Delhi District Court
Haier Appliances (India) Pvt Ltd vs M/S J And J Traders on 27 September, 2025
DLSE010054572017
THE COURT OF DISTRICT JUDGE-03
SOUTH-EAST DISTRICT, SAKET COURTS, NEW DELHI
(PRESIDED OVER BY: SACHIN MITTAL, DHJS)
ARBTN No. 401/17
In the matter of:
M/s Haier Appliances (India) Pvt. Ltd.,
Building No.1, Okhla Industrial Estate,
Phase-III, New Delhi-110020. .... Petitioner.
VERSUS
M/s J & J Traders,
Through its Proprietor, Mr. B. Benitkaran,
No. 37, North Masi Street,
Madurai-625020. .... Respondent.
Date of Institution : 26.07.2017
Date on which arguments concluded : 22.09.2025
Date of Judgment : 27.09.2025
Result : Allowed
ARBTN No. 445/2017
In the matter of:
M/s J & J Traders,
Through its Proprietor, Mr. B. Benitkaran,
No. 37, North Masi Street,
Madurai-625020.
Tamilnadu .... Petitioner.
VERSUS
M/s Haier Appliance (India) Pvt. Ltd.,
ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 1 of 29
AND AND Digitally signed
ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. by SACHIN
SACHIN MITTAL
MITTAL Date:
2025.10.06
17:44:07 +0530
Corporate Identity Number,
(U7414DL2003PTC119101),
Having registered office,
Building No.1,
Okhla Industrial Estate,
Phase-III, New Delhi-110020. ... Respondent.
Date of Institution : 26.08.2017
Date on which arguments concluded : 22.09.2025
Date of Judgment : 27.09.2025
Result : Allowed
JUDGMENT
1. Vide this common Judgment, I shall decide the two captioned petitions, both, filed under Section 34 of the Arbitration and Conciliation Act, 1996 (herein after 'the A&C Act'). Petitioners in both the petitions are seeking setting aside of the Award dated 27.04.2017 (herein after 'the impugned Award') passed by the Sole Arbitrator, Sh. Manoj Nagar.
2. While M/s J and J Traders was the claimant; M/s Haier Applicances (India) Pvt. Ltd. was the respondent in the arbitral proceedings.
3. The Ld. Sole Arbitrator, vide the impugned Award, directed M/s Haier Appliances (India) Pvt. Ltd. to pay to M/s J and J Traders a sum of Rs. 54,43,925/- alongwith interest at the rate of 9% per annum from 08.04.2016 (the date of filing of arbitral claim) till the date of actual payment. The costs of Rs. 5,73,550/- alongwith interest at the rate of 9% per annum from 01.05.2017 till the date of payment were also awarded in favour of M/s J and J Traders and against M/s Haier Appliances (India) Pvt. Ltd.
ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 2 of 29 AND AND Digitally
ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. signed by
SACHIN
SACHIN MITTAL
MITTAL Date:
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4. Pertinently, M/s J and J Traders, in its petition under Section 34 of the A&C Act, is aggrieved to the extent of rejection of its claim no.9 for a sum of Rs. 46,86,000/-. M/s Haier Appliances (India) Pvt. Ltd., in its petition under Section 34 of the A&C Act, is aggrieved by the allowing of part claim of M/s J and J Traders.
5. In the present Judgment, M/s Haier Appliances (India) Pvt. Ltd. shall be referred to as the petitioner and M/s J and J Traders shall be referred to as the respondent.
6. The facts, to the extent the same are relevant and necessary herein, are being narrated. The petitioner claims to be a major manufacturer of home appliances. The petitioner and the respondent entered into a dealership/distribution agreement in the month of April, 2011, whereby the respondent was appointed as dealer/distributor to sell the goods/applicances of the petitioner. The petitioner, pursuant to placement, from time to time, of purchase Orders, supplied the goods/applicances to the respondent. The petitioner, vide letter dated 27.11.2013, terminated the Distribution/Dealer Agreement with the respondent w.e.f. 26.12.2013. The dispute arose between the parties when the claims under various heads raised by the respondent were rejected by the petitioner. The respondent served upon the petitioner a notice dated 14.08.2015 therein demanding payment of a sum of Rs. 60,83,000/-. The petitioner replied to the said notice vide its reply dated 08.09.2015 therein refuting the demand of the respondent.
7. The Ld. Sole Arbitrator was appointed unilaterally by the petitioner as per clause 17 of the Distribution/Dealership Agreement. The said clause reads as under:
"17. ARBITRATION PROCEEDINGS :ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 3 of 29
AND AND
Digitally signed
ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. by SACHIN
SACHIN MITTAL
MITTAL Date:
2025.10.06
17:44:14 +0530
In case of dispute between the parties, both parties agree to refer the dispute to Arbitration. Parties further agree that the Sole Arbitrator shall be appointed by the Company under the provisions of Arbitration and Conciliation Act, 1996 as amended from time to time. Venue of Arbitration shall be at New Delhi. Both parties further agree that at all time the Arbitration Proceedings shall be governed by the laws of India."
8. The first Arbitral hearing was held on 03.02.2016 and the impugned Award was passed on 27.04.2017.
9. Pertinently, the petitioner is seeking setting aside of the impugned Award on the ground of the same being in contravention to public policy of India and against the terms of the contract, A&C Act and other laws of India. The respondent is seeking setting aside of the impugned Award on the ground of public policy of India.
10. I have heard Mr. Rohit Mahajan, Ld. Counsel for the petitioner and Mr. Shilp Vinod, Ld. Counsel for the respondent. I have carefully perused the judicial record as well.
