Unilateral appointment of sole arbitrator was void even under pre-2015 law, Delhi HC rules; participation under protest did not validate ₹77-crore award

The appellant and BF Infrastructure Limited entered into a Share Purchase Agreement (SPA) containing an arbitration clause providing for a sole arbitrator to be appointed in accordance with the Arbitration and Conciliation Act, 1996.

After disputes arose, the appellant invoked arbitration and, following the respondents’ failure to agree to an appointment, unilaterally nominated the sole arbitrator.

The respondents objected to the appointment before the arbitrator, but the objections were rejected; the arbitrator later awarded the appellant ₹77 crore and dismissed the counterclaims.

The respondents’ petitions under Section 34 were allowed, and the award was set aside as arising from a void appointment.

The appellant appealed under Section 37.

1. Whether the appellant’s unilateral appointment of the sole arbitrator, without the respondents’ consent and contrary to the SPA’s appointment procedure, was valid

2. Whether the respondents’ participation in the arbitration, failure to seek appointment under Section 11, or alleged delay in objecting amounted to waiver of their challenge

3. Whether the unilateral appointment rendered the award liable to be set aside, and whether the Single Judge’s decision fell within the permissible scope of review under Section 37

Section 11(2) of the Arbitration and Conciliation Act, 1996 permits parties to agree on an appointment procedure; under Section 11(5), where parties fail to agree on a sole arbitrator, appointment is to be made by the competent court or its designate upon a party’s request.

An appointment made contrary to the agreed procedure and statutory mechanism may be invalid.

Section 4 concerns waiver by a party that, knowing of non-compliance with a derogable requirement, proceeds without timely objection; timely objection and participation under protest do not establish waiver.

Section 18 requires equal treatment of parties.

Under Sections 34 and 37, appellate review is confined to the grounds and limits applicable to setting aside an award; Section 37 does not permit an independent reassessment of the award.

The Court relied on MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, and UHL Power Co. Ltd. v. State of H.P., (2022) 4 SCC 116, on the restricted scope of Section 37 review.

The Court relied on Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), (2025) 4 SCC 641, on the concerns raised by unilateral appointment of a sole arbitrator.

The Court relied on BCCI v. Kochi Cricket (P) Ltd., (2018) 6 SCC 287, on the application of amended Section 34 to petitions filed after the amendment.

Clause 20.4 required the dispute to be referred to a sole arbitrator appointed in accordance with the Act; it did not authorize either party to appoint the arbitrator unilaterally.

The appellant’s notice purporting to permit unilateral appointment after 15 days altered the agreed procedure, and the appellant then appointed the arbitrator without the respondents’ consent.

In the absence of agreement, the appointment mechanism under Section 11 applied; the appellant, as the party invoking arbitration, was required to seek appointment through that mechanism.

The respondents objected before the arbitrator and participated under protest, so their conduct did not validate the appointment or establish waiver under Section 4.

The Court also held that Section 12(5) did not apply to this pre-amendment arbitration, but that did not validate an appointment contrary to the SPA and Section 11; the unilateral appointment raised concerns about impartiality and equal treatment.

The Single Judge’s conclusion that the appointment was void was therefore within the permissible limits of review under Section 37.

It found no ground to interfere with the Single Judge’s decision setting aside the award.

The appeal was dismissed, and the pending application was disposed of.