Delhi District Court
Arun Khattar vs Kanad Kashyap And Anr on 25 July, 2025
DLCT010048202024
IN THE COURT OF SH. M. K. NAGPAL, DISTRICT
JUDGE (COMMERCIAL COURT)-13, CENTRAL DIS-
TRICT, TIS HAZARI COURTS, DELHI
OMP (COMM) NO. :- 27/2024
CNR NO. DLCT01-004820-2024
IN THE MATTER OF :-
Sh. Arun Khattar
S/o Sh. Atam Prakash Khattar,
Aged 62 years,
2E, Caxton House, Jhandewalan Extension,
New Delhi-110005,
Also At
House No. 23/9A, Tilak Nagar,
New Delhi-110018.
... Petitioner
Vs.
1) Sh. Kanad Kashyap,
R/o C-42, Retreat Housing Society,
Patparganj, Delhi-110092.
2) Smt. Manju Jain,
R/o F-2/12-13, Sector-11,
Rohini, New Delhi-110085.
....Respondents
ORDER
25.07.2025
1. This petition has been filed by petitioner under the
provisions of Section 34 of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as the ‘Act’) challenging the arbitral
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award dated 30.12.2023 (hereinafter referred to as the ‘Impugned
Award’) passed by the Ld. sole arbitrator appointed by
respondents herein and adjudicating upon the disputes that arose
between parties from a partnership deed dated 11.05.2018
executed between them. Vide the above impugned award, the Ld.
sole arbitrator is stated to have partly allowed the claims of
respondents and has directed the petitioner herein to pay a total
sum of Rs. 26,65,194/- to respondents, along with pendente lite
and future interest @ 12% pa on expiry of a period of 60 days
from the date of award.
2. CASE OF PETITIONER:
As gathered from the contents of petition and the
documents enclosed therewith, the case of petitioner is that one
Sh. B. R. Jain, who was lessor of one of the showrooms being
run by petitioner, had approached him while stating that son of
his very close friend wanted to learn the ropes of toy industry and
since the petitioner had a vast experience in that field and was
already running his toy business in the name of M/s Happy Zone,
it would be helpful if the petitioner could guide the son of his
friend and be a part of his venture. The petitioner claims that
upon insistence by Sh. B. R. Jain and the respondents, he became
a part of their joint venture and one partnership deed dated
11.05.2018 was executed between him and the respondents. It is
observed that through the said deed, parties had agreed to
conduct business of their partnership firm under the name andOMP (COMM) No. 27/2024 2/ 32
DLCT010048202024style of M/s Sangam Impex for import/export and trading of all
types of consumer, household and other utility goods etc.It has been averred by petitioner that though in terms of the
said partnership deed, the shares of parties in above business
were kept equal and he even invested the requisite amount for
accounting purposes upon insistence of the respondents and Sh.
B. R. Jain, but he was not involved in day to day business of the
firm and it was being run by respondents as well as husband of
respondent no. 2, who was the power of attorney holder of
respondent no. 2 and had even filed a claim before the Ld.
arbitrator on behalf of respondent no. 2 in his above said
capacity.
It has been further averred by petitioner that suddenly in
the month of January, 2019, he got to know that respondent no. 1
had moved to Australia and now only respondent no. 2 and her
husband would be managing the business of firm and soon
thereafter, COVID pandemic had hit the country and thus, he
became completely unaware of the business of said firm. It has
also been averred by him that in the month June, 2020, the above
firm even vacated the rented premises of their stores and it had
hardly any fixed expenses and he had kept some unsold
inventory of the goods of said firm in his own business being run
in the name of M/s Happy Zone to enable the sale of said goods
and to recover the invested money. The petitioner claims that it
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shockingly came to his knowledge that the above firm had taken
huge amounts of loan without any major expenses and above
arrangement of sale of the firm’s goods by him from his own
business was misused by respondents and without any
discussions with him about closure of business of the said firm,
the respondents had issued a misleading legal notice dated
30.11.2022 to him entirely based on some false and frivolous
grounds and seeking payment of Rs. 38,92,184/- from him with
interest.
It is further the case of petitioner that thereafter, the
respondents had also issued one letter dated 10.05.2023 to him
for initiation of arbitration proceedings and for unilateral
appointment of a sole arbitrator for adjudication of disputes
between them and the said appointment was also accepted by
Ld. sole arbitrator vide his declaration dated 17.05.2023 made
under Section 12 (1) of the above said Act. It is being claimed by
petitioner that then a false statement of claim with annexures was
filed by respondents before the Ld. sole arbitrator and the
petitioner had also filed his statement of defence/reply thereto as
well as a written synopsis etc. and after completion of pleadings
and hearing, the impugned award dated 30.12.2023 came to be
passed by the Ld. sole arbitrator and the same is patently illegal,
perverse and it deserves to be set aside on given grounds stated in
the petition.
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3. GROUNDS OF CHALLENGE TO THE IMPUGNED
AWARD BY PETITIONER
The impugned award has been challenged by petitioner
mainly on the following grounds:-
(a) That Ld. sole arbitrator has not appreciated the facts or
factual background of the case in correct spirit and has failed to
adjudicate the core issue of management and control of the
partnership business, which was with the respondents;
(b) That Ld. sole arbitrator has decided the entire dispute
relying merely upon the annual reports of the firm as well as the
equal status of partners in the partnership deed.
