An Award Issued By Unilaterally Appointed Arbitrator Can Be Contested For Invalidity Of Appointment, Even By The Appointing Party: Delhi High Court

The bench of Justice Anup Jairam Bhambhani held that a defect of jurisdiction can be challenged at any stage since it goes to the power of the tribunal to decide the dispute. It held that mere participation in the arbitral proceedings cannot be deemed to be an 'express waiver' in terms of Section 12(5) of the A&C Act.

Facts

The parties entered into an MOU dated 10.09.2007 wherein the respondent agreed to carry out certain works for the petitioner. Clause 19 of the MOU provided for resolution of dispute through arbitration, however, it conferred power on the petitioner to unilaterally appoint the arbitrator.

A dispute arose between the parties, resultantly, the petitioner invoked the arbitration clause and unilaterally appointed a sole arbitrator. The arbitral tribunal decided the issue in favour of the respondent. Aggrieved thereby, the petitioner challenged the award on ground of unilateral appointment of arbitrator.

Submissions of the Parties

The petitioner made the following submissions:

• The award is a nullity since the arbitrator lacked jurisdiction to decide the dispute between the parties.
• The appointment of the arbitrator is invalid since in view of Section 12(5), it could not have been appointed unilaterally by the petitioner.
• The appointment can also be challenged by the appointing party also and it can be challenged at any stage including Section 34 for the first time.

The respondent made the following counter-submissions:

• The arbitrator was appointed by the petitioner itself and it participated in the proceedings without any protest or demur.
• An award cannot be challenged on ground of unilateral appointment by the party making such appointment.
• The petitioner cannot be allowed to approbate and reprobate. It is only when the petitioner suffered the award that it decided to raise the issue of unilateral appointment.

Analysis by the Court

The Court relied observed that the Apex Court in Bharat Broadband Network Ltd. vs. United Telecom Limited had held that unilateral appointment can also be challenged by the appointing party. Moreover, the Court had ruled that mere participation in the arbitral proceedings cannot be considered a waiver of right to object.

The Court held that an award passed by a unilaterally appointed arbitrator can be challenged on ground of invalidity of such appointment and consequent lack of jurisdiction even by the party who made such an appointment.

The Court held that a unilaterally appointed arbitrator lacks inherent jurisdiction and proceedings before him or any decision taken by him is void-ab-initio. The Court observed that there was no express waiver in writing by the parties as required by the law.

The Court held that a defect of jurisdiction can be challenged at any stage since it goes to the power of the tribunal to decide the dispute. It held that mere participation in the arbitral proceedings cannot be deemed to be an 'express waiver' in terms of Section 12(5) of the A&C Act.

The Court also observed that the arbitrator had rejected both the claims and the counter-claims, keeping this in mind, the Court set aside the award on ground of unilateral appointment of the arbitrator. Further, it allowed the parties, liberty to reinitiate arbitral proceedings before an independent arbitrator.

Case Title: Telecommunication Consultants India Ltd v. Shivaa Trading

Citation: 2024 LiveLaw (Del) 471

Date: 09.04.2024

Counsel for the Petitioner: Mr. Nikhilesh Krishnan, Ms. Ritika Priya and Mr. Abhishek Bhushan Singh, Advocates

Counsel for the Respondent: Mr. Ajay Kumar Tiwari, Advocate

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