11. Mr. Mahajan for the petitioner submitted that the Sole Arbitrator was unilaterally appointed by the petitioner; that such appointment was in voilation of Section 12(5) of the A&C Act; that the Sole Arbitrator was, therefore, inelgible to be appointed as an Arbitrator; and that the impugned Award having been rendered by an ineligible Arbitrator is a nullity in the eyes of law. He mainly relied upon the Judgments TRF Ltd. v. Energo Engg. Projects Ltd.1 and Perkins Eastman Architects DPC v. HSCC (India) Ltd.2 for the proposition of law advanced by him. He also relied upon the Judgments of the Supreme Court in Waverly 1 (2017) 8 SCC 377 2 (2020) 20 SCC 760 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 4 of 29 AND AND Digitally signed ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. by SACHIN SACHIN MITTAL MITTAL Date:
2025.10.06 17:44:17 +0530 Jute Mills Co. Ltd. v. Raymon and Co. (India) (P) Ltd.3 and Dharma Prathishthaanam v. Madhok Construction (P) Ltd.4 and the Judgments of the Delhi High Court in S.K. Builders v. CLS Construction (P) Ltd.5 and Vineet Dujodwala v. Phoneix ARC (P) Ltd. 6 for the proposition that the unilateral appointment of Arbitrator was not permissble even before introduction of Section 12(5) in the A&C Act by way of amendments in the year 2015.
12. Per contra, Ld. Counsel for the respondent relied upon the Judgment of Hon'ble High Court of Calcutta in McLeod Russel India Ltd. and Ors. v. Aditya Birla Finance Ltd. and Ors. 7 for contending that a party which participated in arbitral proceedings cannot subsequently challenge the appointment of arbitrator on the ground of unilateral appointment.
13. Though the grounds urged in petitioner's petition for seeking setting aside of the impugned Award pertain to contravention of public policy, Ld. Counsel for the petitioner, during oral submissions, sought the setting aside of the Award on the sole ground of the same being a nullity as it was rendered by a unilaterally appointed sole arbitrator. It, therefore, becomes imperatives to deal with the law regarding validity or otherwise of an Award rendered by a unilaterally appointed arbitrator.
14. It is important to note here that the A&C Act, prior to Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter "2015 amendments), permitted the unilateral appointment of an arbitrator. In pre 2015 amendments era, it was also permissible for an employee of one of the parties to preside over as an arbitrator, or to nominate an 3 1962 SCC OnLIne SC 70 4 (2005) 9 SCC 686 5 2024 SCC OnLine Del 5498 6 2024 SCC OnLine Del 5940 7 MANU/WB/0262/2023 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 5 of 29 Digitally signed AND AND by SACHIN ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. SACHIN MITTAL MITTAL Date:
2025.10.06 17:44:25 +0530 arbitrator in place of him. It was also prevalent that the arbitrator used to be appointed from a penal of arbitrators maintained by one of the parties to arbitral dispute. The A&C Act, prior to 2015 amendments, did not enumerate specific circumstances and/or situations that could disqualify the appointment of an arbitrator. Mere apprehension of bias and/or prejudice were not sufficient grounds to set aside the appointment of the arbitrator unless such apprehensions were premised on real and sufficient evidence to establish bias. Moreover, the Courts had consistently held that clauses in which parties appoint their own employees as arbitrators or where such employees unilaterally appoint arbitrators is not ipso facto sufficient to allege bias and prejudice. There is a rebuttable presumption that operates in favour of such arbitration clauses which can only be displaced if something more than mere apprehension of bias and/or prejudice is established. Reliance in this regard is placed upon the judgments, Ace Pipeline Contracts (P) Ltd. v. Bharat Petrolium Corpn. Ltd.8 and International Airport Authority of India v. K.D. Bali9.
15. The Law Commission, in its 246th report, recommended: (i) introducing Section 12(5) to the A&C Act; and (ii) introducing Schedule V and Schedule VII to the A&C Act therein incorporating the guidelines of the International Bar Association (IBA) regarding the standards of independence and impartiality of arbitrator.
16. The aforesaid recommendations of Law Commission were accepted by the Parliament and the A&C Act was amended by 2015 amendments. The 2015 amendments to the Act introduced Section 12(5) and Schedule V and Schedule VII to the Act. The Schedule V 8 (2007) 5 SCC 304 9 (1988) 2 SCC 360 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 6 of 29 AND AND Digitally signed by ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. SACHIN SACHIN MITTAL MITTAL Date:
2025.10.06 17:44:29 +0530 enumerates grounds which give rise to justifiable doubts as to the independence or impartiality of Arbitrator. The Schedule VII enumerates categories of relationships of a proposed Arbitrator with the parties, or counsel, or the subject matter of the dispute, which renders the proposed appointment of such person as an Arbitrator to be illegal. Section 12(5) clarifies that any individual whose relationship with the party, the subject matter of dispute, and counsel is found to be falling under Schedule VII to the Act, he or she will not be considered eligible for the appointment as an Arbitrator. Unlike the Schedule V, attracting any of the grounds enumerated under Schedule VII will lead to instant disqualification of the Arbitrator from being appointed.
17. The issue regarding validity of an arbitration clause providing for constitution of an arbitral tribunal out of the panel of arbitrators maintained by one of the parties was discussed by the Hon'ble Supreme Court in Voestalpine Schienen GmbH v. DMRC10. The Hon'ble Supreme Court considered the discussion under the head "Neutrality of Arbitrators" made by the Law Commission in its 246 th report and observed as under:
"20. 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 applied to all judicial and quasi-judicial proceedings. 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 (though contractually agreed upon) would render him ineligible to conduct the arbitration. The genesis behind this rational is that even 10 (2017) 4 SCC 665 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 7 of 29 AND AND Digitally signed ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. by SACHIN SACHIN MITTAL Date:
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when an arbitrator is appointed in terms of contract and by the parties to the contract, he is independent of the parties.
Functions and duties require him to rise above the partisan interest of the parties and not to act in, or so as to further, the particular interest of either parties. After all, the arbitrator has adjudicatory role to perform and, therefore, he must be independent of parties as well as impartial. The United Kingdom Supreme Court has beautifully highlighted this aspect in Hashwani v. Jivraj [Hashwani v. Jivraj, (2011) 1 WLR 1872 : 2011 UKSC 40] in the following words : (WLR p. 1889, para 45) "45. ... the dominant purpose of appointing an arbitrator or arbitrators is the impartial resolution of the dispute between the parties in accordance with the terms of the agreement and, although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not personal services under the direction of the parties."
