High Court holds procedural challenge to arbitrator appointment in international commercial arbitration cannot unsettle award absent non‑derogable conflict or prejudice

A bench of Justice Anil Khetarpal and Justice Anish Dayal heard an appeal challenging a Single Judge's order which upheld the validity of an arbitral award dated 14.02.2012. The narrow issue before the Division Bench was whether the High Court's exercise of jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 in appointing a sole arbitrator in an international commercial arbitration (ICA) vitiated the ensuing arbitral proceedings and award where the appointment was made in accordance with the parties' arbitration clause.

The Court dismissed the appeal and affirmed the Single Judge's conclusion that appointment by the High Court did not, by itself, invalidate the award when the appointment conformed with the arbitration agreement and no timely objection or prejudice was shown. The Court observed that Section 11(6) operated as a procedural provision and that objections to appointment were subject to waiver under Section 4. The Court, in its reasoning, observed: "Pertinently, Section 34(2)(a)(v) does not contemplate the setting aside of an arbitral award solely on the ground that the arbitrator was appointed by an authority allegedly lacking competence. The said provision is narrowly tailored and permits interference only where the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement itself is in conflict with a non-derogable provision of Part I of the A&C Act. In the absence of such a conflict, irregularities, if any, in the appointment process do not, ipso facto, vitiate the arbitral award. The statutory scheme thus clearly maintains a distinction between the procedure for appointment of arbitrators and the limited grounds on which an arbitral award may be set aside." The Court also noted that a party who knowingly participated without timely objection was "deemed to have waived his right to so object."

Background

The dispute arose from a Shareholders' Agreement dated 23.11.2006 between the appellant and two respondents, which included Article 28 providing for arbitration in New Delhi and stated that a sole arbitrator "shall be appointed by the Chief Justice of the Delhi High Court upon a reference made to him". Respondent No.1, a Hong Kong company, invoked the clause and initiated proceedings under Section 11; the Chief Justice appointed Hon'ble Justice Anil Dev Singh (Retd.) on 13.04.2009. The appellant contended that the arbitration was international and that, under Section 11(6), only the Supreme Court or an institution designated by it could appoint an arbitrator in an ICA, rendering the appointment and the award void.

The appellant further alleged lack of notice and non-participation, stating she first learnt of the award in 2015. The Single Judge treated as a preliminary issue whether the High Court's appointment in an ICA invalidated proceedings and rejected the challenge, relying on Supreme Court authority that defects in composition were subject to waiver. The appellant sought to set aside the award under Section 34(2)(a)(v) and Section 34(2)(b)(ii).

The Division Bench analysed the scheme of Sections 11, 4 and 34 after the 2015 and 2019 amendments, emphasising party autonomy under Section 11(2) subject to Section 11(6) and the waiver doctrine under Section 4. It held that Section 11(6) was procedural and facilitative, intended to secure constitution of the tribunal rather than affect substantive rights. The Court found that the appellant had participated in arbitration, filed counterclaims, and did not raise the competence objection at the relevant stage; accordingly the objection was held waived. The Court distinguished precedents relied upon by the appellant (including cases concerning unilateral appointments or ineligibility of appointing authorities) and relied on authorities applying the waiver principle. The Court concluded that, in absence of demonstrated prejudice or a conflict with a non‑derogable provision of Part I, the post‑award challenge could not succeed. The appeal was dismissed.

Case No.: FAO(OS) (COMM) 230/2024 Case Title: Hala Kamel Zabal v. Arya Trading Ltd. & Ors. Appearances: For the Petitioner(s): Ms. Mamta Tiwari, Ms. Veronica Mohan and Mr. Vasumitra Gautam, Advocates For the Respondent(s): Ms. Ritika Sinha, Advocate for R‑1