Delhi District Court
Arun Khattar vs Kanad Kashyap And Anr on 25 July, 2025
DLCT010048202024
IN THE COURT OF SH. M. K. NAGPAL, DISTRICT
JUDGE (COMMERCIAL COURT)-13, CENTRAL DIS-
TRICT, TIS HAZARI COURTS, DELHI
OMP (COMM) NO. :- 27/2024
CNR NO. DLCT01-004820-2024
IN THE MATTER OF :-
Sh. Arun Khattar
S/o Sh. Atam Prakash Khattar,
Aged 62 years,
2E, Caxton House, Jhandewalan Extension,
New Delhi-110005,
Also At
House No. 23/9A, Tilak Nagar,
New Delhi-110018.
... Petitioner
Vs.
1) Sh. Kanad Kashyap,
R/o C-42, Retreat Housing Society,
Patparganj, Delhi-110092.
2) Smt. Manju Jain,
R/o F-2/12-13, Sector-11,
Rohini, New Delhi-110085.
....Respondents
ORDER
25.07.2025
1. This petition has been filed by petitioner under the provisions of Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') challenging the arbitral OMP (COMM) No. 27/2024 1/ 32 DLCT010048202024 award dated 30.12.2023 (hereinafter referred to as the 'Impugned Award') passed by the Ld. sole arbitrator appointed by respondents herein and adjudicating upon the disputes that arose between parties from a partnership deed dated 11.05.2018 executed between them. Vide the above impugned award, the Ld. sole arbitrator is stated to have partly allowed the claims of respondents and has directed the petitioner herein to pay a total sum of Rs. 26,65,194/- to respondents, along with pendente lite and future interest @ 12% pa on expiry of a period of 60 days from the date of award.
2. CASE OF PETITIONER:
As gathered from the contents of petition and the documents enclosed therewith, the case of petitioner is that one Sh. B. R. Jain, who was lessor of one of the showrooms being run by petitioner, had approached him while stating that son of his very close friend wanted to learn the ropes of toy industry and since the petitioner had a vast experience in that field and was already running his toy business in the name of M/s Happy Zone, it would be helpful if the petitioner could guide the son of his friend and be a part of his venture. The petitioner claims that upon insistence by Sh. B. R. Jain and the respondents, he became a part of their joint venture and one partnership deed dated 11.05.2018 was executed between him and the respondents. It is observed that through the said deed, parties had agreed to conduct business of their partnership firm under the name and OMP (COMM) No. 27/2024 2/ 32 DLCT010048202024 style of M/s Sangam Impex for import/export and trading of all types of consumer, household and other utility goods etc. It has been averred by petitioner that though in terms of the said partnership deed, the shares of parties in above business were kept equal and he even invested the requisite amount for accounting purposes upon insistence of the respondents and Sh.
B. R. Jain, but he was not involved in day to day business of the firm and it was being run by respondents as well as husband of respondent no. 2, who was the power of attorney holder of respondent no. 2 and had even filed a claim before the Ld. arbitrator on behalf of respondent no. 2 in his above said capacity.
It has been further averred by petitioner that suddenly in the month of January, 2019, he got to know that respondent no. 1 had moved to Australia and now only respondent no. 2 and her husband would be managing the business of firm and soon thereafter, COVID pandemic had hit the country and thus, he became completely unaware of the business of said firm. It has also been averred by him that in the month June, 2020, the above firm even vacated the rented premises of their stores and it had hardly any fixed expenses and he had kept some unsold inventory of the goods of said firm in his own business being run in the name of M/s Happy Zone to enable the sale of said goods and to recover the invested money. The petitioner claims that it OMP (COMM) No. 27/2024 3/ 32 DLCT010048202024 shockingly came to his knowledge that the above firm had taken huge amounts of loan without any major expenses and above arrangement of sale of the firm's goods by him from his own business was misused by respondents and without any discussions with him about closure of business of the said firm, the respondents had issued a misleading legal notice dated 30.11.2022 to him entirely based on some false and frivolous grounds and seeking payment of Rs. 38,92,184/- from him with interest.
It is further the case of petitioner that thereafter, the respondents had also issued one letter dated 10.05.2023 to him for initiation of arbitration proceedings and for unilateral appointment of a sole arbitrator for adjudication of disputes between them and the said appointment was also accepted by Ld. sole arbitrator vide his declaration dated 17.05.2023 made under Section 12 (1) of the above said Act. It is being claimed by petitioner that then a false statement of claim with annexures was filed by respondents before the Ld. sole arbitrator and the petitioner had also filed his statement of defence/reply thereto as well as a written synopsis etc. and after completion of pleadings and hearing, the impugned award dated 30.12.2023 came to be passed by the Ld. sole arbitrator and the same is patently illegal, perverse and it deserves to be set aside on given grounds stated in the petition.
OMP (COMM) No. 27/2024 4/ 32DLCT010048202024
3. GROUNDS OF CHALLENGE TO THE IMPUGNED AWARD BY PETITIONER The impugned award has been challenged by petitioner mainly on the following grounds:-
(a) That Ld. sole arbitrator has not appreciated the facts or factual background of the case in correct spirit and has failed to adjudicate the core issue of management and control of the partnership business, which was with the respondents;
(b) That Ld. sole arbitrator has decided the entire dispute relying merely upon the annual reports of the firm as well as the equal status of partners in the partnership deed.
