U/S 34 OF THE ARBITRATION AND CONCILIATION ACT, A UNILATERAL APPOINTMENT OF AN ARBITRATOR CANNOT BE CHALLENGED - DELHI HC

Single-judge Justice Suresh Kumar Kait of Delhi High Court held that unilateral appointment of an arbitrator cannot be challenged under Section 34 of the Arbitration and Conciliation Act of 1996.  Under Section 34, the scope of interference in an arbitral award is limited and can be examined only when an arbitral tribunal exceeds the scope of contracts or agreements and its jurisdiction.

The Court was hearing a plea filed by Kanodia Infratech Ltd challenging an award of an arbitrator, a retired judge of the Punjab and Haryana High Court, in March 2021 in favor of Dalmia cement. The Arbitrator granted 

Dalmia cements a refund of ₹25 crores along with an interest of 18 percent per annum. Rs 20.83 crores as principal cost plus 18 percent interest and a token compensation of Rs 4 crore along with 18 percent interest.

The petitioner contended that the Arbitrator lacked inherent jurisdiction to entertain the matter since it was appointed unilaterally by the respondent and the petitioner, which went contrary to the settled proposition. 

The Court held the petitioner never objected to the appointment of the Arbitrator in the arbitration proceedings. Besides, it cannot be challenged under Section 34. Justice Kait disposed of the petition but also set aside the compensation of ₹ four crores awarded after the petitioner argued that there was no such prayer by the respondents. It would lead to a miscarriage of justice.

Author: Papiha Ghoshal