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EXECUTION OF AWARD PASSED BY

SOLE ARBITRATOR

PRESENTED BY

SH. AJAY SHARMA, ADDITIONAL AND DISTRICT JUDGE, NUH

NEETIKA BHARDWAJ, ADDITIONAL CIVIL JUDGE SENIOR DIVISION CUM SUB

DIVISIONAL JUDICIAL MAGISTRATE, FIROZEPUR JHIRKA

INTRODUCTION:-
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The significant increase in the role of international trade in the economic development of nations over

the last few decades has been accompanied by a considerable increase in the number of commercial

disputes as well. In India too, rapid globalization of the economy and the resulting increase in

competition has led to an increase in commercial disputes. At the same time, however, the rate of

industrial growth, modernization, and improvement of socio-economic circumstances has, in many

instances, outpaced the rate of growth of dispute resolution mechanisms. In many parts of India, rapid

development has meant increased caseloads for already overburdened courts, further leading to

notoriously slow adjudication of commercial disputes. As a result, alternative dispute resolution

mechanisms, including arbitration, have become more crucial for businesses operating in India as

well as those doing businesses with Indian firms.

WHAT IS ARBITRATION:-

Arbitration is a mechanism of dispute resolution with the intervention of a third person (or more

persons) . The settlement of the dispute that is arrived the judgment of the third person (or more

persons) who are called Arbitrators.

Section 2(a) defines “arbitration” means any arbitration whether or not administered by permanent

arbitral institution.

HISTORICAL BACKGROUND:-

Arbitration has a long history in India. In ancient times, people often voluntarily submitted their

disputes to a group of wise men of a community—called the panchayat—for a binding resolution.

The panchayati raj system has found its place in various laws in India. Modern arbitration law in India

was created by the Bengal Regulations in 1772, during the British rule. The Bengal Regulations

provided for reference by a court to arbitration, with the consent of the parties, in lawsuits for

accounts, partnership deeds, and breach of contract, amongst others. Until 1996, the law governing

arbitration in India consisted mainly of three statutes: (i) the 1937 Arbitration (Protocol and

Convention) Act, (ii) the 1940 Indian Arbitration Act, and (iii) the 1961 Foreign Awards (Recognition
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and Enforcement) Act. The 1940 Act was general law governing arbitration in India along the lines

of the English Arbitration Act of 1934, and both the 1937 and the 1961 Acts were designed to enforce

foreign arbitral awards (the 1961 Act implemented the New York Convention of 1958) The

government enacted the Arbitration and Conciliation Act, 1996 (the 1996 Act) in an effort to

modernize the outdated 1940 Act. The 1996 Act is a comprehensive piece of legislation modeled on

the lines of the UNCITRAL (United Nations Commission on International Trade Law) Model Law.

This Act repealed all the three previous statutes (the 1937 Act, the 1961 Act and the 1940 Act). Its

primary purpose was to encourage arbitration as a cost-effective and quick mechanism for the

settlement of commercial disputes. The 1996 Act covers both domestic arbitration and international

commercial arbitration.

CONTRACTUAL AND COMMERCIAL ARBITRATION:-

Arbitration is normally contractual, forming part of a contract between two parties. However

sometimes arbitration is statutory also, as defined in Section 7(1) of A & C Act.

Section 2(b) defines that “arbitration agreement” means an agreement referred to in section 7.

7. Arbitration agreement.—(1) In this Part, “arbitration agreement”

means an agreement by the parties to submit to arbitration all or certain
disputes which have arisen or which may arise between them in respect of a
defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a
contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in—
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication
including communication through electronic means] which provide a record of the
agreement; or
(c) an exchange of statements of claim and defence in which the existence of the
agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause
constitutes an arbitration agreement if the contract is in writing and the reference
is such as to make that arbitration clause part of the contract.
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One of the instances of statutory arbitration is provided under Section 3G (5) and (6) of National

Highways Act 1956. Under this Act and National Highways Authority of India (NHAI) Act 1988

land may be acquired for NHAI for the purposes of Highways. For such acquired land compensation

is determined by the competent authority under Section 3G (1) and (2) of the 1956 Act. It is provided

under sub-section (5) that if the compensation determined by competent authority is not acceptable

either to the land holder or NHAI, the amount shall be determined by the arbitrator to be appointed

by Central Government on the application by either of the parties.