(c) That the arbitral proceedings and award pronounced by Ld. sole arbitrator are squarely hit by the ratio laid down by the Hon'ble Supreme Court in case of Perkins Eastman Architects DPC Vs. HSCC (India) Ltd., (2020) 20 SCC 760, which further came to be reiterated by the Hon'ble High Court in case of Proddatur Cable TV Digi Services Vs. Siti Cable Network Limited [2020 SCC Online Del 350], as the sole arbitrator was appointed unilaterally by respondents, who were the parties interested in outcome of disputes and further that his appointment was even against the provisions of Clause 15 of the partnership deed;OMP (COMM) No. 27/2024 5/ 32
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(d) That the arbitral proceedings did not adhere to the settled judicial precedents and hence, the same are liable to be set aside under Section 34 of the said Act, as held by the Hon'ble Supreme Court in case of MMTC Ltd. Vs. Vedanta Ltd., (2019) 4SCC 163; and
(e) That Ld. sole arbitrator has wrongly allowed some of the claims of respondents and has passed the impugned award on basis of wrong appreciation of the documents on record.
4. CASE OF RESPONDENTS The respondents in their reply filed to the petition have challenged the case of petitioner and have defended the impugned award on following grounds:-
(i) That during the entire proceedings, conducted before Ld. sole arbitrator, the petitioner had nowhere taken any objection whatsoever regarding the appointment of Ld. arbitrator and it can also be seen from record of arbitral proceedings filed by petitioner himself, that he never challenged the appointment of Ld. arbitrator under Sections 11,13,14 & 16 of the above said Act nor he had sought the disqualification of Ld. arbitrator under Section 12 (5) of the Act and rather, he had actively participated in the said proceedings;
(ii) That participation by petitioner in the arbitral proceedings without any demur qua the appointment of Ld. sole arbitrator can OMP (COMM) No. 27/2024 6/ 32 DLCT010048202024 be demonstrated by or seen from the fact that the petitioner had complied with all procedural orders passed by the Ld. arbitral tribunal from time to time and had also filed his statement of defence, framing of issues and evidence etc.;
(iii) That the decision of the Hon'ble Apex Court in case Perkins Eastman Architects DPC (supra), which is being heavily relied upon by him, is not applicable in the instant case as the said decision was given on 26.11.2019, whereas the impugned award has been passed on 30.12.2023 and even though the said decision stood already delivered by the Hon'ble Apex Court, the petitioner failed to raise any objection regarding the appointment of Ld. arbitrator at any stage of the arbitral proceedings and raising of the said objection by him now at this belated stage is absurd and non-est in law;
(iv) That decision of the Hon'ble Supreme Court in case Perkins Eastman Architects DPC (supra) is not applicable to the facts of present case as in that case, the Hon'ble Apex Court has dealt with a petition filed under the provisions of Section 11(6) of the Act, whereas the present petition has been filed under Section 34 of the said Act which contains some specified grounds for challenge to an arbitral award and the same can not be challenged and set aside on the mandate of appointment of arbitral tribunal;OMP (COMM) No. 27/2024 7/ 32
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(v) That the respondents through a notice dated 13.03.2023 had invoked the arbitration clause as per provisions contained under Section 21 of the Act by proposing the name of Ld. sole arbitrator and through the said notice, they had also called upon the petitioner for suggesting any other name of arbitrator, in case he had any objection to the appointment of Ld. sole arbitrator named by them, within 15 days from receipt of the said notice, but the petitioner failed to reply to said notice and having no other alternative, the respondents vide their letter dated 10.05.2023 had appointed the above arbitrator under intimation to the petitioner;
(vi) That even in his reply dated 06.06.2023 given to the above notice of respondents, the petitioner did not raise any objection to the appointment of Ld. sole arbitrator and he had simply suggested the respondents to meet him and resolve the dispute amicably;
(vii) That though the Counsel for petitioner through his letter dated 20.06.2023 had raised certain objections before the Ld. sole arbitrator, but even in the said letter the appointment of Ld. arbitrator for adjudication of disputes between parties was not objected and since the assurance of full cooperation and assistance on part of petitioner was given in the said letter, it has to be deemed that the petitioner had consented for appointment of the Ld. arbitrator and he had waived off his right to raise any OMP (COMM) No. 27/2024 8/ 32 DLCT010048202024 objection to the appointment of Ld. arbitrator, as held by the Hon'ble Delhi High Court in case of Kanodia Infratech Limited Vs. Dalmia Cement (Bharat) Limited 2021 SCC Online Del 4883.
(viii) That the arbitration proceedings were conducted at Rohini, New Delhi and the seat of arbitration or place where the arbitral proceedings are conducted and concluded is relevant to determine the territorial jurisdiction of the court, which will have the supervisory control over the arbitration proceedings, and hence, in view of provisions contained in Section 2 (1) (e) and 20 of the above said Act, this court has no territorial jurisdiction to entertain or decide the petition.
(ix) That it is well settled that an arbitration award can be challenged or set aside on certain specified grounds only, as mentioned in Section 34 of the Act, and the scope of interference by this court under this Section is very limited and this court should not interfere with the impugned award since it does not suffer from any patent illegality or perversity and has been passed by the Ld. sole arbitrator on correct appreciation of the pleadings and evidence of parties.
