IMPORTANT POINT
The court affirmed that improper appointment of an arbitrator renders the award unsustainable, regardless of jurisdictional issues.

JUDGMENT :

1. This appeal is filed challenging the Order dated 05.07.2024 of the Additional District Court, Thrissur in Arb. O.P. No. 792 of 2017. Appellant herein was the respondent in the said Arb. O.P. The Arb. O.P. had been filed before the District Court by the respondent herein invoking Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act of 1996') seeking to set aside an arbitration award.

2. Arbitration proceedings had been initiated by the appellant seeking to recover amounts due from the respondent under a loan agreement. Though notice issued by the arbitrator had been received by the respondent, he did not choose to participate in the arbitration proceedings. An award for an amount of Rs.37,60,547/-with interest and cost was rendered against the respondent by the arbitrator on 20.08.2017. The said award was challenged by the respondent before the District Court by filing the above Arb. O.P. The learned Judge, after hearing both sides, concluded that the arbitration had been conducted violating the mandates of Sections 11 and 12 of the Act of 1996. The District Court relied on the dictum laid down by this Court in M/s. Hedge Finance Private Limited v. Bijish Joseph, ILR 2022 (3) Ker. 947, wherein it was held that “post-2015 amendment era, there are only two modes of appointment of a sole Arbitrator (i) by express agreement in writing between the parties, post the dispute, agreeing to waive the applicability of Section 12 of the Act or (ii) by order of appointment by the High Court under Section 11 of the Act. If the appointment of a sole arbitrator is made other than by the above two methods, the appointment is ex facie bad and is in contravention of the provisions of the Act, which goes to the roots of the matter, and the Arbitrator becomes de jure ineligible to act as an arbitrator by the operation of law”. Thus following the proposition laid down by this Court that there should be neutrality not only for the arbitrator, but also in the arbitrator selection process as well, the learned District Judge set aside the award and allowed the Arb. O.P. filed by the respondent. The said Order of the District Court is challenged in this Arb. Appeal.

3 We heard Sri.P.B.Krishnan, Senior Advocate instructed by Sri.Sabu George learned counsel for the appellant.

4. The principal contention put forth by the learned Senior Counsel is that on the date of issuance of the impugned Order, the District Court had no jurisdiction to entertain a petition filed under Section 34 of the Act of 1996 since by that time, an amendment had been effected to Section 15(2) of the Commercial Courts Act, 2015 transferring the jurisdiction to entertain a Section 34 application falling within relevant pecuniary limit from the District Court to the Commercial Court. Thus at the time of consideration of the above Arb. O.P., the District Judge had no jurisdiction to entertain the same and ought to have transferred it to the Commercial Court. Thus terming the impugned Order as one rendered without jurisdiction, the learned Senior Counsel seeks it to be set aside.

5. On the face of it, the contention raised by the learned Senior Counsel based on lack of jurisdiction raised against the impugned Order is appealing. However, it assumes relevance to also take note of the findings on merit rendered by the District Court in the impugned Order. After a discussion on merits, it has been unequivocally found by the learned Judge that the arbitrator had been appointed in stark violation of Sections 11 and 12 of the Act of 1996 and hence the award passed by him was unsustainable in law. The said part of the impugned Order rendered on merits remains uncontroverted and valid. We cannot lose sight of the same while proceeding to consider the prayer of the appellant to set aside the impugned Order.

6. Indeed at the time of rendering the Order impugned, the District Court had no jurisdiction to entertain the Arb. O.P. which had been filed b