The unilateral appointment of an arbitrator by one party, violating Section 12(5) of the Arbitration and Conciliation Act, 1996, renders the arbitrator ineligible, necessitating the appointment of a substitute arbitrator.

JUDGMENT

1. The present petition under Section 14 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "A&C Act, 1996") has been filed on behalf of the petitioners seeking termination of the mandate of the Sole Arbitrator appointed by the respondent.

2. It is submitted in the petition that the petitioners purchased the machinery/equipment, namely, LIUGONG CLC 414 from the respondent on 17th April, 2017 vide Loan-cum-Hypothecation-cum-Guarantee Agreement (hereinafter referred to as "Loan Agreement") bearing Loan No.0000007000419315 and the same was to be paid in 36 equal monthly installments of Rs.1,96,930/- commencing from 17th April, 2017 till 03rd February, 2020. The complete installments were made by the petitioners, but only delayed charges remained pending under the Loan Agreement. The disputes arose between the parties, and respondent unilaterally appointed Mr. Jaswant Singh as the Sole Arbitrator to adjudicate the disputes between the parties on 20th November, 2019 in respect of Loan Agreement. The Sole Arbitrator accepted his appointment vide Consent Letter-cum-Notice of Appearance dated 12th December, 2019. The respondent filed its Statement of Claim and interim application under Section 17 of A&C Act, 1996. The petitioners were under the belief that the copy of the claim petition and the interim application would be provided on the first hearing and the matter, thereafter, would be fixed for reply. However, to the utter shock of the petitioner on 22nd January, 2021, the petitioners received a copy of an ad interim ex parte Order passed by the learned Arbitrator under Section 17 of A&C Act, 1996 on 12th December, 2019, whereby the Arbitrator had appointed and authorized the representative of the respondent as a Receiver to take possession of the equipment from where it was found and whoever was in the possession of the same and kept the same under his custody and management.

3. It is claimed that Mr. Jaswant Singh is the Sole Arbitrator in the two earlier claim petitions filed by the respondent against the petitioner for which an objection by way of Section 16 of A&C Act, 1996 had been raised by the petitioners in respect of unilateral appointment of the Arbitrator as being in contravention to Section 12(5) of A&C Act, 1996. However, the said objection to his jurisdiction was not addressed by the Sole Arbitrator and was not treated with urgency; rather the Arbitrator consented to his appointment to similar Claim petitions filed by the respondent which are in contravention of Section 12(5) read with Entry 22 of Schedule VII of A&C Act, 1996.

4. It is submitted that the respondent on the first date of hearing sought an adjournment to file the statement of claim. It was stated in the Notice dated 12th December, 2019 of the Arbitrator, the claim has already been filed, but the same was not correct. The copy of the interim application was also not provided to the petitioner. On the subsequent dates, the respondent kept seeking adjournments for filing the statement of claim. Thereafter, on account of COVID-19 Pandemic and the resultant lockdown, no further dates were notified for proceeding for Arbitration, and no further proceedings had been held.

5. It is submitted that the petitioners by way of e-mail sought confirmation from the Sole Arbitration about any further arbitral proceedings having been taken place and also furnished the contact details. The petitioners also informed the Sole Arbitrator about the moratorium granted to the petitioners for