Rajasthan High Court – Jaipur
Urn: Cw / 36295U / 2024M/S Sundaram … vs Hanuman Prasad S/O Bhanwarlal … on 24 April, 2026
[2026:RJ-JP:17337]
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Civil Writ Petition No. 17398/2024
M/s Sundaram Finance Limited, Office No. 21, Patullos Road,
Chennai 600002, Through Its Authorised Signatory Shri Arun
Khandelwal S/o Late Shri Bhajan Lal Khandewal.
----Petitioner
Versus
1 Hanuman Prasad S/o Bhanwarlal, R/o Billu, Tehsil
Makrana, District Nagaur
2 Anita W/o Hanuman Prasad, R/o Billu, Tehsil Makrana,
District Nagaur
----Respondents
For Petitioner(s) : Mr. R.K. Agarwal, Sr. Adv. Assisted by
Mr. Adhiraj Modi &
Mr. Naman Yadav
For Respondent(s) :
HON’BLE MR. JUSTICE BIPIN GUPTA
Judgment/Order
Reportable
Date of hearing and conclusion of arguments 02.04.2026
Date on which the judgment was reserved 02.04.2026
Whether the full judgment or only the operative Full Judgment
part is pronounced
Date of pronouncement 24.04.2026
1. In the present appeal, the notices were issued to the
respondents however, when service was not effected through
ordinary mode, substituted mode of service was adopted. Vide
order dated 09.10.2025, the application for substituted service
was allowed and the petitioner was directed to effect service by
way of publication in the daily newspaper. However, despite
service through paper publication also when none appeared to
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ex-parte and the order was reserved.
2. The present writ petition has been filed assailing the orders
dated 09.05.2024 and 06.07.2024, passed by learned
Commercial Court, Ajmer, in Execution Application No. 59/2024
and Civil Misc. Case No. 01/2024 (CIS No. 06/2024), whereby the
execution application filed under Section 36 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the ‘Act of 1996’)
was dismissed and even the review petition preferred by the
petitioner was dismissed.
3. The facts in a nutshell are that in the year 2019, the
respondents have approached the petitioner to avail a
financial/loan transaction in the nature of a loan facility against
the purchase of a vehicle to the tune of Rs.6,80,000/- vide loan
agreement No. P010700530 dated 06.11.2019. The borrowers i.e.
respondent No.1 and 2 in the capacity of borrower and co-
borrower executed the loan agreement and agreed to adhere to
the repayment schedule as envisaged.
3.1 Accordingly, the appellant in order to secure the repayment
of the loan had hypothecated the vehicle i.e. Hyundai i20, 2020
Model bearing registration No. RJ 37 CB 1276, as secured asset, in
favour of the petitioner.
3.2 The respondents-borrowers as per the terms of the loan
agreement were jointly and severally liable to repay the loan
amount. Further, the repayment of the aforesaid loan facility had
to be made in equal monthly installments and the secured asset
were to remain hypothecated in favour of the petitioner till the
satisfaction of the loan agreement.
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3.3 Due to the onset of the COVID-19, certain guidelines were
issued by the Reserve Bank of India and in view of the same, the
petitioner granted benefits of the moratorium to the respondents.
Pursuant to the availing of the aforesaid loan facility and the
benefits of the moratorium granted, the respondents failed to
adhere to the repayment schedule and started committing default
in repayment. The petitioner made several requests to the
respondents, however they failed to repay the dues and even the
handing over of the possession of the hypothecated asset.
3.4 As the respondents have defaulted in their repayment
obligation, the petitioner in accordance with the arbitration clause
under the loan agreement, issued a notice dated 22.04.2022,
whereby the respondents were called upon to repay the
outstanding amount of Rs.5,77,223.03/-. Despite the demand
notice, the respondents failed to repay the outstanding dues.
Thus, in furtherance of the arbitration clause in the loan
agreement, the petitioner was compelled to initiate arbitration
proceedings and as per Article 22 of the loan agreement, the
parties had envisaged the reference for adjudication of the dispute
through the ‘Madras Chamber of Commerce and Industry’
(hereinafter referred to as the ‘MCCI’).
