Arbitral Award of Rs.77 Crores Set Aside for Violation of Arbitration Agreement
Comments on the post of Vignesh G and the Judgment dated 12.10.2026 of the High Court of Delhi in FAO (OS)(COMM) 1502025 of Tarsem Jain Vs. Bharat Forge Limited and another
Be that as it may, the procedure under Clause 20 of the SPA provided for reasonable efforts to be made for amicable settlement. On failure to resolve, the dispute was to be referred to a sole arbitrator to be appointed in accordance with the Act upon the request of either party. The seat of arbitration was Delhi. Section 11(2) of the Act provides that subject to sub Section 6 parties are free to agree on the procedure for appointing the arbitrator. Section 11(3) & (4) deals with a three member arbitral tribunal and have no application to the present case. Under Section 11(5) on failure of the parties to agree upon the sole arbitrator within thirty days of receipt of the request from either of the parties, the Chief Justice or a person or a institution designated by the Chief Justice shall make an appointment upon the request of a party. 11. It is not the case of the appellant that the respondents expressly consented to the appointment of the arbitrator. It is an admitted fact that the arbitrator was appointed by the appellant. The initial two notices dated 03.06.2013 and 24.07.2014 were issued by the appellant. In the latter notice the procedure agreed between the parties under Clause 20 of SPA was unilaterally altered by the appellant. It was stated in notice dated 24.07.2014 Page 12 of 16 FAO(OS) (COMM) 150/2025 ` that on failure of the respondents to appoint an arbitrator with the consent of the appellant within fifteen days, the appellant would appoint the sole arbitrator and eventually this was done so. This is contrary to the unambiguous language of Clause 20.4 of SPA and the statutory procedure prescribed under Section 11 of the Act. The learned Single Judge rightly held the appointment of the arbitrator to be void. 12. The participation of the respondents in the arbitral proceedings will not ratify the unilateral appointment made contrary to Clause 20 of the SPA and the statutory provisions of the Act. Moreover, the participation of the respondents in arbitration was under protest. It would not be out of place to mention that both BF Infra and BFL at the very first instance before the arbitrator objected to unilateral appointment. The objections under Section 16 of the Act were rejected by the arbitrator and the remedy against orders rejecting objections was under Section 34 of the Act after passing of the final award. 13. The argument that the respondent not resorted to the remedy under Section 11(6) even after rejection of the objections, is noted to be rejected. The arbitration was initiated at the instance of the appellant. As per the Clause 20 of the SPA and Section 11 of the Act, in absence of consent between the parties on appointment of arbitrator the court had to appoint the arbitrator. The party invoking arbitration was the appellant and had to approach the Court under Section 11 of the Act for appointment of the arbitrator and not vice-versa. 14. The contention the unilateral appointment does not violate Section 12(3) of the Act, deserves rejection. Section 12 of the Act casts an obligation FAO(OS) (COMM) 150/2025 Page 13 of 16 ` on the arbitrator to disclose the circumstances likely to give rise to justifiable doubts to the independence or impartiality of the arbitrator. Sub Section 3(a), permits a challenge to an appointment of the arbitrator in case the circumstances exist giving rise to justifiable doubts for the independence and impartiality. The unilateral appointment of an arbitrator itself casts a doubt on its independence and impartiality
In fact, this case of appointment in violation of Clause 20.4 of SPA and Section 11 of the AA.
The unambiguous language of Clause 20.4 of SPA is clear and mandatory. It was provided that if the parties are unable to resolve the dispute amicable negotiation, the Dispute shall be submitted to Arbitration before a single arbitrator appointed in accordance with the Arbitration and Conciliation Act, 1996, upon the request of either party.
The appellant gave notices for appointment of Arbitrator. However, the respondent did not respond. The appellant, instead of filing section 11 petition, appointed sole arbitrator on its own.
Thus, it was found that the appellant had unilaterally altered Clause 20.4 of SPA and violated Section 11 of the AA. On this count the Arbitral Award was quashed.
