Courts must appoint an independent arbitrator where the arbitration clause permits unilateral appointment.

The petitioner sanctioned a loan facility of ₹4,93,269 to the respondents under a Loan Agreement dated 22 February 2025.

Following alleged defaults in repayment, the petitioner issued a loan recall/demand notice dated 23 September 2025 and subsequently invoked the arbitration clause contained in Clause 33 of the Loan Agreement through a notice dated 29 October 2025 under Section 21 of the Arbitration and Conciliation Act, 1996 (“A&C Act”).

The petitioner filed the present petition under Section 11(6) of the A&C Act seeking appointment of a sole arbitrator.

Despite repeated service attempts through courier, email and other modes, the respondents did not appear.

The Court found that the respondents had been duly served, including through delivery at the recorded email address and a courier consignment returned with the remark “unclaimed”.

The arbitration clause contemplated unilateral appointment of the sole arbitrator by the petitioner.

The Court applied Section 11(6) of the A&C Act, under which the Court may appoint an arbitrator where the agreed appointment procedure has failed or is legally impermissible, and Section 21 concerning commencement of arbitral proceedings through a request for reference to arbitration.

Under Section 3 of the A&C Act, a written communication is deemed received when sent to the addressee’s last known business or mailing address by a means providing a record of the attempt to deliver it.

Relying on SBI General Insurance Co. Ltd. v. Krish Spinning, (2024) 12 SCC 1, In re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 & the Stamp Act, 1899, (2024) 6 SCC 1, and Aslam Ismail Khan Deshmukh v. ASAP Fluids Private Limited, (2025) 1 SCC 502, the Court held that the Section 11 inquiry is limited principally to ascertaining the existence of a valid arbitration agreement.

Further, under TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377, Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760, Bharat Broadband Network Ltd. v. United Telecoms Ltd., 2019 SCC OnLine SC 547, and Hindustan Construction Co. Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd., (2026) 3 SCC 264, a party interested in the outcome of the dispute cannot unilaterally appoint the sole arbitrator; an independent arbitrator must therefore be appointed by the Court.

The Court held that the petitioner had established the existence of the Loan Agreement and the arbitration clause contained in Clause 33, which was sufficient at the Section 11 stage to constitute an arbitral tribunal.

The respondents’ failure to appear did not prevent adjudication because the petitioner had taken reasonable steps to serve them through courier and electronic mail, and the statutory requirements for deemed receipt under Section 3 were satisfied.

Although Clause 33 provided for unilateral appointment of the sole arbitrator by the petitioner, that mechanism was inconsistent with the impartiality and independence requirements recognised in the Supreme Court authorities cited by the Court.

Consequently, the contractual appointment procedure could not be enforced, and the Court was required to appoint an independent sole arbitrator.

The respondents were granted liberty to raise any preliminary objections concerning arbitrability or jurisdiction before the arbitrator.

The arbitrator was directed to furnish the disclosure required under Section 12 of the A&C Act, and the arbitration was directed to proceed under the aegis and rules of the Delhi International Arbitration Centre (DIAC).

All claims, counterclaims and other rights and contentions were left open for determination on merits, and the petition was disposed of accordingly.