3.5 Since the respondents have failed to repay the outstanding
dues, the petitioner invoked the arbitration clause and approached
the MCCI for appointment of a sole arbitrator vide letter dated
16.011.2022. In pursuance of the same, vide letter dated
30.11.2022, the MCCI appointed Mr. Murali Rathinasamy
(hereinafter referred to as the ‘Ld. Sole Arbitrator’) as the sole
arbitrator to adjudicate the matter.
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3.6 The Ld. Sole Arbitrator thereafter issued a notice dated
08.12.2022 along with the declaration under Section 12(1)(b) of
the Act of 1996 and the respondents were called upon to appear
on 09.01.2023. However, they failed to appear before the Ld. Sole
Arbitrator and inspite of granting opportunities, the respondents
did not appear for the proceedings.
3.7 In such event, the Ld. Sole Arbitrator proceeded ex-parte
and passed the arbitral award dated 13.04.2023 for
Rs.4,23,102.90/-. The arbitral award was circulated by the Ld.
Sole Arbitrator to the respondents vide registered post on
17.03.2023.
3.8 However, after expiry of statutory limit of three months
under Section 34 of the Act of 1996, the petitioner preferred an
execution petition bearing No. Execution Case No. 59/2024 before
the Ld. Commercial Court, Ajmer for recovery of an outstanding
amount of Rs.5,06,650/- as on the date of filing of the execution
petition. During the execution proceedings, despite there being no
objections by the respondents, the learned Commercial Court suo
moto treating the appointment of arbitrator as unilateral
appointment, vide order dated 09.05.2024, dismissed the
execution petition on the ground of unilateral appointment and
without due consideration of the facts and circumstances of the
case.
3.9 Aggrieved of the order dated 09.05.2024, the petitioner
preferred a review petition bearing No. 01/2024 (CIS No.06/2024)
on the ground that the Ld. Sole Arbitrator was appointed by the
MCCI in terms of the arbitration clause of the loan agreement and
furthermore, MCCI is being an independent and impartial body,
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the appointment cannot be termed as unilateral. However, even
the review petition came to be dismissed vide order dated
06.07.2024.
3.10 Hence, aggrieved by the orders dated 09.05.2024 and
06.07.2024, the petitioner has preferred the present civil writ
petition.
4. Learned counsel for the petitioner at the outset submitted
that the learned Commercial Court had wrongly dismissed the
execution and review petition of the petitioner without adequately
examining the evidence and legal principles violating the principles
of natural justice, fairness and rule of law.
4.1 Learned counsel for the petitioner submitted that the learned
Commercial Court has made unreasonable findings on multiple
folds which includes the observation made with regard to the
arbitration venue i.e. the Ld. Sole Arbitrator was appointed at
Chennai whereas the respondent was from Nagaur. Learned
counsel submitted that the learned Commercial Court has failed to
apply the principle of party autonomy as enshrined under Section
20(1) of the Act of 1996, which explicitly provides that the parties
to an arbitration agreement have the autonomy to mutually decide
the place of arbitration. Learned counsel drew attention to the
contractual stipulation wherein the parties to the loan agreement
have unanimously agreed the place of arbitration as Chennai.
Learned counsel thus, submitted that the dismissal of the
execution petition on account of territorial jurisdiction was without
any basis.
4.2 Learned counsel for the petitioner further submitted that the
finding as arrived by the learned Commercial Court with regard to
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the appointment of arbitrator not being in compliance with the
statutory provision is perverse and incorrect as there exists no bar
under the Act of 1996 which restrains a party to appoint an
Arbitrator rather under Section 11 (2) of the Act of 1996, the
parties are empowered to agree on a procedure for appointment
of an arbitrator. However, vide impugned orders, the learned
Commercial Court has completely invalidated the procedure
agreed by the parties. Moreover, Article 22 of the loan agreement
had clearly stipulated the law and jurisdiction clause that would
govern the parties to the agreement.