5. I have heard the arguments advanced by Sh. Mritunjai Singh, Ld. Counsel for petitioner and Sh. Roopansh Purohit & Sh. Mohd. Zaid, Ld. Counsels appearing on behalf of respondents and I have also carefully perused the case record, OMP (COMM) No. 27/2024 9/ 32 DLCT010048202024 including the written submissions filed on behalf of both parties and the original arbitral record has been perused.
6. Thus, as is clear from above that the challenge made by respondents to the present petition and their defence to the impugned award is firstly on the ground of territorial jurisdiction of this court and apart from this, they have also submitted that award impugned in this petition is not an unilateral award as the Ld. sole arbitrator was appointed in accordance with provisions of the partnership deed executed between parties and further that the petitioner at no stage had ever objected to or challenged the appointment or jurisdiction of Ld. sole arbitrator to enter upon the arbitral reference or to proceed with and adjudicate upon the same. Again, it is also the case of respondents that the petitioner by his conduct before and during the arbitral proceedings and by participating therein had surrendered to the jurisdiction or accepted the appointment of Ld. arbitrator and he shall be deemed to have waived his right to object to the arbitral award, which came to be passed subsequently by the Ld. sole arbitrator. Further, they have also defended the impugned award on ground that this petition does not contain any of the grounds prescribed by Section 34 of the above said Act for setting aside the same.
7. It is the submission of Ld. Counsel for petitioner that no seat or venue for conduction of arbitration proceedings was fixed by parties in this case and merely because the arbitration proceedings have been conducted by Ld. sole arbitrator at Rohini OMP (COMM) No. 27/2024 10/ 32 DLCT010048202024 is not sufficient to hold or say that the courts at Rohini alone will have the jurisdiction in such a case as the seat or legal seat of an arbitration proceedings is not to be confused or mixed with the place or venue of conduction of said proceedings as it is well settled that the Ld. arbitrator can conduct the proceedings even at other places different from the designated seat for conduction of said proceedings for the convenience of parties or for other reasons. It is also the submission of Ld. Counsel for petitioner that even otherwise, the Ld. arbitrator of this case was appointed unilaterally by respondents and his appointment was made in contradiction and violation to the terms contained in partnership deed and hence, once the appointment of Ld. arbitrator himself was illegal and void ab-initio, as held in various decisions of the Hon'ble Supreme Court and High Courts, then the seat, venue or place of conduction of arbitration proceedings as decided by the Ld. arbitrator becomes immaterial and hence, the award rendered by him has to be held a nullity or non-est in the eyes of law and the same is liable to set aside. It is further his submission that in case there was no agreement between parties with regard to the seat of arbitration, the seat would be where the cause of action has arisen and the supervisory jurisdiction of court shall accordingly be determined.
8. Though Ld. Counsel for petitioner has fairly conceded that the scope of interference by this court under Section 34 of the above said Act is limited and this court cannot re-appreciate the pleadings or evidence of parties on merits and cannot substitute OMP (COMM) No. 27/2024 11/ 32 DLCT010048202024 its own findings for the findings arrived at by the Ld. sole arbitrator, but he has vehemently argued that the impugned award is liable to be set aside solely on the ground that it has been given by a sole arbitrator appointed unilaterally by respondents and against the spirit of provisions contained in the above said Act and the judicial pronouncements with regard to party autonomy in appointment of an arbitrator by mutual consent and the impartiality of the arbitrator.
9. Besides the judgments referred to in this petition and as stated above, Ld. Counsel for petitioner has also referred to and relied the judgments in cases BBR India (P) Ltd. Vs. S.P. Singla Construction (P) Ltd., 2023 1 SCC 693, Enercon (India) Ltd. Vs. Enercon Gmbh, (2014) 5 SCC 1, Indus Mobile Distribution (P) Ltd. Vs. Datawind Innovations (P) Ltd., (2017) 7 SCC 678, Ravi Ranjan Developers Pvt. Ltd. Vs. Aditya Kumar Chatterjee [2022 SCC Online SC 568], BGS SGS Soma JV Vs. JHPC Limited (2020) 4 SCC 234, State of W.B. Vs. Associated Contractors, (2015) 1 SCC 32, Bharat Broadband Network Ltd. Vs. United Telecoms Ltd., (2019) 5SCC 755, Delhi Integrated Multi Model Transit System Ltd. Vs. Delhi Jal Board, 2021 SCC Online Del 4958 and Coronation Infrastructure Pvt. Ltd. Vs. TATA Capital Finances Services, 2022 SCC Online Del 3336.