21. Similarly, Cour de Cassation, France, in a judgment delivered in 1972 in Consorts Ury [Fouchard, Gaillard, Goldman on International Commercial Arbitration 562 (Emmanuel Gaillard & John Savage eds., 1999) {quoting Cour de cassation [Cass.] [Supreme Court for judicial matters] Consorts Ury v. S.A. des Galeries Lafayette, Cass. 2e civ., 13-4-1972, JCP, Pt. II, No. 17189 (1972) (France)}.] , underlined that:
"an independent mind is indispensable in the exercise of judicial power, whatever the source of that power may be, and it is one of the essential qualities of an arbitrator."
22. Independence and impartiality are two different concepts. An arbitrator may be independent and yet, lack impartiality, or vice versa. Impartiality, as is well accepted, is a more subjective concept as compared to independence. Independence, which is more an objective concept, may, thus, be more straightforwardly ascertained by the parties at the outset of the arbitration proceedings in light of the circumstances disclosed by the arbitrator, while partiality will more likely surface during the arbitration proceedings."
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ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. Digitally signed
SACHIN by SACHIN
MITTAL
MITTAL Date: 2025.10.06
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18. In TRF Ltd. (supra), the arbitration clause provided that the Managing Director of the respondent would be the arbitrator or the said Managing Director could appoint his nominee to be an arbitrator. The Hon'ble Supreme Court held such an arbitration clause to be invalid:
54. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated.
Therefore, the view expressed by the High Court is not sustainable and we say so.
19. The Hon'ble Supreme Court in Perkins (Supra) extended the principle established in TRF (supra) and held the unilateral appointment of arbitrator to be bad in law. It was held that a person having an interest in the decision over dispute can not unilaterally appoint an arbitrator:
20. We thus have two categories of cases. The first, similar to the one dealt with in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377 :
(2017) 4 SCC (Civ) 72] where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself but is empowered or authorised to appoint any other person of his choice or discretion as an arbitrator. If, in the first category of cases, the Managing ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 9 of 29 AND AND ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd.
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2025.10.06 17:44:39 +0530 Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or result of the dispute. The element of invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be the test, similar invalidity would always arise and spring even in the second category of cases. If the interest that he has in the outcome of the dispute, is taken to be the basis for the possibility of bias, it will always be present irrespective of whether the matter stands under the first or second category of cases. We are conscious that if such deduction is drawn from the decision of this Court in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] , all cases having clauses similar to that with which we are presently concerned, a party to the agreement would be disentitled to make any appointment of an arbitrator on its own and it would always be available to argue that a party or an official or an authority having interest in the dispute would be disentitled to make appointment of an arbitrator.
21. But, in our view that has to be the logical deduction from TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] Para 50 of the decision shows that this Court was concerned with the issue, "whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an arbitrator" The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator. The next sentences in the paragraph, further show that cases where both the parties could nominate respective arbitrators of their choice were found to be completely a different situation. 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 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 10 of 29 AND AND Digitally ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. signed by SACHIN SACHIN MITTAL MITTAL Date:
2025.10.06 17:44:42 +0530 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. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) and recognised by the decision of this Court in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72].
20. In Bharat Broadband Network Ltd. v. United Telecoms Ltd. 11, the party which had appointed the arbitrator had filed a petition under Section 14 of the A&C Act for termination of mandate of the arbitrator and for appointment of a substitute arbitrator. The Hon'ble Supreme Court clarified that an arbitrator, who falls within any of the categories mentioned under Schedule VII, is ineligible to be an arbitrator by virtue of Section 12(5). Such an ineligibility can be removed only by way of an express agreement in writing subsequent to dispute having arisen between the parties. It was further clarified that the challenge procedure as described under Section 13 is not meant for challenging the appointment of an arbitrator who is ineligible by virtue of Section 12(5) read with Schedule VII. The mandate of an ineligible arbitrator can be terminated through a petitioner under Section 14 of the A&C Act:
14. From a conspectus of the above decisions, it is clear that Section 12(1), as substituted by the Arbitration and Conciliation (Amendment) Act, 2015 ["the Amendment Act, 2015"], makes it clear that when a person is approached in connection with his possible appointment as an arbitrator, it is his duty to disclose in writing any circumstances which are likely to give rise to justifiable doubts as to his independence or impartiality. The disclosure is to be made in the form specified in the Sixth Schedule, and the grounds stated in the Fifth Schedule are to serve as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the 11 (2019) 5 SCC 755 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 11 of 29 Digitally signed AND AND by SACHIN ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. SACHIN MITTAL Date:
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independence or impartiality of an arbitrator. Once this is done, the appointment of the arbitrator may be challenged on the ground that justifiable doubts have arisen under sub-
section (3) of Section 12 subject to the caveat entered by sub-section (4) of Section 12. The challenge procedure is then set out in Section 13, together with the time-limit laid down in Section 13(2). What is important to note is that the Arbitral Tribunal must first decide on the said challenge, and if it is not successful, the Tribunal shall continue the proceedings and make an award. It is only post award that the party challenging the appointment of an arbitrator may make an application for setting aside such an award in accordance with Section 34 of the Act.
15. 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 Seventh 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 Seventh 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 have arisen between them, waive the applicability of this sub-section by an "express agreement in writing". Obviously, the "express agreement in writing"
has reference to a person who is interdicted by the Seventh 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 Seventh Schedule.
