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4. The 1st respondent filed E.P.No.676 of 2022 to execute the Award. In the said EP the Order dated 30.09.2022 was passed to attach the amount lying in the bank account of the 1st petitioner/Judgment Debtor in UCO Bank Athili Branch, West Godavari District directing the Garnishee bank to withhold the said amount and prohibit any transactions until further orders of the Court. This Order is under challenge in CRP No.2345 of 2022.
5. The 1st respondent in the counter filed in CRP No.419 of 2026 has inter alia stated that when the dispute arose due to non-payment of the outstanding loan in spite of the demand notices, the 1st respondent company referred the 2nd respondent in CRP No.419 of 2026 the retired Junior Civil Judge as sole arbitrator to settle the dispute between the petitioners and the 1st respondent. The petitioner did not give reply to the notice and remained silent throughout the arbitration proceedings in AOP.No.6 of 2020 and even in the E.P.No.676 of 2022 filed by the 1st respondent the petitioners never raised their RNT, J & BM, J objections regarding appointment of sole arbitrator which waives the right of the petitioner to object the appointment of sole arbitrator under Section 4 of the Act 1996. The 1st respondent in the counter affidavit has further contended that the sole arbitrator is an individual entity having no direct or indirect relations with the 1st respondent company, and that the arbitrator was not appointed by any person as per the categories prescribed in Seventh Schedule and not barred under the provisions of Section 12 (5) of the Act.
v. In arbitration, the parties vest jurisdiction in the tribunal by exercising their consent in furtherance of a valid arbitration agreement. An arbitrator who lacks jurisdiction cannot make an award on the merits. Hence, an objection to the inherent lack of jurisdiction can be taken at any stage of the proceedings."
29. In L & T Finance Ltd. (supra), on consideration of the aforesaid judgments in Bhadra International (India) Pvt. Ltd. (supra), TRF Ltd. (supra), Perkins Eastman (supra), the Bombay High Court reached to a conclusion that the award by the unilaterally appointed sole Arbitrator deserved to be set aside, which was accordingly set aside and the Commercial Execution Application was dismissed, however, it was kept open to initiate fresh arbitration proceedings, in accordance with law.
30. There is no dispute that the sole Arbitrator was appointed unilaterally by the Finance Company pursuant to the arbitration clause in the Arbitration Agreement.
31. Learned counsel for the petitioners submitted that the person appointing the sole arbitrator is the Legal Manager of the 1st respondent Company. He submitted that the Legal Manager who has appointed the sole arbitrator vide the said letter certainly falls under the categories specified in the Seventh Schedule. He referred to in particular Category-1 the arbitrator as an employee, consultant, Advisor or has any other past or present business relationship with a party, Category-2, the Arbitrator currently represents or advises one of the parties or affiliate of one of the parties, as also the Category-
V. Conclusions:
43. In view of the aforesaid consideration, we reach to the conclusion that the appointment of the sole Arbitrator unilaterally appointed by the Finance Company is violative of Article 14 of the Constitution of India. It was invalid.
The Arbitrator had no jurisdiction, it lacked inherent jurisdiction to pass the Award. The ineligibility under law under Section 12 read with Seventh Schedule, was attracted with respect to the person legal Manager of the 1st respondent Finance Company was attracted. So, he could also not RNT, J & BM, J appoint/nominate 2nd respondent as the sole arbitrator. There was no express waiver by any agreement in writing in terms of proviso to Sub-Section (5) of Section 12 of the Act 1996. Consequently, there was no such waiver to such appointment on the part of the petitioner. The mandate of the Arbitrator stood automatically terminated in law and as per the law laid down in the Central Organisation for Railway Electrification (supra). The law laid down in Central Organisation for Railway Electrification (supra) is not prospective to the appointment of the sole Arbitrator appointed unilaterally. It is prospective only with respect to the appointment of the Arbitral Tribunal consisting of three Members. So, the Award put to execution is not a valid arbitration award; it is passed without jurisdiction. The plea of lack of inherent jurisdiction in the Arbitrator could be raised at any stage and even in collateral proceedings is also the settled legal position. Reference in this respect can be made to the following paragraphs 113 to 116, under the consideration head "C. Challenge to the ineligibility of the arbitrator at any stage of the proceedings, from Bhadra International (India) Pvt. Ltd. (supra).