An arbitral award resulting from a unilaterally appointed Arbitrator is void for lack of inherent jurisdiction, allowing the executing court to refuse enforcement.

JUDGMENT :

(Pranav Trivedi, J.)

[1] The present writ petition has been preferred by the petitioner - original claimant under Article 227 of the Constitution of India, inter alia, praying to quash and set aside the order dated 23.02.2024 passed by the learned 3rd Additional District Judge & Commercial Court, Rajkot at Gondal (hereinafter referred to as "the learned court") in Commercial Execution No. 19 of 2023 (Old R/EXE No. 21 of 2022), whereby the Execution Petition, preferred by the petitioner under the provisions of Section 36 of the Arbitration & Conciliation Act, 1996 (hereinafter referred as to "the Act, 1996") came to be dismissed.

[2] The factual aspect which lead to filing of the writ petition is that the petitioner is a Limited Company, incorporated under the provisions of Companies Act, 2013, inter alia, engaged in the business of providing financial service as well as secured and unsecured credit facilities to the entrepreneurs. The petitioner is also duly registered with the Reserve Bank of India as a Non-banking Finance Company. Respondent No.1 (hereinafter referred to as 'the respondent') had availed a loan cum hypothecation of Rs.4,42,000/- for the purpose of pick-up vehicle, namely, "DOST". The loan was availed from L & T Finance Limited (hereinafter referred as to "L & T") being the Original Creditor. The respondents were liable to repay in 48 equated installments of Rs.12,500/- each. The respondents were irregular in making payments of the loan installments and interest due thereon. L & T repeatedly demanded the payment of the arrears of loan installments along with interest due thereon and made all efforts to recover the dues from the respondents. On account of failure of respondents to pay the loan interest due thereon and other amount, the L & T took possession of the Asset on 13.01.2018 under the terms of the loan agreement.

[2.1] It is the case of the petitioner that even after taking possession of the Asset, the respondents did not take any steps to clear the outstanding dues under the loan agreement. Hence, in order to minimize the losses, L & T sold the Asset on 28.03.2018 as it was empowered to do so under the terms of the loan agreement and realized a sum of Rs.1,50,000/- as sale proceeds. However, even after appropriating the amount realized from the sale of the Asset towards the dues under the agreement, a sum of Rs.1,50,000/- was still due and payable by the respondents on 28.03.2018 with further overdue compensation thereon at the rate of 36% per annum from 29.03.2018 till the date of payment and realization. It is the case of the petitioner that the account so maintained by the L & T, the loan agreement was assigned to an Asset reconstruction company, namely, Chartered Finance Management Private Limited (CFM ARC) on 26.06.2019 through an assignment deed.

[2.2] Pursuant to the assignment, CFM ARC through their advocate sent a notice dated 17.12.2019 under the provisions of the Act and called upon the respondents to make payment of outstanding amount of Rs.3,96,118/- as per the Clause No.12.1 of the loan agreement. Subsequently, CFM ARC appointed sole Arbitrator, namely, Mr. Prashan S. Phophale (hereinafter referred as to "the learned Arbitrator") for adjudication of the dispute. CFM ARC had filed statement of claim. Pursuant to unilateral appointment of Arbitrator, respondent had not participated. Thereafter, the learned Arbitrator was pleased to pass an award dated 30.12.2020, wherein respondents were directed to pay a sum of Rs.3,96,118/- with interest of 18% per annum from 29.03.2018 till realization of payment. Subsequent to the award, CFM ARC had further assigned such account of respondent to the present petitioner through an assignment deed dated 16.02.2022. That is how the petitioner got involved in the issue for the first time. Pursuant to such assignment deed, present petitioner, who was not the original claimant, filed an application under Section 36 of the Act, 1996 for execution of