Delhi High Court appoints retired Justices AK Sikri and MR Shah as arbitrators in dispute between private firm and RailTel

The Delhi High Court recently appointed former Supreme Court judges, Justices AK Sikri and MR Shah as arbitrators in a dispute between a private firm named Margo Networks Private Limited and the public sector enterprise, RailTel Corporations of India [Margo Networks Pvt Ltd & Anr v RailTel Corporation of India Ltd]. .Justices Sikri and Shah will now have to jointly decide on the third arbitrator or presiding officer. In the event they are unable to concur on the third arbitrator's name, the two parties to the dispute can approach the Court.“The agreement between the parties contemplates a three-member Arbitral Tribunal. Accordingly, Justice (Retd) Dr. A. K. Sikri, Former Judge, Supreme Court of India, is appointed as the Petitioner’s nominee Arbitrator; Mr. Justice (Retd) MR Shah, Former Judge, Supreme Court of India is appointed as the nominee Arbitrator of the Respondent. The two arbitrators shall now concur to appoint the third Arbitrator/presiding Arbitrator within 30 days of the date of service of this order,” the High Court's order said..Justice Sachin Datta passed the order on a plea filed by Margo under Section 11 of the Arbitration and Conciliation Act of 1996, seeking the constitution of an independent arbitral tribunal of three arbitrators to adjudicate its disputes with RailTel.On January 10, 2022, Margo issued a demand-cum-invocation notice to RailTel raising certain claims. It also challenged clause 3.37 of the Request for Proposal (RPF). This clause laid down the procedure for the appointment of an arbitral tribunal.Margo (petitioner) argued that that the process was one-sided, onerous, and contrary to the law laid down by the Supreme Court in Voestalpine Schienen Gmbh vs. Delhi Metro Rail Corporation Ltd.The petitioner said that it wanted to appoint its nominee arbitrator and requested RailTel (respondent) to nominate its arbitrator. It was proposed that the two arbitrators so appointed would thereafter appoint the presiding arbitrator to constitute the arbitral tribunal that would adjudicate the disputes between the parties..In reply, RailTel asked the petitioner to act in strict conformity with clause 3.37 of the Request for Proposal (RFP) and to appoint a nominee arbitrator from the panel being maintained by Indian Railways. The panel contained 10 persons, each of whom were former employees of either the Railways or RailTel.Margo maintained that the RFP clause was not fair. However, RailTel insisted that Margo choose an arbitrator from the panel provided. This led Margo to approach the High Court for relief. .After considering the case, Justice Datta observed that the panel of arbitrators shared with the petitioner was clearly restrictive and manifestly not ‘broad-based’.“Thus, in an appointment procedure involving appointment from a panel made by one of the contracting parties, it is mandatory for the panel to be sufficiently broad-based, in conformity with the principle laid down in Voestalpine (supra), failing which, it would be incumbent on the Court, while exercising jurisdiction under Section 11, to constitute an independent and impartial Arbitral Tribunal as mandated in TRF (supra) and Perkins (supra). The judgement of the Supreme Court in CORE does not alter the position in this regard,” the Court held..The bench said that the panel offered by RailTel adversely impinged upon the validity of the appointment procedure contained in clause 3.37. It was necessary that an independent tribunal be constituted, the Court said.It further found that the appointment procedure also failed to pass muster because the ‘counterbalancing’ of power by nominating parties, as contemplated in the Supreme Court's ruling in the Perkins case, would not be achieved by such a procedure. Therefore, Justice Datta allowed the petitioner's plea and appointed the two former Supreme Court judges as arbitrators..Advocates Kunal Tandon, Shashank Shekhar, and Aanchal Khanna appeared for Margo Networks.RailTel was represented through Additional Solicitor General (ASG) Chetan Sharma as well as advocates Yamandeep Kumar, Sabah Iqbal Siddiqui, RV Prabhat, Vinay Yadav and Saurabh Tripathi..[Read Judgment]