Delhi Court has recently Invalidated ₹90 Lakh Arbitral Award Granted to BMW India Financial Services Private Limited due to the Unilateral Appointment of Sole Arbitrator, Citing Violation of the Indian Law.
The Patiala House Court’s Commercial Courts District Judge Anurag Sain stated cited established law that prohibits the unilateral appointment of sole arbitrators, calling into question the validity of the entire arbitration process.
As such, the petitioner’s plea under Section 34 of the Arbitration & Conciliation Act was granted by the court.
The petitioner, Piyush Jain, had loaned about ₹95 lakhs from BMW India Financial Services to purchase a BMW car.
The petitioner defaulted on the loan, resulting in the car’s auction. BMW invoked arbitration as per the 2018 loan agreement, appointing advocate Sanjay Aggarwal as the sole arbitrator. In April 2019, the arbitrator awarded BMW ₹89,68,666 with a 24% annual interest rate from February until payment. The recent ruling invalidated this ₹90 lakh arbitral award due to the unilateral appointment of the arbitrator, as argued by the petitioner.
The petitioner’s counsel alleged bias in the arbitrator’s appointment due to lack of notice, violating the law. The judge clarified that only patent illegality in findings could be reviewed. The Arbitration Act outlines limited grounds for setting aside an award, excluding the factual findings. The court will not interfere if the arbitrator provides sufficient reasoning and avoids legal errors or misconduct.
However, the appointment of the sole arbitrator was a legal matter that the judge could address.
After examining the arbitration agreement, the court concluded that the provision allowing unilateral appointment was illegal following the 2015 amendment to the Arbitration Act.
Furthermore, the court stated that this clause is directly against the provisions of the Arbitration and Conciliation Act, making the arbitrator de jure ineligible to act as an arbitrator by law. The court cited various Supreme Court decisions to support its conclusion that BMW’s unilateral appointment was not valid.
