2026:CHC-OS:188
14. Section 18 of the Act, which mandates equal treatment of parties
throughout the arbitral process, constitutes yet another foundational
provision that bears directly upon the question of appointment.
15. The legal position on unilateral appointment of arbitrators is no longer res
integra. It was authoritatively settled in the first instance by the Hon'ble
Supreme Court in TRF Ltd. v. Energo Engineering Projects Ltd.,
reported as (2017) 8 SCC 377, where the Court applied the doctrine of qui
facit per alium facit per se, one who acts through another acts himself, to
hold that where the designated appointing authority is itself ineligible to
act as an arbitrator, it cannot confer upon another what it does not itself
possess; the power to appoint flows from the capacity to adjudicate, and
once that capacity is extinguished, so too is the power of nomination.
16. This principle was reinforced and extended in Perkins Eastman
Architects DPC (supra), where the Hon'ble Supreme Court held that a
party who has an interest in the outcome of the dispute cannot unilaterally
appoint a sole arbitrator. The Court emphasised that such an arrangement
gives rise to justifiable doubts as to the independence and impartiality of
the arbitral tribunal, and that the right to appoint the adjudicator of one's
own dispute is fundamentally inconsistent with the quasi-judicial
character of arbitration.
17. The question of unilateral appointment was thereafter considered by a
Constitution Bench of five Judges in Central Organisation for Railway
Electrification v. ECI-SPIC-SMO-MCML (JV), reported as (2025) 4 SCC
641. This judgment represents the most comprehensive and authoritative
pronouncement of the Supreme Court on the subject. This pronouncement
of constitutional bench affirms arbitration as a quasi-judicial function and
2026:CHC-OS:188
reiterates that an arbitrator needs to exercise their powers impartially and
objectively. The majority treats the principle of equality found in Section 18
of the Arbitration Act as the basis for the creation of an independent and
impartial tribunal. The majority also relies on the constitutional norms of
equality found in Article 14 of the Constitution. More specifically, the
Constitution Bench declared in unequivocal terms that the independence
and impartiality of arbitral proceedings and equality of parties are
concomitant principles and equal treatment of parties applies at all stages
including at the stage of appointment of arbitrators.
18. The ratio of the Constitution Bench may be distilled into the following
propositions, as they govern the present case:
(i) The principle of equal treatment of parties applies at all stages of
arbitration proceedings, including the stage of the appointment of
arbitrators.
(ii) A clause that allows one party to unilaterally appoint a sole
arbitrator gives rise to justifiable doubts as to the independence and
impartiality of the arbitrator, and such a unilateral clause is
exclusive and hinders equal participation of parties in the
appointment process.
(iii) While party autonomy allows for freedom in forming arbitration
agreements, it is not absolute; mandatory provisions like Sections
12(5) and 18 impose non-derogable obligations to prevent bias and
ensure fairness. Arbitration clauses must facilitate equal
participation from both parties in the appointment process, thereby
preventing any imbalance of power that could compromise the
arbitral tribunal's integrity.
2026:CHC-OS:188
(iv) A person with an interest in the outcome of the dispute cannot
participate in the appointment of an arbitrator; such involvement
would compromise the neutrality and fairness of the process.
19. The Hon'ble Supreme Court in Bhadra International (India) Pvt. Ltd.
(supra), considered three specific questions and answered each as follows:
(i) The first question was 'Whether the Sole Arbitrator was ineligible
under Section 12(5)?' The Hon'ble Court answered it in the
affirmative. The Court held that the principle of equal treatment of
parties applies not only to the arbitral proceedings but also to the
procedure for appointment of arbitrators, and that the parties
must have the possibility of participating in the constitution of the
arbitral tribunal on equal terms. The unilateral appointment of a
sole arbitrator was held to be void ab initio, and the sole arbitrator
so appointed de jure ineligible under Section 12(5) read with the
Seventh Schedule. A notice invoking arbitration does not, by itself,
operate as consent to any future appointment.
(ii) The second question considered was 'Whether the applicability of
Section 12(5) was waived by conduct?' The Hon'ble Court answered
this question in the negative. The Court held that the proviso
requires a clear and unequivocal written agreement, and that mere
participation in proceedings, filing of a Statement of Claim,
recording of "no objection" in a procedural order, or filing an
application under Section 29A, do not, individually or collectively,
constitute an "express agreement in writing" for the purposes of a
valid waiver.