COMPOSITION OF ARBITRAL TRIBUNAL:-

Number of arbitrators:-

Section 10 of the Act provides that parties are free to determine the number of arbitrators. However,

such number shall not be an even number. If parties would fail to determine the number of arbitratiors ,

the arbitral tribunal shall consist of a sole arbitrator.

Appointment of arbitrators :-

Section 11 of the Act deals with appointment of arbitrators. Same is reproduced here as under:-

(1) A person of any nationality may be an arbitrator, unless otherwise agreed by

the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for
appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with
three arbitrators, each
party shall appoint one arbitrator, and the two appointed arbitrators shall appoint
the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and—
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a
request to do so
from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty
days from the
date of their appointment,
the appointment shall be made, upon request of a party, by the Supreme Court or,
as the case may be, the High Court or any person or institution designated by such
Court;
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a
sole arbitrator, if the
parties fail to agree on the arbitrator within thirty days from receipt of a request
by one party from the other party to so agree the appointment shall be made, upon
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request of a party, by the Supreme Court or, as the case may be, the High Court or
any person or institution designated by such Court].
(6) Where, under an appointment procedure agreed upon by the parties,—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement
expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to
him or it under that procedure, a party may request the Supreme Court or, as the
case may be, the High Court or any person or institution designated by such Court
to take the necessary measure, unless the agreement on the appointment procedure
provides other means for securing the appointment.
(6A) The Supreme Court or, as the case may be, the High Court, while considering
any application under sub-section (4) or sub-section (5) or sub-section (6), shall,
notwithstanding any judgment, decree or order of any Court, confine to the
examination of the existence of an arbitration agreement.
(6B) The designation of any person or institution by the Supreme Court or, as the
case may be, the High Court, for the purposes of this section shall not be regarded
as a delegation of judicial power by the Supreme Court or the High Court.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-
section (6) to the Supreme Court or, as the case may be, the High Court or the
person or institution designated by such Court is final and no appeal including
Letters Patent Appeal shall lie against such decision.
(8) The Supreme Court or, as the case may be, the High Court or the person or
institution designated
by such Court, before appointing an arbitrator, shall seek a disclosure in writing
from the prospective arbitrator in terms of sub-section (1) of section 12, and have
due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties;
and
(b) the contents of the disclosure and other considerations as are likely to secure
the appointment of an independent and impartial arbitrator .
(9) In the case of appointment of sole or third arbitrator in an international
commercial arbitration, the Supreme Court or the person or institution designated
by that Court may appoint an arbitrator of a nationality other than the
nationalities of the parties where the parties belong to different nationalities.
(10) The Supreme Court or, as the case may be, the High Court, may make such
scheme as the said
Court may deem appropriate for dealing with matters entrusted by sub-section (4)
or sub-section (5) or sub-section (6), to it.
(11) Where more than one request has been made under sub-section (4) or sub-
section (5) or sub-section (6) to the Chief Justices of different High Courts or their
designates, different High Courts or their designates, the High Court or its
designate to whom the request has been first made under the relevant sub-section
shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-
section (10) arise in an international commercial arbitration, the reference to the
“Supreme Court or, as the case may be, the High Court” in those sub-sections
shall be construed as a reference to the “Supreme Court”; and
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-
section (10) arise in any other arbitration, the reference to “the Supreme Court or,
as the case may be, the High Court” in those sub-sections shall be construed as a
reference to the “High Court” within whose local limits the principal Civil Court
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referred to in clause (e) of sub-section (1) of section 2 is situate, and where the
High Court itself is the Court referred to in that clause, to that High Court.
(13) An application made under this section for appointment of an arbitrator or
arbitrators shall be disposed of by the Supreme Court or the High Court or the
person or institution designated by such Court, as the case maybe, as expeditiously
as possible and an endeavour shall be made to dispose of the matter within a
period of sixty days from the date of service of notice on the opposite party.
(14) For the purpose of determination of the fees of the arbitral tribunal and the
manner of its payment to the arbitral tribunal, the High Court may frame such
rules as may be necessary, after taking into consideration the rates specified in the
Fourth Schedule.
Explanation.—For the removal of doubts, it is hereby clarified that this sub-section
shall not apply to international commercial arbitration and in arbitrations (other
than international commercial arbitration) in case where parties have agreed for
determination of fees as per the rules of an arbitral institution.