10. Per contra, it has been vehemently argued by Ld. Counsel for respondents that this court has no territorial jurisdiction to OMP (COMM) No. 27/2024 12/ 32 DLCT010048202024 entertain or decide this petition as the arbitration proceedings have been conducted by Ld. sole arbitrator at his given address of Rohini and hence, this petition was required to be filed by petitioner before the courts at Rohini as the seat of Ld. arbitrator was at Rohini and even the entire arbitration proceedings have been conducted at the given address of Ld. arbitrator situated within the jurisdiction of Rohini Courts. It is also his submission that the arbitration proceedings were conducted and concluded by the Ld. arbitrator at Rohini without any objection from the side of petitioner qua the seat of Ld. arbitrator and thus, the petitioner by his conduct had made the said seat to be the designated seat of arbitration proceedings and the seat determines the exclusive territorial jurisdiction of the courts for supervisory control over the arbitration proceedings, as per provisions contained in Section 2 (1) (e) and Section 20 of the above said Act. It is also his submission that it is the settled law that the seat of arbitration proceedings is to be determined on the basis of its connection with the arbitration proceedings and not with the cause of action. It is further his submission that in terms of judgments of the Hon'ble Supreme Court as well as High Courts, the applicability of Section 42 of the Act was only for the purposes of determining the court, which a party may approach in anticipation of arbitration proceedings by way of an application under Section 9 of the said Act. It is further his submission that if a seat of arbitration is fixed or designated, then OMP (COMM) No. 27/2024 13/ 32 DLCT010048202024 the court having jurisdiction over the said seat is the exclusive competent court to entertain such petition.
11. He has also relied upon judgments in cases Delhi Tourism and Transportation Development Vs. Satinder Mahajan, 2024 SCC Online Del 3206, Bharat Aluminium Company Vs. Kaiser Aluminium Technical Services INC (2012) 9 SCC 552, BBR (India) Private Limited Vs. S. P. Singla Constructions Private Limited (2023) 1 SCC 693, Southern Railway Vs. M. R. Ramakrishnan, 2023 SCC Online Ker 843 and BGS SGS Soma (supra).
12. It is further the submission of Ld. Counsel for respondents that the issue or objection regarding maintainability of petition before this court for lack of territorial jurisdiction is required to be decided first and before going into merits of the case and on this aspect, he has also relied upon a judgment of the Hon'ble Supreme Court in case Asma Lateef And Anr. Vs. Shabbir Ahmad And Ors., (2024) 4 Supreme Court Cases 696.
13. There is no doubt with regard to the submission being made by Ld. Counsel for respondents or the legal position that an objection pertaining to jurisdiction of a court has to be decided first as the decision on this issue goes to root of the case and pertains to very competency of the court to entertain the case and to decide the disputes on merits and if a court decides the controversy or disputes on merits, without first deciding upon its OMP (COMM) No. 27/2024 14/ 32 DLCT010048202024 own competency to adjudicate upon the same, then the decision or judgment to be tendered in such a case shall be illegal and shall amount to have been pronounced on erroneous assumption of jurisdiction by the court, as was held in the case of Asma Lateef and Anr. (supra) being relied upon by Ld. Counsel for respondents.
14. However, in the present case, though this court is taking up the issue of its territorial jurisdiction for decision first, but it will be clear from further discussion to be held by court that for deciding the above issue, this court will also have to appreciate the pleadings and documents of parties and the rival contentions of Ld. Counsels representing them to discuss the issue of unilateral appointment of Ld. arbitrator simultaneously, as the same is necessary for deciding the issue of territorial jurisdiction. It is so because as per the case of respondents, the courts at Rohini have exclusive jurisdiction because the seat of arbitration was there and the appointment of Ld. sole arbitrator was accepted or acquiesced in by petitioner, whereas according to petitioner the appointment of Ld. arbitrator and determination of seat was unilateral and this court has the territorial jurisdiction in terms of provisions contained in the above said Act to decide this petition.
15. According to Section 2 (1) (e) of the above said Act, a court in relation to a domestic arbitration case means the principal civil court of original jurisdiction in a district, including the High Court in exercise its ordinary original civil jurisdiction, OMP (COMM) No. 27/2024 15/ 32 DLCT010048202024 having jurisdiction to decide the questions forming the subject matter of the arbitration as if the same had been the subject matter of a suit. However, it is now settled that if the parties have fixed or determined a seat for conduction of arbitration proceedings, then the courts having jurisdiction over the place where the arbitration seat is located shall have the exclusive jurisdiction and supervisory control over the arbitration proceedings or disputes arising therefrom between the parties, as held by the Hon'ble Supreme Court in cases BGS SGS Soma JV (supra) being relied upon both sides and BBR India (P) Ltd. (supra) etc. being relied upon by Ld. Counsel for petitioner.
16. Further, in terms of Section 20 (1) of above said Act, the parties are free to agree on the place of arbitration and as per sub- section (2) of this Section, in case the parties fail to agree upon same, the place of arbitration shall be determined by the arbitral tribunal having regard to circumstances of the case, including the convenience of parties. Sub-section (3) of this Section provides that notwithstanding the provisions contained in sub-section (1) or (2) of this Section, the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consulting among its members, for hearing witnesses, experts or the parties or for inspection of documents, goods or other property. It is also now settled that the word "place" used in sub- sections (1) & (2) and that used in sub-section (3) of this Section is not the same as in sub-sections (1) & (2) it refers to the seat or legal seat which has been agreed, designated or determined by OMP (COMM) No. 27/2024 16/ 32 DLCT010048202024 the parties for conduction of arbitration proceedings and the said word when used in sub-section (3) is with reference to the place of conduction of such proceedings, which may even be different from the place where the seat of arbitration has been designated as this place for conduction of proceedings has to be determined by the Ld. arbitrator keeping in view the circumstances of the said case and in light of the provisions contained in said sub- section, for the convenience of parties or witnesses etc. It is also well settled that even if the word "venue" has been used by the parties for the place of conduction of arbitration proceedings, the same has to be taken as the seat of arbitration if the agreement between parties conveys that the said venue or place was intended to be the legal or juridical seat for conduction of arbitration proceedings and the same does not convey any other place as such.
