The Delhi High Court held that an arbitration clause requiring one party to select an arbitrator from a panel curated by the other party violates the principle of equal treatment under Section 18 of the Arbitration and Conciliation Act, 1996, and is therefore invalid. Relying on Supreme Court precedents in Core Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) and a coordinate bench decision, the Court appointed Justice (Retd.) J.R. Midha as sole arbitrator to resolve the dispute between Express Food Services and IRCTC.
Background & Facts
The Dispute
Express Food Services, a partnership firm with over 20 years' experience in railway catering, was awarded 11 cluster catering tenders by IRCTC following competitive bidding. As part of technical eligibility, the petitioner submitted ISO 22000:2018 certificates for two units - Itarsi and Agra Cantt. railway stations, procured through an intermediary which engaged certifying body Otabu. The intermediary represented that the certificates would remain valid for three years without further action. However, the certificates were later cancelled for non-surveillance, prompting IRCTC to issue a Show Cause Notice (SCN) dated 27 April 2026 proposing termination of the tenders, forfeiture of licensee fee and security deposit, and a three-year debarment. The petitioner replied to the SCN on 10 May 2026. Disputes arose, leading the petitioner to file a Section 9 petition (O.M.P.(I) (COMM.) 353/2026) and issue a notice invoking arbitration on 29 August 2026.
Key Facts
- The Master License Agreement governing the parties contains an arbitration clause that provides for the sole arbitrator to be appointed from IRCTC’s list of empanelled arbitrators.
- The petitioner contends that this mechanism is akin to a unilateral appointment, which is impermissible under the Supreme Court’s judgment in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), (2025) 4 SCC 641.
- IRCTC, through the Solicitor General, disputed the petitioner’s merits but conceded that an independent sole arbitrator should be appointed by the Court.
- The Court noted a recent coordinate bench decision in Kalpataru Projects International Ltd. v. Northern Railway, 2026 SCC OnLine Del 110, which held that a similar clause violates the principle of equal treatment.
Procedural History
- 27.04.2026: IRCTC issued Show Cause Notice (SCN) alleging certificate cancellation and proposing termination of tenders, forfeiture, and three-year debarment.
- 10.05.2026: Petitioner filed reply to the SCN.
- 29.08.2026: Petitioner filed Section 9 petition (O.M.P.(I) (COMM.) 353/2026) and issued notice invoking arbitration.
- 17.09.2026: Date of judgment; Court appointed sole arbitrator and disposed of the petition.
Relief Sought
The petitioner sought appointment of an independent sole arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, to adjudicate the disputes, and requested that the impugned arbitration clause be declared invalid.
The Legal Issue
The central question was whether an arbitration clause that mandates one party to select its arbitrator from a panel curated exclusively by the other party offends the principle of equal treatment under Section 18 of the Arbitration and Conciliation Act, 1996, thereby rendering the clause invalid and necessitating judicial appointment of a sole arbitrator under Section 11 of the same Act.
Arguments Presented
For the Petitioner
The petitioner argued that the arbitration clause in the Master License Agreement is unilateral because it gives IRCTC the exclusive power to curate the panel of empanelled arbitrators, while the petitioner is restricted to choosing from that list. This contravenes Section 18, which requires equal treatment of parties in arbitrator appointment. Relying on the Supreme Court’s decisions in Core Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), (2020) 14 SCC 712 and Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), (2025) 4 SCC 641, the petitioner submitted that the clause creates a justifiable doubt about the independence and impartiality of the arbitrator. The petitioner further cited the coordinate bench decision in Kalpataru Projects International Ltd. v. Northern Railway, 2026 SCC OnLine Del 110, which held that a similar clause violates the principle of equal treatment. Consequently, the petitioner prayed for the appointment of an independent sole arbitrator by the Court.
For the Respondent
The Solicitor General, appearing for IRCTC, disputed the petitioner’s contentions on the merits of the underlying dispute concerning the validity of the ISO certificates and the alleged non-surveillance. However, he fairly submitted that, irrespective of the merits, an independent sole arbitrator should be appointed by the Court to adjudicate the parties’ claims and counter-claims, thereby allowing the arbitration to proceed under the rules of the Delhi International Arbitration Centre.
The Court's Analysis
The Court began by noting that the existence of an arbitration agreement was not disputed and that the Master License Agreement contained an arbitration clause providing for the appointment of a sole arbitrator from IRCTC’s list of empanelled arbitrators. The Court examined whether such a clause complies with the principle of equal treatment enshrined in Section 18 of the Arbitration and Conciliation Act, 1996.