ARBITRAL AWARD:-

Section 2(c) of the Act says that “arbitral award” includes an interim award.

ENFORCEMENT OF ARBITRAL AWARD:-

Section 36 of the Act deals with enforcement of the award. So it would be handy to have a glance of
section 36 of Act.
36. Enforcement.—
(1) Where the time for making an application to set aside the arbitral award under
section 34 has expired, then, subject to the provisions of sub-section (2), such
award shall be enforced in accordance with the provisions of the Code of Civil
Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the court.
(2) Where an application to set aside the arbitral award has been filed in the Court
under section 34,
the filing of such an application shall not by itself render that award
unenforceable, unless the Court
grants an order of stay of the operation of the said arbitral award in accordance
with the provisions of sub-section (3), on a separate application made for that
purpose.
(3) Upon filing of an application under sub-section (2) for stay of the operation of
the arbitral award, the Court may, subject to such conditions as it may deem fit,
grant stay of the operation of such award for reasons to be recorded in writing:
Provided that the Court shall, while considering the application for grant of stay
in the case of an arbitral award for payment of money, have due regard to the
provisions for grant of stay of a money
decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).]
Provided further that where the Court is satisfied that a Prima facie case is made
out that,—
(a) the arbitration agreement or contract which is the basis of the award; or
(b) the making of the award, was induced or effected by fraud or corruption, it
shall stay the award unconditionally pending disposal of the challenge under
section 34 to the award.
Explanation.—For the removal of doubts, it is hereby clarified that the above
proviso shall apply to all court cases arising out of or in relation to arbitral
proceedings, irrespective of whether the arbitral or court proceedings were
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commenced prior to or after the commencement of the Arbitration and
Conciliation (Amendment) Act, 2015 (3 of 2016).

A plain reading of the Statutory Provision makes it amply clear that the right of Award Holder

to seek Enforcement of Award is subject to provisions of ‘The Code’. it evident that once a decree is

passed by a Court or an Award is passed by an Arbitral Tribunal all the questions related to Execution

of such Decree/Award must be taken up and determined by the Executing Court itself and that there

shall be no separate suit for this purpose. Thus the duty of the Executing Court include:- To not to go

beyond decree; to not to question the correctness of the Decree unless there is

some ambiguity; to ascertain if the Court/Arbitral Tribunal which passed the Decree/Award had the

inherent jurisdiction. if the Executing Court finds that the judgment is non est or that the

Decree/Award is a nullity on account of lack of inherent jurisdiction with the Arbitral Tribunal,

Section 47 of the Code fully empowers the Execution Court to declare the Decree/Award as “Not

Executable” but shall stop short of declaring it a “Nullity”.

