HDB vs.

Nothway 851-28

Present : Sh. Vipul Dharmani Advocate, counsel for DH.

Jds no. 1 to 5 ex parte.

In hand is execution application to execute Arbitration Award dated

25.02.2017 under Order 21 rule 11(2) of CPC read with section 36 and 38

of Arbitration and Conciliation Act,1996 pertaining to award dated

25.02.2017 passed at Mumbai.

2 Heard. Judgment pronounced by Delhi High Court in case

titled as Kotak Mahindra Bank Ltd. Vs. Narendra Kumar Prajapat ,

2023(2) PLR 1, is before this Court. As per law laid down by Hon’ble

Delhi High Court, award passed by learned Arbitrator , unilaterally

appointed by DH without the consent of loanee/JD becomes non

executable. In para no. 4 of the judgment Division Bench of Hon’ble High

Court by relying upon the pronouncement of Hon’ble Supreme Court

observed as follows:

In response to the application, an affidavit in reply has been filed

by respondents denying all material allegations. It is accepted

that the contract entered into between the parties contains clause

24 regarding dispute resolution. It is, however, disputed that

there was any inaction on part of the respondent in discharging

their obligation in terms of Clause 24. It is submitted interalia

that

(a) The appointment of Major General K.T.Gajria was in

consonance with Clause 24 of the Contract;

(Krishan Kumar Singla)

ADJ/SAS Nagar/ DOD 12.12.23 1
HDB vs. Nothway 851-28

(b) Such appointment could not in any away be said to be illegal;

(c) There was no occasion to file an application seeking

appointment of any other person under the provisions of Section

11(6) read withSection 11(12)(a0 of the Act; and

(d) In any case , the arbitration in the present matter would not be

an International Commercial Arbitration within the meaning of

Section 2(1)(f) of the Act.

3 In case titled as Srei Equipment Finance Limited Vs.Sadhan

Mandal, 2023, AIR (Calcutta), 164 with regard to application filed

under Section 36 of Arbitration and Conciliation Act 1996 seeking

execution of award , Hon’ble Calcutta High Court in para no. 7 of the

judgement observed as follow:

I have dealt in detail with the fate of arbitral awards passed

by unilaterally appointed arbitrators in the case of

Cholamandalam Investment and Finance Company Ltd

Vs.Amarapali Enterprises and another reported in 2023 SCC

Online Cal 605 wherein after examination of the Supreme

Court's pronouncement in HRD Corporation Vs. GAIL

reported in (20180 12 SCC 471 TRF Limited Vs. Energo

Engineering Projects Limited reported in (2017) 8 SCC 377

Perkins Eastman Architects DPC vs. HSCC (India) Ltd

(supra) and Bharat Broadban Network Ltd Vs. United

Telecoms Ltd. reported in (2019) 5 SCC 755 , I had

concluded that arbitral awards passed by unilaterally appointed

(Krishan Kumar Singla)
ADJ/SAS Nagar/ DOD 12.12.23 2
HDB vs. Nothway 851-28

arbitrators do not carry the privilege of existence before the eyes

of law and should be regarded as a nullity. In other words, there is

nothing to execute in an execution application seeking

enforcement of an arbitral award which has been passed by

unilaterally appointed arbitrator. I have delineated below the

relevant paragraph of my judgment:

22 From the analysis undertaken above, the principles the

emanated are extracted below:

a. As held in HRD Corp (Supra), arbitrators falling under

Schedule VII of the Act are ineligible as they lack inherent

jurisdiction. Such, ineligibility was extended to persons appointed

by persons falling under Schedule VII of the Act in TRF Limited (

supra). This ineligibility was ultimately extended to persons who

are unilaterally appointed by one of the parties to the arbitration

in Perkins (supra)

b. The Apex Court has judicially expanded the schedule VII of the

Act to include persons unilaterally appointed by one of the parties

vide its judgment in Perkins(supra) and/or persons appointed by

persons falling under Schedule VII of the Act vide its judgment in

TRF Limited (supra).

c. It is settled principle of law that compliance with Section 12(5)

read with Schedule VII is sine qua non for any arbitral reference

to gain recognition and validity before the Courts. An arbitral

reference which begins with an illegal act vitiates the entire

(Krishan Kumar Singla)
ADJ/SAS Nagar/ DOD 12.12.23 3
HDB vs. Nothway 851-28

arbitral proceedings from its inception and the same cannot be

validated at any later stage. Thus, it would be logical inference to

consider such arbitral proceedings as void ab initio.

d. Awards passed by a unilaterally appointed arbitrator are nonest in

the eyes of law. While Section 47 of CPC is not directly applicable,

guidance has to be sought from the jurisprudence of the Apex Court

vis-a-vis decrees passed while lacking inherent jurisdiction. such

decrees do not exist in the eyes of law and similarly awards passed

while lacking inherent jurisdiction can be said to have never existed.