4.3 Learned counsel for the petitioner contended that vide
impugned order, the learned Commercial Court has held that the
petitioner has unilaterally appointed the Ld. Sole Arbitrator and
has not obtained the consent of the respondents, whereas in the
loan agreement entered between the parties, it has been clearly
stipulated that all the disputes arising between the parties shall be
settled through a sole arbitrator to be appointed by the MCCI,
which is independent and impartial body having no connection or
influence of the petitioner.
4.4. Learned counsel for the petitioner further submitted that this
is not a case where there is unilateral appointment of a Sole
Arbitrator rather the Sole Arbitrator was appointed by the MCCI,
which is a recognised institution. In order to support his
argument, learned counsel for the petitioner relied upon the list of
‘Permanent Ordinary Members’ issued by the Indian Council of
Arbitration wherein MCCI is included bearing Membership No.
OP/ICA/0051. Similarly, the name of MCCI is also reflected in the
Membership Directory, 2026 issued by the International Council
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for Commercial Arbitration, wherein the MCCI finds place under
the list of arbitral institutes in India.
4.5 Learned counsel for the petitioner submitted that the learned
Commercial Court has failed to appreciate the fact that the Union
of India had issued a letter dated 18.09.2020 bearing No. ‘F.No. A-
60011/97/2018-admn.III(LA)’ (Annexure 9) whereby a list of
institutions offering Alternate Dispute Resolution has been
designated and promulgated wherein the MCCI has been
considered as one of such institution by the Department of Legal
Affairs. Thus, the finding as arrived by the learned Commercial
Court is non-est as in a case where the parties decide to rely upon
Institutional Arbitration, the proceedings are governed by the
rules and regulations framed by the Institution. Learned counsel
thus submitted that the reasoning of learned Commercial Court
assuming the delegation of the power of the appointment of the
Ld. Sole Arbitrator by the MCCI is misplaced and liable to be
quashed.
4.6 Learned counsel for the petitioner further contended that the
learned Commercial Court proceeded on patently erroneous
factual premises in holding that the Ld. Sole Arbitrator failed to
make the requisite disclosure. The record, however, demonstrates
that the Arbitrator had duly complied with the mandate of Section
12 read with Sixth Schedule of Act of 1996 and furnished the
disclosure in the prescribed form. The finding of the learned
Commercial Court, therefore, is vitiated by a clear misappreciation
of facts.
4.7 Learned counsel for the petitioner with regard to the
application of disqualification provision under Section 12(5) of the
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Act of 1996 submitted that the learned Commercial Court applied
the said provision in a mechanical manner without examining
whether the case falls within any of the categories enumerated
under the Seventh Schedule. The statutory scheme makes it clear
that ineligibility under Section 12 (5) of the Act of 1996 only arises
when there exists a relationship between the parties/counsel with
the arbitrator or the subject matter squarely falls within specified
categories. However, in the present case, the case of arbitrator
does not squarely fall within the category so mentioned in the
schedule. Moreover, the disclosure clearly reveals that neither the
Arbitrator nor any parties had any relationship or association with
the petitioner that could give rise to ineligibility.
4.8 Learned counsel for the petitioner submits that after
participation in the arbitral proceedings without demur amounts to
a waiver.
4.9 Learned counsel for the petitioner additionally submitted that
the learned Commercial Court further erred in assuming
jurisdiction to decide upon the alleged ineligibility at the stage of
enforcement. The issue of de jure ineligibility, if at all, could only
have been raised in appropriate proceedings under Section 14 or
34 of the Act of 1996.
4.10 Learned counsel for the petitioner contended that the
learned Commercial Court has exceeded its jurisdiction by
adjudicating upon the issue of ineligibility without calling for the
arbitral record or permitting parties to lead evidence. The finding
regarding alleged disqualification is thus rendered without any
foundational material and is liable to be set aside. Learned counsel
argued that while the former may be raised before the Arbitral
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Tribunal itself under Section 12 and 16 of the Act of 1996, the
latter is to be determined strictly in accordance with Section 34 of
the Act of 1996, by a Competent Court. Learned counsel thus,
submitted that the learned Commercial Court has conflated these
distinct remedies, thereby committing a jurisdictional error.
