Pre-2015 Arbitration Does Not Validate Unilateral Arbitrator Appointment: Delhi HIgh Court
The Delhi High Court has held that the fact that an arbitration began before the 2015 amendment to the Arbitration and Conciliation Act does not, by itself, make a unilateral appointment of an arbitrator valid.
A division bench of Justice Avneesh Jhingan and Justice Shail Jain upheld the setting aside of a ₹77 crore arbitral award against Bharat Forge Limited and BF Infrastructure Limited.
The court found that Tarsem Jain, who had invoked the arbitration, breached the agreed procedure by unilaterally appointing the sole arbitrator, contrary to Clause 20.4 of the Share Purchase Agreement and Section 11 of the Act.
The court observed, “There cannot be a quarrel with the proposition that Section 12(5) of the 2015 Amendment Act shall not apply to the cases where arbitration commenced prior to October, 2015 but this in itself shall not validate the unilateral appointment of the arbitrator by the appellant in contravention to Clause 20 of the SPA and Section 11 (6) of the Act.”
The dispute arose from a December 18, 2010 SPA between Jain and BF Infrastructure, a subsidiary of Bharat Forge. Under the agreement, disputes were to be referred to a sole arbitrator appointed in accordance with the Arbitration and Conciliation Act.
Jain invoked arbitration on June 3, 2013, and called upon BF Infrastructure to appoint a sole arbitrator with his consent. In a July 24, 2014 reminder, he stated that if an arbitrator was not appointed within 15 days, he would make the appointment himself. Jain nominated the arbitrator on December 15, 2014.
BF Infrastructure objected to the unilateral appointment on September 9, 2015, after Jain filed his statement of claim. Bharat Forge separately challenged the arbitrator's jurisdiction, contending that it was not a signatory to the SPA.
The arbitrator rejected the objections on December 16, 2015. BF Infrastructure continued participating in the proceedings under protest.
The arbitration culminated in a May 10, 2019 award granting Jain ₹77 crore and dismissing the counterclaims. Bharat Forge and BF Infrastructure challenged the award under Section 34.
On May 26, 2025, a Single Judge held that the sole arbitrator's appointment was void ab initio, set aside the award and dismissed Jain's enforcement petition.
Before the division bench, Jain argued that Section 12(5), introduced by the 2015 amendment, did not apply because the arbitration had commenced in 2013. He also argued that the companies had waived their right to object by participating in the proceedings.
The division bench rejected both arguments.
It held that Jain's July 24, 2014 notice had unilaterally altered the appointment procedure under Clause 20 of the SPA. Since the parties had not agreed on the appointment, Jain, as the party invoking arbitration, had to approach the court under Section 11 rather than appoint the arbitrator himself.
“The party invoking arbitration was the appellant and had to approach the Court under Section 11 of the Act for appointment of the arbitrator and not vice-versa,” the court observed.
The court also held that participation did not ratify the appointment, noting that the companies had objected at the first instance and BF Infrastructure participated under protest.
It agreed that Section 12(5) did not apply to the pre-October 2015 arbitration. However, that did not validate an appointment that independently violated Clause 20 of the SPA and Section 11.
“The case in hand is of void appointment of arbitrator and the award passed is nullity. This was a ground available both under amended and unamended Act,” the court observed.
The division bench dismissed Jain's appeal and upheld the setting aside of the ₹77 crore award.
For Appellant (Tarsem Jain): Senior Advocate Challa Kodanda Ram with Advocates Nikunj Dayal, Pramod Dayal, Ashwani Kumar Sharma, Prashant Joshi, Virat Singhal, Rakesh Kumar, Angad Mehta and Arsh.
For Respondents (Bharat Forge Limited and BF Infrastructure Limited): Senior Advocate Nakul Dewan with Advocates Ashima Sharma, Parag Khandhar, Krishan Kumar, Satyender and Ananya Patwardhan.