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Indian Oil Corporation v Raja Transport, (2009) 8 SCC 520


  • Whether appointing the Indian Oil Corporation’s Director as Arbitrator would take away the independence and impartiality of the arbitral tribunal?


  • Government contract arbitration clauses stating that an employee of the Department (often a high official unrelated to the work or the contract) will serve as the Arbitrator are valid and enforceable.
  • While the appointment of an employee as an arbitrator is not ipso facto a ground to raise a presumption of bias.


  • In 2005, the Appellant (IOC) appointed the Respondent (Raja Trasport) as its dealer for the retail sale of petroleum products. Later, the Appellant terminated the dealership of the Respondent on the recommendation of its Vigilance Department.
  • The Respondent filed in the Court of Civil Judge Dehradun for a declaration that the order of termination of the dealership was illegal and void.
  • The Appellant filed an application under the Civil Procedure Code, praying that the suit be rejected, and the matter be referred to arbitration in terms of Clause 69 of the agreement. The Court of Civil Judge allowed the said application filed by the Appellant, directing the parties to refer the matter to arbitration within two months.
  • The Respondent issued a notice dated 4.1.2006 through its counsel to the Appellant, referring to the Appellant’s insistence that only its Director (Marketing) or an officer nominated by him could act as the Arbitrator in pursuance of the order of the Civil Judge.
  • The Respondent filed an application under section 11(6) of the Act in March 2006 before the Chief Justice of Uttaranchal High Court, praying for the appointment of an independent arbitrator to decide the dispute relating to the validity of the termination of the dealership.
  • The Hon’ble Uttaranchal High Court appointed a retired High Court Judge as the sole Arbitrator to decide the dispute. The said order of the Chief Justice is challenged by the Appellant.


  • The Hon’ble Supreme Court held that in an arbitration agreement, parties are free to choose an employee of one of the parties to serve as an arbitrator.
  • Additionally, it was decided that the Court had the right to reject to designate an employee of one party as the Arbitrator in a dispute if there was any reason to doubt his impartiality or independence.
  • If a party enters into a contract with a government agency, statutory corporation, or public sector organisation knowing full well that it contains an arbitration clause specifying that one of its secretaries or directors shall serve as the Arbitrator, he cannot later claim that he is okay with dispute resolution through arbitration, but not by the named Arbitrator.
  • The Court concluded arbitration agreements in government contracts providing that an employee of the Department (usually a high official unconnected with the work or the contract) will be the Arbitrator are neither void nor unenforceable.