Introduction
Delhi High Court, in the case of M/s KNR Tirumala Infra Pvt. Ltd. v. National Highways Authority of India (ARB. P. No. 1733 of 2024, dated 29th August 2025), has again enunciated the precedence of institutional arbitration and made it clear that when the parties have agreed by their contract to refer their disputes to an arbitral institution, the institution's rules should be complied with in their entirety. The ruling, made by Justice Jasmeet Singh, was a result of a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, where the petitioner asked for its nominee arbitrator from outside the panel kept by the Society for Affordable Redressal of Disputes (SAROD). The Court rejected the petition, asking the petitioner to appoint its arbitrator from the SAROD panel, thus upholding the institution-based arbitration framework in infrastructure contracts.
Background of the Dispute
The case arose out of a concession contract between NHAI and M/s KNR Tirumala Infra Pvt. Ltd. for a section of NH-140 in Andhra Pradesh under Bharatmala Pariyojana. The project was awarded in 2018 and was subject to a condition of the contract where, in case of any dispute, such dispute shall be referred to arbitration under the SAROD Rules. There were disputes regarding obstructions in implementation and non-clearance of bills, upon which the petitioner advanced claims amounting to around Rs. 202 crores. It referred the case to arbitration in May 2024 and appointed Mr. Subhas I. Patel, ex-Secretary to the Government of Gujarat, as its nominee arbitrator. NHAI protested on the basis that the nomination was in contravention of SAROD Rules, which mandate that parties appoint arbitrators from SAROD's empanelled list. Whilst NHAI went ahead and nominated Justice (Retd.) Pradeep Nandrajog from the SAROD panel as their nominee, the petitioner went to the High Court seeking to legitimize its external nomination.
Petitioner’s Submissions
The petitioner contended that it was not a main member of SAROD and could not thus be forced to select from SAROD's panel. Such forcing, it presented, would entail an impermissible limitation on its freedom under the agreement and the Act. The petitioner also challenged the extent and impartiality of the panel of SAROD, arguing that limiting appointments to the panel eroded independence and impartiality. In aid thereof, reference was made to the Supreme Court's ruling in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), where restrictive appointment procedures dominated by a single party were held to be invalid. The petitioner also made reference to the Delhi High Court's ruling in Rani Constructions Pvt. Ltd. v. Union of India to contend against obligatory membership of SAROD as a condition precedent to invoke arbitration.
Respondent’s Submissions
NHAI resisted these submissions, asserting that Clause 38.3 of the agreement clearly submitted disputes to the SAROD Rules. According to Rule 11.4, all arbitrators are to be chosen from the SAROD panel. NHAI claimed that SAROD acts as an autonomous arbitral institution not controlled by it, a stance already established by the Delhi High Court in Kamlesh Kumar v. SAROD at single judge as well as division bench levels. It contended that SAROD has a broad-based and extensive panel with retired Supreme Court and High Court judges, former senior government officials, engineers, and professionals of good repute, and is not akin to narrow, unbalanced panels disapproved in CORE. NHAI then also argued that SAROD Rule changes made in a December 2024 circular abolished the membership hurdle, i.e., non-members could refer disputes to arbitration but had to adhere to SAROD's procedure once the dispute was referred.
Court’s Analysis
Justice Jasmeet Singh, after hearing the competing arguments, held that the ambit of judicial examination under Section 11 is only to see whether there exists a valid agreement to arbitrate, and if that existence is found, the agreed-upon procedure is usually followed. The Court found that the petitioner’s reliance on Rani Constructions was misplaced, since the mischief of compulsory membership had already been addressed by the amendment of the SAROD Rules in December 2024. Moreover, in earlier correspondence, the petitioner had itself undertaken to follow SAROD Rules, thereby weakening its later claim to disregard them.
On the broader issue of panel restrictions, the Court distinguished CORE on the facts. As compared to CORE, where the contractor was forced to select arbitrators from a Railway officer-dominated list and the employer had overriding control, the SAROD system is institutional in character and subject to an independent institution. The SAROD panel, as brought out in previous cases such as Villupuram Highways Construction v. NHAI, consists of 92 arbitrators drawn from varied professional backgrounds, including retired judges, senior administrators, engineers, and finance professionals. Its constitution and empanelment process are handled transparently by a governing body with equal involvement of NHAI and the National Highways Builders Federation (NHBF), a body of contractors. The Court held that it makes it neutral and impartial, doing away with any fear of bias.
The Court went on to highlight that institutional arbitration inherently necessitates compliance with institutional rules in their entirety. Party autonomy cannot be stretched to selectively choosing to apply rules while rejecting others. Permitting parties to appoint arbitrators outside the institutional scheme would subvert the basis of institutional arbitration, bring back unilateralism, and negate the legislative policy underlying Section 43D of the Act, compelling the promotion of institutional arbitration in India.
Verdict
Finally, the Court rejected the petition, releasing the petitioner from liberty to appoint an arbitrator from SAROD's empanelled list, with the two nominated arbitrators to then appoint the presiding arbitrator from the same panel. It made it clear that no view was taken on the merits of the dispute, keeping all substantive rights and contentions before the arbitral tribunal open.
Significance of this decision
This decision has significant implications for infrastructure contracts and Indian arbitration practice. It reinforces the institutional arbitration process by demanding strict compliance with institutional rules once the parties have contractually committed to the same. It curbs the tendency of parties to invoke party autonomy selectively and reaffirms institutional panels, if widely based and impartial, to be adequate in terms of independence and impartiality. The ruling also dispels any existing ambiguities regarding membership in SAROD, establishing that non-members have access to arbitration but are bound by SAROD's processes.
Case Reference: M/S. KNR TIRUMALA INFRA PVT. LTD. VERSUS NATIONAL HIGHWAYS AUTHORITY OF INDIA, ARB. P. NO. 1733 OF 2024 IN THE HIGH COURT OF DELHI
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