17. The scheme of Sections 12, 13 and 14, therefore, is that where an arbitrator makes a disclosure in writing which is likely to give justifiable doubts as to his ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 12 of 29 AND AND Digitally ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. signed by SACHIN SACHIN MITTAL MITTAL Date:
2025.10.06 17:44:50 +0530 independence or impartiality, the appointment of such arbitrator may be challenged under Sections 12(1) to 12(4) read with Section 13. However, where such person becomes "ineligible" to be appointed as an arbitrator, there is no question of challenge to such arbitrator, before such arbitrator. In such a case i.e. a case which falls under Section 12(5), Section 14(1)(a) of the Act gets attracted inasmuch as the arbitrator becomes, as a matter of law (i.e. de jure), unable to perform his functions under Section 12(5), being ineligible to be appointed as an arbitrator. This being so, his mandate automatically terminates, and he shall then be substituted by another arbitrator under Section 14(1) itself. It is only if a controversy occurs concerning whether he has become de jure unable to perform his functions as such, that a party has to apply to the Court to decide on the termination of the mandate, unless otherwise agreed by the parties. Thus, in all Section 12(5) cases, there is no challenge procedure to be availed of. If an arbitrator continues as such, being de jure unable to perform his functions, as he falls within any of the categories mentioned in Section 12(5), read with the Seventh Schedule, a party may apply to the Court, which will then decide on whether his mandate has terminated. Questions which may typically arise under Section 14 may be as to whether such person falls within any of the categories mentioned in the Seventh Schedule, or whether there is a waiver as provided in the proviso to Section 12(5) of the Act. As a matter of law, it is important to note that the proviso to Section 12(5) must be contrasted with Section 4 of the Act. Section 4 deals with cases of deemed waiver by conduct; whereas the proviso to Section 12(5) deals with waiver by express agreement in writing between the parties only if made subsequent to disputes having arisen between them.
19. However, the learned Senior Advocate appearing on behalf of the respondent has argued that Section 12(4) would bar the appellant's application before the Court.
Section 12(4) will only apply when a challenge is made to an arbitrator, inter alia, by the same party who has appointed such arbitrator. This then refers to the challenge procedure set out in Section 13 of the Act. Section 12(4) has no applicability to an application made to the Court under Section 14(2) to determine whether the mandate of ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 13 of 29 AND AND ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. Digitally signed by SACHIN SACHIN MITTAL Date:
MITTAL 2025.10.06 17:44:53 +0530 an arbitrator has terminated as he has, in law, become unable to perform his functions because he is ineligible to be appointed as such under Section 12(5) of the Act.
20. This then brings us to the applicability of the proviso to Section 12(5) on the facts of this case. Unlike Section 4 of the Act which deals with deemed waiver of the right to object by conduct, the proviso to Section 12(5) will only apply if subsequent to disputes having arisen between the parties, the parties waive the applicability of sub-section (5) of Section 12 by an express agreement in writing. For this reason, the argument based on the analogy of Section 7 of the Act must also be rejected. Section 7 deals with arbitration agreements that must be in writing, and then explains that such agreements may be contained in documents which provide a record of such agreements.
On the other hand, Section 12(5) refers to an "express agreement in writing". The expression "express agreement in writing" refers to an agreement made in words as opposed to an agreement which is to be inferred by conduct. Here, Section 9 of the Contract Act, 1872 becomes important. It states:
"9. Promises, express and implied.--Insofar as the proposal or acceptance of any promise is made in words, the promise is said to be express. Insofar as such proposal or acceptance is made otherwise than in words, the promise is said to be implied."
It is thus necessary that there be an "express" agreement in writing. This agreement must be an agreement by which both parties, with full knowledge of the fact that Shri Khan is ineligible to be appointed as an arbitrator, still go ahead and say that they have full faith and confidence in him to continue as such. The facts of the present case disclose no such express agreement. The appointment letter which is relied upon by the High Court as indicating an express agreement on the facts of the case is dated 17-1-2017. On this date, the Managing Director of the appellant was certainly not aware that Shri Khan could not be appointed by him as Section 12(5) read with the Seventh Schedule only went to the invalidity of the appointment of the Managing Director himself as an arbitrator. Shri Khan's invalid appointment only became clear after the declaration of the law by the Supreme Court in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 14 of 29 AND AND ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd.
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2025.10.06 17:44:57 +0530 (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] which, as we have seen hereinabove, was only on 3-7-2017. After this date, far from there being an express agreement between the parties as to the validity of Shri Khan's appointment, the appellant filed an application on 7-10-2017 before the sole arbitrator, bringing the arbitrator's attention to the judgment in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] and asking him to declare that he has become de jure incapable of acting as an arbitrator. Equally, the fact that a statement of claim may have been filed before the arbitrator, would not mean that there is an express agreement in words which would make it clear that both parties wish Shri Khan to continue as arbitrator despite being ineligible to act as such. This being the case, the impugned judgment is not correct when it applies Section 4, Section 7, Section 12(4), Section 13(2) and Section 16(2) of the Act to the facts of the present case, and goes on to state that the appellant cannot be allowed to raise the issue of eligibility of an arbitrator, having itself appointed the arbitrator. The judgment under appeal is also incorrect in stating that there is an express waiver in writing from the fact that an appointment letter has been issued by the appellant, and a statement of claim has been filed by the respondent before the arbitrator. The moment the appellant came to know that Shri Khan's appointment itself would be invalid, it filed an application before the sole arbitrator for termination of his mandate.
21. The Hon'ble Delhi High Court in Proddatur Cable TV Digi Services v. Siti Cable Network Limited12, following the precedents laid down by the Hon'ble Supreme Court in its aforesaid judgments, also ruled the unilateral appointment of Arbitrator to be bad in law.
