Selecting arbitrator according to contract

The Supreme Court last week overruled the judgment of the Delhi High Court and stated that an arbitrator appointed before the 2015 amendment to The Arbitration and Conciliation Act could proceed with arbitration though he may not be eligible under the amended law. The Act was amended to include a schedule which makes some persons ineligible for arbitration. This was meant to avoid objections related to independence and impartiality of the arbitrators. In this case, Aravali Power Co vs Era Infra Engineering, the chief executive officer of Aravali was nominated as the arbitrator and the opposite party participated in the arbitration. Later, Era Infra objected to the choice suspecting the independence of the arbitrator, who is an employee of one of the parties. It moved the high court seeking the appointment of an independent arbitrator. Aravali argued that according to the contract, its officer was eligible to act as arbitrator. However, the high court directed it to submit a set of names for choice of an arbitrator. Aravali appealed to the Supreme Court. It allowed the appeal. The apex court stated that in cases originating before the amendment, the normal course is to appoint a person named in the contract. Merely because he is an officer of one of the parties does not disentitle him from the job. But if circumstances indicate chance of bias, the chief justice can appoint an independent arbitrator, the court ruled.