Sole Arbitrator's Appointment By One Party Due To Other Party's Inaction After Notice Is Not Unilateral: Telangana High Court

The Telangana High Court bench of Justice Moushumi Bhattacharya has held that an arbitrator appointed by one party in accordance with the agreed terms, after giving due notice, cannot be challenged as a unilateral appointment if the other party was given a full and fair opportunity to nominate its arbitrator but chose not to act. In such a situation, enforcement of a foreign award cannot be refused under Section 48 of the Arbitration and Conciliation Act, 1996. Brief Facts: The present petition has been filed seeking enforcement of the foreign award dated 03.05.2022 for a sum of USD 443,310.47 (equivalent to INR 35,329,716.57) and £ 7,000 (equivalent to INR 638,487.97) along with interest of USD 9,235.63 (equivalent to INR 736,035.38) at pro-rata compoundable rates of interest. On 29 September, 2021, the parties entered into a fixture recap by which it was agreed that the Respondent will charter the petitioner's vessels through India and Madagascar or Mozambique. The Vessel was delivered to the respondent on 30 September, 2021 and was re-delivered to the Petitioner on 16 January, 2022 at passing port Durban, South Africa. On 27.01.2022, the respondent replied to the petitioner via an email confirming that the amount due to the petitioner was USD 443,310.47 and requested confirmation of the said amount. On 02.02.2022, the petitioner invoked arbitration under the Charter Party and nominated an arbitrator. The respondent did not nominate one and instead made a lower settlement offer, which was rejected. The petitioner filed its claim on 11.03.2022. The Arbitrator directed the respondent to submit its defence by 20.04.2022 and later by 28.04.2022, but the respondent failed to respond. The Arbitrator proceeded ex parte and passed an Award on 03.05.2022 in favour of the petitioner for USD 443,310.47 plus interest, arbitration costs, and £7,000 as Arbitrator's fee. Despite notice, the respondent did not comply. The petitioner filed this Execution Petition on 02.12.2022. The Petitioner submitted that the petitioner nominated Mr. Alan Oakley as Arbitrator as per Clause 22(a) of the BIMCO Terms 2015 and when the Respondent failed to appoint its Arbitrator within 14 days appointed Mr. Oakley as Sole Arbitrator of which a proper notice was given to the Respondent. It was further submitted that the respondent was kept informed at all stages, including post-Award, and was served a notice for compliance. The respondent's objections to enforcement contradict its prior admission of liability and that the claim of unilateral appointment of Arbitrator violating public policy is meritless. The Execution Petition is valid and properly signed by the petitioner's authorized representative. In reply, the respondent opposes enforcement of the Award under Section 48(2)(b) of the Arbitration Act, arguing that it violates the fundamental policy of Indian law. It was further submitted that the unilateral appointment of the Sole Arbitrator by the petitioner made the process biased and that the Arbitration Agreement itself is invalid and contrary to basic notions of justice. The petitioner should have sought appointment through a neutral forum under Section 18 of the English Arbitration Act. Lastly, it was submitted that it was not given proper notice of the Arbitrator's appointment or the proceedings and was unaware of the petitioner's emails. The Execution Petition is defective due to inconsistencies between the supporting affidavits and the notarization. Observations: The court at the outset noted that all communications related to Arbitration were sent by the Petitioner's lawyers and the Arbitrator to the Respondent's e-mail that was used by him at the time of formation of contract. Additionally, the e-mails were also sent through respondent's broker and Lightship Chartering who also confirmed that the e-mails were forwarded. It further observed that the Respondent has utterly failed to provide a rebuttal to these records. On top of that, the Respondent proposed a settlement offer after the Arbitration had started and this fact has been noted in the Execution Petition also. Based on the above, it held that the arguments of the Respondent that the notice was received were rejected. The court further observed that the Respondent has not questioned the credibility of the E-mail IDs that were used for communication related to the Arbitration but it merely argued that it did not the e-mails. This is not a ground on which enforcement can be refused under section 48 of the Arbitration Act. Section 48(1)(b) applies only when the party is not given a proper notice or is not given a proper opportunity of being heard. The Respondent's failure to open the e-mails and submit a defence shows that it deliberately avoided participating in the Arbitration. It further observed that Clause 22(a) of the BIMCO Terms 2015 provides that a party...

Sole Arbitrator's Appointment By One Party Due To Other Party's Inaction After Notice Is Not Unilateral: Telangana High Court

Mohd Malik Chauhan

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Mohd Malik Chauhan

Sole Arbitrator's Appointment By One Party Due To Other Party's Inaction After Notice Is Not Unilateral: Telangana High Court

Mohd Malik Chauhan

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Mohd Malik Chauhan

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