22. In Central Organisation for Railway Electrification v. ECI-SPIC- SMO-MCML (JV)13, (hereinafter "CORE I"), a 3-Judge Bench of the 12 2020 SCC OnLine Del 350 13 (2020) 14 SCC 712 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 15 of 29 AND AND ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. Digitally signed by SACHIN SACHIN MITTAL MITTAL Date:
2025.10.06 17:45:01 +0530 Hon'ble Supreme Court held that appointment of retired railway officers as arbitrators was valid. It was further held that a party could appoint arbitrator(s) from a group/panel so long as the counter-party got to nominate at least one arbitrator as its nominee. However, in a subsequent decision in Union of India v. Tantia Constructions Ltd. 14, another 3-Judge Bench of the Hon'ble Supreme Court, while dealing with a similar matter, prima facie disagreed with the legal position laid in CORE I (supra). Accordingly, the matter was referred in to a larger Bench to look into the correctness of the view taken by the 3-Judge Bench in CORE I (supra). A five-judge bench of the Supreme Court of India in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV)15, (hereinafter "CORE II") upheld its previous decisions in TRF (supra) and Perkins (supra) and overruled its decisions in Voestalpine (supra) and CORE I (supra) to hold that arbitration clauses: (i) mandating one party to unilaterally appoint the sole arbitrator, or (ii) in case of a three-member panel, mandating one party to select its nominee from a panel of arbitrators curated by the other party, are not permissible as the same violate the principles of equality under the A&C Act. The Supreme Court also held that such unilateral appointment clauses in public-private contracts or public-sector undertaking (PSU) contracts violate the fundamental right to equality before the law under Article 14 of the Constitution:
129. Equal treatment of parties at the stage of appointment of an arbitrator ensures impartiality during the arbitral proceedings. A clause that allows one party to unilaterally appoint a sole arbitrator is exclusive and hinders equal participation of the other party in the appointment process of arbitrators. Further, arbitration is a quasi-judicial and adjudicative process where both parties 14 (2023) 12 SCC 330 15 2024 SCC OnLine SC 3219 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 16 of 29 AND AND ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. Digitally signed by SACHIN SACHIN MITTAL MITTAL Date:
2025.10.06 17:45:04 +0530 ought to be treated equally and given an equal opportunity to persuade the decision-maker of the merits of the case. An arbitral process where one party or its proxy has the power to unilaterally decide who will adjudicate on a dispute is fundamentally contrary to the adjudicatory function of Arbitral Tribunals. [Gary Born, International Commercial Arbitration, (2nd Edn., Kluwer 2014) p. 1952.]
169. In the present reference, we have upheld the decisions of this Court in TRF [TRF Ltd. v. Energo Engg.
Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] and Perkins [Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760] which dealt with situations dealing with sole arbitrators. Thus, TRF [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377 :
(2017) 4 SCC (Civ) 72] and Perkins [Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760] have held the field for years now. However, we have disagreed with Voestalpine [Voestalpine Schienen GmbH v. DMRC Ltd., (2017) 4 SCC 665 : (2017) 2 SCC (Civ) 607] and CORE [Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), (2020) 14 SCC 712] which dealt with the appointment of a three-
member Arbitral Tribunal. We are aware of the fact that giving retrospective effect to the law laid down in the present case may possibly lead to the nullification of innumerable completed and ongoing arbitration proceedings involving three-member tribunals. This will disturb the commercial bargains entered into by both the government and private entities. Therefore, we hold that the law laid down in the present reference will apply prospectively to arbitrator appointments to be made after the date of this judgment. This direction only applies to three-member tribunals.
J. Conclusion
170. In view of the above discussion, we conclude that:
170.1. The principle of equal treatment of parties applies at all stages of arbitration proceedings, including the stage of appointment of arbitrators;
170.2. The Arbitration Act does not prohibit PSUs from empanelling potential arbitrators. However, an arbitration clause cannot mandate the other party to select its arbitrator from the panel curated by PSUs;ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 17 of 29
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170.3. A clause that allows one party to unilaterally appoint a sole arbitrator gives rise to justifiable doubts as to the independence and impartiality of the arbitrator. Further, such a unilateral clause is exclusive and hinders equal participation of the other party in the appointment process of arbitrators;
170.4. In the appointment of a three-member panel, mandating the other party to select its arbitrator from a curated panel of potential arbitrators is against the principle of equal treatment of parties. In this situation, there is no effective counterbalance because parties do not participate equally in the process of appointing arbitrators. The process of appointing arbitrators in CORE [Central Organisation for Railway Electrification v. ECI-SPIC-
SMO-MCML (JV), (2020) 14 SCC 712] is unequal and prejudiced in favour of the Railways;
170.5. Unilateral appointment clauses in public-private contracts are violative of Article 14 of the Constitution; 170.6. The principle of express waiver contained under the proviso to Section 12(5) also applies to situations where the parties seek to waive the allegation of bias against an arbitrator appointed unilaterally by one of the parties. After the disputes have arisen, the parties can determine whether there is a necessity to waive the nemo judex rule; and 170.7. The law laid down in the present reference will apply prospectively to arbitrator appointments to be made after the date of this judgment. This direction applies to three-member tribunals.
171. The reference is answered in the above terms.
23. The Hon'ble Delhi High Court in Man Industries (India) Limited v. Indian Oil Corporation Limited16 held that a participation in arbitral proceedings without raising an objection to the appointment of an arbitrator or filing of an application for extension of mandate does not tantamount to an express agreement in writing for waiving of the ineligibility of the arbitrator under Section 12(5). It was further held that an award rendered by an ineligible arbitrator is a nullity:
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19. In Govind Singh (supra), a Division Bench of this Court considering the above judgments held that even if the party does not raise an objection to the appointment of the Arbitrator and participates in the arbitral proceedings without raising any objection to the appointment of the Arbitrator, it is not a waiver of such party's right under Section 12(5) of the Act. It was further held that an Arbitral Award passed by an Arbitrator who is ineligible to act as an Arbitrator cannot be considered as an Arbitral Award at all.
The ineligibility of an Arbitrator goes to the root of his jurisdiction and the Arbitral Award cannot be considered as valid.
20. In MS Bridge Building Construction Co. Pvt. Ltd. (supra), a learned Single Judge of this Court, relying upon the above judgments, rejected the plea of the respondent therein that the petitioner therein having filed applications for extension of the mandate of the Arbitrator is deemed to have waived the applicability of Section 12(5) of the Act and cannot assail the Award on that ground.