(c) That the arbitral proceedings and award pronounced by Ld.
sole arbitrator are squarely hit by the ratio laid down by the
Hon’ble Supreme Court in case of Perkins Eastman Architects
DPC Vs. HSCC (India) Ltd., (2020) 20 SCC 760, which further
came to be reiterated by the Hon’ble High Court in case of
Proddatur Cable TV Digi Services Vs. Siti Cable Network
Limited [2020 SCC Online Del 350], as the sole arbitrator was
appointed unilaterally by respondents, who were the parties
interested in outcome of disputes and further that his appointment
was even against the provisions of Clause 15 of the partnership
deed;
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(d) That the arbitral proceedings did not adhere to the settled
judicial precedents and hence, the same are liable to be set aside
under Section 34 of the said Act, as held by the Hon’ble Supreme
Court in case of MMTC Ltd. Vs. Vedanta Ltd., (2019) 4SCC
163; and
(e) That Ld. sole arbitrator has wrongly allowed some of the
claims of respondents and has passed the impugned award on
basis of wrong appreciation of the documents on record.
4. CASE OF RESPONDENTS
The respondents in their reply filed to the petition have
challenged the case of petitioner and have defended the
impugned award on following grounds:-
(i) That during the entire proceedings, conducted before Ld.
sole arbitrator, the petitioner had nowhere taken any objection
whatsoever regarding the appointment of Ld. arbitrator and it can
also be seen from record of arbitral proceedings filed by
petitioner himself, that he never challenged the appointment of
Ld. arbitrator under Sections 11,13,14 & 16 of the above said Act
nor he had sought the disqualification of Ld. arbitrator under
Section 12 (5) of the Act and rather, he had actively participated
in the said proceedings;
(ii) That participation by petitioner in the arbitral proceedings
without any demur qua the appointment of Ld. sole arbitrator canOMP (COMM) No. 27/2024 6/ 32
DLCT010048202024be demonstrated by or seen from the fact that the petitioner had
complied with all procedural orders passed by the Ld. arbitral
tribunal from time to time and had also filed his statement of
defence, framing of issues and evidence etc.;
(iii) That the decision of the Hon’ble Apex Court in case
Perkins Eastman Architects DPC (supra), which is being
heavily relied upon by him, is not applicable in the instant case as
the said decision was given on 26.11.2019, whereas the
impugned award has been passed on 30.12.2023 and even though
the said decision stood already delivered by the Hon’ble Apex
Court, the petitioner failed to raise any objection regarding the
appointment of Ld. arbitrator at any stage of the arbitral
proceedings and raising of the said objection by him now at this
belated stage is absurd and non-est in law;
(iv) That decision of the Hon’ble Supreme Court in case
Perkins Eastman Architects DPC (supra) is not applicable to
the facts of present case as in that case, the Hon’ble Apex Court
has dealt with a petition filed under the provisions of Section
11(6) of the Act, whereas the present petition has been filed
under Section 34 of the said Act which contains some specified
grounds for challenge to an arbitral award and the same can not
be challenged and set aside on the mandate of appointment of
arbitral tribunal;
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(v) That the respondents through a notice dated 13.03.2023
had invoked the arbitration clause as per provisions contained
under Section 21 of the Act by proposing the name of Ld. sole
arbitrator and through the said notice, they had also called upon
the petitioner for suggesting any other name of arbitrator, in case
he had any objection to the appointment of Ld. sole arbitrator
named by them, within 15 days from receipt of the said notice,
but the petitioner failed to reply to said notice and having no
other alternative, the respondents vide their letter dated
10.05.2023 had appointed the above arbitrator under intimation
to the petitioner;
(vi) That even in his reply dated 06.06.2023 given to the above
notice of respondents, the petitioner did not raise any objection to
the appointment of Ld. sole arbitrator and he had simply
suggested the respondents to meet him and resolve the dispute
amicably;
(vii) That though the Counsel for petitioner through his letter
dated 20.06.2023 had raised certain objections before the Ld.
sole arbitrator, but even in the said letter the appointment of Ld.
arbitrator for adjudication of disputes between parties was not
objected and since the assurance of full cooperation and
assistance on part of petitioner was given in the said letter, it has
to be deemed that the petitioner had consented for appointment
of the Ld. arbitrator and he had waived off his right to raise any
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objection to the appointment of Ld. arbitrator, as held by the
Hon’ble Delhi High Court in case of Kanodia Infratech
Limited Vs. Dalmia Cement (Bharat) Limited 2021 SCC
Online Del 4883.
(viii) That the arbitration proceedings were conducted at Rohini,
New Delhi and the seat of arbitration or place where the arbitral
proceedings are conducted and concluded is relevant to
determine the territorial jurisdiction of the court, which will have
the supervisory control over the arbitration proceedings, and
hence, in view of provisions contained in Section 2 (1) (e) and 20
of the above said Act, this court has no territorial jurisdiction to
entertain or decide the petition.
(ix) That it is well settled that an arbitration award can be
challenged or set aside on certain specified grounds only, as
mentioned in Section 34 of the Act, and the scope of interference
by this court under this Section is very limited and this court
should not interfere with the impugned award since it does not
suffer from any patent illegality or perversity and has been
passed by the Ld. sole arbitrator on correct appreciation of the
pleadings and evidence of parties.
5. I have heard the arguments advanced by Sh. Mritunjai
Singh, Ld. Counsel for petitioner and Sh. Roopansh Purohit &
Sh. Mohd. Zaid, Ld. Counsels appearing on behalf of
respondents and I have also carefully perused the case record,
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including the written submissions filed on behalf of both parties
and the original arbitral record has been perused.
