The executing court cannot dismiss an execution petition based on unilateral appointment of an arbitrator without a challenge from a party, and an arbitral award is enforceable unless set aside under Section 34.

ORDER :

Challenging the order of the Executing Court/X Assistant Judge, City Civil Court, Chennai, dated 28.06.2024, suo motu, dismissing the Execution Petition in in E.P.No.158 of 2024 in Arbitration Case No: SSP – SF – [MCCI] – 941 of 2022, the decree holder has come up with the present revision petition.

2. The revision petitioner is the claimant and the respondents are the respondents in the arbitration case in No: SSP – SF – [MCCI] – 941 of 2022 arose out of a dispute over a loan transaction. The revision petitioner, a financial institution, referred the matter to the sole arbitrator to adjudicate the dispute that arose between the respondents and themselves. The sole arbitrator passed an award on 30.08.2022 whereby the respondents were directed to pay a sum of Rs.15,49,012.26 paise jointly and severally to the revision petitioner together with interest @ 18% p.a. From 04.02.2022 till date of realization of the said amount in full and also to pay a sum of Rs.5000/- towards arbitrator's fee and a sum of Rs.500/- towards expenses incurred by the arbitrator. On the basis of the award, the revision petitioner initiated an execution proceedings to get executed the award which was taken on file by the learned X Assistant Judge, City Civil Court, Chenna,, in E.P.No.158 of 2024.

3. The learned Judge, however, suo motu, dismissed the execution petition by order dated 28.06.2024 holding that the arbitrator was appointed unilaterally and that the award made by the sole arbitrator is invalid due to a lack of inherent jurisdiction; as a result, the award made by the sole arbitrator in the arbitration case in No: SSP – SF – [MCCI] – 941 of 2022 was not enforceable and could not be regarded as a valid award.

4. When the matter came up for admission on 29.08.2024, this court had directed the revision petitioner to take notice to the respondents through court as well as privately. Despite service of notice, the respondents 1 and 2 did not enter appearance either in person or through counsel, and hence, the matter was ordered to be listed today, printing the name of the respondents in the cause list. Accordingly, it is listed today, and despite the name having been printed on the cause, the respondents have not entered appearance either in person or through counsel. Therefore, this court has no other option except to proceed with the matter further and pass on the merits.

5. Heard Mr.Arvind P.Datar, learned senior counsel for Mr.M.Arunachalam, learned counsel on record for the revision petitioner.

6. Mr.Arvind P.Datar, learned senior counsel, would submit that the executing court cannot suo motu annul the award when a party to the agreement did not challenge the award on the ground of ineligibility of the arbitrator under Section 12(5) of the Arbitration and Conciliation Act, 1996 . According to the learned senior counsel, when the party to the arbitral proceedings did not choose to challenge the appointment of the arbitrator, the same would, in the eye of law, amount to a waiver of applicability of provision to Section 12(5) of the Arbitration and Conciliation Act, 1996 .

7. Mr.Arvind P.Datar would further submit that the bar of ineligibility partakes of a character of not being an absolute bar which would hit at the root of the very assumption of jurisdiction at the inception, rendering the award a nullity and hence, according to him, though the unilateral appointment of arbitrator creates an ineligibility, the same would not amount to inherent lack of jurisdiction rendering the entire arbitral proceedings and the consequential award nullity altogether.

8. In a nutshell, according to Mr.Arvind P.Datar, any award passed by the arbitrator can be set aside only on an application under Section 34 of the Arbitration and Conciliation Act, 1996 . If the award passed by the arbitrator has not been challenged by the aggrieved party, such award shall be final and binding on the parties to the contract. Therefore, the executing court cannot suo motu annul