4.11 Learned counsel for the petitioner submitted that the if the
impugned order is allowed to stand, the same would erode the
sanctity of arbitration agreements and dilute the principle of party
autonomy. Furthermore, such approach would introduce
uncertainty and unpredictability in commercial transactions,
contrary to the settled principles governing arbitration
jurisprudence.
4.12 Learned counsel for the petitioner lastly submitted that the
impugned orders thus suffer from manifest errors of law,
jurisdictional infirmities, and misapplication of the statutory
provisions. Thus, the impugned orders deserve to be quashed and
set aside and the arbitral award as passed by the Ld. Sole
Arbitrator be enforced in accordance with law.
4.13 Learned counsel for the petitioner relied upon the following
judgments to buttress his arguments:
(i) Rafique Bibi (Dead) By Lrs. Vs Sayed Waliuddin
(Dead) by Lrs. & Ors.; (2004) 1 SCC 287.
(ii) Vasudev Dhanjibhai Modi vs Rajabhai Abdul
Rehman & Ors.; (1970) 1 SCC 670.
(iii) Dhurandhar Prasad Singh vs Jai Prakash
University and Ors.; (2001) 6 SCC 534.
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(iv) Thomas Varghese vs Sundaram Finance Ltd.;
2026 SCC OnLine Mad 1768.
(v) Sundaram Finance Limited vs S.M. Thangaraj
and Ors.; 2025 SCC OnLine Mad 5428.
(vi) Nandan Biomatrix Limited vs D 1 Oils Limited;
(2009) 4 SCC 495.
(vii) Sanjeev Kumar Jain vs Raghubir Saran
Charitable Trust and Ors.; (2012) 1 SCC 455.
(viii) Sundaram Finance Ltd. vs Ajith Lukose and
Anr.; 2025 SCC OnLine Ker 6754.
(ix) Balaji Enterprises and Ors. vs Sundaram
Finance Ltd.; 2025 SCC OnLine Del 8195.
(x) Jalaram Fabrics vs Nisarg Textiles Pvt. Ltd.;
2026 SCC OnLine Bom 32.
(xi) KNR Tirumala Infra Pvt. Ltd. vs NHAI; 2025
SCC OnLine Del 5701.
(xii) Five Star Business Finance Ltd. Through Amit
Shrivastava vs Keval Bai and Ors.; Arbitration
Appeal No. 208 of 2025 (Decided on: 16.01.2026)
{High Court of Madhya Pradesh, Bench Indore}.
(xiii) Paramjeet Singh Patheja vs ICDS Ltd.; (2006)
13 SCC 322.
5. Heard learned counsel for the parties and perused the
material available on record.
6. At the outset, the rejection of the execution petition on the
ground of place of arbitration is concerned, this Court is of the
firm opinion that the same is legally untenable as Section 20(1) of
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the Act of 1996 enshrines the principle of ‘Party Autonomy’. In a
recent judgment in the case of J&K Economic Reconstruction
Agency vs Rash Builders India Private Limited; 2026 INSC
368, the Hon’ble Apex Court while relying upon the landmark
judgment passed by a Constitution Bench in the case of Bharat
Aluminium Co. v. Kaiser Aluminium Technical Services Inc.
(2012) 9 SCC 552 emphasized that the agreement between
parties regarding the seat of arbitration is paramount. Once the
parties signed the loan agreement fixing the seat at Chennai, the
learned Commercial Court could not invalidate the proceedings
merely on the grounds of geographical inconvenience. The
relevant paragraph of J&K Economic Reconstruction Agency
(supra) is reproduced herein below:
“13. A Constitution Bench of this Court Bharat
Aluminium Co. v. Kaiser Aluminium Technical Services
Inc. (2012) 9 SCC 552, recognised that arbitration is
anchored to the seat or place chosen by the parties,
and that the law of that seat governs the arbitration. It
was observed that Section 20 of the Arbitration and
Conciliation Act, 1996 embodies party autonomy in the
choice of seat, while also permitting, under sub-section
(3), the holding of hearings at a place convenient to the
parties.”
