Sole Arbitrator's Appointment By One Party Due To Other Party's Inaction After Notice Is Not Unilateral: Telangana High Court

Brief Facts:

The present petition has been filed seeking enforcement of the foreign award dated 03.05.2022 for a sum of USD 443,310.47 (equivalent to INR 35,329,716.57) and £ 7,000 (equivalent to INR 638,487.97) along with interest of USD 9,235.63 (equivalent to INR 736,035.38) at pro-rata compoundable rates of interest.

On 29 September, 2021, the parties entered into a fixture recap by which it was agreed that the Respondent will charter the petitioner's vessels through India and Madagascar or Mozambique. The Vessel was delivered to the respondent on 30 September, 2021 and was re-delivered to the Petitioner on 16 January, 2022 at passing port Durban, South Africa.

On 27.01.2022, the respondent replied to the petitioner via an email confirming that the amount due to the petitioner was USD 443,310.47 and requested confirmation of the said amount.

On 02.02.2022, the petitioner invoked arbitration under the Charter Party and nominated an arbitrator. The respondent did not nominate one and instead made a lower settlement offer, which was rejected. The petitioner filed its claim on 11.03.2022.

The Arbitrator directed the respondent to submit its defence by 20.04.2022 and later by 28.04.2022, but the respondent failed to respond. The Arbitrator proceeded ex parte and passed an Award on 03.05.2022 in favour of the petitioner for USD 443,310.47 plus interest, arbitration costs, and £7,000 as Arbitrator's fee. Despite notice, the respondent did not comply. The petitioner filed this Execution Petition on 02.12.2022.

The Petitioner submitted that the petitioner nominated Mr. Alan Oakley as Arbitrator as per Clause 22(a) of the BIMCO Terms 2015 and when the Respondent failed to appoint its Arbitrator within 14 days appointed Mr. Oakley as Sole Arbitrator of which a proper notice was given to the Respondent.

It was further submitted that the respondent was kept informed at all stages, including post-Award, and was served a notice for compliance. The respondent's objections to enforcement contradict its prior admission of liability and that the claim of unilateral appointment of Arbitrator violating public policy is meritless. The Execution Petition is valid and properly signed by the petitioner's authorized representative.

In reply, the respondent opposes enforcement of the Award under Section 48(2)(b) of the Arbitration Act, arguing that it violates the fundamental policy of Indian law.

It was further submitted that the unilateral appointment of the Sole Arbitrator by the petitioner made the process biased and that the Arbitration Agreement itself is invalid and contrary to basic notions of justice. The petitioner should have sought appointment through a neutral forum under Section 18 of the English Arbitration Act.

Lastly, it was submitted that it was not given proper notice of the Arbitrator's appointment or the proceedings and was unaware of the petitioner's emails. The Execution Petition is defective due to inconsistencies between the supporting affidavits and the notarization.

Observations:

The court at the outset noted that all communications related to Arbitration were sent by the Petitioner's lawyers and the Arbitrator to the Respondent's e-mail that was used by him at the time of formation of contract. Additionally, the e-mails were also sent through respondent's broker and Lightship Chartering who also confirmed that the e-mails were forwarded.

It further observed that the Respondent has utterly failed to provide a rebuttal to these records. On top of that, the Respondent proposed a settlement offer after the Arbitration had started and this fact has been noted in the Execution Petition also. Based on the above, it held that the arguments of the Respondent that the notice was received were rejected.

The court further observed that the Respondent has not questioned the credibility of the E-mail IDs that were used for communication related to the Arbitration but it merely argued that it did not the e-mails. This is not a ground on which enforcement can be refused under section 48 of the Arbitration Act. Section 48(1)(b) applies only when the party is not given a proper notice or is not given a proper opportunity of being heard. The Respondent's failure to open the e-mails and submit a defence shows that it deliberately avoided participating in the Arbitration.

It further observed that Clause 22(a) of the BIMCO Terms 2015 provides that a party initiating arbitration shall appoint its Arbitrator and notify the other party, requiring them to appoint their Arbitrator within 14 days. If the other party fails to do so or give notice, the initiating party may appoint its Arbitrator as Sole Arbitrator without further notice, while informing the other party.

The court held that this mechanism ensures equal opportunity to appoint an Arbitrator and only permits a Sole Arbitrator if the second party fails to act, making it a matter of expediency—not unilaterality. Thus, the respondent's right is not denied but lost due to inaction, which implies consent.

It further said that unilateral appointment of arbitrators denies a party the right to participate and violates the principle of equality which is the foundation of the Arbitration Act. However, these concerns have been addressed by the Arbitration Act through various safeguards under sections 12, 34 and 48. The enforcement of the foreign award under section 48 of the Arbitration can be refused if the award was rendered by the Arbitral Tribunal which was constituted in contravention of the agreed terms or prescribed procedure. This ground is absent in the present case.

The court further noted that the award was challenged under section 48 of the Arbitration Act on the ground of public policy instead of challenging on the ground of composition of Arbitral Tribunal.Under Section 48 of the Arbitration Act, the burden of proof lies entirely on the objecting party to establish valid grounds for refusal.

The court concluded that in the present case, the respondent has failed to prove that the arbitrator was appointed unilaterally. Furthermore, the language that has been used in the Arbitration Clause along with the failure of the Respondent to act despite a proper notice being given negates the objections raised by the Respondent. Accordingly, the arguments of the Respondent were rejected.

Accordingly, the present applications were allowed.

Case Title: St Frosso Shipping Corporation Petitioner Versus M/s Eastern Multitrans Logistics Pvt Ltd

Case Number: EXEP.No.4 of 2022

Judgment Date: 27/06/2025

Counsel for the appellant: Sri Vikram Pooserla, learned Senior Counsel representing Sri M.Abhinay Reddy, learned counsel for the petitioner.

Counsel for the respondent No.1: Sri T.Bala Mohan Reddy, learned counsel appearing for the respondent.

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