NEW DELHI: The Delhi High Court has ruled that any agreement enabling a party to unilaterally appoint the sole or presiding arbitrator is invalid and unenforceable in case of arbitrations in India.
A division bench of Justices Vibhu Bakhru and Tejas Karia, while deciding an appeal on May 31, held that unilateral appointments are void ab initio and strike at the root of a fair adjudicatory process.
“Resultantly, any proceedings conducted before such unilaterally-appointed Arbitral Tribunal are also void and cannot result into an enforceable award being against Public Policy of India and can be set aside under Section 34 of the Act (Arbitration and Conciliation Act) and/or refused to be enforced under Section 36 of the Act,” the court observed.
The bench unequivocally held that any award rendered by a tribunal so constituted is a null and void and can be set aside by courts suo motu, without the necessity of an objection raised by any party.
The judgment further clarified that a challenge to the lack of jurisdiction arising out of unilateral appointment can be raised at any stage, including post-award. Notably, this right rests even on the party that may have made the unilateral appointment in the first place.
“Such objection can be taken even at stage of challenge to the award under Section 34 of the Act or during the enforcement proceedings under Section 36,” the court said.
The observations came in the context of an appeal filed by Mahavir Prasad Gupta and Sons, challenging a district court order setting aside an arbitral award of `1.76 crore in its favour. The district judge had found that the appointment of the sole arbitrator lacked legal validity and had rightly held the award to be a nullity.
Upholding the trial court ruling, the high court reiterated that a valid waiver of ineligibility under Section 12(5) of the Arbitration and Conciliation Act must necessarily be in form of a written agreement, entered into after dispute has arisen.
‘Award rendered void’
The bench unequivocally held that any award rendered by a tribunal so constituted is a null and void and can be set aside by courts suo motu, without the necessity of an objection raised by any party.