Delhi High Court Sets Aside Arbitral Award In Samsung–PTC Dispute Over Unilateral Arbitrator Appointment

The Delhi High Court has recently set aside a 2018 arbitral award arising out of disputes between PTC Techno Pvt. Ltd. and Samsung India Electronics Pvt. Ltd., holding that the appointment of the arbitrator by an official of Samsung was legally impermissible.

A Single Bench of Justice Avneesh Jhingan held that the sole arbitrator, Justice Sunil Ambwani (Retd.), had been appointed by the Vice President of the respondent company, which was contrary to Section 12(5) of the Arbitration and Conciliation Act, 1996. The Court ruled that such an appointment is void ab initio and renders the arbitral proceedings and award a nullity.

“After amendment of Section 12(5) of the Act an employee of a party in dispute can neither be appointed arbitrator nor can nominate or appoint any other person as an arbitrator. The unilateral appointment in absence of an express agreement in writing by the parties to waive applicability of Section 12(5) of the Act is void ab initio," the court observed.

The dispute arose from a Mould Agreement dated June 1, 2009, and two subsequent Purchase and Sale Agreements dated November 26, 2009 and June 20, 2013, under which Samsung had supplied moulds to PTC for manufacturing purposes. The agreements were later terminated, leading to disputes regarding the return of the moulds.

Clause 18 of the Mould Agreement provided for the appointment of a sole arbitrator by the Vice President of the respondent company. Acting under this clause, a sole arbitrator was appointed on April 25, 2017, and the impugned award came to be passed on November 17, 2018.

Challenging the award under Section 34 of the Act, PTC Techno Pvt. Ltd. contended that the appointment was in violation of Section 12(5) read with the Seventh Schedule, rendering the entire arbitral process invalid.

Samsung argued that the petitioner had not objected to the appointment during the proceedings and relied on the July 20, 2017 order of the High Court in Section 9 proceedings, as well as the petitioner's participation in arbitration.

Rejecting this contention, the Court held that waiver of the ineligibility under Section 12(5) must be by an express written agreement between the parties and cannot be inferred from conduct.

“The filing of the statement of claim or participation in the arbitral proceedings cannot be construed to be waiver under the proviso to Section 12(5) of the Act. The unilateral appointment of the arbitrator can be objected to for the first time under Section 34 of the Act,” the court held.

The court further clarified that although no specific format is prescribed for such a waiver, it must be clear, unequivocal, and in writing. It also noted that there was no case that the parties had given express written consent to waive the applicability of Section 12(5).

Holding that the appointment of the arbitrator was in violation of the statutory mandate, the Court concluded that the appointment was void from inception and that the arbitral proceedings and award could not be sustained.

Accordingly, the petition was allowed, and the arbitral award was set aside.

For Petitioner (PTC Techno Pvt. Ltd.): Advocates Tarun Diwan, Pyari.

For Respondent (Samsung India Electronics Pvt. Ltd.): Advocates Sudhir Nandrajog, Niraj Singh, Ankita Singh, Karteek.