SATNAM SINGH AHUJA AND 4 ORS vs KARVY FINANCIAL SERVICES LTD.

2026:BHC-OS:5673

Judgement-ARBP-324-2019+ Final(1).doc


IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 324 OF 2019
Digitally
signed by
CHAITANYA
ASHOK
JADHAV
Date:
2026.03.05
18:14:06
+0530
CHAITANYA
ASHOK
JADHAV
Satnam Singh Ahuja And Ors. …Petitioners
Versus
Karvy Financial Services Ltd. …Respondents
WITH
ARBITRATION PETITION NO. 337 OF 2019
WITH
ARBITRATION PETITION NO. 335 OF 2019
WITH
ARBITRATION PETITION NO. 336 OF 2019
WITH
ARBITRATION PETITION NO. 338 OF 2019
Mr. Rohan Savant , a/w Prabhakar M. Jadhav, Advocates for
the Petitioners in ARBP/324 & 335/2019.
Ms. Vilasini Balsubramaniyam , a/w Prabhakar M. Jadhav,
Advocates for the Petitioners in ARBP/336 & 338/2019.
Mr. Prabhakar M. Jadhav , Advocate for the Petitioners in
ARBP/337/2019.
Mr. Aseem Naphade , a/w Deepanjali Mishra, Sahil Salvi,
Omar Khaiyam Shaikh, i/b Vikas Salvi & Associates, Advocates
for Respondent in all Petitions.
CORAM: SOMASEKHAR SUNDARESAN, J.
DATE: MARCH 5, 2026
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JUDGEMENT:
Context and Factual Background:
1. The captioned proceedings are all under Section 34 of the
Arbitration and Conciliation Act, 1996 (“the Act”) , with the Arbitral
Awards having been passed by an Arbitrator, unilaterally appointed by
the Respondent, Karvy Financial Services Ltd. (“Karvy”) . Although
the Learned Arbitral Tribunal was admittedly unilaterally appointed,
the Petitioners had not protested against such unilateral appointment
throughout the proceedings, and raised the contention only at the stage
of these proceedings under Section 34 of the Act.
2. The implications of such conduct of the Petitioners, and
whether the Petitioners are deemed to have waived their entitlement to
object to the unilateral appointment, is what falls for consideration in
these Petitions.
3. The Learned Advocates for the parties submit that
adjudication of Arbitration Petition No. 324 of 2019 would be
dispositive of all the captioned Petitions. Therefore, the facts are taken
from Arbitration Petition No. 324 of 2019. In that Petition, the
underlying transactions involved a loan amount of Rs.~1.22 crore,
computed as of December 26, 2015, being the debt due along with
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further interest thereon at 14.25%, pursuant to the Loan Agreement
dated March 31, 2011. Arbitration was invoked by Karvy, by notice dated
November 30, 2016 (this date applies to all Petitions). All the Impugned
Awards were passed on February 6, 2018.
4. The short issue that arises for consideration is whether the
unilateral appointment of an arbitrator would render all the Impugned
Awards liable to be quashed and set aside, or whether the uncontested
participation in the arbitration proceedings by the Petitioners would
denude them of the right to challenge the awards on the ground of the
arbitral tribunal having been unilaterally appointed, without their
autonomous consent.
5. The law on unilateral appointment has been declared
emphatically by a five-judge bench of the Supreme Court in the case of
1
Central Organisation . This ruling would come much later – the
Arbitral Awards are all dated February 06, 2018. Therefore, whether
2 3
the law declared in Perkins Eastman and Bharat Broadband , in
terms of Section 12(5) of the Act, would lead to the Impugned Awards
1
Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) –
(2020) 14 SCC 712
2
Perkins Eastman Architects DPC v. HSCC (India) Ltd. – (2020) 20 SCC 760
3
Bharat Broadband Network Limited v. United Telecoms Limited – 2019 (5) SCC
755
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being a nullity is what was under consideration when this matter was
heard.
Contentions of the Parties:
6. Mr. Rohan Sawant, Learned Advocate on behalf of the
Petitioners, would submit that in view of the law declared in the
aforesaid three judgements, unilateral appointment has been equated
with ineligibility under the Seventh Schedule of the Act. An express
consent in writing from the counterparty, that is, not the party making
the unilateral appointment, is required to waive the objection to such
unilateral appointment. He would submit that the counterparty to the
unilaterally-appointing party ought to have positively reposed faith and
confidence in such an Arbitrator despite the appointment being
unilateral.