6. Thus, as is clear from above that the challenge made by
respondents to the present petition and their defence to the
impugned award is firstly on the ground of territorial jurisdiction
of this court and apart from this, they have also submitted that
award impugned in this petition is not an unilateral award as the
Ld. sole arbitrator was appointed in accordance with provisions
of the partnership deed executed between parties and further that
the petitioner at no stage had ever objected to or challenged the
appointment or jurisdiction of Ld. sole arbitrator to enter upon
the arbitral reference or to proceed with and adjudicate upon the
same. Again, it is also the case of respondents that the petitioner
by his conduct before and during the arbitral proceedings and by
participating therein had surrendered to the jurisdiction or
accepted the appointment of Ld. arbitrator and he shall be
deemed to have waived his right to object to the arbitral award,
which came to be passed subsequently by the Ld. sole arbitrator.
Further, they have also defended the impugned award on ground
that this petition does not contain any of the grounds prescribed
by Section 34 of the above said Act for setting aside the same.
7. It is the submission of Ld. Counsel for petitioner that no
seat or venue for conduction of arbitration proceedings was fixed
by parties in this case and merely because the arbitration
proceedings have been conducted by Ld. sole arbitrator at Rohini
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is not sufficient to hold or say that the courts at Rohini alone will
have the jurisdiction in such a case as the seat or legal seat of an
arbitration proceedings is not to be confused or mixed with the
place or venue of conduction of said proceedings as it is well
settled that the Ld. arbitrator can conduct the proceedings even at
other places different from the designated seat for conduction of
said proceedings for the convenience of parties or for other
reasons. It is also the submission of Ld. Counsel for petitioner
that even otherwise, the Ld. arbitrator of this case was appointed
unilaterally by respondents and his appointment was made in
contradiction and violation to the terms contained in partnership
deed and hence, once the appointment of Ld. arbitrator himself
was illegal and void ab-initio, as held in various decisions of the
Hon’ble Supreme Court and High Courts, then the seat, venue or
place of conduction of arbitration proceedings as decided by the
Ld. arbitrator becomes immaterial and hence, the award rendered
by him has to be held a nullity or non-est in the eyes of law and
the same is liable to set aside. It is further his submission that in
case there was no agreement between parties with regard to the
seat of arbitration, the seat would be where the cause of action
has arisen and the supervisory jurisdiction of court shall
accordingly be determined.
8. Though Ld. Counsel for petitioner has fairly conceded that
the scope of interference by this court under Section 34 of the
above said Act is limited and this court cannot re-appreciate the
pleadings or evidence of parties on merits and cannot substitute
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its own findings for the findings arrived at by the Ld. sole
arbitrator, but he has vehemently argued that the impugned award
is liable to be set aside solely on the ground that it has been given
by a sole arbitrator appointed unilaterally by respondents and
against the spirit of provisions contained in the above said Act
and the judicial pronouncements with regard to party autonomy
in appointment of an arbitrator by mutual consent and the
impartiality of the arbitrator.
9. Besides the judgments referred to in this petition and as
stated above, Ld. Counsel for petitioner has also referred to and
relied the judgments in cases BBR India (P) Ltd. Vs. S.P. Singla
Construction (P) Ltd., 2023 1 SCC 693, Enercon (India) Ltd.
Vs. Enercon Gmbh, (2014) 5 SCC 1, Indus Mobile
Distribution (P) Ltd. Vs. Datawind Innovations (P) Ltd.,
(2017) 7 SCC 678, Ravi Ranjan Developers Pvt. Ltd. Vs.
Aditya Kumar Chatterjee [2022 SCC Online SC 568], BGS
SGS Soma JV Vs. JHPC Limited (2020) 4 SCC 234, State of
W.B. Vs. Associated Contractors, (2015) 1 SCC 32, Bharat
Broadband Network Ltd. Vs. United Telecoms Ltd., (2019)
5SCC 755, Delhi Integrated Multi Model Transit System Ltd.
Vs. Delhi Jal Board, 2021 SCC Online Del 4958 and
Coronation Infrastructure Pvt. Ltd. Vs. TATA Capital
Finances Services, 2022 SCC Online Del 3336.
10. Per contra, it has been vehemently argued by Ld. Counsel
for respondents that this court has no territorial jurisdiction to
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entertain or decide this petition as the arbitration proceedings
have been conducted by Ld. sole arbitrator at his given address of
Rohini and hence, this petition was required to be filed by
petitioner before the courts at Rohini as the seat of Ld. arbitrator
was at Rohini and even the entire arbitration proceedings have
been conducted at the given address of Ld. arbitrator situated
within the jurisdiction of Rohini Courts. It is also his submission
that the arbitration proceedings were conducted and concluded
by the Ld. arbitrator at Rohini without any objection from the
side of petitioner qua the seat of Ld. arbitrator and thus, the
petitioner by his conduct had made the said seat to be the
designated seat of arbitration proceedings and the seat determines
the exclusive territorial jurisdiction of the courts for supervisory
control over the arbitration proceedings, as per provisions
contained in Section 2 (1) (e) and Section 20 of the above said
Act. It is also his submission that it is the settled law that the seat
of arbitration proceedings is to be determined on the basis of its
connection with the arbitration proceedings and not with the
cause of action. It is further his submission that in terms of
judgments of the Hon’ble Supreme Court as well as High Courts,
the applicability of Section 42 of the Act was only for the
purposes of determining the court, which a party may approach
in anticipation of arbitration proceedings by way of an
application under Section 9 of the said Act. It is further his
submission that if a seat of arbitration is fixed or designated, then
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the court having jurisdiction over the said seat is the exclusive
competent court to entertain such petition.
