Can a company’s own officer act as arbitrator?

Yes. Parties may name an employee as arbitrator. This alone does not prove bias.

When can courts refuse such an appointment?

If there are reasonable doubts about independence or impartiality, courts may appoint someone else.

Is a government contract clause naming a director invalid?

No. Such clauses are generally valid and enforceable if the officer is unconnected with the work in dispute.

Can a party later object to the named arbitrator it agreed to?

Not usually. A party aware of the named-arbitrator clause cannot accept arbitration but reject that named person without good reason.

Indian Oil Corporation v. Raja Transport

Easy English explainer on whether naming a company’s director as arbitrator affects independence and impartiality in government/PSU contracts.

(2009) 8 SCC 520 Supreme Court of India India Arbitration Law 6 min read

Author: Gulzar Hashmi | Published: 2 November 2025 | Primary: employee arbitrator, government contract arbitration | Secondary: impartiality, Section 11

Quick Summary

The Supreme Court said that parties can name an employee (even a senior officer) as arbitrator in a government/PSU contract. This alone does not show bias. But courts may refuse such appointment if there are real doubts about independence or impartiality in the specific dispute.

Employee permissible No presumption Court safeguard

Issues

Does naming IOC’s Director as arbitrator undermine the tribunal’s independence and impartiality?

Rules

Named-employee clause valid: Government/PSU contracts may validly appoint a departmental employee (usually a senior officer unconnected with the work) as arbitrator.
No automatic bias: Being an employee is not, by itself, a ground to presume bias; impartiality is assessed on facts.
Court’s filter: Courts may decline to appoint the named employee if credible doubts about independence exist.

Facts (Timeline)

Dealership: In 2005, IOC appointed Raja Transport as a dealer for retail petroleum products.

Termination: On vigilance recommendation, IOC terminated the dealership.

Suit filed: Raja Transport sued before Civil Judge, Dehradun, to declare termination illegal.

Clause 69 & reference: IOC sought rejection of suit and reference to arbitration under Clause 69. Court referred parties to arbitration within two months.

Notice dispute: Raja Transport objected to IOC’s insistence that only its Director (Marketing) or nominee act as arbitrator.

Section 11(6) move: Respondent asked Chief Justice of Uttaranchal High Court to appoint an independent arbitrator.

Order challenged: High Court appointed a retired judge as sole arbitrator; IOC challenged this order.

Timeline showing dealership, termination, court orders, and arbitration appointment steps

Arguments

Appellant (IOC)

Contract allowed the Director (Marketing) or nominee to act as arbitrator.
Employee-arbitrator is valid; no automatic bias.
High Court should respect the agreed procedure.

Respondent (Raja Transport)

Director of IOC lacks independence in a dispute with IOC.
Sought neutral, independent arbitrator under Section 11(6).
Risk of perceived bias should be avoided.

Judgment

The Supreme Court held that naming an employee as arbitrator is permissible and enforceable. However, courts can refuse such appointment if there are reasonable doubts about impartiality in the case. A party who signed knowing the clause cannot later accept arbitration but reject the named arbitrator without good grounds.

Gavel and shield symbolizing court’s protection of impartial arbitration

Ratio Decidendi

Employee-arbitrator clause in PSU/government contracts is valid.
No presumption of bias from employment alone; impartiality is fact-specific.
Courts may bypass the named employee if impartiality is reasonably in doubt.

Why It Matters

The decision balances party autonomy with fairness. It validates common PSU clauses yet preserves a safety valve: courts can ensure a neutral tribunal when facts show potential bias.

Key Takeaways

Valid clause: Naming a departmental officer is not void.
Impartiality test: Look for real, case-based doubts—not titles.
Contract discipline: Parties are bound by the agreed procedure absent good reason.

Mnemonic + 3-Step Hook

Mnemonic: V-I-P — Valid clause • Impartiality check • Party bound.

Validate: Is the named-employee clause in the contract?
Inspect: Any concrete facts showing likely bias?
Proceed: Follow clause unless impartiality is truly doubtful.

IRAC Outline

Issue

Does appointing IOC’s Director as arbitrator compromise independence and impartiality?

Rule

Employee-arbitrator clause is valid; no automatic bias; courts may appoint another if impartiality is reasonably in doubt.

Application

Here, the clause named IOC’s Director/nominee. Valid in principle; scrutiny turns on facts indicating possible bias.

Conclusion

Clause stands, but courts retain power to ensure a neutral arbitrator if independence is credibly questioned.

Glossary

Employee-arbitrator: An arbitrator who is an employee or officer of one contracting party.
Impartiality: Arbitrator’s freedom from bias; judged on facts, not status alone.
Section 11(6): Provision for court appointment of arbitrator when agreed method fails.