Paper Seller Can Resume Award Execution Against Buyer, As Delhi HC Says Non-Membership Alone Doesn’t Make Association-Appointed Arbitrator Ineligible

The Appellant, a paper wholesaler, sought to enforce an arbitral award for an outstanding commercial debt.

Invoices issued during the parties’ dealings contained a clause referring disputes to the Paper Merchants Association (Regd.), Delhi, for sole arbitration, with the arbitrator to be appointed by its Executive Committee.

The Association’s Executive Committee appointed the sole arbitrator; the Respondent did not participate, and the arbitrator awarded the claimed principal, interest, and further interest.

In execution, the Respondent objected that the arbitrator had been unilaterally appointed, that he was not an Association member, and that he had not consented in writing to the appointment after the disputes arose.

The Commercial Court allowed the objections and dismissed execution.

The Appellant appealed under Section 13 of the Commercial Courts Act, 2015, read with Order XXI Rule 58 CPC.

Section 7 of the Arbitration and Conciliation Act, 1996 permits an arbitration agreement to be established through written contractual terms or recorded communications; a separately signed agreement is not invariably required, but the material must establish consensus to arbitrate.

Section 12(5) renders an arbitrator ineligible where the arbitrator’s relationship falls within the Seventh Schedule; waiver is possible only by an express written agreement made after disputes arise.

Perkins Eastman Architects DPC v. HSCC (India) Ltd. concerns appointment control by an ineligible party; Bhadra International (India) Pvt. Ltd. v. Airports Authority of India addresses statutory ineligibility and the requirement of express written waiver.

Under Sections 35 and 36, an award is binding and enforceable, and an executing court ordinarily cannot go behind it, but may examine a jurisdictional objection that, if established, would make the award a nullity.

The Court also considered SRF Limited v. Jonson Rubber Industries Limited , Taipack Limited v. Ram Kishore Nagar Mal , Rajesh Jain v. M/s Shiv Shakti Impex , Punjab State Civil Supplies Corporation Ltd. v. M/s Atwal Rice & General Mills , M.V. Omni Projects (India) Ltd. , and Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat .

The Court considered the invoice clause sufficiently clear in its reference to “sole arbitration” and its identification of the Executive Committee as appointing authority; acceptance of invoices and the parties’ course of dealings were relevant to determining consensus, while the cheque supported the existence of the underlying debt but did not itself establish consent to arbitrate.

The Respondent’s non-membership did not, by itself, negate an independently agreed contractual reference to the Association.

The Commercial Court had not identified any relationship between the arbitrator and a party falling within the Seventh Schedule, nor material showing that the Association’s Committee was controlled by or acting in the interest of the Appellant.

It therefore erred in treating the appointment as necessarily unilateral merely because the Respondent was not an Association member.

The executing court could examine a genuine jurisdictional objection, notwithstanding the absence of a Section 34 challenge, but the alleged Section 12(5) disqualification was not established on the record.

It set aside the Commercial Court’s order, rejected the objections insofar as they challenged enforceability on the alleged unilateral appointment, and restored and remitted the execution petition for further proceedings.

The Commercial Court was directed not to reopen the appointment issue decided in the appeal, while remaining permissible execution objections could be considered within the executing court’s limited jurisdiction.