act clearly makes all persons coming under schedule 7 as ineligible to be appointed as arbitrators including the in-house employees.
The Court said it is duty bound to secure the appointment of an independent and impartial arbitrator as per Section 12 of the Act (as amended in 2015). Arbitrator, being an employee of one of the parties, would definitely give rise to justifiable doubt as to his independence and impartiality.