Perkins Eastman Architects DPC v. HSCC (India) Ltd.

The Legal Question Before the Court

The contract between the parties — a design consultancy agreement — contained a dispute resolution clause giving one party (HSCC) the unilateral right to appoint the sole arbitrator. Following a dispute, HSCC invoked this clause and appointed its own nominee as the sole arbitrator, without consulting Perkins Eastman.

The question before the court was whether such a unilateral appointment was valid under the Arbitration and Conciliation Act, 1996, as amended by the 2015 Amendment Act. The 2015 amendments introduced Section 12(5) and the Fifth and Seventh Schedules, which set out specific grounds of ineligibility for arbitrators — including having a relationship with a party that gives rise to justifiable doubts about independence and impartiality.

The Court's Decision

The court held that the unilateral appointment clause was invalid and that the appointment made by HSCC was vitiated. The bench built upon its earlier decision in TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377, and extended its logic significantly.

TRF had held that a person disqualified from being an arbitrator under Section 12(5) — because they have a direct interest in the outcome of the dispute — cannot themselves appoint an arbitrator. Perkins Eastman extended this to its logical conclusion: if a disqualified person cannot appoint, then the disqualification passes through to any person or institution that the disqualified party authorises to make the appointment on their behalf. The ineligibility is not personal — it attaches to the very act of appointment flowing from the interested party's authority.

The Court's Reasoning

The court's reasoning rested on the foundational principle of arbitration: procedural neutrality. An arbitral tribunal's legitimacy depends on the independence and impartiality of its members. Where one party controls the appointment of the decision-maker — even indirectly through a nominee — the entire process is compromised from the outset.

The bench examined the 2015 amendments purposively: Parliament intended to bring Indian arbitration law in conformity with international standards on arbitrator independence. The Fifth Schedule lists circumstances giving rise to justifiable doubts about an arbitrator's impartiality. The Seventh Schedule lists absolute disqualifying grounds. The court held that a party who has an economic interest in the outcome of the dispute — as a contracting party with a claim or liability — falls within the disqualifying category and cannot either sit as arbitrator or direct who sits.

The parties cannot, by contract, override Section 12(5) disqualifications unless they do so expressly in writing after the dispute has arisen — the so-called "post-dispute waiver" under the proviso to Section 12(5). A pre-dispute clause in the contract granting one party unilateral appointment rights does not constitute such a waiver.

Practical Implications — What This Means Today

Perkins Eastman has fundamentally changed how dispute resolution clauses must be drafted in Indian commercial contracts. Government contracts, PSU agreements, infrastructure concessions, and construction agreements routinely contained clauses giving one party — usually the government or PSU — the right to name the sole arbitrator. All such clauses are now unenforceable to the extent they place appointment in the hands of an interested party.

Where an arbitration agreement contains an invalid unilateral appointment clause, Section 11 of the Act is invoked before the High Court (for domestic arbitrations) or the Supreme Court (for international commercial arbitrations), which then appoints a neutral arbitrator. This is now the standard procedure in most government and PSU disputes in Kerala and across India.

For businesses contracting with government bodies, public sector undertakings, and large corporations, the practical advice is clear: examine the dispute resolution clause at the time of contract, not when the dispute arises. A clause that entitles the other party to appoint the arbitrator unilaterally is legally vulnerable and will require Section 11 intervention — adding delay and cost to an already contentious process.

Relevant Statutory Provisions

• Section 11, Arbitration and Conciliation Act, 1996 — Appointment of arbitrators by the court
• Section 12(5), Arbitration and Conciliation Act, 1996 — Grounds of ineligibility for arbitrators
• Fifth Schedule, Arbitration and Conciliation Act, 1996 — Circumstances giving rise to justifiable doubts
• Seventh Schedule, Arbitration and Conciliation Act, 1996 — Absolute disqualifying grounds for arbitrators

Analysis by Vinode V. Luka, Advocate | Published: May 2026 | Last reviewed: May 2026