Procedural objections regarding the appointment of arbitrators in ICA do not invalidate an arbitral award unless linked to non-derogable provisions or demonstrated prejudice.

JUDGMENT :

ANIL KSHETARPAL, J.

1. Through the present Appeal, the Appellant (Petitioner before the learned Single Judge) assails the correctness of the Judgment dated 14.08.2024 [hereinafter referred to as ‘Impugned Order’] whereby the learned Single Judge has adjudicated the issue as to whether, in an International Commercial Arbitration [hereinafter referred to as ‘ICA’] the appointment of an arbitrator by this Court vitiates the resultant Arbitral Award dated 14.02.2012 [hereinafter referred to as ‘Arbitral Award’], if the appointment is in consonance with the arbitration agreement between the parties. Learned Single Judge has unequivocally held that such an appointment does not impair the validity of the Arbitral Award.

2. Herein, the Appellant contends that the appointment of the learned sole arbitrator, Hon’ble Justice Anil Dev Singh (Retd.), by this Court was contrary to law, as the arbitration constituted an ICA and, therefore, the power under Section 11 (6), 1 (6) of the Arbitration and Conciliation Act, 1996, 2A&C Act, could not have been exercised by this Court. It is asserted that such an appointment, being without authority, vitiated the arbitral proceedings and the Arbitral Award.

3. Accordingly, the issue that falls for consideration is whether the exercise of jurisdiction by this Court under Section 11 (6), in an ICA, invalidates the appointment of an arbitrator, the arbitral proceedings and the Arbitral Award.

FACTUAL MATRIX:

4. The issue arising for consideration in the present Appeal is predominantly legal in nature. Accordingly, the facts are noticed briefly and only to the extent necessary for adjudication of the said issue.

5. On 23.11.2006, a Shareholders’ Agreement came to be executed between the Appellant and Respondent Nos.1 and 2, whereunder each of them acquired 33.33% shareholding in Respondent No. 3 Company [hereinafter referred to as the ‘Shareholders’ Agreement’]. The Shareholders’ Agreement incorporated an arbitration clause as the agreed mechanism for dispute resolution under Article 28 [hereinafter referred to as ‘arbitration clause’], which reads as follows:

"ARTICLE 28 – DISPUTE RESOLUTION

28.1 The Parties shall make endeavors to settle any claim, dispute or controversy arising out or in relation to this Agreement, including any dispute with respect to the existence or validity hereof, the activities performed hereunder, or the breach of this Agreement that is a part of such conciliation process, by mutual conciliation. Before arbitration is pursued, the parties shall arrange for one representative of each party to meet in order to assist in reaching a solution to the dispute.

28.2 In the event a dispute cannot be resolved through conciliation pursuant to Article 27.1 hereof within (15) days of such extended period as parties may agree, a party may refer the dispute or difference to binding arbitration as hereunder provided in accordance with the Arbitration and Conciliation Act, 1996. The arbitration shall be held in New Delhi. A sole Arbitrator shall be appointed by the Chief Justice of the Delhi High Court upon a reference made to him as per the provision of the Arbitration and Conciliation Act, 1996. The applicable law shall be Indian Law. The costs and expenses of such arbitration shall b