7. This Court, further having scanned the record and considered
the submissions of the learned counsel for the petitioner, finds
that the primary controversy hinges upon whether the learned
Commercial Court was legally justified in suo moto declaring the
award passed by sole arbitrator as non-executable on the grounds
of ‘unilateral appointment’, notwithstanding that the appointment
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was facilitated by an independent arbitration institution as per the
contractual agreement entered between the parties.
8. On a careful consideration of the arbitration clause, it is
undisputed that the clause in the loan agreement expressly
provided for reference of disputes to arbitration under the aegis of
the MCCI. The said institution, upon invocation of the arbitration
clause by the petitioner, appointed the learned Sole Arbitrator.
Thus, it is clear from the record that the appointment was not
made by the petitioner in its individual capacity but through an
agreed institutional mechanism.
It is pertinent to reproduce below the Article 22 pertaining to the
Arbitration Clause as contained in the Loan Agreement dated
31.07.2019:
” Article 22
Law, Jurisdiction, Arbitration
22. (A) All disputes, differences and/or claim, arising
out of this agreement, whether during its subsistence
or thereafter shall be settled by arbitration in
accordance with the provisions of the Arbitration and
Conciliation Act, 1996 or any statutory amendments
thereof and shall be referred to the sole Arbitration of
an Arbitrator nominated by the Madras Chamber of
Commerce and Industries (MCCI), presently having its
office at “Karumuttu Centre”, 1 Floor, 634, Anna Salai,
Chennai-600 035 or nominated by the Managing
Director of the Lender. The proceedings shall be
governed by the Rules and Regulations of the MCCI
governing arbitration proceedings. If the sole
arbitrator is nominated by the Managing Director of
the Lender such an arbitrator may follow his/her own
rules and procedure. The award given by the sole
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arbitrator shall be final and binding on the parties to
this agreement.
It is a term of this agreement that in the event of such
an arbitrator to whom the matter has been originally
referred, dying or being unable to act for any reason,
MCCI or Managing Director of the Lender, as the case
may be, shall nominate another person to act as
arbitrator. Such a person shall be entitled to proceed
with the reference from the stage at which it was left
by his/her predecessor.
(b) The venue of arbitration proceedings shall be
CHENNAI.
(c) The arbitrator so appointed herein above shall also
be entitled to pass an Award on the hypothecated
asset and also on any other securities furnished by or
on behalf of any of the parties to the Arbitration.”
9. From a bare perusal of the above-mentioned Arbitration
Clause, it is evident that the parties had consciously agreed to
refer disputes to a Sole Arbitrator appointed by the MCCI i.e. an
institutional mechanism. True it is that a letter dated 16.11.2022
(Annexure 5) was issued by the petitioner to the MCCI for
appointment of a sole arbitrator which clearly clarifies the fact that
the appointment of the arbitrator was thus, not made by the
petitioner in its individual capacity, but by the designated
institution in accordance with the agreed procedure.
10. The Court further observes that, under the earlier scheme of
the Arbitration and Conciliation Act, 1996, the Chief Justice of a
High Court had the authority to recognize institutions for the
appointment of arbitral tribunals. After the amendment, however,
Section 2(c)(a) of the Act of 1996 redefined an ‘arbitral institution’
as one designated by the Supreme Court or a High Court under
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the Act. In addition, Section 11(3-A) of the Act of 1996 granted
these courts the power to designate such institutions from time to
time, subject to their grading by the Council under Section 43-I of
the Act of 1996. Unfortunately, neither Section 2(c)(a) nor Section
11(3-A) of the Act of 1996 has been brought into force, as they
have not yet been notified. As a result, the situation remains at a
standstill.
