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Bombay HC – Unilateral Arbitrator Appointment Invalid – Award Nullity and No Estoppel Applies

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By the Arbitral Award dated 18.3.2024, the claim of the respondent for Rs.1,26,46,303/- with 12% per annum arising out of the loan agreement, was allowed.

The petitioner no.1 had taken loan of Rs.2.50 crores from the respondent and it was secured by personal guarantee of the petitioner no.2.   The petitioner no.1 had executed agreement for sale for the offices. 

The respondent invoked the arbitration and nominated arbitrator as per the loan agreement.  The respondent participated in the arbitral proceedings and filed statement of defence.

Even in this section 34 petition, the ground about the unilateral appointment of arbitrator is not specifically raised.

HELD  that the waiver of applicability of Section 12(5) of the Arbitration Act requires an express agreement in writing under the Proviso. The conduct of the parties, such as participation in arbitral proceedings, filing of statement of claim/defence, filing of counterclaim, etc, is inconsequential and cannot constitute a valid waiver under the Proviso to Section 12(5) of the Act.

Since the arbitral award made by unilaterally appointed arbitrator is a nullity, even a party appointing arbitrator is not precluded from raising objection to unilateral appointment and seeking annulment of the award. Principle of estoppel does not apply. The objection of unilateral appointment of arbitrator can be raised at any stage of the proceedings and even while challenging the award under Section 34 or opposing enforcement under Section 36 of the Act.

As the ineligibility goes to the root of the jurisdiction, it is not necessary for a party to raise that objection before arbitrator or even in the Petition filed under Section 34 of the Act. Sub-Sections (2)(b) and (2A) use the expression ‘if court finds that..’ enabling the Court to invalidate the award even in absence of objection in the Petition.

Judgment dated 23.12.2025 of the High Court of Bombay in Commercial Arbitration Petition No.320 of 2024 of Manmohan Bhimsen Goyal and another  Vs.   Madhuban Motors Pvt Ltd.

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