Allahabad High Court Allows Writ Petition Against Arbitral Award Passed After Unilateral Shift Of Seat

The Allahabad High Court on 5 May held that a writ petition challenging an ex parte arbitral award is maintainable in exceptional circumstances involving lack of jurisdiction or violation of principles of natural justice.

A Division Bench of Justices Ajit Kumar and Indrajeet Shukla allowed the writ petition filed by Sushil Kumar Prajapati the proprietor of Laxmi Medical Agency against the Central Hospital, North Central Railway, Allahabad, and set aside an ex parte arbitral award passed in Kolkata after holding that the arbitrator had unilaterally shifted the agreed seat of arbitration from Allahabad to Kolkata without the parties' consent. It observed:

“In exceptional circumstances where the proceedings are vitiated for lack of jurisdiction or a palpable breach of natural justice, this Court must not remain a silent spectator. To hold otherwise would be to allow a procedural technicality to strangle the substantive rights of the parties in the face of manifest arbitrariness.”

Sushil Kumar Prajapati had entered into an agreement with the Central Hospital, North Central Railway, Allahabad, for supply of medicines and surgical items. After disputes arose between the parties, the matter was referred to arbitration. An arbitrator was initially appointed in 2014 and was later replaced in 2018 after his transfer.

The new arbitrator was subsequently transferred to Kolkata and shifted the arbitration proceedings from the agreed venue and seat, Allahabad, to Kolkata without obtaining the parties' consent. Although the process for appointing a fresh arbitrator had commenced after his transfer, the arbitrator resumed proceedings after nearly seven years and passed an ex parte award in May 2025.

The petitioner contended that it received only eight days' notice to appear in Kolkata. The firm informed the arbitrator that the process for appointment of a new arbitrator was underway and sought a change of arbitrator and venue. Despite this, the arbitrator proceeded to pass the ex parte award. The firm then challenged the award before the High Court under Article 226 of the Constitution.

The Railways opposed the petition on the ground of maintainability and argued that the petitioner had an alternative statutory remedy under Section 34 of the Arbitration and Conciliation Act, 1996. The respondents contended that the writ petition ought to be dismissed in limine for failure to exhaust the statutory remedy available under the Act.

The Court, however, held that despite the limited scope of interference under writ jurisdiction in arbitral matters, intervention was warranted in the present case because the proceedings suffered from manifest arbitrariness and breach of natural justice. It found that shifting the arbitral proceedings from Allahabad to Kolkata without consent placed the petitioner at a clear disadvantage and unfairly favoured the Railways. The Bench observed:

“In view of admitted fact as emerges from pleadings on record that the place of arbitration from 'Allahabad' to 'Kolkata' was changed by arbitrator suo moto without consent/agreement of parties even without backing of any provision under agreement. Hence, change of place of arbitration appears to subjecting petitioner to a non playing field giving unfair advantage to the railways establishment without had negotiable means to attend arbitration proceedings. Thus, the ex-parte award in question is unsustainable, accordingly, instant writ petition is allowed.”

Accordingly, the High Court set aside the ex parte arbitral award passed in Kolkata and directed the General Manager, North Central Railway, to appoint a fresh arbitrator to resume proceedings from the stage at which the matter had proceeded ex parte.