Panel-based arbitration clauses prevail where retired officers are not automatically disqualified and reciprocal selection is preserved.

Where a contract prescribes a reciprocal panel-based method for constituting the arbitral tribunal, that agreed mechanism should ordinarily be followed and not replaced by an independent sole arbitrator under general Section 11 powers. Retired Railway officers proposed from the panel were not automatically ineligible under Section 12(5) read with the Seventh Schedule merely because of past service, absent a disqualifying relationship. The ineligibility principle in TRF Limited did not apply in the same way to a two-sided selection process, so the General Manager was not disqualified from participating in the agreed appointment procedure.

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Issues: (i) Whether the High Court could appoint an independent sole arbitrator ignoring the contractual procedure under Clause 64 of the General Conditions of Contract; (ii) whether retired Railway officers proposed in the panel were ineligible to act as arbitrators under Section 12(5) read with the Seventh Schedule; (iii) whether the General Manager became ineligible to nominate arbitrators because of Section 12(5).

Issue (i): Whether the High Court could appoint an independent sole arbitrator ignoring the contractual procedure under Clause 64 of the General Conditions of Contract.

Analysis: The dispute resolution clause provided a specific mechanism for constitution of the arbitral tribunal. After the 2015 amendment, the revised contractual clause continued to require appointment from a panel mechanism, with the parties having reciprocal participation in selection. The Court held that where the contract expressly prescribes the mode of appointment, the court should ordinarily give effect to that agreed procedure and should not supplant it by appointing an independent sole arbitrator merely on a general exercise of power under Section 11.

Conclusion: The appointment of an independent sole arbitrator was not justified and was contrary to the agreed contractual mechanism.

Issue (ii): Whether retired Railway officers proposed in the panel were ineligible to act as arbitrators under Section 12(5) read with the Seventh Schedule.

Analysis: Section 12(5) read with the Seventh Schedule bars categories of persons having the specified disqualifying relationships from acting as arbitrators, but the mere fact that a person is a retired employee of one party does not, by itself, create ineligibility. The panel forwarded by the Railway consisted of retired Railway officers with no disqualifying relationship shown beyond their past service. The Court applied the principle that retired government or public sector officers are not automatically disqualified and that expertise-based empanelment is permissible so long as the statutory disqualification is not attracted.

Conclusion: The retired Railway officers were not rendered ineligible merely because they had earlier served the Railways.

Issue (iii): Whether the General Manager became ineligible to nominate arbitrators because of Section 12(5).

Analysis: The Court distinguished cases where a person who is himself ineligible also has the unilateral power to nominate an arbitrator. Here, the contractual mechanism gave the contractor the right to choose names from the panel, and the Railway's power of nomination was counter-balanced by the contractor's reciprocal choice. In such a two-sided selection process, the ineligibility principle recognised in TRF Limited did not apply in the same way, because the structure was not one of unilateral appointment by an interested authority.

Conclusion: The General Manager was not disqualified from participating in the agreed panel-based appointment process.

Final Conclusion: The agreed arbitral appointment procedure had to be followed, and the High Court's departure from that mechanism was unsustainable.

Ratio Decidendi: Where the contract provides a reciprocal panel-based method for constituting the arbitral tribunal, and no statutory disqualification is shown against the proposed retired officers, the court should not replace the agreed mechanism by appointing an independent sole arbitrator under Section 11.

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