Calcutta High Court Refuses Arbitral Award Enforcement Over Indirect Unilateral Arbitrator Appointment

The Calcutta High Court has refused to enforce an ex parte arbitral award in favour of Cholamandalam Investment and Finance Company Ltd., holding that a lender cannot indirectly secure the appointment of a sole arbitrator through an arbitral institution of its own choosing when the borrowers have neither consented to the process nor participated in it.

Justice Gaurang Kanth held, “The law does not permit such a stratagem. The prohibition engrafted by Section 12(5) and the judicial decisions thereunder is directed not merely at the formal act of appointing an arbitrator, but at the substance of the process, the unilateral control by an interested party over the constitution of the tribunal that is to adjudicate its own claims. Whether that control is exercised directly through a personal appointment, or indirectly through the unilateral invocation of an institutional mechanism, the vices of partiality, inequality and conflict of interest are identical. The form cannot save what the substance condemns"

The court also held that an award rendered by a tribunal lacking inherent jurisdiction cannot become enforceable merely because the limitation period for challenging it has expired.

"An award that is non-est in law is not an 'award' at all within the meaning of the Act; it cannot acquire enforceability by the efflux of limitation for filing a Section 34 petition, because no limitation can cure a fundamental void,” the bench said.

The dispute arose from a loan agreement dated May 25, 2023, between Cholamandalam and borrowers Sayan Goswami and another. After alleging defaults in repayment, the finance company invoked the arbitration clause and referred the dispute to the Southern India Chamber of Commerce and Industry Centre for Alternate Dispute Resolution (SICCI-Centre for ADR) for appointment of an arbitrator.

Pursuant to the referral, Shivaji Mitra was appointed as the sole arbitrator. The arbitral tribunal proceeded ex parte after recording that repeated notices sent through e-mail, WhatsApp and SMS elicited no response from the borrowers, and passed an award on May 13, 2025, in favour of Cholamandalam.

After the limitation period to challenge the award expired, Cholamandalam moved the High Court seeking enforcement of the award.

Before proceeding with execution, the court independently examined whether the award was legally enforceable and whether the tribunal had been validly constituted. It noted that the borrowers had neither consented to SICCI-Centre for ADR being chosen as the appointing institution nor participated in the arbitration proceedings.

The court held that when the opposite party does not participate in the constitution of the tribunal, the proper course is to seek appointment of an arbitrator through the court.

“The remedy was, therefore, both available and unambiguous: the Award Holder ought to have approached the Court under Section 11 for the appointment of an independent arbitrator by a neutral judicial authority,” the bench said.

Rejecting Cholamandalam's contention that appointment through an independent arbitral institution cured the defect, the court held that routing the appointment through an institution chosen solely by the lender did not alter the substance of the process, which remained one controlled by an interested party.

Holding the arbitrator to be de jure ineligible and the tribunal devoid of inherent jurisdiction, the court dismissed the execution petition while granting liberty to Cholamandalam to initiate fresh arbitration proceedings before a validly constituted tribunal.

For Award Holder (Cholamandalam Investment and Finance Company Limited): Advocates Ranjit Singh, Tutul Das, Amar Singh, Subharchita Mukherjee.