Ssangyong Engineering & Construction Co. Ltd vs NHAI
(2019) 15 SCC 131
Arbitrator Appointment / Patent Illegality
Read the judgmentBackground
Ssangyong, a Korean EPC contractor executing a highway project for NHAI, challenged the arbitration clause in the Model Concession Agreement. The clause allowed NHAI to unilaterally appoint the sole arbitrator. Ssangyong argued that this violated the 2015 Amendment to the Arbitration and Conciliation Act, which bars a party who has an interest in the outcome from appointing the arbitrator.
What the court decided
The Supreme Court held that unilateral appointment of arbitrators by one party violates Section 12(5) of the Arbitration Act as amended in 2015. The Court also clarified the scope of 'patent illegality' as a ground to set aside a domestic award under Section 34: an award is patently illegal if it is based on no evidence, ignores vital evidence, or is contrary to substantive law. Courts cannot re-appreciate evidence or substitute their view for the arbitrator's.
What this means for your contracts team
Any NHAI contract clause that gives NHAI the right to unilaterally appoint the sole arbitrator is void under this judgment. If NHAI invokes such a clause, immediately apply to the High Court under Section 11 for appointment of an independent arbitrator. Do not participate in arbitration before a unilaterally-appointed tribunal without objecting on record.
The law is on your side. The documentation has to be too.
Ssangyong Engineering & Construction Co. Ltd won on contemporaneous records. CivilBolt structures your correspondence and site records so the evidence exists when you need it.