Employee arbitrator appointments are not invalid per se in pre-amendment arbitration; contractual procedure and statutory challenge rules govern intervention.

In a pre-amendment arbitration, the mere fact that the named sole arbitrator was an employee of one party did not by itself invalidate the appointment; interference was warranted only if the arbitrator was the dealing authority in relation to the contract, directly subordinate to the decision-maker in dispute, or otherwise gave rise to justifiable doubts about independence or impartiality. The challenge failed because those disqualifying features were not shown. The court also could not bypass the agreed appointment mechanism where the statutory challenge procedure under Section 13 had not been properly invoked and the conditions for Section 11(6) or Section 14 intervention were not satisfied. The contractual arbitration was therefore restored to proceed before the originally appointed arbitrator.

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Issues: (i) Whether, in a pre-amendment arbitration, the appointment of an employee of one party as sole arbitrator was invalid merely because he was an employee and had prior official involvement with similar contracts; (ii) Whether the High Court could terminate the mandate of the appointed arbitrator and appoint an independent arbitrator when the statutory challenge procedure had not been followed and the conditions for invoking Section 11(6) were not satisfied.

Issue (i): Whether, in a pre-amendment arbitration, the appointment of an employee of one party as sole arbitrator was invalid merely because he was an employee and had prior official involvement with similar contracts.

Analysis: For disputes governed by the unamended Act, the mere fact that the named arbitrator is an employee of one party does not by itself create a presumption of bias or lack of independence. The appointment becomes vulnerable only where the person is the controlling or dealing authority in relation to the subject contract, or is directly subordinate to the officer whose decision is in dispute, so as to create justifiable doubts about independence or impartiality. On the facts, the arbitrator was the CEO of the appointing company, but the record did not show that he was the dealing authority in relation to the contract or that he was directly subordinate to the decision-making authority whose act was under challenge. The contractual clause also contemplated appointment of an officer of the owner, and the pre-amendment law required adherence to the agreed procedure absent a legally sustainable basis to displace it.

Conclusion: The appointment of the employee arbitrator was not invalid or unenforceable merely on the grounds relied upon; the challenge to his appointment failed.

Issue (ii): Whether the High Court could terminate the mandate of the appointed arbitrator and appoint an independent arbitrator when the statutory challenge procedure had not been followed and the conditions for invoking Section 11(6) were not satisfied.

Analysis: Under the unamended Act, a party challenging an arbitrator had to follow the procedure under Section 13 within the prescribed time, and an application under Section 14 lay only when the mandate had terminated for de jure or de facto inability or when a real controversy remained on those grounds. The record showed that the respondent participated in the arbitration and sought time to file its claim without promptly invoking the prescribed challenge mechanism. In these circumstances, no valid basis existed for the High Court to bypass the contractual appointment procedure or to invoke the broader post-amendment neutrality standard. The High Court therefore erred in exercising jurisdiction to terminate the mandate and to direct appointment of an independent arbitrator.

Conclusion: The High Court's interference was unjustified, the petition seeking termination of mandate failed, and the contractual arbitration was restored to continue in accordance with law.

Final Conclusion: The appellate court upheld the contractual appointment of the arbitrator in the pre-amendment regime, set aside the High Court's direction for a fresh independent appointment, and left the arbitration to proceed before the originally appointed arbitrator.

Ratio Decidendi: In disputes governed by the unamended Arbitration and Conciliation Act, 1996, an employee-nominated arbitrator is not invalid per se; interference with the agreed appointment is justified only where there are legally sustainable grounds showing justifiable doubts as to independence or impartiality, and the statutory challenge procedure must be followed before resorting to court intervention.

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