21. In JMC Projects (India) Ltd. (supra), another learned Single Judge of this Court again rejected the plea of the respondent observing that the filing of applications for extension of time for continuance and completion of the arbitral proceedings, or applications to the Arbitrator for extension of time to file the affidavit of evidence etc., cannot constitute an "agreement in writing" within the manner of the Proviso to Section 12(5) of the Act.
22. In view of the above authorities, there can be no doubt that the learned Arbitrator appointed by the respondent was de jure ineligible to act as such. The petitioner by its participation in the arbitration proceedings or by its filing of applications under Section 29A of the Act seeking extension of the mandate of the learned Arbitrator, cannot be said to have waived the ineligibility of the learned Arbitrator under Section 12(5) of the Act, and, therefore, the Arbitral Award passed by the learned Arbitrator is invalid.
24. The Hon'ble Delhi High Court in Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat17 and the Hon'ble Calcutta High Court in 17 2023 SCC OnLine Del 3148 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 19 of 29 AND AND Digitally signed ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. by SACHIN SACHIN MITTAL MITTAL Date:
2025.10.06 17:45:17 +0530 Cholamandalam Investment and Finance Co. Ltd. v. Amrapali Enterprises18, were dealing with the issue of the enforcement of Arbitral Award rendered by unilaterally appointed sole Arbitrator. The Hon'ble High Courts after placing reliance upon catena of judgments held that unilateral appointment of an arbitrator is void ab initio and that such an award is also non est in law. The Hon'ble High Courts have reasoned that a person's ineligibility to act as an Arbitrator strikes at the root of the matter. Accordingly, the award rendered by such a unilaterally appointed Arbitrator would be non est and non enforceable in law. It was also held that an executing Court could entertain an objection that the award is a nullity and suffers with illegality going to the root of the matter. The Hon'ble Supreme Court in Kotak Mahindra Bank Ltd v. Narendra Kumar Prajapat19 dismissed the petition file by Kotak Mahindera Bank challenging the Hon'ble Delhi High Court's decision in Kotak Mahindera Bank (Supra) to uphold the Commercial Court's judgment that refused the execution of an award passed by a unilaterally appointed Arbitrator.
25. The Hon'ble Supreme Court in Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran Nigam Ltd.20 has held that the plea that the Award having been rendered by an ineligible arbitrator is a nullity can be taken at any stage of proceedings:
17. We are of the view that it is settled law that if there is an inherent lack of jurisdiction, the plea can be taken up at any stage and also in collateral proceedings. This was held by this Court in Kiran Singh v. Chaman Paswan [Kiran Singh v. Chaman Paswan, (1955) 1 SCR 117 : AIR 1954 SC 340] as follows : (SCR p. 121 : AIR p. 342, para 6) 18 2023 SCC OnLine Cal 605 19 SLP (C) Diary No(s). 47322/2023 20 (2019) 17 SCC 82 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 20 of 29 AND AND Digitally signed ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. by SACHIN SACHIN MITTAL MITTAL Date:
2025.10.06 17:45:21 +0530 "6. ... It is a fundamental principle well-established that a decree passed by a court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties. If the question now under consideration fell to be determined only on the application of general principles governing the matter, there can be no doubt that the District Court of Monghyr was coram non judice, and that its judgment and decree would be nullities."
26. The Hon'ble Delhi High Court in Man Industries (supra) has also held that the plea that the Award is a nullity on the ground of the same having been rendered by unilaterally appointed arbitrator, can even be taken for the first time during oral submissions without even amending the petition:
23. The only question, therefore, left to be considered by this Court is whether the petitioner can now be allowed to agitate the above ground by way of an amendment application, which admittedly has been filed much beyond the period prescribed in Section 34(3) of the Act.
24. In Hindustan Construction Company Limited (supra), the Supreme Court has held that the effect of Section 34(3) of the Act is not to completely rule out any amendment being allowed to be made in the application for seeking setting aside of the Award howsoever material or relevant it may be. The Court held as under:--
"29. There is no doubt that the application for setting aside an arbitral award under Section 34 of the 1996 Act has to be made within the time prescribed under sub- section (3) i.e. within three months and a further period of thirty days on sufficient cause being shown and not thereafter. Whether incorporation of additional grounds by way of amendment in the application under Section ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 21 of 29 AND AND ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. Digitally signed SACHIN by SACHIN MITTAL MITTAL Date: 2025.10.06 17:45:24 +0530 34 tantamounts to filing a fresh application in all situations and circumstances. If that were to be treated so, it would follow that no amendment in the application for setting aside the award howsoever material or relevant it may be for consideration by the court can be added nor existing ground amended after the prescribed period of limitation has expired although the application for setting aside the arbitral award has been made in time. This is not and could not have been the intention of the legislature while enacting Section
34.
30. More so, Section 34(2)(b) enables the court to set aside the arbitral award if it finds that the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force or the arbitral award is in conflict with the public policy of India. The words in clause (b) "the court finds that" do enable the court, where the application under Section 34 has been made within prescribed time, to grant leave to amend such application if the very peculiar circumstances of the case so warrant and it is so required in the interest of justice."
25. In Lion Engineering Consultants (supra), the Supreme Court held that even without an amendment in the petition, a plea of lack of jurisdiction of the Arbitrator can be raised even though no such objection was raised under Section 16 of the Act.
26. In Hindustan Zinc Limited (HZL) (supra), the Court held that if there is an inherent lack of jurisdiction of the Arbitrator, the plea can be taken up any stage and also in collateral proceedings. Such plea can be taken even where the party has consented to the appointment of the Arbitrator.
27. Applying the above principles to the facts of the present case, the plea of the Arbitrator being de jure ineligible to act as such is a plea of lack of jurisdiction. This plea can be allowed to be raised by way of an amendment and even without the same.
