Does Section 12(5) bar government or PSU nominees outright?

No. Government/PSU nominees are not barred per se. Ineligibility arises only if there is a disqualifying relationship or conflict covered by Section 12(5).

Was DMRC’s panel invalid?

No. The Court held such a panel is not automatically invalid. What matters is neutrality, disclosures, and absence of disqualifying links.

What is the key test under Section 12(5)?

Whether the proposed arbitrator has a relationship with a party that creates ineligibility. A clear conflict means the person cannot serve.

Can private parties oppose a government panel in every case?

No. Objections succeed only if a real conflict exists. Mere status as a former government or PSU officer is not enough.

What practical step did the Court encourage?

Use broader, neutral panels and seek proper disclosures to ensure independence and avoid conflicts.

Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd. (2017) 4 SCC 665

Is DMRC’s Panel of Arbitrators invalid under Section 12(5)? The Court explains neutrality, conflicts, and how government panels can still pass muster.

Supreme Court of India 2017 (2017) 4 SCC 665 Arbitration, Conflict of Interest ~7 min

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Quick Summary

Core idea: Section 12(5) disqualifies arbitrators who have disqualifying relationships with a party. But a government/PSU panel is not automatically illegal. The Court said: focus on neutrality, disclosures, and absence of conflicts—then the panel stands.

Panel not per se invalid
Conflicts → Ineligibility
Encourage broad, neutral lists

Issues

Is the DMRC Panel of Arbitrators contrary to Section 12(5)?

Rules

Section 12(5): A person is ineligible to be an arbitrator if they have a relationship with a party that creates a conflict (as covered by the Act).
Practical test: Independence, impartiality, and no disqualifying link with either party.

Facts — Timeline

View Timeline

Contract: DMRC awarded Voestalpine a rail supply contract with an arbitration clause describing how to form the tribunal.

Panel process: DMRC would send a panel of five names; Voestalpine had to choose its nominee from that list.

Objection: Voestalpine rejected the list as contrary to Section 12(5) (alleged conflict/ bias).

Proceedings: The issue reached the Supreme Court of India for appointment/validity of the tribunal.

Arguments

Petitioner (Voestalpine)

Panel is one-sided and offends Section 12(5).
Arbitrators linked to government/PSUs risk bias.
Seek independent tribunal beyond the DMRC list.

Respondent (DMRC)

Panel members are retired engineers/PSU officers with no disqualifying ties.
Process is contractual and ensures expertise.
Section 12(5) ineligibility needs specific conflict, not assumptions.

Judgment

Panel not per se illegal: Selecting retired engineers/PSU nominees does not violate Section 12(5) by itself.
No automatic conflict: Government/PSU background alone does not create ineligibility; a real, disqualifying relationship must be shown.
Good practice: Use broader, neutral panels and proper disclosures so that parties can choose fairly.

Ratio Decidendi

Ineligibility under Section 12(5) flows from a relationship/conflict with a party—not from mere status as a government or PSU nominee. Neutral, disclosure-backed panels are permissible.

Why It Matters

Brings clarity for government contracts that rely on panel nominations.
Shifts debate from labels to actual conflicts and independence.
Encourages broader, balanced panels and full disclosures.

Key Takeaways

Section 12(5) targets real conflicts, not titles.
Government/PSU panels can be valid if neutral and conflict-free.
Parties may insist on broader lists and disclosures.

Mnemonic + 3-Step Hook

Mnemonic — “NO LABEL BIAS”

NO — No automatic bar for govt/PSU names.
LABEL — Labels don’t decide; links do.
BIAS — Prove a real conflict → ineligible.

3-Step Hook: Check Links → Seek Disclosures → Choose Neutral.

IRAC Outline

Issue	Rule	Application	Conclusion
Is DMRC’s panel invalid under Section 12(5)?	12(5) bars arbitrators with disqualifying relationships.	Panel members were retired engineers/PSU officers without shown conflicts.	Panel not per se invalid; look for actual conflicts.
Can private parties object merely due to PSU/government links?	Ineligibility arises from relationships, not mere status.	No specific disqualifying link proved.	Objection fails unless real conflict is shown.

Glossary

Section 12(5): Provision disqualifying arbitrators who have certain relationships with a party.
Conflict of Interest: A link that compromises independence or gives rise to bias.
Panel of Arbitrators: A list from which parties nominate their arbitrators, ideally broad and neutral.