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Award Cannot Be Challenged On Ground Of Unilateral Appointment Of Arbitrator If Appointment Was Not Contested Earlier: Delhi High Court
Ausaf Ayyub
27 Jan 2024 7:35 AM GMT
The High Court of Delhi has held that a party cannot challenge an arbitral award on the ground of the unilateral appointment of the arbitrator if it did not challenge the appointment at an earlier stage.The bench of Justices Suresh Kumar Kait and Neena Bansal Krishna upheld an arbitral award passed by a unilaterally appointed arbitrator by observing that aggrieved party did not challenge...
The High Court of Delhi has held that a party cannot challenge an arbitral award on the ground of the unilateral appointment of the arbitrator if it did not challenge the appointment at an earlier stage.
The bench of Justices Suresh Kumar Kait and Neena Bansal Krishna upheld an arbitral award passed by a unilaterally appointed arbitrator by observing that aggrieved party did not challenge the award at an earlier stage either by filing an application under Section 11(6) or an application under Sections 13&14 of the A&C Act.
Facts
The parties executed an MoU dated 24.01.2015. It contained an arbitration clause. A dispute arose between the parties. Accordingly, the respondent invoked the arbitration clause by notice dated 11.11.2017. By this notice, the respondent also unilaterally appointed the arbitrator.
The arbitrator entered reference and issued notice to the parties. The respondent filed its statement of claim. However, the appellants, vide letter dated 27.10.2018, objected to the appointment of the arbitrator and did not appear before him. In response to the objection letter, the arbitrator held that the proceedings cannot be terminated and that he shall continue with the reference and the proceeded with the arbitral proceedings ex-parte.
The arbitrator, vide an award dated 05.02.2019, allowed the claims of the respondent. Aggrieved thereby, the appellants challenged the award under Section 34 of the A&C Act on the ground of unilateral appointment of the arbitrator as well as on its merit. The challenge was dismissed by the Commercial Court. Aggrieved thereby, the appellants filed an appeal under Section 37 of the Act.
Grounds of Appeal
The appellants challenged the award on the following grounds:
• That the arbitrator was unilaterally appointed by the respondent, therefore, the constitution of the tribunal was bad in law rendering the consequent award liable to challenge under Section 34 of the A&C Act.
• That the MoU that contained the arbitration clause was forged and fabricated.
• Moreover, the MoU was insufficiently stamped and could not be admitted as an evidence.
The respondent made the following counter-arguments:
• That appellants are habitual defaulters, indulged in fabrication of document and a number of civil and criminal cases are pending against them.
• That the appellants did not reply to several of respondent's demand notices.
• That the arbitrator relied on cogent evidences to pass the impugned award.
Analysis by the Court
The Court observed that Clause 13.7 of the MoU provides for unilateral appointment of the arbitrator by the respondent. It further observed that the appellants objected to the appointment of the arbitrator through their letter dated 27.10.2018 due to the unilateral appointment by respondent.
The Court also observed that the respondent sent several notices demanding the dues from the appellants. Further it observed that the arbitrator was appointed on 02.08.2018, however, the proceedings only commenced after eight months from the notice of appointment. Yet, the appellants did not take any recourse to law for revocation of appointment of the arbitrator.
The Court held that a party cannot challenge an arbitral award on the ground of the unilateral appointment of the arbitrator if it did not challenge the appointment at an earlier stage. It held that the appellant should have challenged the award at an earlier stage either by filing an application under Section 11(6) or an application under Sections 13&14 of the A&C Act.
Accordingly, the Court dismissed the challenge and upheld the award.
Case Title: Arjun Mall Retail Holdings Pvt Ltd v. Gunocen Inc
Citation: 2024 LiveLaw (Del) 105
Date: 23.01.2024
Counsel for the Petitioner: Mr. Saeed Qadri & Ms. Kareena Fareed, Advocates
Counsel for the Respondent: Mr. Navdeep Singh, Advocate
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