11. He has also relied upon judgments in cases Delhi Tourism
and Transportation Development Vs. Satinder Mahajan, 2024
SCC Online Del 3206, Bharat Aluminium Company Vs.
Kaiser Aluminium Technical Services INC (2012) 9 SCC 552,
BBR (India) Private Limited Vs. S. P. Singla Constructions
Private Limited (2023) 1 SCC 693, Southern Railway Vs. M.
R. Ramakrishnan, 2023 SCC Online Ker 843 and BGS SGS
Soma (supra).
12. It is further the submission of Ld. Counsel for respondents
that the issue or objection regarding maintainability of petition
before this court for lack of territorial jurisdiction is required to
be decided first and before going into merits of the case and on
this aspect, he has also relied upon a judgment of the Hon’ble
Supreme Court in case Asma Lateef And Anr. Vs. Shabbir
Ahmad And Ors., (2024) 4 Supreme Court Cases 696.
13. There is no doubt with regard to the submission being
made by Ld. Counsel for respondents or the legal position that an
objection pertaining to jurisdiction of a court has to be decided
first as the decision on this issue goes to root of the case and
pertains to very competency of the court to entertain the case and
to decide the disputes on merits and if a court decides the
controversy or disputes on merits, without first deciding upon its
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own competency to adjudicate upon the same, then the decision
or judgment to be tendered in such a case shall be illegal and
shall amount to have been pronounced on erroneous assumption
of jurisdiction by the court, as was held in the case of Asma
Lateef and Anr. (supra) being relied upon by Ld. Counsel for
respondents.
14. However, in the present case, though this court is taking up
the issue of its territorial jurisdiction for decision first, but it will
be clear from further discussion to be held by court that for
deciding the above issue, this court will also have to appreciate
the pleadings and documents of parties and the rival contentions
of Ld. Counsels representing them to discuss the issue of
unilateral appointment of Ld. arbitrator simultaneously, as the
same is necessary for deciding the issue of territorial jurisdiction.
It is so because as per the case of respondents, the courts at
Rohini have exclusive jurisdiction because the seat of arbitration
was there and the appointment of Ld. sole arbitrator was accepted
or acquiesced in by petitioner, whereas according to petitioner
the appointment of Ld. arbitrator and determination of seat was
unilateral and this court has the territorial jurisdiction in terms of
provisions contained in the above said Act to decide this petition.
15. According to Section 2 (1) (e) of the above said Act, a
court in relation to a domestic arbitration case means the
principal civil court of original jurisdiction in a district, including
the High Court in exercise its ordinary original civil jurisdiction,
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having jurisdiction to decide the questions forming the subject
matter of the arbitration as if the same had been the subject
matter of a suit. However, it is now settled that if the parties have
fixed or determined a seat for conduction of arbitration
proceedings, then the courts having jurisdiction over the place
where the arbitration seat is located shall have the exclusive
jurisdiction and supervisory control over the arbitration
proceedings or disputes arising therefrom between the parties, as
held by the Hon’ble Supreme Court in cases BGS SGS Soma JV
(supra) being relied upon both sides and BBR India (P) Ltd.
(supra) etc. being relied upon by Ld. Counsel for petitioner.
16. Further, in terms of Section 20 (1) of above said Act, the
parties are free to agree on the place of arbitration and as per sub-
section (2) of this Section, in case the parties fail to agree upon
same, the place of arbitration shall be determined by the arbitral
tribunal having regard to circumstances of the case, including the
convenience of parties. Sub-section (3) of this Section provides
that notwithstanding the provisions contained in sub-section (1)
or (2) of this Section, the arbitral tribunal may, unless otherwise
agreed by the parties, meet at any place it considers appropriate
for consulting among its members, for hearing witnesses, experts
or the parties or for inspection of documents, goods or other
property. It is also now settled that the word “place” used in sub-
sections (1) & (2) and that used in sub-section (3) of this Section
is not the same as in sub-sections (1) & (2) it refers to the seat or
legal seat which has been agreed, designated or determined by
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the parties for conduction of arbitration proceedings and the said
word when used in sub-section (3) is with reference to the place
of conduction of such proceedings, which may even be different
from the place where the seat of arbitration has been designated
as this place for conduction of proceedings has to be determined
by the Ld. arbitrator keeping in view the circumstances of the
said case and in light of the provisions contained in said sub-
section, for the convenience of parties or witnesses etc. It is also
well settled that even if the word “venue” has been used by the
parties for the place of conduction of arbitration proceedings, the
same has to be taken as the seat of arbitration if the agreement
between parties conveys that the said venue or place was
intended to be the legal or juridical seat for conduction of
arbitration proceedings and the same does not convey any other
place as such.
17. Further, in terms of Section 42 of the Act, notwithstanding
anything contained elsewhere in the said part or in any other law
for the time being in force, where with respect to an arbitration
agreement any application under that part has been made in a
court, then that court alone shall have the jurisdiction over the
arbitral proceedings and all subsequent applications arising out of
the said agreement and the arbitral proceedings shall be made in
that court and in no other court. However, it has been held that
the provisions of this Section are only intended to apply to a
“court” as defined in Section 2 (1) (e) of the Act and the parties
cannot approach to any other court within whose jurisdiction no
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cause of action in respect to the subject of an agreement arose or
which cannot be considered to be the principal civil court of
jurisdiction of the district in respect to said matter. Since no other
application or petition pertaining to the subject matter in question
has been filed before any other court, the question of
applicability or interpretation of provisions of this Section 42 of
the Act does not arise in this petition.