Drawing on the Supreme Court’s reasoning in Core Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), (2020) 14 SCC 712, the Court observed that when one party curates a panel of potential arbitrators and the other party is bound to select its arbitrator exclusively from that panel, the latter’s freedom to choose an arbitrator of its own choice is effectively restricted. The curating party may exclude individuals it deems unfavorable, thereby creating a reasonable doubt about the arbitrator’s independence and impartiality. The Court emphasized that the problem arises not from the mere existence of a curated panel, but from making it mandatory for the other party to select from that panel, which results in an unequal appointment process.
The Court further relied on the later Supreme Court judgment in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), (2025) 4 SCC 641, which reiterated that the curation of a panel by one party and the consequent restriction on the other party’s choice violates Section 18. The Court noted that the reasoning in Kalpataru Projects International Ltd. v. Northern Railway, 2026 SCC OnLine Del 110, a coordinate bench of the Delhi High Court, applied the same principle to a factually similar scenario and concluded that the arbitration clause was invalid.
Applying these principles, the Court found that the arbitration clause in the present case suffers from the same infirmity: IRCTC, as the respondent, holds the exclusive power to curate the panel of empanelled arbitrators, while the petitioner is confined to selecting from that list. This arrangement denies the petitioner equal participation in the appointment process and gives rise to justifiable doubts about the arbitrator’s neutrality. Consequently, the Court declared the clause invalid and unenforceable.
Having invalidated the agreed-upon appointment mechanism, the Court turned to Section 11 of the Arbitration and Conciliation Act, 1996, which empowers the Chief Justice or his designate to appoint an arbitrator when the parties’ agreement fails to provide for a valid appointment procedure. The Court recorded that both parties, including the Solicitor General for IRCTC, consented to the appointment of an independent sole arbitrator. Accordingly, the Court appointed Justice (Retd.) J. R. Midha, former Judge of the Delhi High Court, as the sole arbitrator to adjudicate the disputes between the parties. The Court directed that the arbitration proceedings shall be conducted under the aegis and rules of the Delhi International Arbitration Centre (DIAC), with the arbitrator furnishing the requisite disclosures under Section 12 of the Act. The parties were granted liberty to file an appropriate application should any impediment arise in the appointment process. Finally, the Court clarified that its order does not express any opinion on the merits of the underlying controversy, leaving all claims and counter-claims open for determination by the arbitrator in accordance with law.
The Verdict
The petitioner succeeded. The Court declared the arbitration clause in the Master License Agreement invalid for violating the principle of equal treatment under Section 18 of the Arbitration and Conciliation Act, 1996, and appointed Justice (Retd.) J. R. Midha as the sole arbitrator under Section 11 of the Act. The arbitration shall proceed under the rules of the Delhi International Arbitration Centre, with the arbitrator to furnish disclosures under Section 12. The parties are at liberty to file an application if any impediment arises. No opinion was expressed on the merits of the underlying dispute.
What This Means For Similar Cases
Arbitration Clauses Must Ensure Equal Participation
Parties drafting arbitration agreements must ensure that the appointment mechanism allows both sides equal participation in selecting the arbitrator. A clause that gives one party exclusive power to curate the panel while binding the other to choose from that panel is likely to be struck down as violative of Section 18. Practitioners should consider alternative models, such as each party nominating an arbitrator and those two nominating a third, or using a neutral institution’s list.
Curated Panels Undermine Impartiality
Even if a curated panel is maintained for convenience, making its use mandatory for the other party creates a reasonable doubt about the arbitrator’s independence. The judgment reinforces that the mere existence of a panel is not problematic; the defect lies in the lack of reciprocal choice. Parties should avoid provisions that effectively exclude one side from influencing the pool of potential arbitrators.
Section 11 Intervention When Clause Is Defective
When an arbitration clause is found invalid or unworkable, Section 11 provides a swift remedy for judicial appointment of an arbitrator. The judgment highlights that courts will act upon consensus of the parties (or even unilateral request) to name an independent arbitrator, thereby preventing delays in initiating arbitration. Practitioners should be ready to invoke Section 11 promptly when faced with a defective clause, and ensure that the appointed arbitrator complies with disclosure requirements under Section 12 to prevent challenges to the award.
