One of the most celebrated features of arbitration is party autonomy—the freedom of parties to determine how their disputes should be resolved, including who will resolve them. But a critical question remains unresolved in the minds of many arbitration practitioners: Can a party, after agreeing to institutional arbitration, later assert an unrestricted right to appoint an arbitrator of its own choosing disregarding the institution’s procedural framework?
This issue was squarely addressed by the Delhi High Court in the recent case of M/s KNR Tirumala Infra Pvt. Ltd. v. National Highways Authority of India1 which reaffirms a vital yet often misunderstood principle in arbitration law: once parties contractually agree to institutional arbitration, they are bound by the rules of that institution, including those governing the appointment of arbitrators. Thus, party autonomy does not extend so far as to permit deviation from the agreed institutional process.
At the heart of the decision lies a reaffirmation of contractual fidelity in arbitration procedures, but it also sheds considerable light on the contours of party autonomy. While party autonomy is the backbone of arbitration, it is not an abstract or unilateral right; it is defined and constrained by the very terms of the arbitration agreement that the parties choose to sign.
The Arbitration & Conciliation Act ( for brevity “the Act”), 1996 forms the bedrock to this as it contains several phrases that show the Indian legislature’s wisdom in prioritizing party autonomy throughout the arbitral process such as “unless otherwise agreed by the parties,” “failing any agreement,” “the parties are free to agree,” “failing such agreement,” and “unless the agreement on the appointment procedure provides other means.” Sections 10 and 11 of the Act further reinforce this principle by allowing parties to freely determine the number of arbitrators and the procedure for their appointment. When parties opt for institutional arbitration, they are effectively bound by the procedural rules of that institution, including any limitations on the pool from which arbitrators can be selected.
The petitioner in the instant case of KNR Tirumala (supra) had sought to nominate an arbitrator of its own choosing, external to the agreed SAROD panel, arguing that since it was not a “member” of SAROD, it was not bound by its rules. The Court rejected this argument on a twofold basis: first, SAROD had already clarified that membership was not a prerequisite for invoking arbitration under its rules; and second, once the arbitration was invoked under SAROD, Rule 11.4 which requires parties to appoint arbitrators from its empanelled list became binding on both parties, regardless of membership status.
This reasoning is firmly anchored in a broader principle long recognized in arbitration jurisprudence: institutional rules agreed by parties form an integral part of their arbitration agreement, and cannot be disregarded post-facto. Even previously, the Supreme Court’s through a catena of judgements had laid emphasis on the binding nature of institutional frameworks such as in Quippo Construction Equipment Ltd. v. Janardan Nirman Pvt. Ltd2., where the Court held that once parties consent to institutional arbitration, they are presumed to have accepted its procedures.
A fundamental aspect of arbitration is that the parties’ consent to their choice of arbitrator and the process must be both equal and unequivocal. The arbitrator, in turn, must be independent and unbiased. Any perception of partiality can invalidate the proceedings. The legal basis for this principle is found in Section 12 of the Arbitration and Conciliation Act, 1996, which bars the appointment of individuals with specific connections to the parties or the dispute. The Seventh Schedule of the Act lists categories of relationships that automatically render an individual ineligible to serve as an arbitrator, thereby invalidating any proceedings in which they participate. A key judicial precedent in this area is the Supreme Court’s decision in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV). In this case, the court nullified an appointment process that was deemed unilateral and in violation of Section 12(5) of the Act, reinforcing the importance of a fair and impartial selection process.
The High Court in the instant case of KNR Tirumala (supra) also addressed an attempted analogy with CORE case by distinguishing CORE on a critical point: unlike the skewed and controlled appointment process in CORE, SAROD offers a balanced and independent structure, and maintains a large and diverse panel of qualified arbitrators. Thus, the concern in CORE—that one party had an unfair advantage in the appointment process was entirely absent in the SAROD context.
By upholding SAROD’s appointment procedure, the Court affirmed the legislative intent behind Section 43D(2)(h) of the Arbitration and Conciliation Act, which promotes institutional arbitration as a mechanism for efficient and impartial dispute resolution. Institutional rules are not mere procedural conveniences; they are safeguards designed to foster neutrality and predictability in arbitration. Allowing parties to circumvent them under the guise of autonomy would defeat the very purpose of institutional arbitration and open the door to delay, manipulation, and inconsistency.
The Court’s insistence on procedural discipline also implicitly reinforces the doctrine of competence-competence and the finality of agreed procedures, echoing principles recognised in international arbitration practice, including in Redfern and Hunter on International Arbitration3, which notes that arbitration institutions are “creatures of contract” whose rules must be given binding effect unless expressly agreed otherwise.
Conclusion
Ultimately, the Delhi High Court’s ruling represents a principled stand on the limits of party autonomy in institutional arbitration. The decision is timely and consequential, and sends a clear message: party autonomy must operate within the bounds of party consent, and that consent includes adherence to institutional rules that the parties have contractually agreed upon. Hence, to treat the agreed institutional rules as optional would undermine the very sanctity of arbitration agreements and erode confidence in the system.
For a country like India, this judgment holds significant implications and, more broadly, for the global landscape of commercial dispute resolution. it strengthens the credibility of institutional arbitration, encouraging businesses to use such forums. It provides legal clarity that once parties choose a specific institutional framework, they are bound by its rules, including the selection of arbitrators from a pre-defined panel. This will help reduce procedural delays and challenges under Section 11 of the Arbitration and Conciliation Act, fostering a more predictable and efficient arbitration ecosystem.
Globally, this ruling aligns with international best practices that prioritize institutional integrity and independence in arbitration. It signals to foreign investors that India is a reliable jurisdiction for resolving commercial disputes, where contractual agreements, including arbitration clauses, are strictly upheld. As the ruling strengthens the hands of institutional arbitration bodies, we must ponder: To what extent does a party’s “free will” in agreeing to an arbitration clause truly exist when faced with non-negotiable, standardized contracts from powerful gov/non govt. entities? Does the act of agreeing to a pre-defined panel effectively cede a fundamental right to choose one’s judge, even if the panel is broad and independent? This raises a profound question about the power dynamics in modern commercial agreements and whether institutional rules, even if fair, can truly be considered a product of mutual consent.
Citations
- M/s KNR Tirumala Infra Pvt. Ltd. v. National Highways Authority of India, ARB. P. NO. 1733/2024
- Quippo Construction Equipment Ltd. v. Janardan Nirman Pvt. Ltd.(2020) 18 SCC 277
- Nigel Blackaby, Constantine Partasides and Alan Redfern, Redfern and Hunter on International Arbitration (7th edn, OUP 2022)
Expositor(s): Adv. Mahelaka Abrar
