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2026 Supreme(AP) 992

IN THE HIGH COURT OF ANDHRA PRADESH
RAVI NATH TILHARI, BALAJI MEDAMALLI, JJ.
Katta Srinivasu - Petitioner
Vs.
M/s. IKF Finance Limited - Respondent
Civil Revision Petition Nos. 2345 of 2022 & 419 of 2026
Decided On : 10-04-2026

Advocates:
Advocate Appeared:
For the Petitioner: Sri P. V. A. Padmanabham
For the Respondent: Sri V. V. L. N. Purnesh

A unilateral appointment of a sole arbitrator by a party having an interest in the dispute is invalid under the Act. Such an arbitrator suffers from inherent lack of jurisdiction, rendering the award non-est. The right to challenge this ineligibility is not waived unless there is an express written agreement.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 4, 12(5), 14, 15, 16 and 34 - Constitution of India - Article 14 - Unilateral appointment of sole arbitrator - Ineligibility of arbitrator - Mandate of arbitrator - Waiver of right to object - Execution of arbitral award - Principle of equal treatment of parties - Arbitrator falling under Seventh Schedule is de jure ineligible, and appointment is ex facie invalid - Managing director or authorized official having interest in dispute/outcome cannot unilaterally nominate sole arbitrator - Inherent lack of jurisdiction can be raised at any stage including collateral proceedings. (Paras 16, 21, 25, 27, 43)

(B) Arbitration and Conciliation Act, 1996 - Section 12(5) - Proviso - Express agreement in writing - Requirement for waiver - Right to object to appointment of ineligible arbitrator cannot be taken away by mere implication - There must be clear, unequivocal written agreement subsequent to dispute arising for waiver to be valid. (Paras 25, 28, 41)

Facts of the case:
The petitioner challenged an order of attachment passed in execution proceedings of an arbitral award. The award was passed by a sole arbitrator who was unilaterally appointed by the respondent finance entity. The petitioner contended that the appointment was invalid under the Act, as the official of the respondent entity who appointed the arbitrator was himself ineligible under the Seventh Schedule, and consequently lacked the authority to nominate an arbitrator. The respondent contended that the petitioner had waived the right to object by participating in proceedings and not raising objections earlier under Section 4.

Findings of Court:
The court held that the principle of equal treatment applies to the appointment of arbitrators. An arbitrator who is ineligible under the Seventh Schedule is unable to perform functions as a matter of law, and the appointment is void. The authority to appoint an arbitrator is obliterated once the authority becomes ineligible. Since there was no express written agreement to waive the ineligibility as required by the proviso to Section 12(5), the plea of waiver was rejected.

Issues: Whether the unilateral appointment of a sole arbitrator is valid; whether the petitioner waived the right to object to such an appointment; and whether an award passed by an ineligible arbitrator can be challenged at the stage of execution.

Ratio Decidendi: An arbitrator appointed unilaterally by a party having interest in the dispute is ineligible by operation of law. The ineligibility renders the arbitrator's mandate automatically terminated and the resulting award void. Such jurisdictional defects can be raised at any stage, including in execution proceedings, as a court or tribunal lacking inherent jurisdiction cannot render an award on merits.

Result: Civil revision petitions allowed; impugned order of attachment set aside and arbitration proceedings under Section 34 closed as the award was found to be without jurisdiction.

JUDGMENT :

(Per Hon'ble Sri Justice Ravi Nath Tilhari)

Heard Sri P. V. A. Padmanabham, learned counsel for the petitioners and Sri V. V. L. N. Purnesh, learned counsel for the respondents.

2. The aforesaid civil revision petitions have been filed under Article 227 of the Constitution of India. In CRP No.2345 of 2022 the challenge is to the Order dated 30.09.2022 passed in Execution Petition No.676 of 2022 in AOP.No.6 of 2020 in the application of the decree holder for attachment of the bank account of the petitioner and in the other CRP No.419 of 2026 the grievance raised for is the non-disposal of the petitioners' application for stay in ARB OP No.02 of 2023 under Section 34 of the Arbitration and Conciliation Act, 1996 (in short 'Act 1996'), pending in the same Court of VIII Additional District Judge, Vijayawada.