11. This Court finds strength in the petitioner’s reliance on the
recent judgment of Thomas Varghese (supra) decided on
24/02/2026, wherein the High Court of Madras has categorically
held that where the arbitration agreement provides for
appointment of an arbitrator through an independent institution,
such appointment cannot be characterized as unilateral merely
because one of the parties initiates the process. The Court
emphasized that institutional arbitration ensures neutrality,
independence, and adherence to established procedures, thereby
negating any apprehension of bias. The relevant paragraphs of
Thomas Varghese (supra) are reproduced herein below:
20. The last and the most important issue to be dealt with is
the appointment of Sole Arbitrator by MCCI. It was
contended that even though the Sole Arbitrator was
appointed by MCCI, that institution is not a recognised
institution and hence it tantamounts to unilateral
appointment of the Sole Arbitrator which runs against the
dictum of the Apex Court in Perkins case referred supra and
also the judgment of the Apex Court in Bhadra International
(India) Pvt. Ltd. v. Airports Authority of India, 2026 SCC
OnLine SC 7.
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21. It will be relevant to extract the Arbitration Clause
contained in the Loan Agreement dated 31.07.2019
hereunder:
LAW, JURISDICTION, ARBITRATION
(a) All disputes, differences and/or claim, arising out of this
agreement, whether during its subsistence or thereafter
shall be settled by arbitration in accordance with the
provisions of the Arbitration and Conciliation Act, 1996 or
any statutory amendments thereof and shall be referred to
the sole Arbitration of an Arbitrator nominated by The
Madras Chamber of Commerce and Industries (MCCI),
presently having its office at “Karomuttu Centre”, I Floor,
634, Anna Salai, Chennai-600035 or nominated by the
Managing Director of the lender. The proceedings shall be
governed by the Rules and Regulations of the MCCI
governing arbitration proceedings. If the sole arbitrator is
nominated by the Managing Director of the Lender, such an
arbitrator may follow his/her own rules and procedure. The
award given by the sole arbitrator shall be final and binding
on the parties to this agreement. It is a term of this
agreement that in the event of such an arbitrator to whom
the matter has been originally referred, dying or being
unable to act for any reason, MCCI or Managing Director of
the Lender, as the case may be, shall nominate another
person to act as Arbitrator. Such a person shall be entitled to
proceed with the reference from the stage at which it was
left by his/her predecessor.
(b) The venue of arbitration proceedings shall be CHENNAI.
(c) The arbitrator so appointed herein above shall also be
entitled to pass an Award on the hypothecated asset and
also on any other securities furnished by or on behalf of the
parties to the arbitration.
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22. A careful reading of the above Clause shows that the
dispute/differences arising out of the parties will be referred
to the Sole Arbitrator nominated by the MCCI or the
Managing Director of the respondent financial company. If
the Sole Arbitrator had been appointed by the Managing
Director of the respondent financial institution, straight away
it will be hit under Section 12(5) of the Act and the judgment
of the Apex Court in Perkins case and Bhadra International
case will come into play and the award itself will become a
nullity in the eye of law.
23. In the case in hand, admittedly, the Sole Arbitrator was
not appointed by the Managing Director of the respondent
financial institution.
24. The respondent by communication dated 05.5.2022
addressed to the Registrar of MCCI, requested for
appointment of an Arbitrator to adjudicate the claim/dispute
between the parties. A copy of this letter was sent to the
petitioner as well as the petitioner’s father who stood as the
guarantor. Even prior to sending such communication to
MCCI, the trigger notice was issued under Section 21 of the
Act on 09.3.2022. The MCCI appointed a Sole Arbitrator who
was a retired District and Sessions Judge and the Sole
Arbitrator issued notice to the petitioner and his father along
with claim statement and documents filed by the respondent.
25. The crucial issue to be considered by this Court is as to
whether such appointment of Sole Arbitrator made by MCCI
is valid or it is tainted on the ground that even such
appointment will be construed as unilateral appointment of a
Sole Arbitrator.
26. In the earlier avatar of the Arbitration Act, there was a
mechanism for the Chief Justice of a High Court to recognise
an institution for the purpose of appointment of an Arbitral
Tribunal. For instance, Nani Palkhivala Arbitration Centre
[NPAC] is one such Centre which was designated by the Chief
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Justice of the High Court of Madras through a notification as
an institution under Section 11(6) of the Act r/w Rule 3 of
appointment of Arbitrator by the Chief Justice of the Madras
High Court Scheme, 1996.