CHALLENGE OF AWARD:-

12. Grounds for challenge.—

(1) When a person is approached in connection with his possible appointment as
an arbitrator, he shall disclose in writing any circumstances,—
(a) such as the existence either direct or indirect, of any past or present
relationship with or interest in any of the parties or in relation to the subject-matter
in dispute, whether financial, business, professional or other kind, which is likely
to give rise to justifiable doubts as to his independence or
impartiality; and
(b) which are likely to affect his ability to devote sufficient time to the arbitration
and in particular his ability to complete the entire arbitration within a period of
twelve months .
Explanation1.—The grounds stated in the Fifth Schedule shall guide in
determining whether circumstances exist which give rise to justifiable doubts as
to the independence or impartiality of an
arbitrator.
Explanation 2.—The disclosure shall be made by such person in the form specified
in the Sixth Schedule.
(2) An arbitrator, from the time of his appointment and throughout the arbitral
proceedings, shall, without delay, disclose to the parties in writing any
circumstances referred to in sub-section (1) unless they have already been
informed of them by him.
(3) An arbitrator may be challenged only if—
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(a) circumstances exist that give rise to justifiable doubts as to his independence
or impartiality,or
(b) he does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose
appointment he has participated, only for reasons of which he becomes aware after
the appointment has been made.
( 5) Notwithstanding any prior agreement to the contrary, any person whose
relationship, with the parties or counsel or the subject-matter of the dispute, falls
under any of the categories specified in the Seventh Schedule shall be ineligible to
be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them,
waive the applicability of this sub-section by an express agreement in writing.

In case titled TRF Limited Vs. Energo Engineering Projects Ltd. (2017) 8 SCC 377 Full

Bench of Hon’ble Supreme Court led by Justice Deepak Mishra had the opportunity to reprise and

articulate the course corrective effect introduction of Section 12(5) read with Schedule 7 of the Act.

The issue before Hon’ble Full Bench of the Supreme Court was, “Whether a person who is ineligible

to preside an Arbitral Tribunal on account of operation of law i.e. Section 12(5) read with Schedule

7 of the Act would be eligible to nominate another person as Arbitrator.” While comparing the

unamended Section 12 of the Act with the amended Section 12 of the Act, post 2015 Amendment,

Hon’ble Supreme Court ruled:-

“12.Sub-Section (5) of Section 12, on which immense stress has been laid by the
learned counsel for the appellant, as has been reproduced above, commences with
a non-obstante clause. It categorically lays down that if a person whose
relationship with the parties or the counsel for the subject matter of the dispute
falls under any of the categories specified in the Seventh Schedule shall be
ineligible to be appointed as an arbitrator. There is a qualifier which indicates
that parties may subsequent to the disputes arisen between them, waive the
applicability by express agreement in writing. The qualifier finds place in the
proviso appended to sub-section 5 of Section 12. On a careful scrutiny of the
proviso,it is discernible that there are fundamentally three components, namely the
parties can waive the applicability of the sub-section; the said waiver can only
take place subsequent to dispute having arisen between the parties; and such
waiver must be by an express agreement in writing.”
(Emphasis Supplied)

In case title Bharat Broadband Network Vs. United Telecoms Limited, (2019) 5 SCC 755 while

dealing with an issue of Section 12(5) read with Schedule 7 qua unilateral appointment of arbitrator

by official of the disputing company, the Bench led by Justice R. F. Nariman dealt with an issue

wherein during the pendency of arbitral proceedings before a Sole Arbitrator who was unilaterally
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appointed by CMD of Bharat Broadband Network, an application was moved before the Arbitrator

by the Bharat Broadband Network company that in the light of TRF Limited the Tribunal would be

de jure unable to perform the function as Arbitrator and that he should withdraw from the arbitration

so that an application under Section 11 of the Act can be filed before the High Court. The plea was

rejected by the Arbitrator. When Bharat Broadband Network approached Delhi High Court, the High

Court rejected the plea of the Bharat Broadband Network on the ground that since the Sole

Arbitrator was appointed by Bharat Broadband Network itself, it is estopped from making a plea for

removal of the arbitrator. While discussing Voestalpine Schienen Hon’ble Supreme Court ruled that,

