An arbitrator's unilateral appointment, without mutual consent, is invalid, making any resultant award unenforceable under Section 12(5) of the Arbitration and Conciliation Act, 1996.

AMIT MAHAJAN VIBHU BAKHRU, J. (Oral)

1. The appellant has filed the present appeal impugning an order dated 23.11.2022, passed by the learned Commercial Court whereby the appellant’s application for enforcement of an ex- parte arbitral award dated 21.07.2021, passed by Shri C. Prasanna Venkatesh, Sole Arbitrator in favour of D.H. Finance Company, was rejected.

2. The appellant claims that it is an assignee of D.H. Finance Company and is, therefore, entitled to enforce the Arbitral Award rendered in favour of the said entity.

3. In terms of the Arbitral Award, the sum of Rs.4,66,103.3/- alongwith interest @ 18% per annum was awarded in favour of the D.H. Finance Company which was a claimant before the Arbitral Tribunal. The learned Commercial Court had found that the Arbitral Award was rendered ex-parte by an Arbitrator who was unilaterally appointed by D.H. Finance Company without any recourse or consent of the respondent. The Court had also found that the learned Arbitrator was ineligible for being appointed as an Arbitrator in terms of Section 12(5) of the Arbitration and Conciliation Act, 1996 (hereafter ‘the A&C Act’).

4. In T RF Ltd. v. Energo Engineering Projects Ltd. , (2017) 8 SCC 377, the Supreme Court held that once the Arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. In Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd., (2020) 20 SCC 760 , the Supreme Court, following the earlier decision in TRF Ltd. (supra), held that the Chairman-cum-Managing Director of a party was ineligible to appoint an arbitrator. Following the aforesaid decisions, this court in Proddatur Cable TV Digi Services v. Siti Cable Network Limited , (2020) 267 DLT 51 held that it is not permissible for a party to unilaterally appoint an arbitrator without the consent of the other party(ies). It is important to note that the aforesaid decisions were rendered in the context of Section 12(5) of the A&C Act.

5. In the present case, the learned Commercial Court had found that the arbitrator appointed by the claimant (DH Finance Company) was ineligible to be appointed as an arbitrator by virtue of Section 12(5) of the A&C Act as interpreted by the Supreme Court in the aforementioned decisions.

6. The learned counsel appearing for the appellant does not seriously dispute that the arbitrator unilaterally appointed by the claimant was ineligible to be appointed as an arbitrator by virtue of Section 12(5) of the Act. He has largely focused his contentions on assailing the decision of the learned Commercial Court to award costs. It was also contended that the respondent was aware of the appointment of the arbitrator and had not raised any objection to such appointment; therefore the respondent is now precluded from challenging the impugned award.

7. We find little merit in the aforesaid contentions. The proviso to Section 12(5) of the A&C Act is unambiguous. A party can waive its right to object to the ineligibility of an arbitrator under Section 12(5) of the A&C Act but the same is subject to two conditions. First, that the waiver is required to be by and done by an express agreement in writing; and second, that such agreement is entered into after the disputes have arisen. Unless both the aforesaid conditions are satisfied, there can be no waiver of the ineligibility of an arbitrator.

8. In Bharat Broadband Network Limited v. United Telecoms Limited , (2019) 5 SCC 755 , the Supreme Court had authoritatively held that waiver of a right to object to ineligibility of an arbitrator under Section 12