Unilateral appointment of an arbitrator without mutual consent invalidates the arbitration agreement, reinforcing parties' obligations under the Arbitration and Conciliation Act.

PER : SANDEEP V. MARNE, J.

1) This Appeal is filed under the provisions of Section 37 of the Arbitration and Conciliation Act, 1996 (the Act) challenging the judgment and order dated 10 January 2025 passed by the learned Single Judge of this Court in Commercial Arbitration Petition No.210 of 2024. By the impugned order, the learned Judge has set aside the Award passed by the Arbitral Tribunal.

2) Brief facts of the case are that a company by name Pratibha Industries Ltd. (Pratibha) was awarded two work orders by Public Health Engineering Department, Government of Rajasthan. Pratibha awarded some part of the work to the Respondent. The Appellant claims to have facilitated such work allotted to the Respondent by Pratibha and claims facilitation consideration from the Respondent.

3) The Appellant claims that Memorandum of Understanding dated 15 January 2019 (the MoU) was executed between the parties, under which it was agreed to pay facilitation consideration as percentage of margin of the work awarded by Pratibha to the Respondent. Respondent denied having executed such MoU. Appellant raised several demands on the Respondent for payment of facilitation consideration. On 2 July 2021, the Appellant invoked arbitration clause recommending one Mr. A. Jagannathan as the sole Arbitrator to resolve the disputes between the parties in accordance with clause 7 of the MoU. On 10 August 2021, the Respondent addressed letter to the Arbitrator informing him about his appointment as sole Arbitrator. On 7 September 2021, the Respondent addressed a letter to the Arbitrator objecting to his appointment. Appellant disputes the genuineness of the said letter. On 27 September 2021, Respondent wrote to the Appellant with a copy to the sole Arbitrator and once again refused to accept appointment of Mr. A. Jagannathan as sole Arbitrator. On 20 October 2021 the Respondent filed a civil suit in Jaipur seeking declaration that the MoU was null and void. Appellant has filed statement of claim before the Arbitrator. On 29 January 2022. The Respondent reiterated objection before the Arbitrator. On 16 March 2022 the Arbitrator ruled that he intended to continue with the arbitration proceedings holding that the Respondent had not challenged his appointment within the time limit specified in Section 13 (2) of the Act. On 14 October 2022, the Arbitrator made an Award awarding the amount of Rs.11,20,90,862/- alongwith interest @12% per annum in favour of the Appellant.

4) Respondent filed Commercial Arbitration Petition No.210 of 2024 challenging the Award under Section 34 of the Act. The learned Single Judge, by the impugned judgment and order dated 10 January 2025, has set aside the Award holding that the appointment of the learned Arbitrator was unilateral, illegal and void. Aggrieved by the order of the learned Single Judge setting aside the Award, the Appellant has filed the present Appeal under the provisions of Section 37 of the Act.

5) We have heard Ms. Mohite, the learned counsel appearing for the Appellant, who would submit that the learned Single Judge has grossly erred in setting aside the arbitral Award. That the learned Single Judge has ignored the position that the Respondent never challenged the jurisdiction of the Arbitrator by filing application under Section 16 of the Act. That having failed to challenge jurisdiction of the arbitral tribunal under Section 16 of the Act, it was impermissible for the Respondent to challenge the Award on the ground of erroneous appointment of the Arbitrator under Section 34 of the Act. In support, she would rely upon judgment