Arbitration clause autonomy: a named employee-arbitrator is not automatically disqualified, and courts should follow the agreed procedure.

A valid arbitration clause naming an employee of one party as arbitrator is not invalid merely for want of independence or impartiality; bias must be shown by specific circumstances creating a justifiable doubt. The court dealing with appointment under section 11(6) should ordinarily give effect to the agreed contractual mechanism and the named arbitrator, and should depart from it only where the arbitrator is unavailable or recorded material establishes a legitimate concern about independence or impartiality. A request for appointment must also follow the contractual procedure, and a party that bypasses the designated appointment route does not validly invoke the clause. The stated position is that the agreed mechanism, including appointment of the Director (Marketing), governs.

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Issues: (i) Whether an employee of one of the parties, when named as arbitrator in the arbitration clause, is per se disqualified for want of independence or impartiality; (ii) whether the Chief Justice or designate can ignore the contractual appointment procedure and the named arbitrator while exercising power under section 11(6) of the Arbitration and Conciliation Act, 1996; and (iii) whether the respondent had validly invoked the arbitration clause and whether the appellant failed to act under the agreed procedure.

Issue (i): Whether an employee of one of the parties, when named as arbitrator in the arbitration clause, is per se disqualified for want of independence or impartiality.

Analysis: The contractual nomination of an arbitrator forms part of the arbitration bargain and cannot be disregarded merely because the named arbitrator is an employee of one party. Sections 11, 12 and 18 of the Arbitration and Conciliation Act, 1996 do emphasize independence, impartiality and equal treatment, but they do not invalidate a clause naming a senior officer of a government or public sector body as arbitrator. A presumption of bias does not arise merely from employment; a justifiable apprehension must be shown, such as a direct connection with the dispute or control over the contract.

Conclusion: The named employee-arbitrator was not disqualified per se, and the assumption of bias was incorrect.

Issue (ii): Whether the Chief Justice or designate can ignore the contractual appointment procedure and the named arbitrator while exercising power under section 11(6) of the Arbitration and Conciliation Act, 1996.

Analysis: Section 11(6) operates only when a party fails to act as required under the agreed procedure. Section 11(8) requires due regard to the qualifications and the need for an independent and impartial arbitrator, but the statutory scheme prefers adherence to party autonomy and to the agreed appointment mechanism. Departure from the named arbitrator is an exception, justified only where there are recorded reasons showing inability of the named arbitrator to act, or material giving rise to justifiable doubts about independence or impartiality. The contractual condition excluding all persons other than the Director, Marketing or his nominee was inconsistent with the statutory power and could not control the court's discretion, but that did not authorise ignoring the agreed procedure without valid cause.

Conclusion: The Chief Justice could not bypass the contractual procedure and named arbitrator in the absence of legally sustainable reasons.

Issue (iii): Whether the respondent had validly invoked the arbitration clause and whether the appellant failed to act under the agreed procedure.

Analysis: The respondent's notice sought appointment of an independent arbitrator contrary to the contractual mechanism, instead of invoking the clause by referring the dispute to the designated Director (Marketing) or calling upon the appellant to do so. After the civil court order merged in the appellate order directing reference to arbitration as per the agreement, the respondent still did not take the step required by the clause. On that footing, it was the respondent, not the appellant, who failed to act in accordance with the agreed appointment procedure.

Conclusion: The respondent did not validly invoke the agreed procedure and the appellant was not in default.

Final Conclusion: The contractual arbitration mechanism was entitled to be given effect, no valid basis existed to appoint an outside arbitrator, and the sole arbitrator had to be the Director (Marketing) under the agreement.

Ratio Decidendi: A named arbitrator under a valid arbitration clause cannot be displaced merely because he is an employee of one party; the court exercising power under section 11 must ordinarily give effect to the agreed appointment procedure unless specific circumstances create a justifiable doubt as to independence or impartiality or the named arbitrator is unavailable.

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