“Section 12(5), on the other hand, is a new provision which relates to the de jure
inability of an arbitrator to act as such. Under this provision, any prior agreement
to the contrary is wiped out by the non-obstante clause in Section 12(5) the
moment any person whose relationship with the parties or the counsel or the
subject matter of the dispute falls under the 7 th Schedule. The sub-Section then
declares that such person shall be “ineligible” to be appointed as arbitrator. The
only way in which this ineligibility can be removed is by the proviso, which again
is a special provision which states that parties may, subsequent to disputes having
arisen between them, waive the applicability of Section 12(5) by an express
agreement in writing. What is clear, therefore, is that where, under any agreement
between the parties, a person falls within any of the categories set out in the 7th
Schedule, he is, as a matter of law, ineligible to be appointed as an arbitrator. The
only way in which this ineligibility can be removed, again, in law, is that parties
may after disputes having arisen between them, waive the applicability of this sub-
section by an “express agreement in writing”. The express agreement in writing”
has reference to a person who is interdicted by the 7 th Schedule, but who is stated
by parties (after the disputes have arisen between them) to be a person in whom
they have faith notwithstanding the fact that such person is interdicted by the 7 th
Schedule.”

In case title Haryana Space Application Centre (HARSAC) and Anr. Vs. Pan India Consultants,

(2021) 3 SCC 103 the Full Bench of Hon’ble Supreme Court dealt with a case where the petitioner

appointed the Principal Secretary of the State as Nominee Arbitrator and arbitral proceedings were

going on in for more than 4 years, Full Bench of Hon’ble Supreme Court ruled that the application of

Section 12(5) read with Schedule 7 of the Act is mandatory and not derogable.

The Apex Court ruled, “We are of the view that the appointment of the Principal
Secretary, Government of Haryana as the nominee arbitrator of HARSAC which
is a Nodal Agency of the Government of Haryana, would be invalid under Section
12(5) of the Arbitration and Conciliation Act, 1996 (as amended by the 2015
Amendment Act) provides that notwithstanding any prior agreement to the
contrary, any person whose relationship with the parties, or counsel falls within
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any of the categories specified in the 7 th Schedule, shall be ineligible to be
appointed as an arbitrator......…

The arbitrator is a manager, director or part of the management of has a similar

controlling influence, in an affiliate of one of the parties if the affiliate is directly
involved in the matters in dispute in the arbitration......…

Section 12(5) read with the 7 th Schedule is a mandatory and non- derogable
provision of the Act. In the facts of the present case, the Principal Secretary to the
Government of Haryana would be ineligible to be appointed as an arbitrator, since
he would have a controlling influence on the Appellant Company being a nodal
agency of the State. The Counsel for both parties during the course of hearing
have consented to the substitution of the existing tribunal, by the appointment of a
Sole Arbitrator to complete the arbitral proceedings.”

(Emphasis Supplied)

Lately, in case title Jaipur Jila Dugdh Utpadak Sehkari Sangh Ltd. Vs. Ajay Sales and Suppliers,

2021 SCC Online SC 730, the Supreme Court Bench headed by HMJ M R Shah dealt with a case

where the Arbitration Clause dated 31.03.2015 provided for appointment of Sangh’s Chairman as

Sole Arbitrator. When the dispute arose and Arbitration was invoked on 19.10.2019, the respondent

approached High Court of Rajasthan which under Section 11 of The Act where a fresh Arbitrator was

appointed. When the High Court’s order was challenged before the Supreme Court with a plea that

the Arbitration Clause pre-existed the 2015 Amendment of The Act and inclusion of Section 12(5)

and Schedule 7 Hon’ble Supreme Court while dismissing the petition challenging the High Court