7. Therefore, Mr. Sawant would submit, in all these cases, the
Arbitrator was de jure incapable of acting as such. Therefore, an
objection need not have been raised before the Arbitrator, and an
application under Section 14 need not be filed in every case of unilateral
appointment of an arbitrator for a challenge under Section 34 on this
ground to be tenable. Mr. Sawant would submit that unilateral
appointment will automatically lead to ineligibility of the Arbitrator, and
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even active participation by a counterparty in the arbitration
proceedings would not lead to cleansing of the absence of independence
and impartiality arising out of such a unilateral appointment. Mr.
Sawant would submit that this being purely a question of law, any party
is entitled to raise this element as a ground for quashing and setting
aside the Arbitral Award at the Section 34 stage.
8. In contrast, Mr. Aseem Naphade, Learned Advocate for Karvy
would submit that in the peculiar facts of this case, the consent of the
Petitioners to the conduct of the arbitration by the Arbitrator can be
discerned. He would submit that it would be incumbent on the party
objecting to the unilateral appointment to have raised an objection. On
the contrary, if the party chooses to engage in the arbitration and hopes
to ambush the final award if found to be adverse, the eligibility of the
Arbitral Tribunal or the Arbitral Award ought not to be brought under a
cloud.
Analysis and Findings:
9. While the parties had been heard at some length in
November 2025, it is noteworthy that by way of a judgement rendered
4
by the Supreme Court in Bhadra International in January 2026,
4
Bhadra International (India) Pvt. Ltd. And Ors. Vs. Airports Authority of India –
2026 SCC OnLine SC 7
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the Supreme Court has emphatically dealt with the issue of de jure
inability and the right to challenge an arbitral award, despite
participation in the arbitral proceedings .
10. In Bhadra International , the Supreme Court was
considering concurrent decisions of a Learned Single Judge and a
Learned Division Bench of this Court, holding that participation in
arbitral proceedings, without any objection being raised in the course of
the arbitration proceedings, would indeed constitute a waiver of the
applicability of Section 12(5) of the Act. It had been held by the Learned
Division Bench that in the facts of that case, after the insertion of
Section 12(5), the arbitral proceedings had continued for two more years
without any objections and, therefore they are deemed to have waived
their rights. This is precisely the fact pattern involved in the captioned
Petitions.
11. Dealing with such concurrent findings, the Supreme Court
framed the following issues in Bhadra International :
“29. Having heard the learned counsel appearing for the parties and having
gone through the materials on record, the following questions fall for our
consideration:-
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i. Whether the sole arbitrator could be said to have become “ineligible to
be appointed as an arbitrator” by virtue of sub-section (5) of Section 12
of the Act, 1996?
ii. Whether the parties could be said to have waived the applicability of
sub-section (5) of Section 12 of the Act, 1996, by way of their conduct,
either expressed or implied ?
iii. Whether the appellants could have raised an objection to the
appointment of the sole arbitrator for the first time in an application
under Section 34 of the Act, 1996?”
[Emphasis Supplied]
12. Dealing with the aforesaid issues, the Supreme Court went on
to consider the provisions of Section 12(5), and the march of the law as
declared in this regard, leading to a de jure ineligibility of a unilaterally
appointed arbitrator to validly conduct arbitration proceedings, to
answer the first issue.
No Deemed Waiver: .
13. Thereafter, the Supreme Court went on to consider whether a
party, by conduct, could be deemed to have waived expressly or by
necessary implication, any objection to the arbitral award passed by
such an arbitral tribunal. Towards this end, the Supreme Court held the
following :
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“79. The expression “express agreement in writing” demonstrates a
deliberate and informed act that although a party is fully aware of the
arbitrator’s ineligibility, yet it chooses to forego the right to object against
the appointment of such an arbitrator. The requirement of an express
agreement in writing has been introduced as it reflects awareness and a
conscious intention to waive the right to object under sub-section (5) of
Section 12. A clear manifestation of the expression of waiver assumes
greater importance in light of the fact that the parties are overcoming a
restriction imposed by law.