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27. The Hon'ble Delhi High Court in Airports Authority of India v. TDI International India Pvt. Limited21 again affirmed the legal position that objection against jurisdiction of a unilaterally appointed arbitrator can be taken at any stage:
23. The question as to whether this ground can be raised for the first time in the course of oral arguments in a petition under Section 34 of the Act, has been decided in AAI's favour, specifically in the judgment of a coordinate bench in Man Industries43 In paragraph 27 of the judgment, the Court held that the question was one of jurisdiction and de jure ineligibility to act, which can be raised "by way of an amendment and even without the same." In reaching this conclusion, this Court relied inter alia upon the judgments of the Supreme Court in Lion Engineering Consultants v. State of M.P.44 and Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran Nigam Ltd. , which emphasise 45 that challenges to the jurisdiction of an arbitrator can be raised for the first time in Section 34 proceedings, and even in collateral proceedings.
28. The facts of the case, Mahavir Prasad Gupta and Sons v. Govt. of NCT of Delhi22 were similar to those of the present case. This was an appeal under Section 37 against the Order whereby the Ld. Commercial Court had allowed the Section 34 petition filed by the respondent and had set aside the Award. The respondent had not pleaded the ground of unilateral appointment of arbitrator in its Section 34 petition. However, the Ld. Commercial Court set aside the Award on the ground of the same being in contravention of public policy as the arbitrator was unilaterally appointed by one of the parties. The Division Bench of the Hon'ble Delhi High Court held that the Award rendered by a unilaterally appointed arbitrator is against public policy of India and that such an Award is liable to be set aside by the Court under Section 34 even if no 21 2024 SCC OnLine Del 4016 22 2025 SCC OnLine Del 4241 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 23 of 29 Digitally signed AND AND by SACHIN ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. SACHIN MITTAL Date:
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such ground has been taken in the petition. It was further held that such an Award being a nullity can not be enforced under Section 36:
54. In any event, Section 34(2)(b) of the Act empowers the Court to set aside the award if 'the Court finds that', which means that it is an obligation of the Court to ensure that that award is not against the Public Policy of India. Hence, even if any of the parties have not raised an objection regarding the unilateral appointment, if the Court while considering the application under Section 34 of the Act finds that the Award is null and void due to the unilateral appointment of the arbitrator, has power to set aside the award without any objection by any of the parties.
The concept of Public Policy of India is explained and clarified in Explanation 1 to Section 34(2)(b) of the Act that the award must not be in contravention with the fundamental policy of Indian law or in conflict with the most basic notions of morality or justice. Right to equality is part of the basic structure of the Constitution of India and integral to the fundamental policy of India law. The judgment in CORE (supra) has held as under:
"70. The concept of equality under Article 14 enshrines the principle of equality of treatment. The basic principle underlying Article 14 is that the law must operate equally on all persons under like circumstances. [M. Nagaraj v. Union of India, (2006) 8 SCC 212, para 106 : (2007) 1 SCC (L&S) 1013] The implication of equal treatment in the context of judicial adjudication is that "all litigants similarly situated are entitled to avail themselves of the same procedural rights for relief, and for defence with like protection and without discrimination" [Shree Meenakshi Mills Ltd. v. A.V. Visvanatha Sastri, (1954) 2 SCC 497, para 6 : (1954) 26 ITR 713]. In Union of India v. Madras Bar Assn. [Union of India v. Madras Bar Assn., (2010) 11 SCC 1, para 102 : (2010) 156 Comp Cas 392], a Constitution Bench held that the right to equality before the law and equal protection of laws guaranteed by Article 14 of the Constitution includes a right to have a person's rights adjudicated by a forum which exercises judicial power impartially ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 24 of 29 AND AND Digitally signed M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd.
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and independently. Thus, the constitutional norm of procedural equality is a necessary concomitant to a fair and impartial adjudicatory process."
55. Any unilateral appointment of the sole or presiding arbitrator militates against the most basic notion of justice. Hence, any unilateral appointment will take away the equal treatment of the parties enshrined under Section 18 of the Act, which is a complete code in itself as held by the Supreme Court in Kandla Export Corpn. v. OCI Corpn, (2018) 14 SCC 715.
56. Hence, the objection with regard to award being nullity due to unilateral appointment can be raised for the first time at the stage of Section 34 of the Act and even in absence of the objection, if the Court while deciding the application under Section 34 of the Act finds that the award is vitiated by unilateral appointment can on its own set aside the award.
57. Similarly, the Court executing the award under Section 36 of the Act read with Order XXI of the Civil Procedure Code, 1908 ('CPC') can refuse to enforce the award, which is deemed to be a decree passed by the Indian Court at the stage of enforcement proceedings. Under CPC, a decree is said to be nullity if it passed by a Court having lack of inherent jurisdiction. The decree is called nullity if it is ultra vires the powers of the Court passing the decree and not merely voidable decree. Applying the same principles to the awards that are considered as decree under Section 36 of the Act, the Court enforcing the awards must refuse to enforce the awards that are passed by unilaterally appointed arbitrator, being a nullity having lack of inherent jurisdiction to pass the award.
60. Hence, the objection with regard to unilateral appointment can be taken at any stage even during the proceedings under Section 34 of the Act and during enforcement of the Award under Section 36 of the Act for the first time and even without raising such an objection by any of the parties, the Court has power to set aside or refuse to enforce the Award if the Court finds that the same is passed by a sole or presiding arbitrator that is unilaterally appointed as the Award passed by such an Arbitral Tribunal would be a nullity.
