The court ruled that the appointment violated Section 12(5) of the Arbitration and Conciliation Act, rendering the award void.
In a significant ruling, the Delhi High Court has set aside an arbitral award in the case of Bharat Heavy Electricals Ltd. (BHEL) v. Fitwell Constructions, citing the unilateral appointment of the arbitrator by BHEL as the primary reason for the decision. The judgment, delivered by Justice Avneesh Jhingan, emphasized that the appointment of an arbitrator by one party without express written waiver from both parties contravenes Section 12(5) of the Arbitration and Conciliation Act, 1996, and the Seventh Schedule, leading to the award being null and unenforceable.
The dispute originated from a sub-contract awarded by BHEL to Fitwell Constructions for work related to the Tapovan Vishnugad Hydro Electric Project in Uttarakhand. Following a delay in project execution and compensation disputes, Fitwell Constructions requested arbitration. BHEL unilaterally appointed the sole arbitrator, a move challenged under Section 34 of the Arbitration and Conciliation Act.
The court referred to the Supreme Court's decisions in similar cases, highlighting that the principle of equal treatment of parties mandates equal say in the appointment of arbitrators. Justice Jhingan pointed out that any unilateral appointment without an express written agreement waiving Section 12(5) is invalid. The court further noted that participation in arbitral proceedings does not constitute a waiver of rights regarding the appointment process.
BHEL's argument that the appointment was a joint decision was dismissed, as the court found it limited Fitwell's choice, violating Section 18 of the Act, which ensures equal treatment in arbitral proceedings. The court concluded that the arbitrator's appointment was void ab initio, and consequently, the award was a nullity.
This ruling reaffirms the stringent requirements for arbitrator appointments post the 2015 amendment to the Arbitration and Conciliation Act. The decision underscores the judiciary's commitment to maintaining the integrity of arbitration proceedings and ensuring compliance with statutory provisions to uphold fairness in dispute resolution.
Bottom Line :
Unilateral appointment of an arbitrator by one party without express waiver in writing by both parties violates Section 12(5) of the Arbitration and Conciliation Act, 1996, rendering the appointment void ab initio and resulting in the arbitral award being null and unenforceable.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 12(5), Section 34, Seventh Schedule
Bharat Heavy Electricals Ltd. v. Fitwell Constructions, (Delhi) : Law Finder Doc id # 2962626
