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Impartiality Of Arbitrators Appointed Under The General Conditions Of Contracts Of The Indian Rails

Updated: 5 days ago

It is impertinent that the alternate dispute redressal systems that we opt-in our country, be it arbitration, mediation or conciliation, are impartial and not rigged. To achieve this objective the Arbitration and Conciliation (Amendment) Act, 2015 was enacted and it came into force on 23.10.2015.

This amendment introduced an important provision, Section 12(5) read with the Seventh Schedule, which provided for a list of persons who cannot be appointed as arbitrators keeping in mind the significance of the impartial nature of the job. The said list includes any person who is an employee, a consultant, advisor or any person having any past or present relationship with any party. The provision also contains a proviso that the parties may waive their right and can appoint any person. The sole purpose for introducing this amendment is that integrity and the impartiality of the arbitral institution can be maintained.

As a practising lawyer who has worked extensively on arbitration cases, I have been dealing with a lot of matters against the Indian Railways. The Indian Railways amended its General Conditions of Contract on 16.11.2016 and vide this amendment they introduced a clause which provided for an implied waiver by the contractor so as to appoint retired and ex-employees of Indian railways as arbitrators. This contract condition is void ab initio as it is strictly against the law as provided in Section 12(5) read with the Seventh Schedule. The Supreme Court in its recent judgment, Central Organisation for Railway Electrification vs. M/s ECI-SPIC-SMO_MCML, A Joint Venture Company, held that since it has been agreed by the parties, therefore, a retired employee of railways can be appointed as an arbitrator irrespective of the fact that the same goes against the very essence of arbitration law that it needs to be impartial.

The practical reality is that the contractors in order to procure a tender from the railways are forced to agree to the terms of the General Conditions of Contract. There is no room for negotiation as it is a standard form of contract and thus, the contractors don’t have any free will when it comes to making a choice as to who should be an arbitrator.

The clause permitting retired employees to act as arbitrators in the General Conditions of Contract is against Section 12(5) read with Schedule VII of the Arbitration and Conciliation Act, 1996 and therefore, illegal as no agreement can be made against the law. Also one of the basic essentials of the contract is the free will of both the parties. Even in a standard form of contract, no clause can be inserted which results in duress and goes against the law.

The Apex Court did not appreciate the object of Section 12(5) read with Schedule VII of the Act of 1996. By this judgment, the Court has definitely upheld the letter of law but the Court should’ve upheld the spirit of the law as well.


Aarushi Khare is a practising advocate at the Allahabad High Court.

You can contact them at - khareaarushi12@gmail.com


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