order ruled that,

“So far as the submission on behalf of the petitioners that the agreement was prior
to the insertion of Sub-Section 5 of Section 12 read with 7 th Schedule to the Act
and therefore the disqualification under Sub-Section 5 of Section 12 read with 7
th Schedule to the Act shall not be applicable and that once an arbitrator-
Chairman started the arbitration proceedings thereafter the High Court is not
justified in appointing an Arbitrator are concerned the aforesaid has no substance
and can to be accepted in view of the decision of this Court in TRF Limited
Judgment(supra), Bharat Broadband Network Judgment(supra), Voestalpine
Schienen Judgment (supra). In the aforesaid decisions this Court had an occasion
to consider in detail the object and purpose of insertion of Sub-Section 5 of Section
12 read with 7 th Schedule to the Act. In the case of Voestalpine Schienen
Judgment(supra) it is observed and held by this Court that the main purpose for
amending the provision was to provide for ‘Neutrality of Arbitrators’. It is further
observed that in order to achieve this, Sub-section 5 of Section 12 lays down that
notwithstanding any prior agreement to the contrary, any person whose
relationship with the parties or counsel or the subject-matter of the dispute falls
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under any of the categories specified in the 7 th Schedule, he shall be ineligible to
be appointed as an arbitrator. It is further observed that in such an eventuality i.e.
when the arbitration clause finds foul with the amended provisions (Sub-Section
5) of Section 12 read with 7 th Schedule the appointment of an Arbitrator would
be beyond pale of the arbitration agreement, empowering the Court to appoint
such arbitrator as may be permissible. It is further observed that , that would be
the effect of non- obstante clause contained in Sub-Section5 of Section 12 and the
other party cannot insist on appointment of the arbitrator in terms of the
arbitration agreement.......…

It is further observed and held by this Court in the aforeasaid decision that
independence and impartiality of the arbitrator are the hallmarks of any
arbitration proceedings. Rule against bias is one of the fundamental principles of
natural justice which shall apply to all judicial and quasi- judicial proceedings. It
is further observed that it is for this reason that notwithstanding the fact that
relationship between the parties, to the arbitration and the arbitrators themselves
are contractual in nature and the source of an arbitrator’s appointment is deduced
from the agreement entered into between the parties, notwithstanding the same
non-independence and non-impartiality of such arbitrator would render him
ineligible to conduct the arbitration.
(Emphasis Supplied)

In another case title Ellora Papermills Vs. State of M.P., (2022) 3 SCC 1 Hon’ble Supreme Court

on 04.01.2022 dealt with a matter wherein the dispute pertained to year 1993-94 and the Arbitral

Tribunal consisting of officers of State of MP was constituted much prior to promulgation of 2015

Amendment and inclusion of Section 12(5) and 7 th Schedule w.e.f. 23.10.2015. High Court did not

interfere with the Tribunal citing the reason that the Tribunal started functioning prior to 23.10.2015

and that the appellant had already participated in the proceedings. Hon’ble Supreme Court while

relying on TRF Limited, Bharat Broadband, Voestalpine and Ajay Sales Judgments stressed that

‘Neutrality of Arbitrators’, their independence and imparitality is critical for the entire process. The

Bench reiterated,

“Though, the Law Commission discussed the aforesaid aspect under the heading
“Neutrality of Arbirators”, the focus of discussion was on impartiality and
independence of the arbitrators which has relation to or bias towards one of the
parties. In the field of international arbitration, neutrality is generally related to
the nationality of the arbitrator. In international sphere, the “appearnace of
neutrality” is considered equally important, which means that an arbitrator is
neutral if his nationality is different from that of the parties. However, that is not
the aspect which is being considered and the term “neutrality” used is relatable
to impartiality and independence of the arbitrators, without any bias towards any
of the parties. In fact, the term “Neutrality of Arbitrators” is commonly used in
this context as well.....…
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Keeping in mind the afore quoted recommendation of the Law Commission, with
which spirit, Section 12 has been amended by the Amendment Act, 2015, it is
manifest that the main purpose for
amending the provision was to provide for neutrality of arbitrators. In order to
achieve this, sub-Section 5 of Section 12 lays down that notwithstanding any prior
agreement to the contrary, any person whose relationship with the parties or
counsel or the subject matter of the dispute falls under any of the categories
specified in the 7 th Schedule, he shall be ineligible to be appointed as an
arbitrator. In such an eventuality i.e. when the arbitration clause finds foul with
the amended provisions extracted above, the appointment of an arbitrator would
be beyond pale of the arbitration agreement, empowering the Court to appoint
such arbitrator(s) as may be permissible. That would be the effect of non obstante
clause contained in sub-Section 5 of Section 12 and the other party cannot insist
on appointment of the arbitrator in terms of arbitration agreement.”

