Arbitrator neutrality requires a meaningful disclosed panel; a three-name panel and undisclosed railway choice were found objectionable.

Section 12(5) of the Arbitration and Conciliation Act, 1996, read with the Fifth and Seventh Schedules, distinguishes between ineligibility and circumstances creating doubts about independence or impartiality. Prior service as a government or railway officer does not by itself disqualify a retired officer from acting as an arbitrator, but the appointing process must still preserve meaningful neutrality. A panel of only three names was held too narrow, and a clause permitting the railway to appoint its arbitrator from outside the disclosed panel was considered objectionable because the contractor would not know the appointee's background. The process was required to be revised with a longer disclosed panel of at least 30 names.

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Issues: Whether a restricted panel of three names for appointment of the contractor's nominee arbitrator, and a clause permitting the railway to appoint its arbitrator from outside the disclosed panel, was consistent with the requirements of neutrality and the statutory restrictions on arbitrator eligibility.

Analysis: Section 12(5) of the Arbitration and Conciliation Act, 1996, read with the Seventh Schedule, renders ineligible a person whose relationship with the parties, counsel, or dispute falls within the specified categories, while the Fifth Schedule indicates circumstances creating justifiable doubts as to independence or impartiality. The governing principle is that independence and impartiality are distinct, and prior service with government or a public organisation does not by itself disqualify a retired officer from acting as an arbitrator. However, the choice offered to a party must still be meaningful and sufficiently wide so that the standards of neutrality are not diluted. The disclosed panel of only three names was found to be too short, and the clause allowing the railway to appoint from outside a disclosed panel was held to be objectionable because the contractor would not know the background of the railway's appointee.

Conclusion: The challenge to the mere inclusion of retired government or railway officers as arbitrators was rejected, but the panel furnished was held to be inadequate and the appointment process was directed to be revised by supplying a longer disclosed panel of at least 30 names and making the railway's appointment from that disclosed panel.

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