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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
SANDEEP V. MARNE, J.
Jalaram Fabrics - Petitioner
Versus
Nisarg Textiles Pvt. Ltd. - Respondent
ARBITRATON PETITION NO. 267 OF 2024, INTERIM APPLICATION (L) NO. 35308 OF 2022
Decided On : 08-01-2026
Yes, the judgment generally supports the appointment of arbitrators by arbitral institutions. It emphasizes that such appointments, when made in accordance with the institution’s rules and procedures, are valid and legitimate. The judgment underscores that the role of the institution is to act as a neutral and independent appointing authority, ensuring transparency and fairness in the selection process (!) .
It also highlights that institutional appointments are consistent with the principles of arbitration, especially when the process adheres to the parties’ agreement and the institution’s established guidelines. The judgment affirms that these appointments do not constitute unilateral decisions by a single party but are instead made through an impartial process designed to uphold the integrity of the arbitration (!) .
Therefore, the judgment supports the view that appointments of arbitrators by institutions are valid and legitimate, provided they follow proper procedures and maintain neutrality and transparency (!) .
| Table of Content |
|---|
| 1. overview of arbitration agreement and award (Para 1 , 2 , 3) |
| 2. challenge based on alleged unilateral appointment of arbitrators (Para 4 , 5 , 6 , 7) |
| 3. court's consideration of parties' contentions (Para 8 , 9) |
| 4. existence and acceptance of arbitration clause (Para 10 , 11) |
| 5. unilateral appointment objections and statutory references (Para 12 , 13) |
| 6. principles regarding appointment in institutional arbitration (Para 14 , 15 , 16) |
| 7. arbital tribunal's procedure and petitioner’s failure to act (Para 17 , 18 , 19 , 20) |
| 8. institutional vs ad hoc arbitration comparison (Para 21 , 22) |
| 9. legal precedents regarding arbitrator appointment (Para 23 , 24 , 25) |
| 10. distinguishing characteristics of relevant case law (Para 26 , 27) |
| 11. valid objections to unilateral appointments in arbitration (Para 28 , 29 , 30 , 31) |
| 12. distinction in statutory provisions and contextual differences (Para 32 , 33 , 34 , 35 , 36) |
| 13. court's dismissal of petitioner's objections and upholding of award (Para 37 , 38 , 39 , 40 , 41) |
| 14. final orders and costs awarded against petitioner (Para 42 , 43 , 44) |
SANDEEP V. MARNE, J.
1) By this Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act), the Petitioner has challenged the Award dated 21 July 2022 passed by the three Member Arbitral Tribunal of Bharat Merchants’ Chamber. By the impugned Award, the Arbitral Tribunal has directed the Petitioner to pay to the Respondent sum of Rs.11,44,850/- together with interest @ 18% p.a. on the principal amount of Rs.6,37,146/- till the date of the Award, totalling Rs.17,81,996/-. The Arbitral Tribunal has also granted post award interest @ 18% p.a. and costs of arbitration in favour of the Respondent.
2) Petitioner-Jalaram Fabrics is a proprietary concern engaged in the business of dealing with garments. Respondent is a private limited company registered under the Companies Act, 1956 and carries on business, inter alia of manufacture of fabrics including shirtings. Petitioner placed orders with the Respondent for supply of fabrics. Respondent supplied the goods to the Petitioner from time to time and various invoices were raised by the Respondent on the Petitioner. According to the Petitioner, during March 2019 to July 2019, it noticed issues in the supply, quality and pricing of Respondent's goods and claims to have requested Respondent to have the defective goods exchanged and replaced. By letter dated 20 November 2021, Respondent claimed that a sum of Rs.11,92,614/- was due and payable by the Petitioner towards the goods supplied. Respondent referred to arbitration clause printed on the invoices. Respondent claimed total amount of Rs.17,26,641/- including interest @ 18% p.a. and threatening the Petitioner to refer the disputes to the Arbitration Bench of Bharat Merchants’ Chamber. Petitioner replied to the Respondent on 4 December 2021 claiming that an amount of Rs.10,87,534/- was already paid by the Petitioner to the Respondent in cash from time to time and that the balance amount was only Rs.1,05,071/-. It was claimed that three cheques were issued towards balance payment, but they were required to be stopped as Respondent had failed to deliver the goods. Petitioner claimed that if Respondent was to deliver the goods, he was ready to pay the balance amount of Rs.1,05,071/-.
3) On 8 March 2022, Petitioner’s Advocate addressed letter to Bharat Merchants’ Chamber branding the same as ‘say’ of the Petitioner and repeating the stand taken in the previous reply dated 4 December 2021. Petitioner did not question the jurisdiction of Bharat Merchants’ Chamber to conduct arbitral proceedings. It appears that the Respondent was given copy of ‘say’ dated 8 March 2022 and Respondent’s Advocate responded on 17 March 2022 denying the contents of the same and once again demanded amount of Rs.11,92,614/- alongwith 18% interest. Since the Petitioner failed to nominate his arbitrator, letter dated 22 March 2022 was issued b
An arbitration award cannot be invalidated for unilateral appointment of arbitrators if the parties had the opportunity to nominate their respective arbitrators through an independent institute, main....
A unilateral appointment of an arbitrator by one party contravenes Section 12(5) of the Arbitration and Conciliation Act, rendering the arbitral award void ab initio and against public policy.
The court emphasized the necessity for impartiality in arbitration, ruling that automatic appointments of arbitrators undermined the arbitration clause, rendering the award invalid.
A party cannot challenge an arbitration award if it has unilaterally appointed the arbitrator, as such appointments violate principles of impartiality, making the award unenforceable.
The appointment of the arbitrator must adhere to the terms of the arbitration agreement, and challenges to the appointment must fall within the exhaustive grounds enumerated in Section 34(2) of the 1....
The appointment of the Sole Arbitrator by the MCCI was valid and did not contravene the Arbitration and Conciliation Act, 1996, even if one party did not participate in the arbitration proceedings.
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