The Bombay High Court has reaffirmed that a unilateral appointment of an arbitrator renders the entire arbitration process void ab initio, even at the execution stage. This ruling, grounded in the Supreme Court’s recent decision in Bhadra International (India) Pvt. Ltd. v. Airports Authority of India, delivers a decisive clarification on the non-negotiable nature of arbitrator impartiality under the Arbitration and Conciliation Act, 1996.
Background & Facts
The Dispute
The petitioner, Bajaj Finance Limited, sought execution of an arbitral award passed in its favour against the respondents, Abbas Travels and Communication and others. The award arose from a commercial dispute concerning a financing agreement. The arbitration was initiated under a clause in the contract, which provided for a sole arbitrator to be appointed by the petitioner.
Key Facts
- The arbitration was invoked on 15.03.2021 by the petitioner
- The sole arbitrator was appointed unilaterally by the petitioner on 22.04.2021 without consultation or consent from the respondents
- The arbitrator conducted proceedings, recorded evidence, and delivered an award in favour of the petitioner on 18.11.2022
- The petitioner filed Execution Application No. 1757 of 2023 on 05.01.2023 to enforce the award
- The respondents raised no objection to the arbitrator’s appointment during the arbitration proceedings or in the challenge under Section 34
- The Office of the Prothonotary & Senior Master of the Bombay High Court, upon review, identified the unilateral appointment as a violation of Section 12(5) of the Arbitration and Conciliation Act, 1996
Procedural History
- 15.03.2021: Arbitration invoked by petitioner
- 22.04.2021: Sole arbitrator appointed unilaterally by petitioner
- 18.11.2022: Arbitral award rendered in favour of petitioner
- 05.01.2023: Execution Application No. 1757 of 2023 filed
- 20.02.2025: Office of the Prothonotary & Senior Master flagged unilateral appointment
- 06.04.2026: Hearing before Justice Firdosh P. Pooniwalla
Relief Sought
The petitioner sought enforcement of the arbitral award dated 18.11.2022, including recovery of principal amount of Rs. 4,25,00,000, interest at 12% per annum from 18.11.2022, and costs.
The Legal Issue
The central question was whether an arbitrator appointed unilaterally by one party, in violation of Section 12(5) of the Arbitration and Conciliation Act, 1996, can validate an arbitral award, even if no objection was raised during the proceedings, and whether such a defect can be raised for the first time in execution proceedings.
Arguments Presented
For the Petitioner
The petitioner contended that the respondents had participated fully in the arbitration without raising any objection to the arbitrator’s appointment. It argued that the award was valid, the respondents had acquiesced to the process, and setting it aside at the execution stage would amount to abuse of process and cause undue prejudice. Reliance was placed on the doctrine of waiver and estoppel.
For the Respondent
The respondents, though not appearing, were represented by the Court’s own observation that the appointment was patently in breach of Section 12(5). The Court noted that the statutory bar under Section 12(5) is mandatory and cannot be waived by conduct or silence. The respondents’ non-appearance did not cure the jurisdictional defect.
The Court's Analysis
The Court examined the Supreme Court’s ruling in Bhadra International (India) Pvt. Ltd. v. Airports Authority of India, which held that the ineligibility of an arbitrator under Section 12(5) is a jurisdictional defect that renders the appointment void ab initio. The Court emphasized that such a defect is not curable by consent, acquiescence, or lapse of time.
"The ineligibility of an arbitrator under Section 12(5) goes to the root of the arbitration process. It is not a procedural irregularity but a statutory bar that invalidates the entire proceeding from its inception."
The Court rejected the petitioner’s argument that the respondents’ silence amounted to waiver. It held that Section 12(5) is a mandatory provision designed to ensure impartiality and independence, and its violation cannot be condoned even if no objection was raised earlier. The Court further clarified that such a challenge is not barred by limitation or procedural delay and may be raised at any stage, including execution.
The Court also noted that the Office of the Prothonotary & Senior Master had correctly identified the defect, and the Court was bound by the binding precedent of the Supreme Court.
The Verdict
The Execution Application No. 1757 of 2023 was dismissed. The arbitral award dated 18.11.2022 was set aside. The Commercial Execution Application, the connected Interim Application, and any Chamber Summons were disposed of. The parties were granted liberty to initiate fresh arbitration proceedings. The period from the invocation of arbitration on 15.03.2021 to the date of this order (06.04.2026) shall be excluded for the purpose of limitation in any fresh arbitration. The Court also granted liberty to apply if the parties have an express written waiver under the proviso to Section 12(5) of the Arbitration and Conciliation Act, 1996.
What This Means For Similar Cases
Arbitrator Appointments Must Be Impartial by Design
- Practitioners must ensure arbitrator appointments comply strictly with Section 12(5) - no unilateral appointments, even if the contract permits it
- Any appointment by a party with a direct interest in the outcome triggers automatic ineligibility
- Waiver clauses in arbitration agreements are ineffective against Section 12(5) unless they meet the strict conditions of the proviso
Execution Stage Is Not a Safe Haven for Defective Awards
- Parties cannot rely on procedural silence to validate a void arbitrator appointment
- Courts will examine jurisdictional defects at any stage, including execution
- Execution applications based on awards from ineligible arbitrators are liable to be dismissed outright
Fresh Arbitration Is Permitted With Limitation Relief
- Parties may re-initiate arbitration without being barred by limitation for the period already spent
- This provides a practical remedy without penalizing parties for the other side’s statutory violation
- Legal advisors should advise clients to preserve all arbitration documents for potential re-initiation