Unilateral appointment of Arbitrator is Anti-thesis to“Nemo Judex in causa cua”- “No one can
be a Judge in his own case”.

“Nemo Judex in causa cua”- “No one can be a Judge in his own case” is one of the most

fundamental Principles of Natural Justice which is soul and fulcrum of any judicial or quasi-judicial

process. As opined by Law Commission of India in its Reports, Parliament of India in the 2015

Amendment of Arbitration and Conciliation Act, 1996 and repeatedly ruled by authoritatively

judgments of Hon’ble Supreme Court, ‘Neutrality of Arbitration Proceedings’ cannot be allowed to

be succumb or got highjacked by insistence of a large section of NBFCs and other Corporations to

continue to violate the impartiality, probity and unbiasedness of arbitration proceedings in the country.

The unilateral appointment of arbitrators is germane to this vice and when the first step is taken in a

wrong direction and is rendered nonest, every next step and the culmination of the arbitral journey

into an award is nothing but a zilch or nullity.

Whether CORE Judgment has over-ruled TRF Limited Judgment of Hon’ble Supreme Court?

In CORE Judgment the Apex Court allowed the appointment of Arbitral Tribunal from a panel

maintained by Railways. The Bench was of the view that since Contractor/opposite party was allowed

to choose two names out of a panel of 4 retired railway officers, Arbitral Tribunal, Section 12(5) of

the Act is not violated and concerns of TRF Limited stands addressed.

This CORE Judgment came for scrutiny before Hon’ble Supreme Court in Union of India Vs.

Tantia Construction Limited SLP(c) 12670/2020 decided on 11.01.2021 by another Three-Judge

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Bench of the Apex Court led by HMJ R. F Nariman. It was found that CORE Judgment is in

contradiction of TRF Limited and an order was passed requesting the Hon’ble Chief Justice of India

to constitute a ‘Larger Bench’ for adjudicating on the correctness of the CORE judgment.

Recent Development regarding Unilateral Appointment of Arbitrator

The hallmark of arbitration proceedings lies in the independence and impartiality of arbitrators. Such

features have been meticulously imbedded in the Arbitration and Conciliation Act, 1996 by the

Parliament. Over the past few years, the parties and courts have been facing an issue of appointment

of arbitrator by one party alone by invoking the terms of the agreement. According to Section 11(2)

of the Arbitration and Conciliation Act, 1996 the parties are free to agree on a procedure for

appointing the arbitrator. Various companies, banks and dominant parties which majorly enjoy a

dominating position over the other party, incorporate the procedure for the appointment of arbitrator

in their agreements in such a way that the other party has no say in the appointment of the arbitrator.

The Hon’ble Supreme Court’s decision in Perkins Eastman Architects DPC and Ors. vs.

HSCC (India) Ltd., (2020) 20 SCC 760 discusses the equal power of parties to appoint the arbitrator.

The Court has observed that if one party has the exclusive right to appoint the arbitrator, then his

choice will always have an element of bias. The relevant extract of the Court’s observation is as

follows:

“21. …The reason is clear that whatever advantage a party may derive by nominating an
arbitrator of its choice would get counter balanced by equal power with the other party. But,
in a case where only one party has a right to appoint a sole arbitrator, its choice will always
have an element of exclusivity in determining or charting the course for dispute resolution.
Naturally, the person who has an interest in the outcome or decision of the dispute must not
have the power to appoint a sole arbitrator….”