18. Now coming back to facts of the present case, the
contention of Ld. Counsel for respondents regarding the
jurisdiction of Rohini courts can be accepted by this court only
when this court is able to conclude from pleadings of parties and
the documents on record that the parties have agreed for the seat
of arbitration to be at Rohini or for adjudication of their disputes
by the Ld. sole arbitrator appointed in the case and conduction of
proceedings by him at his given address of Rohini.
19. As already discussed, the disputes between parties
admittedly arose out of one partnership agreement dated
11.05.2018 executed between parties and the relevant Clause 15
of this agreement containing a provision for adjudication of
disputes through arbitration is being reproduced herein below:-
“15. In the event of any dispute or difference or question arising
between the partners hereto, during the continuance of the
partnership or any time thereafter, such disputes, differences or
question shall be referred to an Arbitrator, appointed by
majority of partners in accordance with the provisions of Indian
Arbitration Act or any statutory modification thereof for the
time being in force.”
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20. It is clear from the above Clause that though the parties
had agreed for adjudication of their disputes or differences
arising out of the partnership business through an arbitrator, but
the seat of conduction of arbitration proceedings was not agreed
or decided by the parties through this Clause and even the
arbitrator was not named by the parties and his appointment was
left to the decision of majority of partners to be made in
accordance with provisions of the Arbitration Act or any statutory
modifications thereof for the time being in force. Hence, it
cannot be said on the basis of this Clause that the seat or venue
for conduction of arbitration proceedings was to be at Rohini and
therefore, on the basis of this Clause, it also cannot be said that
the courts at Rohini alone were having the supervisory
jurisdiction in the present case.
21. Now coming to the question of appointment of Ld. sole
arbitrator and the legality thereof, it has been argued on behalf of
respondents that the same was in compliance of the terms and
spirit of this Clause as it empowered the majority of partners to
appoint the arbitrator and since the disputes arose between parties
in respect to the partnership business carried out or being carried
by them, the respondents herein have legally and validly
exercised their right to appoint the sole arbitrator for adjudication
of said disputes. However, this court is not able to accept the
above argument of Ld. Counsel for respondents as the said
Clause also stipulates that such an appointment of arbitrator by
majority of partners has to be in accordance with provisions of
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the above said Act or any statutory modifications thereof as are in
force.
22. It is the mandate contained in the above said Act and also
the admitted and settled legal position that the appointment of an
arbitrator has to be with the consent of both or all the parties and
they are free to appoint any person to act as an arbitrator for
adjudication of their disputes and they are also free to decide
upon the seat for conduction of arbitration proceedings.
However, in the present case, though the disputes arose between
the three partners of the above firm, who are party to this
petition, but the appointment of Ld. sole arbitrator has not been
made with consent of all three of them and it has been made by
only two partners who are respondents in this petition. Hence,
since these two partners or respondents were having a common
interest in subject matter of arbitration and same was against or
contrary to the interest held or rights being claimed by the third
partner or petitioner herein, the above appointment of Ld. sole
arbitrator by respondents has to be held to be a unilateral
appointment and not an appointment which was made with the
consent or concurrence of all partners.
23. Section 12 of above Act contains the grounds on which
appointment of an arbitrator can be challenged and a bare perusal
of the provisions contained in this Section shows that an
arbitrator has to be an independent person. Any relation or
interest of arbitrator with any of the parties or even the non-
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disclosure thereof can render an arbitrator to be incompetent to
conduct the arbitration proceedings in terms of said Section and
the award to be delivered by such an arbitrator to be non-est or a
nullity in eyes of law and hence, non-executable. The entire
thrust of provisions contained in above Section and Act is to
ensure that an arbitrator is a neutral person and he represents
consents of all the concerned parties. The above legal position is
duly reflected in almost all the relevant judgments being referred
to by Ld. Counsels for parties. Sub-section (2) of Section 12 of
the said Act makes it necessary for the arbitrator to make certain
disclosures mentioned in sub-section (1) thereof in form
specified in Sixth Schedule of the Act and sub-section (5)
thereof, which was inserted by the Amendment Act of 2015,
provides that notwithstanding any prior agreement to the
contrary, any person whose relationship, with the parties or
counsel or the subject matter of the dispute, falls under any of the
categories specified in the Seventh Schedule of Act shall be
ineligible to be appointed as an arbitrator. However, as per
proviso added to this sub-section, the parties may, subsequent to
disputes having arisen between them, waive the applicability of
this sub-section by an express agreement in writing.
24. As stated above an award which has been given by a sole
arbitrator unilaterally appointed or got appointed by a party is
void ab-initio and it has to be treated as non-est in the eyes of
law. It is also settled that if a person himself is not competent to
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act as an arbitrator because of the reason that he has an interest in
any of the parties or the subject matter of dispute between them,
then he cannot also appoint any other person to act as an
arbitrator. The principles of fair play are considered pivotal and
sacrosanct to the appointment of arbitrators as well as to the
proceedings in arbitration and any omission thereof or deviation
therefrom would result in striking at the very root of jurisdiction
of arbitrator and it would render the entire proceedings conducted
and award given by him as unacceptable and unsustainable in the
eyes of law.