80. It is in the same breath we say that appointment of an arbitrator with
the consent of both parties is the general rule, while unilateral appointment
is an exception. When one party appoints an arbitrator unilaterally, even if
its own consent is implicit, the consent of the opposite party stands
compromised, and the choice of the former is effectively imposed upon the
letter.
85. The conscious use of the prefatory expression also serves to
differentiate such waiver from ‘deemed waiver’ as stipulated under Section 4
of the Act, 1996. We must be mindful of the fact that if the legislature
intended that waiver under Section 12(5) could similarly arise by implication
or conduct as mentioned under Section 4, it would have refrained from
introducing a heightened and mandatory requirement, more particularly, in
light of the rigours of the Seventh Schedule. The statutory design therefore
makes it evident that the bar under Section 12(5) can be removed only by a
clear, unequivocal ,and written agreement executed after the dispute has
arisen, and not by any form of tacit acceptance or procedural participation.
86. The mandate of an express agreement in writing in the present case
may looked at from one another angle. The unilateral appointment of an
arbitrator is assessed from the viewpoint of the parties. However, when the
parties later execute an express written agreement waiving the ineligibility
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of the proposed arbitrator, the position gets altered. Such written waiver
supplies the very consent that was previously missing, thereby placing the
appointment on the same footing as a mutually agreed appointment and
addresses concerns regarding neutrality and fairness.”
[Emphasis Supplied]
Participation Without Challenge in the Arbitration:
14. It is noteworthy that in Bhadra International , the
Supreme Court also dealt with the facet of a challenge being raised
before the Arbitrator when the proceedings are underway. The Supreme
Court has emphatically declared that when an Arbitrator is totally
ineligible to act as such, the ineligibility is a matter of law and would go
to the root of the appointment. Thus, the termination of mandate under
Section 14 would be automatic, regardless of whether a challenge was
raised in the course of the arbitration proceedings.
15. Therefore, it has been held that there is no need for a party
challenging an arbitral award under Section 34 of the Act to have
challenged the independence and impartiality of the arbitrator in the
course of the arbitration proceedings. Specifically, in dealing with the
facet of continued participation in the arbitration proceedings without
protest as a parameter of waiver, the Supreme Court held the following :
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“95. In Govind Singh v. Satya Group Pvt. Ltd., 2023 SCC OnLine Del 37 ,
the contention before the Delhi High Court was that the appellant therein by
its conduct had waived its right to object to the unilateral appointment of the
sole arbitrator. The Court categorically held that it is not necessary to even
examine whether the appellant had raised an objection. Even if the appellant
had participated in the proceedings without raising any objection, it cannot
be said that he had waived his right under Section 12(5) of the Act, 1996. The
relevant observations read thus:—
“
19. The contention that the appellant by its conduct has waived its
right to object to the appointment of the learned Arbitrator is also
without merit. The question whether a party can, by its conduct, waive
its right under Section 12(5) of the A&C Act is no longer res integra.
The Supreme Court in the case of Bharat Broadband Network Limited
v. United Telecoms Limited : (2019) 5 SCC 755 had explained that any
waiver under Section 12(5) of the A&C Act would be valid only if it is
by an express agreement in writing. There is no scope for imputing any
implied waiver of the rights under Section 12(5) of the A&C Act by
conduct or otherwise.
20. Thus, it is not necessary to examine the question whether the
appellant had raised an objection to the appointment of the learned
Arbitrator. Even if it is assumed that the appellant had participated in
the arbitral proceedings without raising any objection to the
appointment of the learned Arbitrator, it is not open to hold that he
had waived his right under Section 12(5) of the A&C Act. Although it
is not material, the record does indicate that the appellant had
objected to the appointment of respondent no. 2 as an arbitrator.”
(Emphasis supplied)
96. The net effect of the aforesaid is that a notice invoking the arbitration
clause under Section 21 of the Act, 1996, a procedural order, submission of
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statement of claim by the appellants, the filing an application seeking interim
relief, or a reply to an application under Section 33 of the Act, 1996, cannot
be countenanced to mean “an express agreement in writing” within the
meaning of the proviso to sub-section (5) of Section 12 of the Act, 1996 .
97. One could argue that a miscreant party may participate in the arbitral
proceedings up to the passing of the award, despite having full knowledge of
the arbitrator's ineligibility. While after an adverse award is rendered, such a
party may then seek to challenge it with a view to having it set aside. Such an
apprehension is reasonable, however, to obviate the possibility of such
misuse, the party making unilateral appointment must endeavour to enter into
an express written agreement as stipulated in the proviso to Section 12(5), so
as to safeguard the proceedings from being rendered futile.