2026:CHC-OS:188
(iii) The third question considered was 'Whether the objection could be
raised for the first time in Section 34 proceedings?' The Hon'ble
Court answered this question in the affirmative. The Court held
that a challenge to an arbitrator's ineligibility can be raised at any
stage, because an award passed by an ineligible arbitrator is non-
est and carries no enforceability or recognition in law. Accordingly,
the appeals were allowed and the impugned judgment of the
Division Bench of the Delhi High Court was set aside.
20. The present case involves an additional and particularly significant
dimension. The Award Holder, being directly interested in the outcome of
the arbitral proceedings, was statutorily precluded from appointing the
Sole Arbitrator under Section 12(5) of the Act read with the law declared in
TRF (supra) and Perkins Eastman (supra).
21. The legal position that emerges from the foregoing discussion leads
inexorably to an examination of what recourse was lawfully available to the
Award Holder in the facts of the present case.
22. The Award Debtor did not respond to the invocation of the arbitration
clause. Faced with the non-participation of the other party, the Award
Holder was confronted with a situation expressly contemplated and
provided for by the Act itself. Section 11 of the Act constitutes the
statutory mechanism specifically designed to address the appointment of
an arbitrator in circumstances where a party fails or refuses to act as
required under the appointment procedure, including where the
respondent does not participate in the constitution of the tribunal. The
remedy was, therefore, both available and unambiguous: the Award Holder
2026:CHC-OS:188
ought to have approached the Court under Section 11 for the appointment
of an independent arbitrator by a neutral judicial authority.
23. Instead, the Award Holder chose to bypass the statutory remedy and
unilaterally approached LWTODR, an institution of its own selection, for
the appointment of the Sole Arbitrator. This course of action was
impermissible in law for reasons that admit of no departure. An Alternate
Dispute Resolution institution or centre, however reputed, cannot be
approached unilaterally by one party for the appointment of an arbitrator
in the absence of the other party's consent. The foundational premise of
institutional arbitration is that both parties have agreed, either in the
original arbitration agreement or subsequently, to submit their disputes to
the rules and the appointing authority of a specified institution. Where
such an agreement exists, the institutional rules derive their binding force
from the mutual consent of the parties. Where no such specific
institutional agreement exists, or where the agreement vests the
appointment power in one party, the institution cannot, merely by being
invoked by the interested party, acquire the capacity to make a valid
appointment binding upon the other side. The consent of the parties is the
very source of the legitimacy of any institutional appointment; without it,
the institution acts in a vacuum.
24. It is, therefore, a settled principle that Alternate Dispute Resolution
mechanisms, whether institutional arbitration centres, conciliation bodies,
or any other such forum, can be validly approached for appointment of an
arbitrator only with the consent of both parties, either as expressed in a
prior agreement naming the institution, or as obtained after the disputes
have arisen. Where one party refuses to participate and no prior
2026:CHC-OS:188
institutional agreement subsists, the Act does not leave the invoking party
without a remedy; it provides a specific and exclusive remedy in Section
11. The legislature has, in its wisdom, placed this power in the hands of
the Court precisely to ensure that the appointment of the arbitrator, in a
contested or non-participatory situation, is made by an independent
judicial authority and not by the interested party through a mechanism of
its own choosing. Any other construction would defeat the entire purpose
of the post-2015 amendments to the Act, which were designed to insulate
the constitution of the arbitral tribunal from the influence of an interested
party. To permit the Award Holder to approach an institution of its choice,
in the absence of any institutional agreement and without the consent of
the Award Debtor, would be to sanction precisely the mischief that
Sections 12(5) and 18 of the Act, read with the Constitution Bench
judgment in Central Organisation for Railway Electrification v. ECI-
SPIC-SMO-MCML (JV) (supra), were intended to prevent. In the result, the
unilateral referral to LWTODR and the appointment of the Sole Arbitrator
pursuant thereto are rendered void ab initio, for want of consent, authority
and jurisdiction.
25. The law does not permit such a stratagem. The prohibition engrafted by
Section 12(5) and the judicial decisions thereunder is directed not merely
at the formal act of appointing an arbitrator, but at the substance of the
process, the unilateral control by an interested party over the constitution
of the tribunal that is to adjudicate its own claims. Whether that control is
exercised directly through a personal appointment, or indirectly through
the unilateral invocation of an institutional mechanism, the vices of
2026:CHC-OS:188
partiality, inequality and conflict of interest are identical. The form cannot
save what the substance condemns.
26. In the present case, it is recorded in the award itself that the Award Debtor
did not participate at any stage of the arbitral proceedings, neither at the
stage of invocation of arbitration, nor at the stage of constitution of the
Tribunal, nor at any stage of the hearing. A party that never appeared
before the Tribunal, cannot be held to have waived any right.
