Award Passed By Unilaterally Appointed Arbitrator Is Void; Himachal Pradesh High Court

The bench of Justice Jyotsana Rewal Dua held that an arbitration award passed by a unilaterally appointed sole arbitrator is not enforceable under Section 36 of the A&C Act.

The Court further held that Section 12(5) would also apply to arbitration agreement entered into before the 2015 amendment came into effect. Moreover, it held that mere participation in the arbitration proceedings before the ineligible arbitrator would be of no consequence.

Facts

The parties entered into an agreement dated 20.03.2012 regarding the extraction of resin and delivery thereof. A dispute arose between the parties when allegedly the respondent failed to extract the relevant quantity of the resins. The petitioner demanded the compensation, however, it invoked the arbitration and unilaterally appointed the arbitrator when the respondent refused to pay the demanded sum.

The arbitrator passed an award in favour of the petitioner. Accordingly, the petitioner put the award for enforcement under Section 36 of the Act. However, the executing Court refused to enforce the award on the ground that it was not a valid award having been passed by an ineligible arbitrator.

Aggrieved with the order of the executing Court, the petitioner approached the High Court.

Grounds of Challenge

The petitioner challenged the impugned order on the following grounds:

• Section 12(5) would not apply to the arbitration between the parties as the arbitration agreement was entered into between the parties prior to the 2015 amendment.
• The respondent had participated in the arbitral proceedings, therefore, the award was valid.

Analysis by the Court

The Court held that arbitral proceedings conducted by a unilaterally appointed arbitrator are void ab initio and the consequent award is non-est.

The Court held that an arbitration award passed by a unilaterally appointed sole arbitrator is not enforceable under Section 36 of the A&C Act. It further held that Section 12(5) would also apply to arbitration agreement entered before the 2015 amendment came into effect. Moreover, it held that mere signature of the respondent on the arbitration agreement and participation in the arbitration proceedings before the ineligible arbitrator would be of no consequence.

The Court observed that there was no infirmity in the order of the lower court and it had rightly refused to enforce a void arbitration award.

Accordingly, the Court dismissed the petition.

Case Title: Divisional Manager v. Prem Lal, CMPMO NO. 58 of 2023

Date: 27.02.2023

Counsel for the Petitioner: Mr. Rajesh Verma

Counsel for the Respondents: N/A

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