25. In case of Dharma Prathishthanam vs M/S. Madhok
Construction Pvt. Ltd., 2005 (9) SCC 686, the Hon’ble
Supreme Court of India observed as under:-
” The Constitution Bench in Khardah Company Ltd. Vs. Raymond
& Co.(India) Private Ltd. AIR 1962 SC 1810 decided the issue
from the view point of jurisdictional competence and held that
what confers jurisdiction on the arbitrators to hear and decide a
dispute is an arbitration agreement and where there is no such
agreement there is an initial want of jurisdiction which cannot be
cured even by acquiescence. It is clearly spelled out from the law
laid down by the Constitution Bench that the arbitrators shall
derive their jurisdiction from the agreement and consent. Thus,
there is ample judicial opinion available for the proposition that
the reference to a sole arbitrator as contemplated by para 1 of the
First Schedule has to be a consensual reference and not an
unilateral reference by one party alone to which the other party
does not consent.”
26. In case of M/s Voestalpine Schienen Gmbh Vs. Delhi
Metro Rail Corporation Ltd., (2017) 4 SCC 665, the Hon’ble
Supreme Court while dealing with the effect of introduction of
sub-section (5) of Section 12 of the Arbitration & Conciliation
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Act, 1996, with simultaneous inclusion of Seventh Schedule of
the said Act, has emphasized and highlighted the need of
neutrality of arbitrators and it was held by their Lordships in the
said case that any relation or interest of arbitrator with any of the
parties in any of the forms as mentioned in Seventh Schedule
may effect the legality of award. It was also held by their
Lordships in this case that even if any arbitration clause
permitting unilateral appointment existed in an agreement prior
to insertion of sub-section (5) of Section 12, the same is rendered
a nullity by insertion of the said sub-section (5) and Seventh
Schedule of the said Act.
27. On this aspect, it is also relevant here to state that while
relying upon its earlier judgment in case of TRF Limited
(supra), the Hon’ble Supreme Court in case of Perkins
Eastman Architects DPC & Anr. (Supra) has held that the
person who has an interest in the outcome or decision of the
dispute must not have the power to appoint a sole arbitrator and
hence, a party to the agreement would be disentitled to make any
appointment of an arbitrator. The relevant extracts of the said
decision read as under:-
“21. But, in our view that has to be the logical deduction from
[TRF Ltd. (TRF Ltd. v. Energo Engg. Projects Ltd.,
MANU/SC/0755/2017 : (2017) 8 SCC 377 : (2017) 4 SCC (Civ)
72] Para 50 of the decision shows that this Court has concerned
with the issue, “whether the Managing Director, after becoming
ineligible by operation of law, is he still eligible to nominate an
arbitrator” The ineligibility referred to therein, was as a result of
operation of law, in that a person having an interest in the dispute
or in the outcome or decision thereof, must not only be ineligibleOMP (COMM) No. 27/2024 23/ 32
DLCT010048202024to act as an arbitrator but must also not be eligible to appoint
anyone else as an arbitrator and that such person cannot and
should not have any role in charting out any course to the dispute
resolution by having the power to appoint an arbitrator……”
(Emphasis supplied)
28. Following the above said decision of the Hon’ble Supreme
Court in case of Perkins Eastman Architects DPC & Ors.
(supra), the Hon’ble High Court of Delhi in the case of
Proddatur Cable TV Digi Services (supra) also held that it
would be impermissible for a party to unilaterally appoint an
arbitrator as in terms of Section 12(5) of the Arbitration &
Conciliation Act read with the Seventh Schedule of the said Act,
an employee would be ineligible to act as an arbitrator by virtue
of the law as explained by the Hon’ble Supreme Court in TRF
Ltd. (Supra) and Perkins Eastman Architects DPC & Ors.
(Supra). It was further held by their Lordships that such
ineligibility would also extend to a person appointed by such
officials who are otherwise ineligible to act as arbitrators.
29. In the case of Kotak Mahindra Bank Ltd. Vs. Narendra
Kumar Prajapat passed in EFA Commercial No. 3/2023 on
17.05.2023, the Hon’ble High Court held as under :-
“4. In TRF Ltd. v. Energo Engineering Projects Ltd.: (2017) 8
SCC 377, the Supreme Court held that once the Arbitrator has
become ineligible by operation of law, he cannot nominate
another as an arbitrator. In Perkins Eastman Architects DPC &
Anr. v. HSCC (India) Ltd.: (2020) 20 SCC 760, the Supreme
Court, following the earlier decision in TRF Ltd. (supra), held
that the Chairman-cum-Managing Director of a party was
ineligible to appoint an arbitrator. Following the aforesaid
decisions, this court in Proddatur Cable TV Digi Services v. SitiOMP (COMM) No. 27/2024 24/ 32
DLCT010048202024Cable Network Limited: (2020) 267 DLT 51 held that it is not
permissible for a party to unilaterally appoint an arbitrator
without the consent of the other party(ies). It is important to note
that the aforesaid decisions were rendered in the context of
Section 12(5) of the A&C Act.
xxx xxx xxx xxx
7. We find little merit in the aforesaid contentions. The proviso
to Section 12(5) of the A&C Act is unambiguous. A party can
waive its right to object to the ineligibility of an arbitrator under
Section 12(5) of the A&C Act but the same is subject to two
conditions. First, that the waiver is required to be by and done
by an express agreement in writing; and second, that such
agreement is entered into after the disputes have arisen. Unless
both the aforesaid conditions are satisfied, there can be no
waiver of the ineligibility of an arbitrator.
