The Bombay High Court examined whether a unilateral appointment of an arbitrator made before the 2015 amendment to the Arbitration and Conciliation Act, 1996 renders the entire arbitral proceeding void. The Court held that such appointments are not void where the arbitration agreement names an arbitrator or authorises one party to appoint, and only the third category - appointments made without any contractual basis or consent - is void ab initio.
Background & Facts
The Dispute
The applicant, M/s S. E. Investments Ltd. (now known as Paisalo Digital Limited), filed execution applications to enforce arbitral awards against several respondents, including Star Bazaar Private Limited, Hareram Cotton Industries (through its proprietor Ramdas Mahadev Hirode) and M/s Maple Composite Containers Limited. The awards arose from commercial contracts that contained arbitration clauses. The central controversy was whether the arbitrators, appointed unilaterally before 23 October 2015, were ineligible under the post-2015 amendment and therefore the awards should be set aside.
Key Facts
- The Arbitration and Conciliation Act, 1996 was amended by Act 3 of 2016 with retrospective effect from 23 October 2015, inserting Section 12(5) and the Seventh Schedule.
- The parties entered into the underlying commercial contracts at various dates prior to 2015; the arbitration clauses either named a specific arbitrator, authorised one party to appoint, or were silent on the appointment procedure.
- The notice invoking arbitration in the Aravali Power case was issued on 29 July 2015; the arbitrator was appointed on 19 August 2015 and the parties appeared before the arbitrator on 7 October 2015, all before the amendment’s effective date.
- On 5 January 2026 the Supreme Court in Bhadra International (India) Pvt. Ltd. v. Airport Authority of India held that post-2015 unilateral appointments violating Section 12(5) are void, but the Court limited the ratio to appointments made after the amendment.
- On 1 July 2026 the Execution Court framed two questions: (i) whether unilateral appointment of an arbitrator prior to 23 October 2015 is without jurisdiction and void ab initio; (ii) if so, whether the executing court can consider the effect of such appointment when there is no challenge to the award.
Procedural History
- 15 June 2019: Original execution application No. 59 of 2016 filed by the applicant.
- 02 March 2015: Execution Application No. 2028 of 2015 filed against Maple Composite Containers Ltd.
- 02 March 2015: Execution Application No. 2073 of 2016 filed against Hareram Cotton Industries.
- 02 March 2015: Execution Application No. 1783 of 2015 filed against Sezal Glass Ltd.
- 05 January 2026: Supreme Court decision in Bhadra International (India) Pvt. Ltd. delivered.
- 01 July 2026: Execution Court framed the two questions for consideration.
- 04 August 2026: Judgment delivered by Justice Jitendra Jain, Bombay High Court.
The Parties' Positions
- Applicant argued that the pre-2015 appointments were valid under the then-existing provisions of Sections 7, 11, 12 and 18 of the Act and that the 2015 amendment could not be applied retrospectively.
- Respondents contended that the Supreme Court’s Bhadra ratio made all unilateral appointments void, irrespective of the date of appointment, and that the awards should therefore be set aside.
Relief Sought
The applicant sought enforcement of the arbitral awards and dismissal of the respondents’ challenge to the arbitrators’ appointment. The respondents sought a declaration that the appointments were void and that the awards could not be executed.
The Legal Issue
The central question was whether a unilateral appointment of an arbitrator made before 23 October 2015, in a contract that either named an arbitrator or authorised one party to appoint, is without jurisdiction and consequently void ab initio, and if so, whether the executing court may consider the effect of such appointment when there is no challenge to the award.
Arguments Presented
For the Applicant
- Relied on the pre-amendment provisions of Sections 7, 11(6), 12(1)-(3) and 18, which allowed parties to agree on the appointment procedure and recognised the validity of named arbitrators or authorised appointments.
- Cited Datar Switchgears Ltd. v. Tata Finance Ltd., ACE Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corp., and Indian Oil Corp. Ltd. v. Ors. where the Supreme Court upheld unilateral appointments that were consistent with the arbitration agreement.
- Emphasised the prospective nature of the 2015 amendment under Section 26 of the Amendment Act, stating that it does not apply to arbitral proceedings commenced before 23 October 2015 unless the parties expressly agree.