I. Facts:

3. Briefly, the facts are, that there exists an arbitration award in favour of M/s.INK Finance Limited, Vijayawada, the Finance Company, dated 20.01.2021 in AOP No.6 of 2020 passed by the sole arbitrator. The Award was against both the petitioners in CRP.No.419 of 2026 and the only petitioner in CRP.No.2345 of 2022. The petitioner in CRP.No.2345 of 2022 is the 1^st petitioner in CRP No.419 of 2026. The Award is for recovery of amount under loan basing on an agreement No.LN148437 in favour of the 1^st respondent finance company. The Sole Arbitrator, by name Sri B. Chalapathi Suri, passed an award dated 20.01.2021 which is said to be an ex parte award without service of notice on the petitioners. The 1^st petitioner is the barrower and the other petitioner is the guarantor. Being aggrieved, the petitioners filed AOP.No.2 of 2023 under Section 34 of the Act 1996 in the Court of the Principal District Judge, Krishna at Mchilipatnam for setting aside the award in Award No.6 of 2020, dated 20.01.2021. The same is pending before the VIII Additional District Judge, Vijayawada.

4. The 1^st respondent filed E.P.No.676 of 2022 to execute the Award. In the said EP the Order dated 30.09.2022 was passed to attach the amount lying in the bank account of the 1^st petitioner/Judgment Debtor in UCO Bank Athili Branch, West Godavari District directing the Garnishee bank to withhold the said amount and prohibit any transactions until further orders of the Court. This Order is under challenge in CRP No.2345 of 2022.

5. The 1^st respondent in the counter filed in CRP No.419 of 2026 has inter alia stated that when the dispute arose due to non-payment of the outstanding loan in spite of the demand notices, the 1^st respondent company referred the 2^nd respondent in CRP No.419 of 2026 the retired Junior Civil Judge as sole arbitrator to settle the dispute between the petitioners and the 1^st respondent. The petitioner did not give reply to the notice and remained silent throughout the arbitration proceedings in AOP.No.6 of 2020 and even in the E.P.No.676 of 2022 filed by the 1^st respondent the petitioners never raised their objections regarding appointment of sole arbitrator which waives the right of the petitioner to object the appointment of sole arbitrator under Section 4 of the Act 1996. The 1^st respondent in the counter affidavit has further contended that the sole arbitrator is an individual entity having no direct or indirect relations with the 1^st respondent company, and that the arbitrator was not appointed by any person as per the categories prescribed in Seventh Schedule and not barred under the provisions of Section 12 (5) of the Act.

6. The 1^st respondent has filed counter in CRP.No.2345 of 2022 as well, and inter alia, submitted that the arbitration proceedings and SARFAESI Act proceedings can go together. The two Acts are cumulative remedies to the secured creditor. The SARFAESI proceedings are in the nature of enforcement proceedings. The arbitration proceedings would be in the form of adjudicator process. So, both can go on simulataneously and one is not the bar for the other remedy.

II. Submissions:

i) For petitioners:

7. Sri P. V.

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2026 Supreme(AP) 992

IN THE HIGH COURT OF ANDHRA PRADESHRAVI NATH TILHARI, BALAJI MEDAMALLI, JJ.Katta Srinivasu - PetitionerVs.M/s. IKF Finance Limited - RespondentCivil Revision Petition Nos. 2345 of 2022 & 419 of 2026Decided On : 10-04-2026

Cases Referred (2)

IN THE HIGH COURT OF ANDHRA PRADESH
RAVI NATH TILHARI, BALAJI MEDAMALLI, JJ.
Katta Srinivasu - Petitioner
Vs.
M/s. IKF Finance Limited - Respondent
Civil Revision Petition Nos. 2345 of 2022 & 419 of 2026
Decided On : 10-04-2026