IMPORTANT POINT
The central legal point established is that arbitral proceedings conducted by unilaterally appointed arbitrators lack independence and impartiality, rendering the resulting arbitral award non-est in the eyes of the law.

JUDGMENT :

SHEKHAR B. SARAF, J.

1. The instant application under Section 36 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) by the petitioner Cholamandalam Investment and Finance Company Ltd. (hereinafter referred to as the ‘award holder’) arises from an arbitral award dated November 22nd, 2021 (‘hereinafter referred to as the ‘impugned award’) passed by the sole arbitrator Mr. Soma Kar Ghosh. The award debtors in the present proceedings are Amrapali Enterprises represented by proprietor Mohammad Jahangir (hereinafter referred to as the ‘borrower’) and Saif Khan (hereinafter referred to as the ‘guarantor’). By virtue of the aforesaid arbitral award, the award debtors were directed to pay INR 25,04,421.8/- (Twenty Five LakhsFour Thousand Four Hundred Twenty One and Eighty Paise) along with 18 percent per annum pendente lite interest, and further 18 percent per annum interest from the date of award till the date of payment.

2. The impugned award is a result of a Loan cum Hypothecation Agreement dated February, 2020 entered between the parties wherein the award debtors sought financial assistance in order to purchase a vehicle on finance. It is the submission of the award holder that the vehicle is under the possession of the award holder as the same was surrendered by the borrower.

3. From a glance at the arbitral award, it is crystal clear that the sole arbitrator Mr. Soma Kar Ghosh, was appointed by the award holder unilaterally by their letter dated June 25, 2021. Furthermore, it is also apparent that at no point during the arbitral proceedings, award holders participated in the same, and that the arbitrator proceeded and made an award ex-parte.

4. Recently in Cholamandalam Investment and Finance Company Ltd. vs. Amprapali Enterprise and Another, EC No. 122 of 2022, I had outlined the deplorable practice on part of financial and banking companies to unilaterally appoint an arbitrator despite the system being outlawed by the Supreme Court in Perkins Eastman vs. HSCC India Limited, 2020 (20) SCC 760 and TRF Limited vs. Energoo Engineering Projects Limited, 2017 (8) SCC 377. It is undeniable that independence and impartiality of arbitrators is the Lakshman Rekha of arbitration proceedings which the parties cannot transgress in any manner and at any cost whatsoever.

The arbitral proceedings conducted by unilaterally appointed arbitrators carry a permanent mark of bias & ineligibility and the same cannot be washed away at any juncture including execution. Such arbitral proceedings cannot be validated at any stage, and thus, the arbitral award so passed does not carry the fortune of legitimate existence. In fact, arbitral awards passed by unilaterally appointed arbitrators are passed with inherent lack of jurisdiction and therefore, are non-est in the eyes of law. In these peculiar circumstances, whenever the Court is seized of such execution applications, it is duty bound to exercise judicial discretion and restrain itself from executing them, as has been elaborated in detail in the aforesaid decision.

5. Accordingly, for the reasons discussed above, EC 123/2022 is dismissed. There shall be no order as to the costs.

6. The parties before me have consented for fresh arbitration and accordingly, I appoint Mr. Ayon Dutta, (Mobile No. 9874487022) as the sole arbitrator by the consent of the parties. The appointment is subject to submission of declaration by the Arbitrator in terms of Section 12(1) in the form prescribed in the Sixth Schedule of the Schedule of the Act before the Registrar, Original Side of this Court within four weeks from date. Let this order be conveyed to the Arbitrator by the Registrar, Original Side.

7. The award-holder is directed to maintain status quo in regards to the vehicle that is in their possession. Parties, however, are at liberty to file appropriate applications before the Arbitrator in accordance with the law.