17. Further, in terms of Section 42 of the Act, notwithstanding anything contained elsewhere in the said part or in any other law for the time being in force, where with respect to an arbitration agreement any application under that part has been made in a court, then that court alone shall have the jurisdiction over the arbitral proceedings and all subsequent applications arising out of the said agreement and the arbitral proceedings shall be made in that court and in no other court. However, it has been held that the provisions of this Section are only intended to apply to a "court" as defined in Section 2 (1) (e) of the Act and the parties cannot approach to any other court within whose jurisdiction no OMP (COMM) No. 27/2024 17/ 32 DLCT010048202024 cause of action in respect to the subject of an agreement arose or which cannot be considered to be the principal civil court of jurisdiction of the district in respect to said matter. Since no other application or petition pertaining to the subject matter in question has been filed before any other court, the question of applicability or interpretation of provisions of this Section 42 of the Act does not arise in this petition.
18. Now coming back to facts of the present case, the contention of Ld. Counsel for respondents regarding the jurisdiction of Rohini courts can be accepted by this court only when this court is able to conclude from pleadings of parties and the documents on record that the parties have agreed for the seat of arbitration to be at Rohini or for adjudication of their disputes by the Ld. sole arbitrator appointed in the case and conduction of proceedings by him at his given address of Rohini.
19. As already discussed, the disputes between parties admittedly arose out of one partnership agreement dated 11.05.2018 executed between parties and the relevant Clause 15 of this agreement containing a provision for adjudication of disputes through arbitration is being reproduced herein below:-
"15. In the event of any dispute or difference or question arising between the partners hereto, during the continuance of the partnership or any time thereafter, such disputes, differences or question shall be referred to an Arbitrator, appointed by majority of partners in accordance with the provisions of Indian Arbitration Act or any statutory modification thereof for the time being in force."OMP (COMM) No. 27/2024 18/ 32
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20. It is clear from the above Clause that though the parties had agreed for adjudication of their disputes or differences arising out of the partnership business through an arbitrator, but the seat of conduction of arbitration proceedings was not agreed or decided by the parties through this Clause and even the arbitrator was not named by the parties and his appointment was left to the decision of majority of partners to be made in accordance with provisions of the Arbitration Act or any statutory modifications thereof for the time being in force. Hence, it cannot be said on the basis of this Clause that the seat or venue for conduction of arbitration proceedings was to be at Rohini and therefore, on the basis of this Clause, it also cannot be said that the courts at Rohini alone were having the supervisory jurisdiction in the present case.
21. Now coming to the question of appointment of Ld. sole arbitrator and the legality thereof, it has been argued on behalf of respondents that the same was in compliance of the terms and spirit of this Clause as it empowered the majority of partners to appoint the arbitrator and since the disputes arose between parties in respect to the partnership business carried out or being carried by them, the respondents herein have legally and validly exercised their right to appoint the sole arbitrator for adjudication of said disputes. However, this court is not able to accept the above argument of Ld. Counsel for respondents as the said Clause also stipulates that such an appointment of arbitrator by majority of partners has to be in accordance with provisions of OMP (COMM) No. 27/2024 19/ 32 DLCT010048202024 the above said Act or any statutory modifications thereof as are in force.
22. It is the mandate contained in the above said Act and also the admitted and settled legal position that the appointment of an arbitrator has to be with the consent of both or all the parties and they are free to appoint any person to act as an arbitrator for adjudication of their disputes and they are also free to decide upon the seat for conduction of arbitration proceedings. However, in the present case, though the disputes arose between the three partners of the above firm, who are party to this petition, but the appointment of Ld. sole arbitrator has not been made with consent of all three of them and it has been made by only two partners who are respondents in this petition. Hence, since these two partners or respondents were having a common interest in subject matter of arbitration and same was against or contrary to the interest held or rights being claimed by the third partner or petitioner herein, the above appointment of Ld. sole arbitrator by respondents has to be held to be a unilateral appointment and not an appointment which was made with the consent or concurrence of all partners.
23. Section 12 of above Act contains the grounds on which appointment of an arbitrator can be challenged and a bare perusal of the provisions contained in this Section shows that an arbitrator has to be an independent person. Any relation or interest of arbitrator with any of the parties or even the non-
OMP (COMM) No. 27/2024 20/ 32DLCT010048202024 disclosure thereof can render an arbitrator to be incompetent to conduct the arbitration proceedings in terms of said Section and the award to be delivered by such an arbitrator to be non-est or a nullity in eyes of law and hence, non-executable. The entire thrust of provisions contained in above Section and Act is to ensure that an arbitrator is a neutral person and he represents consents of all the concerned parties. The above legal position is duly reflected in almost all the relevant judgments being referred to by Ld. Counsels for parties. Sub-section (2) of Section 12 of the said Act makes it necessary for the arbitrator to make certain disclosures mentioned in sub-section (1) thereof in form specified in Sixth Schedule of the Act and sub-section (5) thereof, which was inserted by the Amendment Act of 2015, provides 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 Seventh Schedule of Act shall be ineligible to be appointed as an arbitrator. However, as per proviso added to this sub-section, the parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.
