Bombay HC Upholds Pre-2015 Unilateral Arbitrator Appointments If Allowed Under Arbitration Clause

On August 4, the Bombay High Court ruled that an arbitrator appointed unilaterally before October 23, 2015, remains valid if the arbitration agreement permits one party to make the appointment. The case involved four execution proceedings of SE Investments Ltd (now Paisalo Digital Ltd), with Justice Jitendra Jain delivering the judgment.

The court examined whether an executing court should refuse to enforce arbitral awards on grounds of unilateral appointments before the 2015 amendment to the Arbitration and Conciliation Act. Before the amendment, unilateral appointments were recognized under certain conditions, including when the arbitration agreement named a specific arbitrator, specified a person or designation for appointment, or allowed one party to appoint the arbitrator.

Post-2015, Section 12(5) was introduced to strengthen arbitrator independence and impartiality requirements. Justice Jain clarified that the 2015 legal standard should not invalidate every unilateral appointment made before October 23, 2015, if the arbitration agreement permitted it. However, he drew a line between such contracts and cases lacking such provisions.

Unilateral appointments without consent would invalidate the proceedings and award. The court emphasized the importance of examining each case based on the agreement and appointment circumstances. The four cases are pending further consideration on September 15.