L AND T FINANCE LTD (FORMERLY KNOWN AS L AND T HOUSING FINANCE LTD) v. SANGEETA BHANSALI (BORROWER) AND ANR
Unilateral Appointment of Arbitrator Renders Award Void: Challenge Permissible Even at Execution Stage.
Court: Bombay High Court
Citation: 2026:BHC-OS:1344
Decision Date: 17-01-2026
List of Laws
The Arbitration and Conciliation Act, 1996; Section 12(5) of the Arbitration and Conciliation Act, 1996; VII Schedule of the Arbitration and Conciliation Act, 1996; Section 34 of the Arbitration and Conciliation Act, 1996
- Facts: L&T Finance Ltd. initiated arbitration against Sangeeta and Aditya Bhansali (borrower and co-borrower, respectively) due to disputes arising from loan agreements. The lender invoked the arbitration clause and appointed a sole arbitrator. The Judgment Debtor challenged the unilateral appointment of the arbitrator before the Sole Arbitrator, which was rejected. The Sole Arbitrator passed an award in favor of the Claimant. The Judgment Debtor did not challenge the award under Section 34 of the Arbitration and Conciliation Act, 1996. Subsequently, the Claimant filed a Commercial Execution Application to enforce the award. The Judgment Debtor again raised the issue of the unilateral appointment of the arbitrator.
- Procedural Posture: The Commercial Execution Application was filed in the High Court of Judicature at Bombay to execute the arbitral award. The court was considering the validity of the award given the challenge to the arbitrator's appointment.
- Issue: Is an arbitral award passed by a unilaterally appointed arbitrator valid and enforceable, especially when the appointment is challenged as being void ab initio, and can such a challenge be raised even at the stage of execution?
- Holding: The High Court held that the arbitral award passed by the unilaterally appointed arbitrator is set aside, and the Commercial Execution Application is dismissed.
- Reasoning: The Court relied on the Supreme Court's judgment in Bhadra International (India) Pvt. Ltd. vs. Airport Authority of India, which held that unilateral appointment of an arbitrator is void ab initio and that the arbitrator so appointed is de jure ineligible under Section 12(5) read with the VII Schedule of the Arbitration and Conciliation Act, 1996. The Court emphasized the principle of 'equal treatment of the parties' in constituting the arbitral tribunal. It further noted that a challenge to the arbitrator's ineligibility can be raised at any stage, even during execution proceedings, as an award passed by an arbitrator lacking jurisdiction is non-est. The court also considered decisions in Perkins Eastman Architects DPC & ANR. vs. HSCC (India) Limited and Bharat Broadband Network Ltd. vs. United Telecoms Ltd., reinforcing the principle against unilateral arbitrator appointments.
🔒 For Members Only