In commercial agreements today, arbitration clauses have become standard practice. Most vendors, banks, NBFCs, service providers, and business entities insert arbitration provisions in their contracts to resolve disputes outside court. While arbitration is meant to be a neutral and efficient dispute resolution mechanism, the reality in many cases is far from neutral—especially where one party unilaterally appoints the arbitrator, conducts proceedings without notice, and attempts to enforce ex-parte awards.
At Pansari Legal Solutions LLP, we regularly represent parties wrongfully dragged into such arbitration proceedings and help them assert their legal rights before Arbitrators, High Courts, and even the Hon’ble Supreme Court.
The Problem: Unilateral Appointment of Arbitrators
In numerous contracts, particularly with banks, NBFCs, and corporate giants, the arbitration clause allows only one party (usually the lender or supplier) to:
• Choose the arbitrator without consulting the other party;
• Decide the venue, language, and even procedural rules;
• Send notices via email or courier, often without confirmation;
• Proceed ex-parte and obtain arbitral awards which are later sought to be executed like decrees.
This practice is not just unfair—it is illegal, as held by several judgments of the Supreme Court of India.
Legal Position: Supreme Court on Unilateral Arbitrator Appointments
The Hon’ble Supreme Court, in TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377, and later in Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2019) 9 SCC 377, has clearly held that a party interested in the outcome of arbitration cannot unilaterally appoint the sole arbitrator. If a clause gives one party the exclusive right to appoint, such an appointment is null and void, and the arbitration can be challenged under Section 12(5) and Section 13 of the Arbitration and Conciliation Act, 1996.
Further, under Section 34 of the Act, a party can challenge the arbitral award if the procedure adopted was contrary to the agreement or violates principles of natural justice.
Our Strategic Approach for Respondents in Arbitration
When we represent clients who are respondents in such one-sided arbitration cases, we adopt a multi-layered approach:
• Immediately reply to any notice challenging the unilateral appointment of the arbitrator;
• File a Section 13 application before the Arbitral Tribunal raising bias, interest, and improper constitution;
• Approach the High Court under Section 14 for termination of the mandate where the arbitrator is illegally appointed;
• File a petition under Section 34 for setting aside the award if passed without proper hearing;
• Challenge ex-parte award execution proceedings under CPC or Arbitration Act, depending on facts.
We also verify whether proper invocation, venue, language, and jurisdiction has been followed, as many awards fail at this stage.
Key Grounds to Challenge Arbitrations
• Unilateral appointment of arbitrator;
• Absence of mutual consent;
• Arbitrator is connected to one party or their law firm;
• Notice never properly served;
• Arbitrator proceeded without granting opportunity to file reply or evidence;
• Procedural violations or denial of fair hearing.
Even if the respondent never appeared due to lack of knowledge or communication, law permits restoration of rights if natural justice is violated.
Conclusion: Arbitration is Lawful Only When It Is Fair
Arbitration cannot be a tool of oppression. It must be consensual, neutral, and balanced. If you have received a notice from an arbitrator, or if an award is being enforced against you based on unilateral action, you are not powerless. You have strong legal remedies.
At Pansari Legal Solutions LLP, we stand with individuals, businesses, and MSMEs who are often caught in unfair arbitration proceedings. We help set aside biased awards, stop unlawful enforcement, and where necessary, initiate counterclaims in properly constituted arbitrations.
Before you accept or ignore any notice—consult us. Because in arbitration, what you do in the first 30 days can decide the next 3 years.
