JALARAM FABRICS v. NISARG TEXTILES PVT. LTD.
Institutional Arbitration vs. Unilateral Appointment: Validity of Arbitral Award Under Section 34 of the Arbitration and Conciliation Act, 1996.
Court: Bombay High Court
Citation: 2026:BHC-OS:397
Decision Date: 08-01-2026
List of Laws
Arbitration and Conciliation Act, 1996; The Companies Act, 1956
- Facts: Jalaram Fabrics (Petitioner) challenged an arbitral award directing it to pay Nisarg Textiles Pvt. Ltd. (Respondent) Rs. 11,44,850 with 18% interest on the principal amount of Rs. 6,37,146, totaling Rs. 17,81,996, plus post-award interest and arbitration costs. The dispute arose from unpaid invoices for fabric supplied by the Respondent, with the invoices containing an arbitration clause referring disputes to the Bharat Merchants' Chamber, Mumbai. The Petitioner claimed defective goods and disputed the amount due, while the Respondent initiated arbitration.
- Procedural Posture: The Petitioner filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the arbitral award. The Respondent opposed the petition, supporting the award.
- Issue: Did the arbitral award suffer from the vice of unilateral appointment of the arbitrator, rendering it invalid under Section 34 of the Arbitration and Conciliation Act, 1996, considering the arbitration clause referring disputes to the Bharat Merchants' Chamber and the process followed for appointing the arbitral tribunal? Did the Petitioner waive its right to object to the jurisdiction of the arbitral tribunal by participating in the proceedings without raising a timely objection under Section 16 of the Arbitration and Conciliation Act, 1996?
- Holding: The Court dismissed the Arbitration Petition, holding that the arbitral award did not suffer from the vice of unilateral appointment because the arbitrator was appointed by the Bharat Merchants' Chamber, an independent institution, and not unilaterally by the Respondent. The Court also found that the Petitioner was given the opportunity to nominate its arbitrator but failed to do so.
- Reasoning: The Court reasoned that the arbitration clause in the invoices indicated an agreement for institutional arbitration through the Bharat Merchants' Chamber. The Chamber's rules provided for a broad-based panel of arbitrators, and both parties had the right to nominate their arbitrator. The Petitioner's failure to nominate its arbitrator led to the Institute appointing a nominee on its behalf. The Court distinguished the case from instances of unilateral appointment by one party, emphasizing the role of the independent institution in the appointment process. The Court also noted that the Petitioner participated in the proceedings by filing a "Say" without objecting to the jurisdiction or composition of the tribunal, further weakening its challenge to the award. The court relied on several judgments, including Sundaram Finance Ltd. vs. Ajith Lukose and Balaji Enterprises & Ors. Versus. Sundaram Finance Ltd., to support the view that institutional arbitration does not suffer from the vice of unilateral appointment.
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