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29. The Hon'ble Division Bench in Mahavir Prasad (supra) in para 61 to 73 also discussed various judgements (Select Realty v. Intec Capital Limited23, Kanodia Infratech Limited v. Dalmia Cement (Bharat) Limited24, Arjun Mall Retail Holdings (P) Ltd. v. Gunocen Inc.25, VR Dakshin (P) Ltd. v. Scm Silks (P) Ltd.26 and Bhadra International India (P) Ltd. v. Airports Authority of India27) wherein the Court had not allowed the ground of unilateral appointment to be raised for the first time at the stage of proceedings under Section 34 or Section
36. The Hon'ble Division Bench distinguished some of these judgments and other judgment(s) were held per incuriam.
30. The Hon'ble Division Bench in Mahavir Prasad (supra) has also held that a party which has unilaterally appointed the arbitrator can also challenge the Award under Section 34:
81. Accordingly, the party that unilaterally appointed the arbitrator cannot be deemed to have agreed in writing to waive the ineligibility of the arbitrator by act of appointment. When appointment itself is ineligible under the provisions of Section 12(5) of the Act read with Seventh Schedule of the Act, it does not take away the right of the party to challenge such an appointment merely because that party had made the appointment in absence of express agreement in writing between the parties to waive the applicability of Section 12(5) of the Act.
82. Hence, a party which unilaterally appointed the arbitrator has right to object to such appointment irrespective of fact that that party itself made the appointment of the arbitrator. Mere fact of making appointment in writing will not make the ineligible appointment a valid appointment unless there is express agreement in writing waiving such ineligibility.23
2021 SCC OnLine Del 4333 24 2021 SCC OnLine Del 4883 25 (2024) 1 HCC (Del) 755 26 2024 SCC OnLine Mad 6761 27 2025 SCC OnLine Del 698 ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 26 of 29 AND AND Digitally signed ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. SACHIN by SACHIN MITTAL MITTAL Date: 2025.10.06 17:45:43 +0530
83. Although it appears disingenuous, a party appointing an the sole or presiding arbitrator unilaterally can challenge the award on the ground that the award has been rendered in contravention of Section 12(5) of the Act read with Seventh Schedule of the Act notwithstanding that the said party itself made such an appointment. When the Arbitral Tribunal inherently lacked jurisdiction to act, the arbitration proceedings are void ab initio, rendering the award unenforceable irrespective of which party made such unilateral appointment. The arbitral proceedings and an award made by an unilaterally appointed sole or presiding arbitrator, who is de jure ineligible to be appointed as an arbitrator by virtue of the Seventh Schedule of the Act are void ab initio. The waiver under the proviso to Section 12(5) of the Act must be express and subsequent to the disputes having been arisen between the parties. Hence, the party which appointed the sole or presiding arbitrator unilaterally can also challenge the award under Section 34 of the Act on the ground of such ineligibility.
31. The law as discussed in aforesaid binding precedents can be summarized as under:
(a) Independence and impartiality are the essential aspects of arbitral proceedings. Principle of equal treatment of parties applies at all stages of arbitral proceedings, including the stage of appointment of an Arbitrator;
(b) Neither a party to dispute, or its director/employee etc. can be the arbitrator; nor can such party or its director/employee etc. unilaterally appoint an Arbitrator, by virtue of Section 12(5) and Schedule VII of the A&C Act;
(c) The ineligibility of a unilaterally appointed Arbitrator can be removed only by a contract in writing executed between the parties subsequent to dispute as provided under proviso to Section 12(5) of the A&C Act;ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 27 of 29
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(d) A party, which has unilaterally appointed a Arbitrator, in the
absence of a contract as provided under proviso to Section 12(5) of the A&C Act, can also challenge the appointment of Arbitrator;
(e) Participation in arbitration proceedings or filing of an application for extension of mandate of an Arbitrator does not amount to waiver or removal of ineligibility of an unilaterally appointed Arbitrator;
(f) Challenge procedure under Section 13 of the A&C Act is not meant for an ineligible Arbitrator i.e. unilaterally appointed Arbitrator. The mandate of such an ineligible Arbitrator can be terminated as per Section 14 of the A&C Act;
(g) An Award rendered by a unilaterally appointed Arbitrator is void/non est/nullity, which can be set up at any stage of proceedings, even during collateral proceedings;
(h) The plea of an Award being a nullity on the ground of the same having been rendered by a unilaterally appointed Arbitrator can be taken/urged for the first time even during oral submissions and without first amending the petition;
(i) The Award rendered by a unilaterally appointed Arbitrator is in contravention to public policy of India and, therefore, the same is liable to set aside under Section 34 of the A&C Act;
32. In view of the findings: the Arbitrator was unilaterally appointed by the petitioner and such an Award is void/ non est/nullity; the impugned Award is held to be in contravention of public policy of India. The impugned Award is, therefore, set aside. Hence, I do not feel any need to determine other grounds of setting aside the Award as urged in the petitions. Parties shall be at liberty to take recourse of legal ARBTN No. 401/17 Haier Appliances(India)Pvt. Ltd. v. M/s J and J Traders Page 28 of 29 Digitally AND AND signed by ARBTN No. 445/17 M/s J and J Traders v. Haier Appliances(India)Pvt. Ltd. SACHIN SACHIN MITTAL MITTAL Date:
2025.10.06 17:45:51 +0530 proceedings for enforcement of their rights, including initiation of fresh arbitral proceedings.
33. Both the petitions stand disposed off.
34. File be consigned to Record Room.
35. This Judgment is being signed in two sets. One set each be placed in judicial record of both the petitions.
Announced & dictated in SACHIN Digitally signed by SACHIN MITTAL the open Court on 27.09.2025 MITTAL 17:46:01 +0530 Date: 2025.10.06 (Sachin Mittal) District Judge-03/South-East District Saket Courts, New Delhi/27.09.2025 Certified that this Judgment contains 29 pages and each page bears my signatures.
(Sachin Mittal) District Judge-03/South-East District Saket Courts, New Delhi/27.09.2025 Note: The Order was pronounced on 27.09.2025. However, it could not be corrected and uploaded due to Courts being closed from 28.09.2025 to 03.10.2025 and on 05.10.2025. It, now, having been corrected today i.e. 06.10.2025, is being released for being uploaded.
Digitally
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