98. Thus, all the High Court decisions taking a contrary view to the
present judgment would stand overruled.
[Emphasis Supplied]
Conclusions:
16. The declaration of law in Bhadra International is
emphatic and crystal clear. There is no longer any further room to
examine whether any participation in the arbitration proceedings, even
in the form of written pleadings would constitute consent to proceed by
necessary implication. Endorsing the Delhi High Court’s view in
5
Govind Singh emphatically, the law declared now leaves no room for
5
Govind Singh v. Satya Group Pvt. Ltd. – 2023 SCC OnLine Del 37
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inference and ability to distinguish the judgements in Perkins
Eastman or Bharat Broadband , or even Central Organisation .
17. Undoubtedly, the sole issue on which the parties agitated
their respective submissions before this Court was on the premise of
whether the Petitioners could be regarded as miscreants who
consciously participated in the arbitration proceedings up to the passing
of the Arbitral Award with full knowledge of the unilateral appointment,
and then taking up the challenge only when an adverse award is
rendered, in reliance upon Central Organisation .
18. This has been explicitly referred to by the Supreme Court in
Bhadra International to hold that, to avoid such a situation, it
would be mandatory for the unilaterally appointing party to enter into
an express written agreement of consent, which would be responsive to
a conscious and autonomous choice by such party, failing which the
proceedings would be rendered futile. In a nutshell, the conclusions
drawn by the Supreme Court can be profitably noticed from the
following extracts :
“123. A conspectus of the aforesaid detailed discussion on the position
of law as regards Section 12 of the Act, 1996, is as follows:—
“i. The principle of equal treatment of parties provided in Section
18 of the Act, 1996, applies not only to the arbitral proceedings but also
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to the procedure for appointment of arbitrators. Equal treatment of the
parties entails that the parties must have an equal say in the constitution
of the arbitral tribunal.
ii. Sub-section (5) of Section 12 provides that any person whose
relationship with the parties or counsel, or the dispute, whether direct
or indirect, falls within any of the categories specified in the Seventh
Schedule would be ineligible to be appointed as an arbitrator. Since,
the ineligibility stems from the operation of law, not only is a person
having an interest in the dispute or its outcome ineligible to act as an
arbitrator, but appointment by such a person would be ex facie invalid.
iii. The words “an express agreement in writing” in the proviso to
Section 12(5) means that the right to object to the appointment of an
ineligible arbitrator cannot be taken away by mere implication. The
agreement referred to in the proviso must be a clear, unequivocal
written agreement.
iv. When an arbitrator is found to be ineligible by virtue of Section
12(5) read with the Seventh Schedule, his mandate is automatically
terminated. In such circumstance, an aggrieved party may approach the
court under Section 14 read with Section 15 for appointment of a
substitute arbitrator. Whereas, when an award has been passed by such
an arbitrator, an aggrieved party may approach the court under
Section 34 for setting aside the award.
v. In arbitration, the parties vest jurisdiction in the tribunal by
exercising their consent in furtherance of a valid arbitration agreement.
An arbitrator who lacks jurisdiction cannot make an award on the
merits. Hence, an objection to the inherent lack of jurisdiction can be
taken at any stage of the proceedings.”
[Emphasis Supplied]
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19. Therefore, in view of the foregoing unequivocal and express
declaration of the law, also declaring that all High Court decisions that
have held a view contrary to Bhadra International would stand
overruled, it is clear that all the captioned Petitions would need to be
allowed. There is no basis left to consider any defence of the Arbitral
Awards impugned in the caption proceedings.
20. Evidently, the vice of unilateral appointment of an Arbitrator
is not curable by uncontested participation in the arbitration
proceedings. Evidently, equity would not supplant the law, and there is
no scope for supplementing the law declared on the anvil of uncontested
participation before the unilaterally appointed arbitrator.
21. Therefore, all the Petitions are hereby allowed and the
Impugned Awards are set aside.
22. All actions required to be taken pursuant to this order shall
be taken upon receipt of a downloaded copy as available on this Court’s
website.
[ SOMASEKHAR SUNDARESAN, J.]
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