Bombay High Court Quashes ₹1.26 Crore Arbitral Award Over Unilateral Appointment Of Arbitrator

The Bombay High Court recently set aside a ₹1.26 crore arbitral award made in favor of Madhuban Motors Pvt. Ltd. on the grounds that the lender unilaterally appointed the sole arbitrator, violating Section 12(5) of the Arbitration and Conciliation Act, 1996. Ruling that participation in arbitral proceedings cannot remedy an ineligible appointment, the Bench comprising of Justice Sandeep V. Marne held that the award was "patently illegal" and "against public policy". The disputed stemmed from a loan agreement dated November 1st, 2014, in which Madhuban Motors had advanced an amount of ₹2.5 crore to its former Vice-President - Manmohan Bhimsen Goyal, with his wife Kavita Goyal personally guaranteeing the debt. Following further disputes with the outstanding amount reportedly being ₹1.26 crore, Madhuban Motors invoked the arbitration clause, appointing an advocate as the sole arbitrator in February 2017. On March 18, 2024, the arbitral tribunal passed an award directing the petitioners, Manmohan Bhimsen Goyal and Kavita Goyal to pay ₹1,26,46,303 along with 12% interest and fees. Aggrieved, the borrowers approached the High Court under Section 34 of the Act to set aside the award. The borrowers argued that the unilateral appointment of the arbitrator rendered the award void, and that mere involvement in the proceedings, including the filing of a defense and counterclaim, did not constitute a "express agreement in writing" waiving the statutory ineligibility. By taking part in the arbitration, requesting extensions of the arbitrator's mandate, and failing to raise any objections within the statutory timeframe, the Madhuban Motors contended that the petitioners had consented to the appointment, constituting a waiver by conduct. Justice Sandeep V Marne relied on decisions of Supreme Court and High Court precedents, including TRF Ltd., Perkins Eastman, Bharat Broadband Network, and the Constitution Bench decision in Central Organisation for Railway Electrification. The Court reiterated that a clause permitting one party to unilaterally appoint a sole arbitrator “gives rise to justifiable doubts as to the independence and impartiality of the arbitrator” and violates the principle of equal treatment of parties. Justice Marne on 23rd December, 2025, held that any arbitration agreement that provides for the sole or presiding arbitrator to be appointed unilaterally is void and unenforceable. It further clarified that “the objection of unilateral appointment of arbitrator can be raised at any stage of the proceedings and even while challenging the award under Section 34 or opposing enforcement under Section 36 of the Act”. The Court further found that as the unilateral appointment went "to the root of the matter" and violated public policy, it may still be reviewed even though it was not expressly pleaded in the Section 34 petition. The Court rejecting the argument of waiver by conduct, stated that the statutory need of an unambiguous, post-dispute written waiver cannot be substituted by filing pleadings or attending hearings. Consequently, the Bombay High Court allowed the petition and set aside the arbitral award dated March 18th, 2024, ruling it to be void. Case Title: Manmohan Bhimsen Goyal & Anr. v. Madhuban Motors Pvt. Ltd. Case No.: Commercial Arbitration Petition No. 320 of 2024 Coram: Justice Sandeep V. Marne Date of Decision: 23 December 2025 Counsel for Petitioners: Mr. Dharam Jumani Counsel for Respondent: Mr. Mutahhar Khan Click Here To Read/Download Order

Bombay High Court Quashes ₹1.26 Crore Arbitral Award Over Unilateral Appointment Of Arbitrator

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