Delhi HC Sets Aside Interim Award Over Unilateral Arbitrator Appointment

Overview

The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 questions the Interim Award dated 6 September 2019 passed by the Sole Arbitrator, whereby the petitioner's request to implead Respondent No. 2 (Alankar Apartments Pvt. Ltd.) into the arbitral proceedings was rejected on the ground that no arbitration agreement existed with the said entity.

Factual Matrix

The petitioner, M/s Alpro Industries, had executed a contract dated 16 April 2014 with Respondent No. 1, Ambience Pvt. Ltd., for supply and installation of façade systems at a commercial tower project in Gurgaon. The contract value was subsequently revised upward through multiple amendments. The contract contained an arbitration clause providing that disputes could be referred to an arbitrator to be appointed solely by Respondent No. 1.

After disputes arose, the petitioner invoked arbitration against both the respondents and applied for the appointment of a sole arbitrator. Respondent No. 1 then appointed Justice M.S. Liberhan (Retd.) as the Sole Arbitrator. During arbitral proceedings, Respondent No. 1 had objected to the impleadment of Respondent No. 2 on the ground that it was not a party to the arbitration agreement. The Arbitrator had sustained the objection and by the impugned order,

Petitioner's Case

1. The appointment of the Sole Arbitrator, being unilateral, was void ab initio in terms of the ratio of TRF Ltd., Perkins and Bharat Broadband prohibiting unilateral appointment of arbitrators, unless specifically waived in writing under Section 12(5).

2. The petitioner's letter dated 25 October 2018 was not an express written waiver; at best, it reflected a conditional consent linked to the impleadment of Respondent No. 2.

3. Respondent No. 2 is bound by the arbitration agreement under the Group of Companies Doctrine, as both respondents shared management control, contractual documents, payments, and execution responsibilities.

4. The impugned decision is an "Interim Award" as it finally decides the jurisdictional issue of non-impleadment, which affects the composition of the Arbitral Tribunal and the enforceability of the final award.

Defence of Respondents

The respondents thus contended that the impugned decision was not assailable under Section 34 since the said decision declined to implead and did not decide any substantive right. They also contended that the petitioner expressly waived objections regarding the appointment of the arbitrator.

Decision

The Court set aside the Impugned Interim Award dated 6th September, 2019.

The court concluded that the arbitrator was unilaterally appointed solely by Respondent No.1, which is void ab initio under Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996.

Because the letter dated 25 October 2018 did not comply with the statutory requirement for an “express agreement in writing,” there was no valid waiver by the petitioner, indicating awareness of ineligibility and consent despite that fact.

Participation in arbitration proceedings does NOT amount to implied waiver.

Case Reference:- O.M.P. (COMM) 480/2019, I.A. 15906/2019 & I.A. 22472/2025 M/S ALPRO INDUSTRIES Vs. M/S AMBIENCE PVT. LIMITED & ANR.