• Clarification about court judgment regarding arbitration

I want to know whether Arbitral award itself stands vitiated, if passed by unilaterally appointed arbitrator(s): Calcutta High Court and it's judgment dated 11th April 2023 [Srei Equipment Finance Ltd. v. Sadhan Mandal, 2023 SCC OnLine Cal 831, decided on [deleted]].

In simple language I want to know that if one party unilaterally appointed an arbitrator and got an award in their favor then that award will not be automatically executed by the court? This means other party does not have to do anything. DID I UNDERSTOOD IT RIGHT? I am not a legal expert.
Asked 11 months ago in Civil Law

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10 Answers

Yes it’s vitiated but same needs to be set aside by court in appeal 

Prashant Nayak
Advocate, Mumbai
31951 Answers
179 Consultations

4.1 on 5.0

there are only two modes of appointment of an arbitrator – the arbitrator may be appointed by consent of the parties or alternately, there must be an order of the Court appointing an arbitrator. It was held that, “There is simply no third option it requires that there be neutrality in the dispute resolution process throughout. You cannot have an impartial arbitration free from all justifiable doubt if the manner in which the arbitral tribunal is constituted itself is beset by justifiable doubt.”...


 

Arbitral award would be void 

 

 

Ajay Sethi
Advocate, Mumbai
94725 Answers
7535 Consultations

5.0 on 5.0

when an authority exercises jurisdiction it does not possess, its decision amounts to a nullity in law. Thus, a decision by an authority having no jurisdiction is non est and its invalidity can be set up whenever it is sought to be acted upon. It would be of little consequence that such a plea of invalidity was not taken at the earliest possible stage....


Ajay Sethi
Advocate, Mumbai
94725 Answers
7535 Consultations

5.0 on 5.0

As per law the executing court does not have power to reexamine or to check the validity of award if the same is received by it for execution of award. Executing court cannot go into the merit of the case. An award exist and is enforceable till the same is not declared invalid or set aside by a competent court, so a party to Arbitration donot have power to decide the validity of an award. The application of given case law depends upon the facts and merit of the case. So the facts and merit of your case is required to be exsmined in order to examine the application of given case law. Further in the given case law the court itself has said that judgement is applicable to awards wherein the arbitral proceeding commenced post the 2015 amendment to the Arbitration Act. It does not deal with proceedings having been initiated pre the 2015 amendment and concluding post the 2015 amendment. So your conception of law is incorrect. You are required to challenge the award in high court under section 34 Arbitration Act and thereafter, if required, to file appeal. 

Siddharth Srivastava
Advocate, Delhi
1243 Answers

5.0 on 5.0

Refer to paragraph No.  5 of cited judgment,  “…where the arbitral award is given by an arbitrator who has been unilaterally appointed by a party, the arbitral proceedings and the award itself stands vitiated as the arbitrator lacked inherent jurisdiction to adjudicate disputes between the parties.” One need not be legal expert to conclude that an award passed by arbitrator/s unilaterally appointed is invalid and not executable. Presence of clause to that extent will not save such award.

Ravi Shinde
Advocate, Hyderabad
4042 Answers
42 Consultations

5.0 on 5.0

Award is void but when execution will file, effected party have to appear in execution proceeding and submit an objection that award id void and cannot be enforced.

Yogendra Singh Rajawat
Advocate, Jaipur
22636 Answers
31 Consultations

4.4 on 5.0

Unilateral appointment is also not allowed because any party who has an interest in the outcome of the dispute should not be allowed to preside over as an arbitrator for that dispute.

There has been plethora of cases where High Courts and Supreme Court has set aside the arbitral award on the ground of unilateral appointment of arbitrator. The reason behind such setting aside is that appointment of arbitrator by one party alone without giving opportunity to the other party shall have an element of bias and partiality.

On one hand, where parties are given autonomy to agree on the procedure to appoint an arbitrator under Section 11(2), on the other hand, it is not correct to say that the same is not an absolute right of the party. The right of the parties to agree on the procedure to appoint the arbitrator is now subject to reasonable restriction, and one such instance of reasonable restriction is the unilateral appointment of arbitrator.

You can file a petition to set aside the award in the appellate court 

T Kalaiselvan
Advocate, Vellore
84925 Answers
2196 Consultations

5.0 on 5.0

The Supreme Court has given rationale behind such appointment in decisions like Perkins and TRF Ltd. Further, it has become important for parties to draft the dispute resolution clause cautiously and should keep in mind that unilateral appointment is not allowed under the garb of party autonomy. 

The Court has observed that if one party has the exclusive right to appoint the arbitrator, then his choice will always have an element of bias. The relevant extract of the Court's observation is as follows:

The reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter balanced by equal power with the other party. But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016)."

T Kalaiselvan
Advocate, Vellore
84925 Answers
2196 Consultations

5.0 on 5.0

- Arbitral award passed by unilaterally appointed arbitrators do not carry the privilege of existence before the eyes of law and should be regarded as a nullity.

- There are many judgements where the Court observed that an arbitrator lacks inherent jurisdiction to adjudicate disputes between the parties, if he/she is appointed unilaterally by one party only and as a result both the arbitral proceedings and the award itself stand vitiated.

- However, as per section 36 of the act, the arbitral award shall be enforced under the CPC just as if it were a decree of the court.

Mohammed Shahzad
Advocate, Delhi
13230 Answers
198 Consultations

5.0 on 5.0

However, in general, if an arbitration agreement provides for the appointment of a sole arbitrator by one party, and that arbitrator proceeds to unilaterally issue an award, there may be grounds for challenging the validity of the arbitration award. The specific laws and regulations governing arbitration can vary between jurisdictions, so it's essential to consult with a qualified legal professional who can provide advice based on the latest laws and court precedents in your specific jurisdiction.

 

They will be able to assess the specific details of your case, including the terms of the arbitration agreement and any applicable laws, and provide you with accurate guidance on the potential implications of the unilaterally appointed arbitrator and the validity of the arbitration award.

 

 

Anik Miu
Advocate, Bangalore
8883 Answers
110 Consultations

4.7 on 5.0

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