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M/s Glock Asia-Pacific Ltd. vs. Union of India

Not available · 2023 INSC 568Decided 19 May 2023
Not available
Dr. Dhananjaya Y. Chandrachud · Pamidighantam Sri Narasimha · J.B. Pardiwala · K.V. Viswanathan as the third judge · Narasimha

Background

Glock Asia-Pacific Ltd., a foreign supplier, had contracted with the Union of India's Ministry of Home Affairs to supply pistols; a performance bank guarantee furnished for the contract was extended for years and eventually invoked by the Government after the supplier declined further extension. When a dispute arose, Glock invoked arbitration and nominated a retired High Court judge as sole arbitrator, but the Government insisted the contract's arbitration clause required disputes to go to an officer of the Ministry of Law appointed by the Secretary, Ministry of Home Affairs, prompting Glock to approach the Supreme Court to appoint an independent arbitrator.

Decision Breakdown

The Court rejected the Government's argument that a contract executed "in the name of the President of India" under Article 299 of the Constitution is immune from statutory conditions like Section 12(5) of the Arbitration Act, holding that Article 299 only prescribes the formality for binding the Government, not substantive contract law. Applying Section 12(5) read with the Seventh Schedule (which disqualifies as arbitrator anyone with an employment or similar relationship with a party) and following its earlier ruling in Perkins Eastman, the Court held that a clause letting the Government's own Secretary appoint a fellow government employee as sole arbitrator is inherently conflicted and unenforceable "notwithstanding any prior agreement," distinguishing this from cases involving multi-member panels of retired officials which had been upheld elsewhere. The Court allowed the application and appointed a former Supreme Court judge, Justice Indu Malhotra, as the sole independent arbitrator to resolve the dispute.

Lesson Learnt

A contract clause allowing one party, including the Government, to unilaterally appoint its own employee as the sole arbitrator is invalid under Indian arbitration law regardless of any prior agreement, because genuine impartiality and independence of the arbitrator cannot be waived merely by contractual consent given before the dispute arose.

Official source (sci.gov.in)View Judgment (PDF)

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