24. As stated above an award which has been given by a sole arbitrator unilaterally appointed or got appointed by a party is void ab-initio and it has to be treated as non-est in the eyes of law. It is also settled that if a person himself is not competent to OMP (COMM) No. 27/2024 21/ 32 DLCT010048202024 act as an arbitrator because of the reason that he has an interest in any of the parties or the subject matter of dispute between them, then he cannot also appoint any other person to act as an arbitrator. The principles of fair play are considered pivotal and sacrosanct to the appointment of arbitrators as well as to the proceedings in arbitration and any omission thereof or deviation therefrom would result in striking at the very root of jurisdiction of arbitrator and it would render the entire proceedings conducted and award given by him as unacceptable and unsustainable in the eyes of law.
25. In case of Dharma Prathishthanam vs M/S. Madhok Construction Pvt. Ltd., 2005 (9) SCC 686, the Hon'ble Supreme Court of India observed as under:-
" The Constitution Bench in Khardah Company Ltd. Vs. Raymond & Co.(India) Private Ltd. AIR 1962 SC 1810 decided the issue from the view point of jurisdictional competence and held that what confers jurisdiction on the arbitrators to hear and decide a dispute is an arbitration agreement and where there is no such agreement there is an initial want of jurisdiction which cannot be cured even by acquiescence. It is clearly spelled out from the law laid down by the Constitution Bench that the arbitrators shall derive their jurisdiction from the agreement and consent. Thus, there is ample judicial opinion available for the proposition that the reference to a sole arbitrator as contemplated by para 1 of the First Schedule has to be a consensual reference and not an unilateral reference by one party alone to which the other party does not consent."
26. In case of M/s Voestalpine Schienen Gmbh Vs. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665, the Hon'ble Supreme Court while dealing with the effect of introduction of sub-section (5) of Section 12 of the Arbitration & Conciliation OMP (COMM) No. 27/2024 22/ 32 DLCT010048202024 Act, 1996, with simultaneous inclusion of Seventh Schedule of the said Act, has emphasized and highlighted the need of neutrality of arbitrators and it was held by their Lordships in the said case that any relation or interest of arbitrator with any of the parties in any of the forms as mentioned in Seventh Schedule may effect the legality of award. It was also held by their Lordships in this case that even if any arbitration clause permitting unilateral appointment existed in an agreement prior to insertion of sub-section (5) of Section 12, the same is rendered a nullity by insertion of the said sub-section (5) and Seventh Schedule of the said Act.
27. On this aspect, it is also relevant here to state that while relying upon its earlier judgment in case of TRF Limited (supra), the Hon'ble Supreme Court in case of Perkins Eastman Architects DPC & Anr. (Supra) has held that the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator and hence, a party to the agreement would be disentitled to make any appointment of an arbitrator. The relevant extracts of the said decision read as under:-
"21. But, in our view that has to be the logical deduction from [TRF Ltd. (TRF Ltd. v. Energo Engg. Projects Ltd., MANU/SC/0755/2017 : (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] Para 50 of the decision shows that this Court has 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 OMP (COMM) No. 27/2024 23/ 32 DLCT010048202024 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......"
(Emphasis supplied)
28. Following the above said decision of the Hon'ble Supreme Court in case of Perkins Eastman Architects DPC & Ors. (supra), the Hon'ble High Court of Delhi in the case of Proddatur Cable TV Digi Services (supra) also held that it would be impermissible for a party to unilaterally appoint an arbitrator as in terms of Section 12(5) of the Arbitration & Conciliation Act read with the Seventh Schedule of the said Act, an employee would be ineligible to act as an arbitrator by virtue of the law as explained by the Hon'ble Supreme Court in TRF Ltd. (Supra) and Perkins Eastman Architects DPC & Ors. (Supra). It was further held by their Lordships that such ineligibility would also extend to a person appointed by such officials who are otherwise ineligible to act as arbitrators.
29. In the case of Kotak Mahindra Bank Ltd. Vs. Narendra Kumar Prajapat passed in EFA Commercial No. 3/2023 on 17.05.2023, the Hon'ble High Court held as under :-
"4. In TRF Ltd. v. Energo Engineering Projects Ltd.: (2017) 8 SCC 377, the Supreme Court held that once the Arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. In Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd.: (2020) 20 SCC 760, the Supreme Court, following the earlier decision in TRF Ltd. (supra), held that the Chairman-cum-Managing Director of a party was ineligible to appoint an arbitrator. Following the aforesaid decisions, this court in Proddatur Cable TV Digi Services v. Siti OMP (COMM) No. 27/2024 24/ 32 DLCT010048202024 Cable Network Limited: (2020) 267 DLT 51 held that it is not permissible for a party to unilaterally appoint an arbitrator without the consent of the other party(ies). It is important to note that the aforesaid decisions were rendered in the context of Section 12(5) of the A&C Act.
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7. We find little merit in the aforesaid contentions. The proviso to Section 12(5) of the A&C Act is unambiguous. A party can waive its right to object to the ineligibility of an arbitrator under Section 12(5) of the A&C Act but the same is subject to two conditions. First, that the waiver is required to be by and done by an express agreement in writing; and second, that such agreement is entered into after the disputes have arisen. Unless both the aforesaid conditions are satisfied, there can be no waiver of the ineligibility of an arbitrator.
