Delhi High Court: Mere Participation Of Parties Without Unequivocal & Written Waiver Won’t Lead To Acceptance Of Unilateral Appointment Of Arbitrator
The Delhi High Court allowed Petitions under the Arbitration and Conciliation Act, 1996, seeking termination of the mandate of Sole Arbitrator and for appointment of a substitute Arbitrator.
The Delhi High Court reiterated that mere participation of parties without an unequivocal and written waiver will not tantamount to the acceptance of a unilateral appointment of an Arbitrator.
The Court reiterated thus in Petitions filed under Section 14(1)(a) read with Sections 14(2) and 15(2) of the Arbitration and Conciliation Act, 1996 (A&C Act), seeking termination of the mandate of Sole Arbitrator and for appointment of a substitute Arbitrator.
A Single Bench of Justice Subramonium Prasad observed, “… this Court is of the view that in light of the law laid down by the Hon’ble Supreme Court in the aforementioned judgements, mere participation of the parties without an unequivocal, written waiver after the dispute has arisen would not tantamount to acceptance of a unilateral appointment and the unilateral appointment of Arbitrator by the Respondent in this case being void ab intitio, as held by the Apex Court, is liable to be terminated.”
The Bench noted that a person’s ineligibility to act as an Arbitrator strikes at the very root of the appointment and if the Arbitrator was ineligible to be appointed, anything and everything that flows from such illegal appointment is also non est in law.
Advocates Vasanth Rajasekaran and Mritunjay Kumar Singh represented the Petitioners while Advocate Sohel Seghal represented the Respondent.
Factual Background
The dispute in this case arose from a Works Contract for Construction of PEB Project between the Petitioners and the Respondent. The Respondent unilaterally appointed a Sole Arbitrator to adjudicate disputes, which the Petitioners claimed that it was invalid. The Petitioners argued that the Sole Arbitrator was appointed unilaterally by the Respondent, which is not permissible under the A&C Act. The Petitioners further claimed that the person who appointed the Sole Arbitrator has a substantial interest in the outcome of the dispute, making the appointment as invalid.
It was also contended that the Sole Arbitrator was de jure ineligible due to the conflict of interest, and the only remedy is to approach the Court for termination of the mandate. The High Court had earlier extended the mandate of the Arbitrator by 6 months. The Petitioners, therefore, approached the High Court seeking termination of the mandate and appointment of a substitute Arbitrator. The Court had stayed the arbitration proceedings pending the outcome of their Petitions.
Reasoning
The High Court after hearing the arguments from both sides, said, “This Court is unable to accept the arguments on behalf of the learned counsel for the Respondent that the Petitioner’s participation in arbitral proceeding tantamounts to their waiver of the unilateral appointment of the Arbitrator in terms of proviso to Section 12(5) of the Arbitration Act.”
The Court enunciated that the essence of Section 12(5) and the proviso thereto is that there must be an explicit agreement in writing which should be obtained after the dispute has arisen and for the proviso to apply, in this case, there has been no such waiver on the part of either of the Petitioners.
“The Hon’ble Supreme Court has held that independence and impartiality of the arbitrator are cardinal principles of the arbitration framework of India. Unilateral appointment of arbitrator cuts at the very root of these principles and is antithetical to the idea of equal treatment of parties by the Arbitrator”, it added.
Accordingly, the High Court allowed the Petitions.
Cause Title- Shakti Pump India Ltd. v. Apex Buildsys Ltd. (Neutral Citation: 2025:DHC:1813)
Appearance:
Petitioner: Advocates Vasanth Rajasekaran, Mritunjay Kumar Singh, Harshvardhan Korada, Rajiv Vijay Mishra, Rajeev Kumar Gupta, Prakash Kashyap, and Shaikat Khatua.
Respondent: Advocates Sohel Sehgal, Rakesh Kumar, Ramesh Babu, and Jainendra Maldhir.