Further, the Bombay High Court in Naresh Kanayal Rajwani & Ors. v. Kotak Mahindra Bank

Limited & Anr.- [Comm. Arbitration Petition (L) No. 1444 of 2019 dated November 23, 2022

held that the mere fact that a party has participated in the arbitral proceedings, the same will not
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disentitle the party to challenge the award on the ground of unilateral appointment of the arbitrator.

Accordingly, on this ground, the Court set aside the arbitral award. The relevant extract of the court’s

decision has been reproduced as follows:

“19. … The specific manner of waiving the applicability of Section 12(5) of the
said Act is mandated in the proviso thereof, but such procedure was admittedly
not followed in the present case and therefore, it cannot be said that merely be-
cause the petitioners participated in the arbitration proceedings, they were dis-
entitled from raising the ground about the arbitration proceedings having been
vitiated, due to unilateral appointment of the Arbitrator by the respondent-
Bank.”

The Calcutta High Court in Yashovardhan Sinha HUF v. Satyatej Vyapaar Pvt. Ltd., A.P. No. 156

of 2022 appointed a new arbitrator in place of an arbitrator who was appointed unilaterally by a party.

The Court held that while exercising the powers under Section 14 of the Arbitration and Conciliation

Act, 1996, the Court will be guided by the principles of Section 11 of the Act.

Recently, the Hon’ble Supreme Court of India in Kotak Mahindra Bank Ltd. v. Narendra Kumar

Prajapat – SLP (C) Diary No(s). 47322/2023, decided on 12.12.2023, has expressed its agreement

with the recent landmark development in the arbitration arena that an award passed by a unilaterally

appointed arbitrator is not executable. The Apex Court dismissed the Special Leave Petition filed by

Kotak Mahindra Bank impugning the Delhi High Court’s Judgment, which upheld the judgment

passed by the Commercial Court, which had refused the execution of an Award passed by a unilater-

ally appointed arbitrator.

Earlier, the Division Bench of the Hon’ble Delhi High Court had dismissed the first appeal while up-

holding the sternly worded 46-page judgement of the District Judge, Commercial Court deciding the

first appeal against the dismissal of the execution petition. The Hon’ble Delhi High Court said,

“This Court finds no infirmity with the aforesaid view (of District Judge, Com-
mercial Court). A person who is ineligible to act an Arbitrator, lacks the inher-
ent jurisdiction to render an Arbitral Award under the A&C Act. It is trite law
that a decision, by any authority, which lacks inherent jurisdiction to make such
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a decision, cannot be considered as valid. Thus, clearly, such an impugned
award cannot be enforced.”

The District Judge had relied on Section 12(5) read with Schedule 7 of the A&C Act, duly explained

by the Supreme Court in TRF Ltd. v. Energo Engineering Projects Ltd. -2017 (supra), Perkins

Eastman Architects DPC & Anr. v. HSCC (India) Ltd. -2020 (supra) and Bharat Broadband

Network Limited v. United Telecoms Limited - (2019) 5 SCC 755 and several judgments of the

Hon’ble Delhi High Court, to conclude that the prevalent practice of unilateral appointment of Sole

Arbitrator is void ab initio, non-est, and a nullity.

CONCLUSION:-

Unilateral Appointment of Sole Arbitrator is non est and void ab initio. Awards passed by such a

Tribunal is ‘Non-Executable”. The statutory provision of Section 12(5) read with Schedule 7 of the

Act duly explained by full Bench of Hon’ble Supreme Court in TRF Judgment and other Supreme

Court judgments it is found that as per legal position as it exists as on date, the unilateral appointment

of Sole Arbitrator was void ab initio, non-est and a nullity. The proceedings carried out by such

unilaterally appointed arbitrator Ex-Parte and the awards sought to be executed is found to have been

passed with inherent lack of jurisdiction. As such, this Court is of the firm view that the

Award under Execution is rendered ‘Non-Executable’. Executing Court now can suo-moto refuse

execution of the award without any objection petition filed by the JD before the court by invoking

powers under Section 47 of the Civil Procedure Code to protect the interest of the vulnerable masses.