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2025 Supreme(Online)(Mad) 48687
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Abdul Quddhose, J
M/s.JRS Infrastructure, through its Sole Proprietor Jaswant Rai Garg – Appellant
Versus
M/s.Sundaram Finance Ltd. – Respondent
Arb.O.P (Com.Div.) No.132 of 2025 | A.No.1307 of 2025
For the Appellants/Petitioners: Mr.Advaidh Neelakandan R., Mr.Pranav R.Menon Krishnasree.S for M/s.ARK Law Associates
For the Respondent: Mr.M.Arunachalam
An arbitrator appointed unilaterally by a party with an interest in the dispute is ineligible, violating the Arbitration and Conciliation Act.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Arbitral Award - Challenge against unilateral appointment of Arbitrator without petitioners' consent - Consent required as per Section 12(5) of the Act - Supreme Court ruling in Perkins Eastman Architects DPC vs. HSCC cited to establish that Managing Director's unilateral appointment was invalid. (Paras 3, 13)
(B) Participation in Arbitration - Claim by respondent of petitioners’ participation rejected as petitioners set ex parte, notice unclaimed. (Paras 9, 12)
(C) Disclosure requirements under Fifth Schedule of the Act not met.
Findings of Court:
The arbitral award set aside due to illegality of appointment process.
Result: Petition allowed.
| Table of Content |
|---|
| 1. challenge to arbitral award under section 34 due to unilateral appointment. (Para 1 , 2) |
| 2. arguments about the validity of the arbitration clause and participation. (Para 3 , 4 , 5 , 6) |
| 3. discussion on ineligibility and requirements for disclosure during arbitration. (Para 7 , 8 , 9 , 10) |
| 4. court's ruling on setting aside the arbitral award. (Para 13) |
| 5. final decision allowing the petition and setting aside the award. (Para 14) |
ORDER
This petition has been filed under Section 34 of the Arbitration and Conciliation Act, challenging the impugned Arbitral Award dated
25.07.2024 passed in favour of the respondent against the petitioners.
2.The petitioners have primarily challenged the impugned arbitral award on the ground that the Arbitrator, who has passed the impugned arbitral award, was appointed unilaterally by the respondent, without obtaining the consent of the petitioners.
3.Learned counsel for the petitioners drew the attention of this Court to the impugned arbitral award and would submit that as seen from the same, the Arbitrator was appointed unilaterally by the respondent. He would submit that as per Section 12 (5) of the Arbitration and Conciliation Act, there must be an express waiver with regard to the arbitration clause, relied upon by the respondent, which provides for the appointment of an Arbitrator by the Managing Director of the respondent. He would submit that there is no express waiver given by the petitioners for the Managing Director of the respondent to appoint an Arbitrator as per the arbitration clause, provided in the Loan Agreement. Learned counsel for the petitioners also relies upon the judgment of the Hon'ble Supreme Court in the case ofPerkins Eastman Architects DPC and another vs. HSCC (India) Limited reported in (2020) 20 SCC 760 and in particular, he relies upon paragraph 21 of the said judgment and would submit that the Managing Director of the respondent company as per the said judgment is ineligible to appoint an Arbitrator and since in the instant case, the Managing Director of the respondent company had appointed the Arbitrator, without the consent of the petitioner, the arbitral award passed by such an Arbitrator is bad in law.
4.On the other hand, learned counsel for the respondent places reliance on the following:
a)The loan contract provides for an arbitration clause;
b)Notice dated 25.01.2022 sent by the respondent to the petitioners intimating the petitioners that they are defaulters in the repayment of the loan and calling upon them to pay the outstanding dues of the respondent;
c)Letter dated 12.12.2022 sent by the petitioners to the respondent.
5.According to the respondent, the petitioners, having undertaken to regularise all the arrears of installments and other charges pending as on date and having agreed to pay the future installments on the respective due dates, without committing any delay and having requested the respondent to withdraw the arbitration by giving liberty to the respondent to initiate fresh arbitration at the respondent's discretion, the petitioner cannot raise the contention that the Arbitrator was appointed unilaterally by the respondent. The respondent has also stated that in the very same letter dated 12.12.2022, the petitioner has confirmed that there exists an arbitration clause in the contract, which provides for the appointment of a Sole Arbitrator by the Managing Director of the respondent company and the venue of the Arbitration has also been fixed as Chennai. Therefore, having accepted the arbitration clause as provided under the loan agreement, without any demur, the petitioner cannot raise a contention in this Section 34 petition that the Arbitrator was appointed unilaterally by the respondent.
6.Learned counsel for the respondent would submit that the petitioners have waived their right to object to the appointment of the Arbitrator by the Managing Director of the respondent company since they have acquiesced to the arbitration clause
