No Review or Appeal Against Arbitrator Appointment Order

Source: Supreme Court

Why in News?

The bench of Justices JB Pardiwala and R Mahadevan in the case of Hindustan Construction Company Ltd. v. Bihar Rajya Pul Nirman Nigam Limited and Others (2025) held that no review or appeal lies against an order appointing an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.

What was the Background of Hindustan Construction Company Ltd. v. Bihar Rajya Pul Nirman Nigam Limited and Others (2025) Case? 

• A dispute arose from a 2014 contract between Hindustan Construction Company (HCC) and Bihar Rajya Pul Nirman Nigam Limited (BRPNNL). 
• The arbitration clause in the contract had been invoked previously in an earlier dispute, which resulted in a final award that was honored by both parties. 
• When a second dispute emerged, HCC invoked the same arbitration clause and requested the BRPNNL Managing Director to appoint an arbitrator. 
• Following the Managing Director's failure to act on the request, HCC approached the Patna High Court under Section 11 of the Arbitration and Conciliation Act. 
• In 2021, the Patna High Court appointed Justice Shivaji Pandey (Retd.) as the sole arbitrator to resolve the dispute. 
• Both parties actively participated in the arbitration proceedings for over three years, attending more than 70 hearings. 
• The parties jointly sought extensions of the arbitrator's mandate under Section 29A of the Act on multiple occasions. 
• In early 2024, when arguments were virtually complete, BRPNNL filed a review petition before the High Court challenging the existence of the arbitration agreement itself. 
• The Patna High Court accepted the review petition, suspended the ongoing arbitration proceedings, and subsequently dismissed HCC's original Section 11 petition. 
• Aggrieved by this decision, HCC filed an appeal before the Supreme Court.

What were the Court's Observations? 

• The Court held that once the Patna High Court appointed the arbitrator in 2021 under Section 11(6), it became functus officio and could not reopen or review its own order. 
• The Court clarified that while High Courts possess limited review powers, such power is extremely circumscribed in arbitration matters and can only be exercised to correct an error apparent on the face of the record or address an overlooked material fact, not to revisit findings of law. 
• The Court observed that there is no statutory provision for review or appeal from an order under Section 11, reflecting a conscious legislative choice that once an arbitrator is appointed, the arbitral process must proceed unhindered. 
• The Court noted that the proper remedies available to BRPNNL were to invoke Section 16 before the tribunal or file a Special Leave Petition under Article 136, not to pursue a review petition. 
• Having participated fully in arbitral proceedings for three years, including joint applications for extending the arbitrator's mandate, BRPNNL was estopped from reopening the matter through review. 
• The Court emphasized that the High Court's retrospective invalidation of its own appointment order undermined certainty, diluted the sanctity of judicial orders, and contradicted the principle of minimal judicial interference in arbitration. 
• The Supreme Court set aside the Patna High Court's review order and allowed the appeal, permitting arbitration proceedings to continue.

What is Section 11 of the Arbitration and Conciliation Act, 1996? 

• Nationality of Arbitrators:  
  • Any person of any nationality can be an arbitrator, unless the parties agree otherwise. 
  • Appointment procedure:  
  • Parties are free to agree on a procedure for appointing arbitrators, subject to subsection (6). 
  • In the absence of an agreement, for a three-arbitrator tribunal, each party appoints one arbitrator, and the two appointed arbitrators select the third (presiding) arbitrator. 
• Role of Arbitral Institutions:  
  • The Supreme Court and High Courts can designate graded arbitral institutions for appointing arbitrators. 
  • In jurisdictions without graded institutions, the Chief Justice of the High Court may maintain a panel of arbitrators. 
  • These arbitrators are deemed to be arbitral institutions and are entitled to fees as specified in the Fourth Schedule. 
• Appointment in case of failure:  
  • If a party fails to appoint an arbitrator within 30 days of receiving a request, or if the two appointed arbitrators fail to agree on the third within 30 days, the appointment is made by the designated arbitral institution. 
  • For international commercial arbitration, the Supreme Court designates the institution; for other arbitrations, the High Court does so. 
• Sole arbitrator appointment:  
  • If parties fail to agree on a sole arbitrator within 30 days, the appointment is made as per subsection (4). 
• Failure to act under agreed procedure:  
  • If a party, the appointed arbitrators, or a designated person/institution fails to perform under the agreed procedure, the court-designated arbitral institution makes the appointment. 
• Disclosure requirements:  
  • Before appointing an arbitrator, the arbitral institution must seek a written disclosure from the prospective arbitrator as per Section 12(1). 
  • The institution must consider any qualifications required by the parties' agreement and the contents of the disclosure. 
• International commercial arbitration:  
  • For sole or third arbitrator appointments in international commercial arbitrations, the designated institution may appoint an arbitrator of a nationality different from the parties. 
• Multiple appointment requests:  
  • If multiple requests are made to different institutions, the one receiving the first request is competent to appoint. 
• Time frame for appointment:  
  • The arbitral institution must dispose of an application for appointment within 30 days of serving notice on the opposite party. 
• Fees determination:  
  • The arbitral institution determines the arbitral tribunal's fees and payment manner, subject to rates in the Fourth Schedule. 
  • This doesn't apply to international commercial arbitrations or where parties have agreed on fee determination as per arbitral institution rules. 
• Non-delegation of judicial power:  
  • The designation of a person or institution by the Supreme Court or High Court is not considered a delegation of judicial power.