27. Courts have consistently emphasised the self-contained nature of the Act,
which provides a comprehensive framework for challenging arbitral
awards. Section 36 deals with enforcement and does not ordinarily provide
for challenges to the merits of the arbitral award. Challenges on grounds of
nullity or illegality are ordinarily to be raised in proceedings under Section
34 of the Act. However, this general principle admits of a well-recognised
exception: where the defect goes not to the merits of the award but to the
very jurisdiction of the tribunal, where the award is not merely erroneous
but void ab initio, the executing court is not only empowered but obligated
to decline enforcement. An award that is non-est in law is not an "award"
at all within the meaning of the Act; it cannot acquire enforceability by the
efflux of limitation for filing a Section 34 petition, because no limitation
can cure a fundamental void.
28. Learned Single Bench of this Court in Cholamandalam Investment and
Finance Co. Ltd. v. Amrapali Enterprises & Anr. (EC 122/2022) has
expressly held that an award made by an arbitrator appointed unilaterally
by the petitioner is non-est and that its enforcement is to be denied under
Section 36 of the Act even if the award was not set aside under Section 34.
A similar view has been taken by the Division Bench of the Delhi High
2026:CHC-OS:188
Court in Mahaveer Prasad Gupta v. Government of NCT of Delhi,
reported as 2025 SCC OnLine Del 4241, wherein it was categorically held
that courts seized of execution proceedings must refuse enforcement of
awards rendered by unilaterally appointed arbitrators, such awards being
nullities on account of inherent lack of jurisdiction. The Special Leave
Petition (C) No. 24207/2025 preferred against the said judgment was
dismissed by the Hon'ble Supreme Court on 02.02.2026, thereby affirming
the legal position. Furthermore, the Special Leave Petition (Diary) No.
47322/2023 against the Delhi High court Division Bench's ruling in
Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat (EFA
(Comm.) 3/2023) was similarly dismissed by the Supreme Court on
12.12.2023, which had held that the executing court can refuse to enforce
an award passed by an arbitrator unilaterally appointed by an interested
party who is ineligible under Section 12(5) of the Act.
29. Upon a holistic consideration of the statutory framework, the authoritative
pronouncements of the Hon'ble Supreme Court in TRF Ltd. (supra),
Perkins Eastman Architects (supra), Central Organisation for
Railway Electrification v. ECI-SPIC-SMO-MCML (JV) (supra) and Bhadra
International (India) Pvt. Ltd. (supra), and the decisions of various High
Courts noticed hereinabove, this Court is of the considered opinion as
follows:
(i) The arbitration clause in the Loan Agreement dated 07.03.2024
vested the right of appointment of the Sole Arbitrator in the Award
Holder, who is an interested party. Such a clause is, by operation
of the law declared by the Hon'ble Supreme Court, legally
2026:CHC-OS:188
unsustainable and contrary to the mandatory provisions of Section
12(5) of the Act.
(ii) The Award Holder's act of unilaterally invoking the services of
LWTODR for the appointment of the Sole Arbitrator, without the
consent or participation of the Award Debtor, amounts in
substance to the exercise of the very power of unilateral
appointment that is prohibited in law. The institutional form does
not alter the substantive nature of the act.
(iii) The Sole Arbitrator so appointed was de jure ineligible by
operation of law. His mandate never legally commenced. The
Arbitral Tribunal was, accordingly, constituted in derogation of the
mandatory provisions of the Act and was devoid of inherent
jurisdiction to adjudicate the disputes between the parties.
(iv) The ex parte Award dated 29.08.2025, rendered by a tribunal
lacking inherent jurisdiction, is void ab initio and is non-est in the
eyes of law. It carries no enforceability or recognition in law and
cannot be executed as a decree of this Court under Section 36 of
the Act.
(v) The non-participation of the Award Debtor at all stages of the
proceedings, including the stage of constitution of the Tribunal,
precludes any inference of waiver, consent or acquiescence, which
in any event could only be established by an express agreement in
writing subsequent to the arising of the dispute.
30. In view of the foregoing, this Court declines to enforce the ex parte Arbitral
Award dated 29.08.2025 and dismisses the present Execution Petition. If
the Award Holder is aggrieved and desires to pursue its claims, it is at
2026:CHC-OS:188
liberty to initiate fresh arbitral proceedings before a validly constituted
Arbitral Tribunal, appointed in accordance with the provisions of the Act
and the principles of independence, impartiality and equality of parties.
31. The Execution Petition stands dismissed accordingly.
(Gaurang Kanth, J.)
SAKIL AMED (P.A)
