Case Note & Summary
The dispute arose from multiple arbitration petitions under Section 34 of the Arbitration and Conciliation Act, 1996, challenging arbitral awards passed by an arbitrator unilaterally appointed by the respondent, The underlying transactions involved loans under agreements dated March 31, 2011, with arbitration invoked on November 30, 2016, and awards passed on February 6, 2018. The petitioners participated in the arbitration proceedings without protesting the unilateral appointment but raised the objection only at the Section 34 stage. The core legal issue was whether unilateral appointment renders awards void and whether participation constitutes waiver of the right to challenge. The petitioners argued that unilateral appointment leads to de jure ineligibility under Section 12(5), requiring express written consent for waiver, and that challenge under Section 34 is permissible without prior objection. The respondent contended that petitioners' consent could be discerned from their conduct, and objection should have been raised earlier. The court analyzed Supreme Court precedents, including Central Organisation for Railway Electrification, Perkins Eastman, Bharat Broadband, and particularly Bhadra International, which dealt with similar facts. The court held that unilateral appointment equates to ineligibility under the Seventh Schedule, making the arbitrator de jure incapable. It further held that waiver under Section 12(5) requires an express agreement in writing after the dispute arises, and participation without objection does not constitute waiver, as statutory design mandates clear written agreement. Additionally, the court held that when an arbitrator is ineligible, termination of mandate under Section 14 is automatic, and challenge under Section 34 is tenable without prior objection during arbitration. Consequently, the court quashed and set aside the impugned arbitral awards, allowing the petitions.
Headnote
A) Arbitration Law - Arbitrator Appointment - Unilateral Appointment Leads to De Jure Ineligibility - Arbitration and Conciliation Act, 1996, Section 12(5) - Petitioners challenged arbitral awards under Section 34 on ground of unilateral arbitrator appointment by respondent - Court analyzed Supreme Court precedents establishing that unilateral appointment equates to ineligibility under Seventh Schedule - Held that such appointment renders arbitrator de jure incapable, making awards liable to be set aside (Paras 4-5, 12). B) Arbitration Law - Waiver of Objection - Express Written Agreement Required for Waiver Under Section 12(5) - Arbitration and Conciliation Act, 1996, Section 12(5) - Respondent contended petitioners waived objection by participating in arbitration without protest - Court relied on Supreme Court's Bhadra International ruling that waiver requires express agreement in writing after dispute arises - Held that participation without objection does not constitute waiver, as statutory design mandates clear written agreement to overcome Section 12(5) bar (Paras 10-13). C) Arbitration Law - Challenge to Arbitral Award - No Prior Objection Required When Arbitrator Ineligible - Arbitration and Conciliation Act, 1996, Sections 12(5), 14, 34 - Petitioners raised challenge under Section 34 without prior objection during arbitration - Court followed Supreme Court's holding that when arbitrator is ineligible, termination of mandate under Section 14 is automatic - Held that challenge under Section 34 is tenable without prior objection, as ineligibility goes to root of appointment (Paras 14-15).
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Issue of Consideration: Whether unilateral appointment of arbitrator renders arbitral awards liable to be set aside under Section 34 of Arbitration and Conciliation Act, 1996, and whether participation in arbitration proceedings without objection constitutes waiver of right to challenge
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Final Decision
Court allowed the petitions, quashed and set aside the impugned arbitral awards, holding that unilateral appointment renders arbitrator de jure ineligible, waiver requires express written agreement after dispute arises, and challenge under Section 34 is tenable without prior objection
