Arbitral Award Not Invalid Though High Court Appointed Arbitrator Instead Of Supreme Court In ICA: Delhi High Court

The Delhi High Court has refused to set aside a 2012 arbitral award after a shareholder argued that the arbitrator was wrongly appointed by the High Court instead of the Supreme Court in an international commercial arbitration.

Rejecting the challenge, the court held that the Arbitration and Conciliation Act does not permit annulment of an award merely because of a dispute over which court appointed the arbitrator.

"Section 34(2)(a)(v) does not contemplate the setting aside of an arbitral award solely on the ground that the arbitrator was appointed by an authority allegedly lacking competence. The said provision is narrowly tailored and permits interference only where the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement itself is in conflict with a non-derogable provision of Part I of the A&C Act. In the absence of such a conflict, irregularities, if any, in the appointment process do not, ipso facto, vitiate the arbitral award,” the court said.

A Division Bench of Justice Anil Kshetrapal and Justice Anish Dayal observed that the provision allows interference only where the arbitral tribunal was constituted contrary to the parties' agreement or a non-derogable provision of law. It does not permit reopening concluded awards on technical objections raised for the first time after the proceedings end.

The bench also relied on the doctrine of waiver, holding that parties who participate in arbitration without raising timely objections are deemed to have given up the right to challenge the process later.

The dispute arose from a Shareholders' Agreement executed in 2006. The agreement involved Hala Kamel Zabal, a Canadian citizen, Arya Trading Ltd, a Hong Kong-incorporated company, and another shareholder. Each held a 33.33% stake in the company.

The agreement expressly provided that disputes would be resolved by a sole arbitrator appointed by the Chief Justice of the Delhi High Court.

Disputes later arose between the shareholders. In April 2009, the Chief Justice of the Delhi High Court appointed Justice Anil Dev Singh (Retd.) as the sole arbitrator in accordance with the arbitration clause. The arbitration concluded with an award dated February 14, 2012.

Several years after the arbitral award was passed, Hala Kamel Zabal moved the court to challenge it. She said the dispute involved a foreign company and a foreign national and therefore fell under the category of an international commercial arbitration.

On that basis, she argued that Indian law gives the power to appoint an arbitrator in such cases only to the Supreme Court. Since the arbitrator in her case had been appointed by the Delhi High Court, she contended that the appointment was invalid and the award could not stand.

A single judge of the Delhi High Court rejected this argument in an order dated August 14, 2024. Zabal then carried the matter in appeal before a Division Bench.

Before the appellate court, Zabal maintained that the statutory scheme governing international commercial arbitrations is mandatory in nature. She argued that this requirement could not be waived, even if the parties had agreed in their contract to a different method for appointing the arbitrator.

Arya Trading Ltd opposed the appeal. It told the court that the arbitrator had been appointed strictly in line with the arbitration clause agreed between the parties and that Zabal had taken part in the arbitration proceedings without objecting to the appointment.

It also pointed out that Zabal had participated in the arbitration proceedings for years without questioning the High Court's power to appoint the arbitrator.

Upholding the single judge's view, the Division Bench held that the power of appointment under Section 11 of the Act is procedural and facilitative in nature. It exists to ensure that arbitration can proceed, not to invalidate awards after the process has concluded.

“Where the appointment was made in terms of the agreed arbitration clause, the arbitral proceedings were allowed to progress to conclusion, and no infirmity affecting the merits, fairness, or integrity of the process has been established, interference at the post-award stage would defeat the legislative intent,” the court said.

The bench also noted that Zabal had failed to demonstrate any prejudice, bias, or lack of independence on the part of the arbitrator. The objection raised, it said, was purely technical.

At the same time, the court clarified that this ruling does not dilute the statutory framework governing arbitrator appointments. The distinction between domestic arbitrations and international commercial arbitrations, it said, continues to apply at the appointment stage.

However, once arbitration has concluded and an award has been rendered, belated challenges based solely on the forum of appointment cannot be entertained, the court held.

The appeal was accordingly dismissed.

For Appellant (Hala Kamel Zabal): Advocates Mamta Tiwari,Veronica Mohan, Vasumitra Gautam

For Respondent No. 1 (Arya Trading Ltd): Advocate Ritika Sinha