MANMOHAN BHIMSEN GOYAL v. MADHUBAN MOTORS PVT LTD
Unilateral Appointment of Arbitrator: Award Set Aside Due to Lack of Express Written Waiver Under Section 12(5) of the Arbitration Act.
Court: Bombay High Court
Citation: 2025:BHC-OS:26724
Decision Date: 23-12-2025
List of Laws
The Arbitration and Conciliation Act, 1996; Section 12(5) of the Arbitration and Conciliation Act, 1996; Section 34 of the Arbitration and Conciliation Act, 1996; Article 14 of the Constitution of India
- Facts: The Petitioners challenged an arbitral award passed by a sole arbitrator appointed unilaterally by the Respondent, Madhuban Motors Pvt. Ltd., in a dispute arising from a Loan Agreement. The Petitioners argued that the unilateral appointment of the arbitrator was invalid under Section 12(5) of the Arbitration and Conciliation Act, 1996, as it raises concerns about the arbitrator's independence and impartiality. The Respondent contended that the Petitioners had consented to the arbitrator's appointment and waived their right to object by participating in the arbitral proceedings, filing a counterclaim, and seeking extensions of the arbitrator's mandate.
- Procedural Posture: The Petitioners filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, in the High Court of Judicature at Bombay, challenging the arbitral award.
- Issue: Can an arbitral award be set aside under Section 34 of the Arbitration and Conciliation Act, 1996, on the ground of unilateral appointment of the arbitrator, even if the objecting party participated in the arbitral proceedings and did not initially raise the objection? Does participation in arbitration proceedings, including filing a counterclaim, constitute an express waiver under Section 12(5) of the Act?
- Holding: Yes, the arbitral award is set aside. The court held that the unilateral appointment of the arbitrator was invalid under Section 12(5) of the Arbitration and Conciliation Act, 1996, and that mere participation in the arbitral proceedings does not constitute an express waiver of the right to object to such appointment.
- Reasoning: The Court reasoned that Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act renders a person ineligible to be appointed as an arbitrator if their relationship with the parties raises justifiable doubts as to their independence or impartiality. The proviso to Section 12(5) allows parties to waive this ineligibility only by an express agreement in writing after disputes have arisen. The Court relied on several Supreme Court judgments, including TRF Ltd. v. Energo Engineering Projects Ltd. and Bharat Broadband Network Ltd. v. United Telecoms Ltd., to emphasize that mere participation in arbitral proceedings, filing a statement of defense or counterclaim, or seeking extensions of the arbitrator's mandate does not constitute an express waiver. The Court also noted that the principle of equal treatment of parties in the appointment of arbitrators is a fundamental aspect of Indian law and that unilateral appointment clauses are violative of Article 14 of the Constitution. The court concluded that since the arbitrator's appointment was unilateral and there was no express written waiver from the Petitioners, the award was against public policy and liable to be set aside.
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