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The Supreme Court of India has delivered a significant ruling on the appointment of arbitrators in disputes between public sector undertakings (PSUs) and private firms. The court has definitively stated that PSUs cannot unilaterally appoint arbitrators in such cases, emphasizing the need for mutual consent from both parties involved. This decision underscores the principle of fairness and equal rights in commercial disputes, ensuring that private firms are not disadvantaged in their dealings with state-owned entities.
The ruling stems from a case where a PSU sought to unilaterally appoint an arbitrator in a dispute with a private firm. The court, however, held that this practice is not permissible under the Arbitration and Conciliation Act, 1996. The Act, according to the court's interpretation, mandates that the appointment of an arbitrator should be a collaborative process involving both parties. This ensures impartiality and prevents one party from unduly influencing the arbitration process.
This decision carries significant implications for commercial transactions involving PSUs and private firms. It establishes a clear legal precedent that prevents PSUs from leveraging their position to dictate the terms of arbitration. By requiring mutual consent, the ruling promotes a level playing field where both parties have an equal say in choosing the individual who will adjudicate their dispute. This fosters a more equitable and transparent system for resolving commercial disagreements.
Source: PSUs cannot unilaterally appoint arbitrators in disputes with pvt firms: SC