Court Overrules SIDCO's Nomination Due to Conflict of Interest, Ensures Neutral Arbitration
In a significant ruling, the Jammu & Kashmir and Ladakh High Court, on August 21, 2026, appointed an independent arbitrator to resolve a dispute between M/s Abraq Infrastructures LLP and the Union Territory of Jammu & Kashmir. The dispute arose from a construction contract for the National Institute of Fashion Technology (NIFT) at Ompora, Budgam, with an allotted cost of approximately Rs. 44 crores.
The petitioner, M/s Abraq Infrastructures LLP, had initially sought arbitration following the termination of their contract by the respondent, citing alleged interference and variation in work quantities. The arbitration clause in the contract designated the Managing Director of SIDCO as the arbitrator. However, the court found this designation unworkable, as the Managing Director was deemed ineligible under Section 12(5) of the Arbitration and Conciliation Act, 1996, due to potential conflicts of interest.
Citing past judgments, including TRF Ltd. v. Energo Engineering Projects Ltd. and Perkins Eastman Architects DPC v. HSCC (India) Ltd., the court emphasized the necessity of appointing an independent arbitrator to ensure neutrality and fairness. The judgment also highlighted the court's limited role under Section 11(6) of the Arbitration Act, which is primarily to ascertain the existence of a valid arbitration agreement, leaving substantive issues for the arbitrator.
Consequently, Mr. Mehraj-ud-Din Sofi, a retired District and Sessions Judge, was appointed as the sole arbitrator. He is tasked with proceeding according to the Arbitration and Conciliation Act, 1996, and resolving the dispute impartially.
Bottom Line :
Arbitration - Appointment of Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 - Managing Director, SIDCO, being ineligible under Section 12(5) read with the Seventh Schedule of the Act, cannot act as Arbitrator or nominate another person as Arbitrator. Court's duty to appoint an independent Arbitrator when the designated clause becomes unworkable.
Statutory provision(s): Arbitration and Conciliation Act, 1996, Sections 11(6), 12(5), 16, Seventh Schedule
