Bombay High Court Upholds Pre-October 2015 Unilateral Arbitrator Appointments
The Bombay High Court in Mumbai held on August 4 that an arbitrator appointed unilaterally before October 23, 2015, will not be considered invalid if the underlying arbitration agreement allowed one party to make the appointment.
Justice Jitendra Jain passed the judgment while dealing with four execution proceedings involving SE Investments Ltd, now known as Paisalo Digital Ltd. The central issue before the court was whether an executing court could refuse to enforce arbitral awards on the ground that the arbitrators had been appointed unilaterally prior to statutory changes made to arbitration law in 2015.
In a detailed 71-page judgment, Justice Jain observed that before October 23, 2015, unilateral appointments were recognized by courts in certain situations. These included cases where the arbitration agreement named a particular arbitrator, specified a person or designation for appointment, or gave one of the parties the authority to appoint an arbitrator.
The legal framework changed after the 2015 amendment to the Arbitration and Conciliation Act, which introduced Section 12(5) to strengthen requirements regarding the independence and impartiality of arbitrators.
Justice Jain ruled that the later legal position could not be applied to invalidate every arbitrator appointment made before October 23, 2015. The court held that a unilateral appointment prior to that date, wherein the arbitration clause provided for a named arbitrator, designation, or party authorization, would not be without jurisdiction.
However, the court drew a distinction between contractual appointments and unauthorized cases. If the arbitration agreement did not name an arbitrator or give either party the power to appoint one, and one party nevertheless appointed an arbitrator without the consent of the other, the appointment would be invalid and the resulting award could be treated as void.
The court stated that the position had to be examined based on the arbitration agreement and the circumstances of the appointment. It also held that where an appointment had already been challenged unsuccessfully, the executing court could not subsequently treat the resulting award as void.
The four connected matters have been posted for further consideration on September 15.
