In a recent judgment dated 9th July 2025, the Delhi High Court, presided over by Justice Jyoti Singh, adjudicated three petitions filed by Power Grid Corporation of India Ltd. (Petitioner) against Mirador Commercial Pvt. Ltd. (Respondent), concerning the appointment of a sole arbitrator in ongoing disputes between the parties. The petitions sought termination of the arbitrator’s mandate under Sections 14(1) and 14(2) of the Arbitration and Conciliation Act, 1996. At the heart of the matter was the challenge to the arbitrator’s appointment, which the Petitioner contended was unilateral and therefore invalid.

The background of the case involves several contracts entered into in 2010 for the construction of high-voltage transmission lines. These contracts, originally executed with SPIC-SMO (later acquired by the Respondent), formed joint ventures with Aster Teleservices Pvt. Ltd. The disputes arose post-completion and commissioning of the projects, primarily around the failure of tower foundations, alleged substandard quality, rectification costs, and financial reconciliation issues.

Following unresolved issues, the Respondent invoked arbitration in May 2024, claiming a sum of ₹3.33 crores with interest in each case and nominated Justice Iqbal Ahmed Ansari (Retd.) as arbitrator. The Petitioner responded by objecting to the premature invocation of arbitration, arguing that the pre-arbitral step of approaching the Project Manager was bypassed and that the attempt to make a composite reference for distinct contracts was flawed. Despite the objections, the Respondent reaffirmed the appointment of its nominee as the Sole Arbitrator under Clause 39.2 of the General Conditions of Contract (GCC), prompting the Petitioner to approach the Court.

In the hearings, the Petitioner’s primary contention was that Clause 39.2 of the GCC, which allowed a party to unilaterally appoint a sole arbitrator in the event of the other party’s inaction, was invalid. Reliance was placed on landmark Supreme Court judgments, including Perkins Eastman Architects DPC v. HSCC (India) Ltd. and Central Organisation for Railway Electrification (CORE) v. ECI SPIC SMO MCML (JV), which held that unilateral appointments violate the principle of party autonomy and the requirement of arbitrator neutrality. According to the Petitioner, once it objected to the arbitration invocation, there was no failure to appoint an arbitrator as contemplated under the contract, and thus, the default mechanism of unilateral appointment should not apply.

Conversely, the Respondent argued that Clause 39.2 was fundamentally different from those invalidated in Perkins and CORE. The clause, it was submitted, did not vest a unilateral right but set out a mutually agreed mechanism—if one party failed to appoint an arbitrator within sixty days of notice, the nominee of the initiating party would become the Sole Arbitrator. The Respondent maintained that this framework was voluntarily adopted by both parties and did not breach the principles of impartiality or autonomy.

The Court noted that it had earlier issued notice in these petitions specifically to examine the validity of Clause 39.2 in light of the Perkins judgment, confining its scrutiny to the question of unilateral appointment. Other objections raised by the Petitioner—such as premature invocation, composite reference across unrelated contracts, time-barred claims, and non-joinder of necessary parties—were ruled to fall within the domain of the arbitrator under Section 16 of the 1996 Act. This interim view was upheld by the Supreme Court in March 2025 when it dismissed the Petitioner’s special leave petitions.

Justice Singh observed that Clause 39.2 clearly and unambiguously provides that if either party fails to appoint its arbitrator within sixty days of notice, the arbitrator appointed by the other party becomes the sole arbitrator. The Court rejected the Petitioner’s interpretation that raising objections constituted a valid response, thereby precluding the default provision. It held that “failure” in the context of Clause 39.2 could only mean failure to appoint an arbitrator within the stipulated time. Permitting a party to avoid the default clause by merely raising objections would create an impasse in the arbitration process and defeat the intent of the agreed mechanism.

While initially the Petitioner argued the clause was legally invalid under Perkins, it later changed its stance to argue that the conditions for invoking the default clause were not met due to its objections. The Court refused to entertain this change of position, noting that arguments beyond the pleaded case and contrary to prior judicial orders could not be accepted at this stage.

Ultimately, the Court held that the Petitioner failed to appoint its nominee within the prescribed sixty-day window. Therefore, the appointment of the Respondent’s nominee as the Sole Arbitrator was valid under Clause 39.2. The petitions were accordingly dismissed, and the mandate of the appointed arbitrator was upheld.

This judgment reinforces the principle that arbitration clauses voluntarily agreed upon by the parties must be honored as per their plain language. It also underscores the limited role of courts in interfering with arbitral proceedings, particularly when disputes can be addressed under the tribunal’s jurisdiction pursuant to Section 16 of the 1996 Act. Legal professionals and contracting parties alike are reminded through this case of the importance of clarity in arbitration clauses and the consequences of inaction within stipulated timelines.