Therefore, the parties would be free to re-agitate the matter.

e. This judgement is applicable to awards wherein the arbitral

proceedings commences post the 2015 amendment to the Act. It

does not deal with proceedings having been initiated pre the 2015

amendment and concluding post the 2015 amendment.

4 In case titled as Cholamandalam Investment and Fiance

Company limted Vs. Amarpal Enterprise & Another EC 122 of

2022, DOD 14.03.2023 , Hon’ble High Court at Calcutta with regard to

application filed under Section 36 of Arbitration and Conciliation Act for

execution of arbitral award in para no.24 observed as follows:

Impartiality as discussed is the paramount principle of arbitral

proceedings and something which the Courts have to safeguard at

every stage of such proceedings. Even at the stage of execution, the

lady of justice cannot turn a blind eye and let one party run over the

other. The people vest faith in the Court to sadfeguard their rights
(Krishan Kumar Singla)
ADJ/SAS Nagar/ DOD 12.12.23 4
HDB vs. Nothway 851-28

and uphold the principles of natural justice, irrespective of

procedural hurdles. Whatever the case may be , including an

execution case where Courts are expected to simply enforce the

award without further probing, impartiality as principle cannot be

railroaded. Shackles of procedural limitation in such cases will not

prevent parties from seeking the immunity of the Court. Parties

make such unilateral appointments couch behind procedural

technicalities to shield their unlawful act and reap the fruit of their

own mischief.

5 In the matter in hand, DH has unilaterally appointed Sh.

D.K.Sharma as Sole Arbitrator .There is nothing on file to show that

consent of JD about such appointment was ever obtained. The award is

total silent in this regard. Rather from the award it comes out that Learned

Arbitrator was appointed sole Arbitrator by DH. The provisions contained

under Section 12(5) read with 5th and 7th Schedule of the Arbitration and

Conciliation Act 1996, debar the parties from unilaterally appointing an

arbitrator. In Perkins Eastman Architech DPC and Anr Vs. HSCC

(India) Limited, AIR 2020 , SC, 59 , the Hon’ble Supreme Court ruled

that the unilateral appointment power of appointing the sole arbitrator is

invalid because there is a possibility of bias, in which the appointed

arbitrator may act in a way to save the interests of the appointing party,

thus, violating the neutrality of the proceedings. It is trite to observe that

an arbitrator may either be appointed with the consent of the parties or

alternatively by the order of the Court. There is no third option available.

(Krishan Kumar Singla)

ADJ/SAS Nagar/ DOD 12.12.23 5
HDB vs. Nothway 851-28

6 The Hon’ble High Court of Allahabad in Garg Gas

Service Vs. Hindustan Petroleum Corporation Limited 2020 Law

Suit ( All) 105, held that any appointment of the arbitrator by the

claimant will have no effect in law and his proceedings will be nonest.

7 The validity of nonest proceedigns can be set up whenever it

is sought to be enforced as a foundation for a right, even at the stage of

execution or in collateral proceedings.

8 From the judgements discussed above, it clearly comes out

that in the similar circumstances, it was held that sole arbitrator appointed

in such fashion without the waiver by opposite party becomes ineligible,

he lack inherent jurisdiction to proceed further and the arbitral award

rendered by such ineligible Arbitrator cannot be considered as an Arbitral

award. Same is a nulity and cannot be enforced.

9 This being the legal and factual position, the Award under

execution in the present proceedings also becomes in-executable.

10 The current execution proceedings cannot be continued.

Same are dismissed.

11 File be consigned to Record Room.

JYOTSNA
ARYA
"I attest to the
accuracy and
authenticity of

Pronounced (Krishan Kumar Singla)

this document."
2023.12.22
16:06:21 +0530

12.12.2023 Additional District Judge

SAS Nagar
jyotsna, stenographer I UID no. PB0197

(Krishan Kumar Singla)

ADJ/SAS Nagar/ DOD 12.12.23 6