8. In Bharat Broadband Network Limited v. United Telecoms
Limited: (2019) 5 SCC 755, the Supreme Court had
authoritatively held that waiver of a right to object to
ineligibility of an arbitrator under Section 12(5) of the A&C Act
cannot be inferred by conduct of a party. Such waiver can only
be by an express agreement in writing. The Court had also
clarified that “the expression ‘express agreement in writing’
refers to an agreement made in words as opposed to an
agreement which is to be inferred by conduct”.
9. In view of the above, the failure, if any, on the part of the
respondent to object to the unilateral appointment of the sole
arbitrator, cannot be construed as waiver of his right under
Section 12(5) of the A&C Act.
10. The award rendered by an arbitrator who is ineligible to be
appointed as such cannot be enforced.
11. In HRD Corporation v. GAIL (India) Ltd.: (2018) 12 SCC
471, the Supreme Court held as under:
“Since ineligibility goes to the root of the appointment, Section
12(5) read with the Seventh Schedule makes it clear that if the
arbitrator falls in any one of the categories specified in the
Seventh Schedule, he becomes “ineligible” to act as arbitrator.
Once he becomes ineligible, it is clear that, under Section 14(1)
(a), he then becomes dejure unable to perform his functions
inasmuch as, in law, he is regarded as “ineligible”. In order to
determine whether an arbitrator is de jure unable to perform his
functions, it is not necessary to go to the Arbitral Tribunal
under Section 13. Since such a person would lack inherentOMP (COMM) No. 27/2024 25/ 32
DLCT010048202024jurisdiction to proceed any further, an application may be filed
under Section 14(2) to the Court to decide on the termination
of his/her mandate on this ground.”
(Emphasis Supplied)
12. In Govind Singh v. M/S Satya Group Pvt Ltd & Anr.:
2023/DHC/000081 this court held as under:
“In view of the above, the remaining question to be addressed
is whether an arbitral award rendered by a person who is
ineligible to act as an arbitrator is valid or binding on the
parties. Clearly, the answer must be in the negative. The
arbitral award rendered by a person who is ineligible to act as
an arbitrator cannot be considered as an arbitral award. The
ineligibility of the arbitrator goes to the root of his jurisdiction.
Plainly an arbitral award rendered by the arbitral tribunal
which lacks the inherent jurisdiction cannot be considered as
valid. In the aforesaid view, the impugned award is liable to be
set aside as being wholly without jurisdiction.
xxx xxx xxx xxx
14. This Court finds no infirmity with the aforesaid view. A
person who is ineligible to act an Arbitrator, lacks the inherent
jurisdiction to render an Arbitral Award under the A&C Act. It is
trite law that a decision, by any authority, which lacks inherent
jurisdiction to make such a decision, cannot be considered as
valid. Thus, clearly, such an impugned award cannot be
enforced.”
(Emphasis supplied)
30. The Special Leave Petition (Civil) Diary No. 47322/2023
filed by Kotak Mahindra Bank Ltd. against the above said
order of the Hon’ble High Court was also dismissed on
12.12.2023 by the Hon’ble Supreme Court with following
words:-
“From paragraph 6 of the impugned order, it appears to be an
admitted position that the Arbitrator unilaterally appointed by
the petitioner was in eligible to be appointed as an arbitrator by
virtue of Section12(5) of the Arbitration and Conciliation Act,
1996. Hence, in view of this peculiar factual position, no case
for interference is made out in exercise of our jurisdiction under
Article 136 of the Constitution of India. The Special Leave
Petition is accordingly dismissed.”
OMP (COMM) No. 27/2024 26/ 32
DLCT010048202024
(Emphasis supplied)
31. Similar is the legal position laid down by the Hon’ble High
Court in case of Coronation Infrastructure Pvt. Ltd. (supra)
being relied upon by Ld. Counsel for petitioner.
32. Thus, it is crystal clear from above that the impugned
award being passed by a unilateral arbitrator appointed by
respondents herein has to be treated as non-est and a nullity in
the eyes of law and the same is liable to be set aside on this
ground alone.
33. Now coming to the question as to whether the conduct of
petitioner herein in participating in arbitral proceedings and not
raising of an objection to the jurisdiction of or conduction of
proceedings by the Ld. sole arbitrator can be treated as a waiver
of his right to raise such an objection in view of the provisions
contained in said Act, it can be clearly seen from the legal
position discussed above that the said conduct of petitioner
cannot amount to a waiver of his rights to object to the
jurisdiction of the Ld. sole arbitrator as in case of Bharat
Broadband (supra) and Narendra Kumar Prajapat (Supra),
their Lordships of the Hon’ble Supreme Court and High Court
have clearly held that such waiver by a party has to be by an
express agreement in writing.
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DLCT010048202024
34. As already discussed, the contention of Ld. Counsel for
respondents is that the respondents through their letter dated
13.03.2023 had invoked the arbitration Clause under Section 21
of the above Act and had suggested the name of Ld. sole
arbitrator for resolution of their disputes and though the
petitioner was asked to respond to the same or to suggest any
other name of his choice for arbitrator within a period of 15 days,
but he failed to do so or even respond to the said letter. It is also
his contention that having no other option, the respondents had
then appointed the sole arbitrator vide their letter dated
10.05.2023 and the petitioner even in his reply dated 06.06.2023
thereto has not raised any objection to the said appointment.
