'Non-Consideration Of SC Judgment Amounts To Patent Illegality': Calcutta High Court Sets Aside Award On Grounds Of Unilateral Appointment

Brief Facts:

This application has been filed under section 34 of the Arbitration Act seeking to set aside the arbitral award on the ground of the arbitrator's unilateral appointment, which is impermissible in law. The award suffers from patent illegality and violates the fundamental policy of Indian law, which mandates an independent and impartial tribunal. Further, the award disregards binding judicial precedents, making it liable to be set aside.

Observations:

The court at the outset observed that the petitioner has rightly challenged the award on the ground that it was passed by an arbitrator who was unilaterally appointed. The unilateral appointment of the Arbitrator is impermissible in law.

The Supreme Court recently in Central Organisation for Railway Electrification vs. ECI SPIC SMO MCML (JV) A joint Venture Company after citing its own judgment in Perkins Eastman Architects DPC and Another vs. HSCC (India) Ltd.(2019) held that the reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter-balanced by equal power with the other party.

The Apex Court further observed that but, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution.

The Apex Court further held that naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) and recognised by the decision of this Court in TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017).

Based on the above, the court held that the petitioners have established a strong case for interference under Section 34 of the Arbitration Act. The arbitrator, unilaterally appointed by the respondent, failed to consider relevant objections and settled law on this issue.

The court also noted that allegedly, the Arbitrator had previously represented the respondent as counsel. The award is vitiated by perversity and an erroneous assumption of jurisdiction.

Accordingly, the application was allowed and the award was set aside.

Case Title: VIRGO SOFTECH LIMITED & ANR. VS SREI EQUIPMENT FINANCE LTD.

Case Number: AP-COM/361/2025

Judgment Date: 13/05/2025

Mr. Akhil Sachar, Adv. Ms. Sunanda Tulsyan, Adv. Mr. Roshan Pathak, Adv. …for petitioners.

Mr. Swatarup Banerjee, Adv. Mr. Sariful Haque, Adv. Mr. Subhankar Chakraborty, Adv. Ms. Ruchira Manna, Adv. …for respondent.

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