8. In Bharat Broadband Network Limited v. United Telecoms Limited: (2019) 5 SCC 755, the Supreme Court had authoritatively held that waiver of a right to object to ineligibility of an arbitrator under Section 12(5) of the A&C Act cannot be inferred by conduct of a party. Such waiver can only be by an express agreement in writing. The Court had also clarified that "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".
9. In view of the above, the failure, if any, on the part of the respondent to object to the unilateral appointment of the sole arbitrator, cannot be construed as waiver of his right under Section 12(5) of the A&C Act.
10. The award rendered by an arbitrator who is ineligible to be appointed as such cannot be enforced.
11. In HRD Corporation v. GAIL (India) Ltd.: (2018) 12 SCC 471, the Supreme Court held as under:
"Since ineligibility goes to the root of the appointment, Section 12(5) read with the Seventh Schedule makes it clear that if the arbitrator falls in any one of the categories specified in the Seventh Schedule, he becomes "ineligible" to act as arbitrator. Once he becomes ineligible, it is clear that, under Section 14(1)
(a), he then becomes dejure unable to perform his functions inasmuch as, in law, he is regarded as "ineligible". In order to determine whether an arbitrator is de jure unable to perform his functions, it is not necessary to go to the Arbitral Tribunal under Section 13. Since such a person would lack inherent OMP (COMM) No. 27/2024 25/ 32 DLCT010048202024 jurisdiction to proceed any further, an application may be filed under Section 14(2) to the Court to decide on the termination of his/her mandate on this ground."
(Emphasis Supplied)
12. In Govind Singh v. M/S Satya Group Pvt Ltd & Anr.:
2023/DHC/000081 this court held as under:
"In view of the above, the remaining question to be addressed is whether an arbitral award rendered by a person who is ineligible to act as an arbitrator is valid or binding on the parties. Clearly, the answer must be in the negative. The arbitral award rendered by a person who is ineligible to act as an arbitrator cannot be considered as an arbitral award. The ineligibility of the arbitrator goes to the root of his jurisdiction. Plainly an arbitral award rendered by the arbitral tribunal which lacks the inherent jurisdiction cannot be considered as valid. In the aforesaid view, the impugned award is liable to be set aside as being wholly without jurisdiction.
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14. This Court finds no infirmity with the aforesaid view. A person who is ineligible to act an Arbitrator, lacks the inherent 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 a decision, cannot be considered as valid. Thus, clearly, such an impugned award cannot be enforced."
(Emphasis supplied)
30. The Special Leave Petition (Civil) Diary No. 47322/2023 filed by Kotak Mahindra Bank Ltd. against the above said order of the Hon'ble High Court was also dismissed on 12.12.2023 by the Hon'ble Supreme Court with following words:-
"From paragraph 6 of the impugned order, it appears to be an admitted position that the Arbitrator unilaterally appointed by the petitioner was in eligible to be appointed as an arbitrator by virtue of Section12(5) of the Arbitration and Conciliation Act, 1996. Hence, in view of this peculiar factual position, no case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India. The Special Leave Petition is accordingly dismissed."OMP (COMM) No. 27/2024 26/ 32
DLCT010048202024 (Emphasis supplied)
31. Similar is the legal position laid down by the Hon'ble High Court in case of Coronation Infrastructure Pvt. Ltd. (supra) being relied upon by Ld. Counsel for petitioner.
32. Thus, it is crystal clear from above that the impugned award being passed by a unilateral arbitrator appointed by respondents herein has to be treated as non-est and a nullity in the eyes of law and the same is liable to be set aside on this ground alone.
33. Now coming to the question as to whether the conduct of petitioner herein in participating in arbitral proceedings and not raising of an objection to the jurisdiction of or conduction of proceedings by the Ld. sole arbitrator can be treated as a waiver of his right to raise such an objection in view of the provisions contained in said Act, it can be clearly seen from the legal position discussed above that the said conduct of petitioner cannot amount to a waiver of his rights to object to the jurisdiction of the Ld. sole arbitrator as in case of Bharat Broadband (supra) and Narendra Kumar Prajapat (Supra), their Lordships of the Hon'ble Supreme Court and High Court have clearly held that such waiver by a party has to be by an express agreement in writing.
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34. As already discussed, the contention of Ld. Counsel for respondents is that the respondents through their letter dated 13.03.2023 had invoked the arbitration Clause under Section 21 of the above Act and had suggested the name of Ld. sole arbitrator for resolution of their disputes and though the petitioner was asked to respond to the same or to suggest any other name of his choice for arbitrator within a period of 15 days, but he failed to do so or even respond to the said letter. It is also his contention that having no other option, the respondents had then appointed the sole arbitrator vide their letter dated 10.05.2023 and the petitioner even in his reply dated 06.06.2023 thereto has not raised any objection to the said appointment. Further, it is also the contention of Ld. Counsel for respondents that the petitioner even in his letter dated 20.06.2023 addressed to the Ld. sole arbitrator had not objected to the appointment of Ld. arbitrator and had rather requested for expeditious disposal of the proceedings and had assured his full corporation and assistance and thus, the above documents and conduct of petitioner can and should be treated as his written waiver in terms of proviso to Section 12 (5) of the Act.
