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Can an award holder, directly and materially interested in the outcome of arbitral proceedings, bypass the prohibition against unilateral appointment of a sole arbitrator by routing the appointment through an ODR institution selected and invoked solely by it? The High Court of Calcutta, in L AND T FINANCE LIMITED v. JAI PARAS MATERIAL STORE AND ORS.1, dismissed the execution petition on May 14, 2026, by Justice Gaurang Kanth. The Court examined the substance of the appointment mechanism to hold that any appointment mechanism set in motion unilaterally by an interested party without the consent or participation of the Award Debtor is void ab initio, rendering the subsequent arbitral award non-est and entirely unenforceable under Section 36 of the Arbitration and Conciliation Act, 1996. This significant ruling clarifies that the strict mandate of arbitrator impartiality cannot be subverted by wrapping a unilateral choice in the garb of an administrative forum routing a unilateral appointment through an institutional or ODR forum selected by one party.
The dispute originated from a commercial transaction where the Award Debtor(s) had availed of financial assistance under a Loan Agreement dated September 24, 2022. Following a default in repayment, the Award Holder invoked the arbitration clause on March 29, 2025, proposing that the matter be referred to “Presolv360”, an Online Dispute Resolution (ODR) forum. Upon receiving no response from the Award Debtor, the Award Holder unilaterally proceeded with the reference to Presolv360, which then appointed a sole arbitrator under its institutional rules. Despite repeated electronic notices sent via notices through electronic means, including email, WhatsApp, and SMS, the Award Debtor(s) remained absent throughout the proceedings. The sole arbitrator subsequently conducted the proceedings ex parte and rendered an award in favour of the Award Holder on July 25, 2025. As no application under Section 34 was filed by the Award Debtor(s) within the prescribed limitation period, the Award Holder moved the High Court of Calcutta seeking execution of the award as a decree of the court.
Substance of the Appointment Mechanism
In scrutinizing the enforceability of the award, the High Court focused primarily on the validity of the manner in which the Sole Arbitrator came to be appointed. The Award Holder’s position was that because an independent institution (Presolv360) made the formal appointment, the standard legal infirmities tied to unilateral nominations did not apply. However, Justice Kanth rejected this position by emphasizing that “form cannot save what substance condemns.” The core rationale rests on the realization that the Award Holder, a non-banking financial company, was directly and materially interested in the outcome of the dispute and unilaterally approached Presolv360, an institution of its own selection, without any mutual agreement or subsequent consent from the debtor Award Debtor.
The Court observed that an ADR institution or centre can be validly approached for appointment only with the consent of both parties, either in a prior agreement naming the institution or after disputes arise. In the absence of a prior written agreement specifically naming the institution, or explicit consent obtained after the dispute arises, a unilateral reference forces the institution to act in a functional vacuum. By taking this unilateral path to bypass the statutory mechanism under Section 11 of the Act, which provides for appointment by the Court where a party fails or refuses to act as required under the appointment procedure, the Award Holder engaged in an impermissible stratagem designed to maintain structural control over the tribunal amounting to unilateral control by an interested party over the constitution of the tribunal.
Statutory and Precedential Basis
To solidify this holding, the judgment weaves together a line of Supreme Court jurisprudence, establishing a cohesive framework around Sections 12(5), 14(1)(a), and 18 of the Arbitration Act.
TRF Ltd. v. Energo Engineering Projects Ltd.2 The High Court applied the foundational maxim qui facit per alium facit per se (he who acts through another acts himself). Under this rule, if a statutory disqualification prevents an interested party from acting as an arbitrator, that same party is legally stripped of the capacity to nominate or choose the appointment mechanism.
Perkins Eastman Architects DPC v. HSCC (India) Ltd.3 The Court reinforced that a party with a direct material interest in the outcome cannot unilaterally dictate the appointment of a sole arbitrator,as it introduces justifiable doubts regarding independence and violates the quasi-judicial integrity of arbitration.
Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV)4: Drawing upon this five-Judge Constitution Bench decision, the Court highlighted that the principle of equal treatment under Section 18, also grounded in the constitutional norm of equality under Article 14, applies strictly at the appointment stage. Party autonomy is not absolute and is subject to mandatory provisions such as Sections 12(5) and 18, which impose non-derogable obligations to prevent bias and ensure fairness.
Bhadra International (India) Pvt. Ltd. v. Airports Authority of India5: The Court relied on the Supreme Court’s holding that a unilateral appointment is void ab initio. It clarified that an ineligible arbitrator suffers from a de jure inability to perform functions, causing their mandate to terminate automatically by operation of law under Section 14(1)(a). Furthermore, the Court reiterated that the Award Debtor’s non-participation at all stages could not amount to waiver, consent or acquiescence, which in any event could only be established by an express agreement in writing subsequent to the arising of the dispute.
Execution Court and Jurisdictional Nullity
A significant procedural issue addressed in the judgment was weather the executing court could refuse enforcement where the defect went to the inherent jurisdiction of the tribunal. While executing courts generally do not re-examine the merits of an award, the High Court identified a clear exception for defects going to the very jurisdiction of the tribunal. Because the sole arbitrator was de jure ineligible from the very beginning, the resulting tribunal lacked inherent jurisdiction. Consequently, the ex parte award was not merely erroneous, but The expiry of the limitation period for filing a Section 34 petition could not cure a fundamental void.
In support of refusal at the execution stage, the Court relied on the Division Bench ruling of the Delhi High Court in Mahaveer Prasad Gupta v. Government of NCT of Delhi6, as well as Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat. These cases were relied upon for the proposition that courts seized of execution proceedings must refuse enforcement of awards rendered by unilaterally appointed arbitrators where such awards are nullities on account of inherent lack of jurisdiction.
Conclusion
The Calcutta High Court’s ruling in L AND T FINANCE LIMITED v. JAI PARAS MATERIAL STORE AND ORS. serves as a holding that an ADR institution or centre can be validly approached for appointment only with the consent of both parties, either in a prior agreement naming the institution or after disputes have arisen, the Court held that institutional form does not alter the substantive nature of a unilateral appointment and declined to sanction the mischief that Sections 12(5) and 18 were intended to prevent. The judgment firmly establishes that independence, impartiality and equality of parties are mandatory considerations at every stage of the arbitration process, including the appointment stage. For Award Holders, the legal path forward remains clear: when faced with a silent or non-cooperative Award Debtor,where there is no prior institutional agreement and the other party does not participate, the statutory remedy is to approach the Court under Section 11 for appointment of an independent arbitrator in accordance with the provisions of the Act.
Citations
Expositor(s): Adv. Jahnobi Paul
