Unilateral Appointment of Arbitrator is Impermissible; Independent Arbitrator Must Be Appointed for Prima Facie Existing Agreements

The Petitioner filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator to resolve disputes arising from an "Agreement for Taking Possession for Fit Outs" dated 20.08.2021

Clause 38 of said Agreement provided for arbitration but stipulated that the sole arbitrator was to be appointed unilaterally by "Ambience" (the Petitioner)

The Petitioner invoked arbitration via notice dated 01.08.2025

The Respondent objected to the clause on the grounds that it permitted impermissible unilateral appointment

1. Whether a clause providing for the unilateral appointment of an arbitrator by one party is legally sustainable

2. Whether the court, under Section 11(6), should refer the dispute to an independent arbitrator despite the invalidity of the appointment procedure in the agreement

3. What is the permissible scope of judicial scrutiny by a referral court under Section 11 of the Act in light of recent Supreme Court jurisprudence

Section 11(6) of the Arbitration and Conciliation Act regarding the appointment of arbitrators

The principle that unilateral appointment of an arbitrator is legally impermissible

The court followed the standard of scrutiny established by the Supreme Court in SBI General Insurance Co. Ltd. v. Krish Spinning (2024) and the seven-judge bench in Interplay Between Arbitration Agreements & Stamp Act, 1899, In re (2024), which narrowed the court’s role under Section 11 to a prima facie examination of the "existence" of an arbitration agreement only, leaving issues of "validity" or "accord and satisfaction" to the Arbitral Tribunal under the principle of competence-competence

The court observed that while Clause 38's provision for unilateral appointment was invalid under settled law, the "existence" of the arbitration agreement itself was not in dispute

Following the "eyes of the needle" and "facilitative role" doctrines revisited in Krish Spinning, the court held that its jurisdiction is extremely circumscribed and limited to ensuring a valid arbitration agreement exists in writing

The court reasoned that delving into contested facts or the merits of the dispute at the Section 11 stage would violate arbitral autonomy and the legislative intent of minimum judicial interference

Since the parties reached an agreement during the proceedings to refer the matter to the Delhi International Arbitration Centre (DIAC), the court found no impediment to appointing an independent arbitrator to cure the defect of the unilateral appointment clause

The court appointed Mr. Rajnish Kumar Jha, Advocate, as the Sole Arbitrator under the aegis of DIAC

The petition was disposed of with a direction for the Arbitrator to file the required Section 12(2) disclosure within one week