35. However, this court is not able to accept the above contentions of Ld. Counsel for respondents for the reasons and legal position already discussed above as such a waiver on part of petitioner cannot be inferred from his conduct or documents and has to be a waiver made in writing through an express agreement. If the petitioner did not respond to the notice dated 13.03.2023 OMP (COMM) No. 27/2024 28/ 32 DLCT010048202024 sent by respondents suggesting the name of sole arbitrator, it was the duty of respondents to approach the Hon'ble High Court for appointment of an arbitrator in terms of provisions contained in Section 11 of the Act and they were not justified in unilaterally appointing an arbitrator through their subsequent letter dated 06.06.2023. As the respondents being party to the above said arbitration agreement were directly interested in the outcome of disputes, in terms of provisions contained in the said Act and the legal position discussed above, they were not competent to either themselves act as arbitrators or even to appoint any other person as arbitrator for resolution of their disputes and since the appointment of sole arbitrator in this case by them has become illegal, since he became de-jure ineligible or incompetent to perform his functions or to act as such, as he lacked inherent jurisdiction to entertain upon the reference and to adjudicate upon the disputes between parties, the non-raising of any objection by plaintiff to his jurisdiction or to the arbitral proceedings being conducted by him is also not a ground to uphold the impugned award as the same is a nullity and is liable to be treated as non-est in the eyes of law.
36. Coming back to the question of territorial jurisdiction again, as already discussed, Section 20 (1) of the Act gives a free hand to parties to agree on the place or seat of arbitration and if they failed to arrive at or there is no such agreement between them to this effect, then the place or seat of arbitration shall be determined by the arbitral tribunal as per provisions of Section OMP (COMM) No. 27/2024 29/ 32 DLCT010048202024 20 (2) of the Act. It has already been held in this order that parties failed to decide the seat of arbitration or to reach upon an agreement about the same with mutual consent and though the seat of arbitration in this case was determined by Ld. sole arbitrator, but since his appointment itself has been held to be a illegal or he became ineligible or incompetent de-jure to perform his functions as such for the reason that it was a unilateral appointment made by respondents herein and the award delivered by him has been held to be a nullity and as non-est in the eyes of law, the determination of seat by him unilaterally for conduction of arbitration proceedings cannot also be held legal. Hence, the supervisory jurisdiction of courts in respect to the subject matter of arbitration has to be decided in terms of provisions contained in Section 2 (1) (e) of the above said Act and it is to be determined with reference to the place where a cause of action arose in respect to the said matter or transactions, as has been submitted by Ld. Counsel for petitioner and as also held in the judgments of the Hon'ble Supreme Court in cases Enercon (India) Ltd. (supra) and Indus Mobile Distribution (P) Ltd. (supra) etc. being relied upon on behalf of petitioner. Further, as provided by this Section 2 (1) (e) of the Act, this jurisdiction has to be determined as if the questions forming the subject matter of arbitration were the subject matter of a suit.
37. Section 20 CPC provides that a suit shall be instituted, inter-alia, in a court within the local limits of whose jurisdiction the cause of action for filing of the said suit arises, wholly or in OMP (COMM) No. 27/2024 30/ 32 DLCT010048202024 part. It has been observed on a perusal of the above partnership agreement dated 11.05.2018 executed between parties that the business of their partnership was to be carried on from the address/office at 237, First Floor, Cycle Market, Jhandewalan Extension, Phase-1, New Delhi-55, which admittedly falls within the jurisdiction of this court. The relevant Clause 3 of the above partnership agreement on this aspect is also being reproduced herein for proper appreciation of the terms thereof:-
"3. That the business of the partnership shall be carried from Office at 237, First Floor, Cycle Market, Jhandewalan Extension, Phase-1, New Delhi-110055, and/or at such other place or places as the partners may decide from time to time."
38. Thus, since the business of partnership firm of parties has been conducted from the above given address of the firm at Jhandewalan, Delhi and the said address or office falls within the jurisdiction of this court, it can be said with certainty that this court has the territorial jurisdiction to decide the disputed questions between parties as relating to and arising out of the above partnership business, if the same have been the subject matter of a suit as a cause of action for filing the suit arose within the jurisdiction of this court. Therefore, as a necessary corollary to the same, it can also be said and held that this court is the supervisory court having territorial jurisdiction over the subject matter of arbitration in respect to the disputes that arose between parties out of the above partnership business.
OMP (COMM) No. 27/2024 31/ 32DLCT010048202024
39. Therefore, as a result of the above fact and legal discussion, the impugned award is held illegal and a nullity in the eyes of law and the same is, therefore, set aside. This petition filed by petitioner company under Section 34 of Arbitration and Conciliation Act, 1996 stands allowed and disposed off accordingly.
40. File be consigned to the Record Room and arbitral record be sent back after due compliance Digitally signed by M K NAGPAL MK Date:
Announced in the open court NAGPAL 2025.07.25 16:08:49 Dated: 25.07.2025 +0530 (M. K. Nagpal) District Judge, Commercial Court-13 Central District, Tis Hazari Courts, Delhi/25.07.2025(p) OMP (COMM) No. 27/2024 32/ 32