For the Respondents
- Relied on Bhadra International (India) Pvt. Ltd. v. Airport Authority of India where the Supreme Court held that unilateral appointment contrary to Section 12(5) is void, arguing that the ratio extends to pre-2015 appointments because the underlying principle of impartiality was merely made explicit by the amendment.
- Submitted that the Seventh Schedule’s disqualification categories apply implicitly to all appointments, making any unilateral appointment without consent invalid.
- Cited Dharma Prathishthanam v. Madhok Construction (P) Ltd. to argue that non-consensual appointments are illegal irrespective of the amendment date.
The Court's Analysis
The Court began by outlining the statutory framework. Sections 7, 11, 12 and 18 of the Arbitration and Conciliation Act, 1996, as they stood before the 2015 amendment, already required parties to agree on the appointment procedure and provided mechanisms for challenging an arbitrator on grounds of bias or lack of independence. The Fifth Schedule listed the grounds for challenge, while the Seventh Schedule, inserted by the amendment, enumerated categories of ineligible persons.
"Unilateral appointment of an arbitrator prior to 23 October 2015 wherein the arbitration clause provides for a named arbitrator or by designation or authorising appointment of an arbitrator by one of the party will not be without jurisdiction and consequently, the proceedings arising therefrom would not be void ab initio."
The Court distinguished three categories of unilateral appointment:
- Named arbitrator or authority to appoint - where the agreement expressly identifies the arbitrator or gives one party the power to appoint. The Court held that such appointments are valid even if made before the amendment, because the parties have already consented to the identity or mechanism of appointment.
- Authority to appoint without naming - where the agreement authorises a party to appoint an arbitrator but does not name the individual. The Court treated this as consensual and valid, provided the appointed person does not fall within the disqualification categories at the time of appointment.
- No contractual provision for appointment - where the agreement is silent on the arbitrator and one party unilaterally appoints a person. In this scenario, the Court held the appointment is void ab initio because there is no consent, aligning with the Dharma Prathishthanam principle.
The Court examined the prospective operation of Section 12(5) and Section 26 of the Amendment Act. It reiterated that the amendment applies only to arbitral proceedings commenced after 23 October 2015, as defined by Section 21 (the date the notice invoking arbitration is received). Since the notice of arbitration in the present matters was received before that date, the amendment could not retrospectively invalidate the appointments.
The Court also addressed the argument that the Bhadra ratio should be read back to cover pre-2015 appointments. It held that the Supreme Court itself limited the ratio to post-amendment appointments and that reading it otherwise would amount to over-extension of judicial precedent. The Court emphasized that the doctrine of ratio decidendi must be applied within the factual matrix of the deciding case.
Finally, the Court considered the effect of a failed challenge. It held that if a party does not successfully challenge the arbitrator’s appointment within the statutory time-frame, the appointment stands and the award cannot be set aside on that ground alone.
The Verdict
The Court answered the first question in the negative: a unilateral appointment of an arbitrator prior to 23 October 2015 is not automatically void where the arbitration agreement names the arbitrator or authorises one party to appoint. Only appointments made without any contractual basis or consent (the third category) are void ab initio. The second question was deemed not applicable except in the third category; where a successful challenge is not made, the executing court may enforce the award.
What This Means For Similar Cases
Consent Is the Cornerstone
- Parties must ensure that the arbitration clause either names the arbitrator or clearly authorises a specific party to appoint. Silent clauses lead to a void appointment.
- Drafting should include an explicit waiver provision if the parties wish the 2015 amendment to apply retrospectively.
Prospective Application of the 2015 Amendment
- The amendment’s provisions, especially Section 12(5) and the Seventh Schedule, apply only to arbitral proceedings commenced on or after 23 October 2015.
- Courts will look to the date of the notice invoking arbitration (Section 21) to determine applicability.
Challenge Timing Is Critical
- A party must raise a challenge to the arbitrator’s appointment within the period prescribed in Section 13 (generally 15 days from knowledge of the appointment).
- Failure to challenge timely results in waiver, and the award becomes enforceable.
Practical take-aways for practitioners
- Review arbitration clauses for explicit appointment mechanisms.
- Advise clients that any post-2015 amendment reliance requires a written waiver.
- File challenges promptly; otherwise, the court will treat the appointment as valid.
- In execution proceedings, argue that the award stands unless the appointment falls in the third category.