Further, it is also the contention of Ld. Counsel for respondents
that the petitioner even in his letter dated 20.06.2023 addressed
to the Ld. sole arbitrator had not objected to the appointment of
Ld. arbitrator and had rather requested for expeditious disposal of
the proceedings and had assured his full corporation and
assistance and thus, the above documents and conduct of
petitioner can and should be treated as his written waiver in terms
of proviso to Section 12 (5) of the Act.
35. However, this court is not able to accept the above
contentions of Ld. Counsel for respondents for the reasons and
legal position already discussed above as such a waiver on part of
petitioner cannot be inferred from his conduct or documents and
has to be a waiver made in writing through an express agreement.
If the petitioner did not respond to the notice dated 13.03.2023
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DLCT010048202024
sent by respondents suggesting the name of sole arbitrator, it was
the duty of respondents to approach the Hon’ble High Court for
appointment of an arbitrator in terms of provisions contained in
Section 11 of the Act and they were not justified in unilaterally
appointing an arbitrator through their subsequent letter dated
06.06.2023. As the respondents being party to the above said
arbitration agreement were directly interested in the outcome of
disputes, in terms of provisions contained in the said Act and the
legal position discussed above, they were not competent to either
themselves act as arbitrators or even to appoint any other person
as arbitrator for resolution of their disputes and since the
appointment of sole arbitrator in this case by them has become
illegal, since he became de-jure ineligible or incompetent to
perform his functions or to act as such, as he lacked inherent
jurisdiction to entertain upon the reference and to adjudicate
upon the disputes between parties, the non-raising of any
objection by plaintiff to his jurisdiction or to the arbitral
proceedings being conducted by him is also not a ground to
uphold the impugned award as the same is a nullity and is liable
to be treated as non-est in the eyes of law.
36. Coming back to the question of territorial jurisdiction
again, as already discussed, Section 20 (1) of the Act gives a free
hand to parties to agree on the place or seat of arbitration and if
they failed to arrive at or there is no such agreement between
them to this effect, then the place or seat of arbitration shall be
determined by the arbitral tribunal as per provisions of Section
OMP (COMM) No. 27/2024 29/ 32
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20 (2) of the Act. It has already been held in this order that
parties failed to decide the seat of arbitration or to reach upon an
agreement about the same with mutual consent and though the
seat of arbitration in this case was determined by Ld. sole
arbitrator, but since his appointment itself has been held to be a
illegal or he became ineligible or incompetent de-jure to perform
his functions as such for the reason that it was a unilateral
appointment made by respondents herein and the award delivered
by him has been held to be a nullity and as non-est in the eyes of
law, the determination of seat by him unilaterally for conduction
of arbitration proceedings cannot also be held legal. Hence, the
supervisory jurisdiction of courts in respect to the subject matter
of arbitration has to be decided in terms of provisions contained
in Section 2 (1) (e) of the above said Act and it is to be
determined with reference to the place where a cause of action
arose in respect to the said matter or transactions, as has been
submitted by Ld. Counsel for petitioner and as also held in the
judgments of the Hon’ble Supreme Court in cases Enercon
(India) Ltd. (supra) and Indus Mobile Distribution (P) Ltd.
(supra) etc. being relied upon on behalf of petitioner. Further, as
provided by this Section 2 (1) (e) of the Act, this jurisdiction has
to be determined as if the questions forming the subject matter of
arbitration were the subject matter of a suit.
37. Section 20 CPC provides that a suit shall be instituted,
inter-alia, in a court within the local limits of whose jurisdiction
the cause of action for filing of the said suit arises, wholly or in
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DLCT010048202024
part. It has been observed on a perusal of the above partnership
agreement dated 11.05.2018 executed between parties that the
business of their partnership was to be carried on from the
address/office at 237, First Floor, Cycle Market, Jhandewalan
Extension, Phase-1, New Delhi-55, which admittedly falls within
the jurisdiction of this court. The relevant Clause 3 of the above
partnership agreement on this aspect is also being reproduced
herein for proper appreciation of the terms thereof:-
“3. That the business of the partnership shall be carried from
Office at 237, First Floor, Cycle Market, Jhandewalan
Extension, Phase-1, New Delhi-110055, and/or at such other
place or places as the partners may decide from time to time.”
38. Thus, since the business of partnership firm of parties has
been conducted from the above given address of the firm at
Jhandewalan, Delhi and the said address or office falls within the
jurisdiction of this court, it can be said with certainty that this
court has the territorial jurisdiction to decide the disputed
questions between parties as relating to and arising out of the
above partnership business, if the same have been the subject
matter of a suit as a cause of action for filing the suit arose within
the jurisdiction of this court. Therefore, as a necessary corollary
to the same, it can also be said and held that this court is the
supervisory court having territorial jurisdiction over the subject
matter of arbitration in respect to the disputes that arose between
parties out of the above partnership business.
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39. Therefore, as a result of the above fact and legal
discussion, the impugned award is held illegal and a nullity in the
eyes of law and the same is, therefore, set aside. This petition
filed by petitioner company under Section 34 of Arbitration and
Conciliation Act, 1996 stands allowed and disposed off
accordingly.
40. File be consigned to the Record Room and arbitral record
be sent back after due compliance
Digitally
signed by M K
NAGPAL
MK Date:
Announced in the open court NAGPAL 2025.07.25
16:08:49
Dated: 25.07.2025 +0530(M. K. Nagpal)
District Judge, Commercial Court-13
Central District, Tis Hazari Courts,
Delhi/25.07.2025(p)OMP (COMM) No. 27/2024 32/ 32