The Calcutta High Court has quashed an ex-parte arbitral award, reiterating that a sole arbitrator appointed unilaterally by one party undermines the principles of natural justice and renders the entire arbitral process void in law.

 

Delivering judgment on December 2, 2025, Justice Shampa Sarkar allowed a challenge under Section 34 of the Arbitration and Conciliation Act, 1996, filed by YD Transport Company and its proprietor. The Court held that such a unilateral constitution of the tribunal breaches Section 12(5) read with the Seventh Schedule, vitiating the award as a nullity.

 

The dispute concerned alleged outstanding dues of ₹7.27 crores under a loan arrangement between the petitioners and SREI Equipment Finance Ltd. After invoking the arbitration clause, SREI appointed the sole arbitrator without petitioners’ concurrence and proceedings continued ex-parte, culminating in an award dated 28 December 2017. Challenging the same, the petitioners approached the High Court relying on constitutional protections under Article 14, arguing they never received a signed copy of the award and that the unilateral appointment was legally incompetent.

 

SREI countered that the Section 34 plea was time-barred, stressing that the arbitrator had dispatched the signed award via registered post. It also invoked Section 42 to assert that the Calcutta High Court lacked jurisdiction since execution proceedings were first initiated at Jamshedpur. Further, it contended that the petitioners’ participation implied acquiescence to the arbitrator’s authority.

 

The Court framed its determination around three core questions:

Whether the Section 34 challenge was filed within limitation,

Whether Section 42 divested the Calcutta High Court of jurisdiction, and

Whether unilateral appointment can be sustained despite participation.

 

On limitation, the Court applied Section 31(5) strictly, noting that mere postal dispatch did not prove actual delivery. Since the award was only later obtained, limitation was computed from April 9, 2019, making the petition within time.

 

Regarding jurisdiction, the Court clarified the distinction between proceedings under Part I (Section 34) and post-award execution under Section 36. It held that Section 42 does not apply after arbitral proceedings conclude, and as Calcutta was the seat, the High Court retained exclusive supervisory jurisdiction.

 

On the unilateral appointment, the Court relied on Supreme Court precedents including TRF Ltd., Bharat Broadband Network, Perkins Eastman, and Ellora Paper Mills. It reaffirmed that:

• A party interested in the dispute cannot unilaterally nominate an arbitrator

• Any waiver of Section 12(5) must be express and in writing

• Mere participation does not amount to waiver

 

Declaring the arbitrator de jure incapable of continuing, the Court found the award contrary to public policy and tainted by institutional bias. Consequently, the award dated 28.12.2017 was set aside in entirety.