27. After the amendment was carried out in the Arbitration
Act, Section 2(c)(a) defined an arbitral institution to mean
an institution designated by the Supreme Court or the High
Court under the Act. Similarly, Section 11(3-A) also vested
with power to designate arbitral institutions from time to
time which have been graded by the Council under Section
43-I for the purposes of the Act. Unfortunately, neither
Section 2(c)(a) nor Section 11(3-A) have come into effect till
date since it has not been notified. Therefore, there is a
stalemate as on today since the Chief Justice has now been
replaced by the term ‘Court’ and there is no mechanism for
the Court to designate any arbitral institutions.
28. This Court must also take judicial notice of the fact that
many of the financial institutions in order to get over the
judgment of the Apex Court in Perkins case have formed
associations and given them the name of an arbitral
institutions which is manned by their own Arbitrators and
they make it look as if the Arbitrator is appointed by the
institution. This is clearly a ruse to get over the judgment of
the Apex Court and try to achieve indirectly what cannot be
achieved directly. Therefore, Courts must be wary and
ensure that the genuineness or otherwise of the institution is
gone into before recognising the Arbitrator appointed by
such arbitral institutions.
29. On the one hand, a party can approach the Court under
Section 11(6)(c) for appointment of an Arbitrator if the
parties had agreed for the procedure of appointment of an
Arbitral Tribunal by an arbitral institution and such
institution fails to perform its function. On the other hand,
the Act as it stands, does not have a mechanism for the
Court to designate arbitral institutions. Hence, the Court has
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to perform a balancing act by enquiring on the credibility
about the arbitral institution agreed between the parties in
the Arbitration Clause and if there is no questionable
integrity regarding the arbitral institution, the Court cannot
disregard the Arbitrator appointed by such Arbitral Tribunal.
Such appointment of an Arbitrator by the arbitral institution
cannot be construed as an unilateral appointment of an
Arbitrator since the institution is performing its function by
appointing an Arbitrator as agreed between the parties and
which to an extent is recognised under Section 11(6) of the
Act.
30. If one of the party to the agreement approaches an
arbitral institution named in the agreement for appointment
of Arbitral Tribunal, on receipt of notice, it is always left open
to the other party to refuse to give consent if the other party
is able to establish that such arbitral institution is nothing but
a ruse adopted by the party who approached the institution
to get over the issue of unilateral appointment of Arbitrator
by having their own team of Arbitrators in the so called
arbitral institutions. In such a scenario, the concerned party
can workout their remedy by approaching the Court for
appointment/termination and substitution of Arbitral Tribunal
in accordance with law.
31. The appointment of Arbitral Tribunal by an institution
that is agreed upon between the parties per se cannot be
dealt with in the same manner in which the Court deals with
an unilateral appointment of an Arbitrator. It becomes a
question of fact which has to be gone into on a case to case
basis and the credibility of the arbitral institution whose
services are sought, has to be tested whenever objections
are raised by the other party.
32. There is no need for the Court to perform all these
balancing acts if only the executive notifies the amendments
to enable Courts to designate arbitral institutions under
Section 11(3-A) of the Act. Hence, this Court makes a
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fervent appeal to the executive to notify the relevant
provisions and bring those provisions into effect so that the
Supreme Court and High Courts can designate arbitral
institutions graded by the Council under Section 43 I of the
Act and it will enable the parties to agree upon such
designated arbitral institutions for appointment of Arbitral
Tribunal and to a great extent, filing applications before the
High Court under Section 11 of the act will come down and it
will save the precious time of the Courts. Hopefully this
clarion call is heard by the executive to immediately take
steps to notify the relevant provisions under the Act to
designate arbitral institutions.
33. In the light of the above discussion, this Court has to test
the credibility of MCCI which has appointed the Sole
Arbitrator in this case. The MCCI was came into force much
before the law of Arbitration was even conceived. It was
started in the year 1836 and it is affiliated to Indian Council
of Arbitration. The same is evident from the website of the
Indian Council of Arbitration as on 12.11.2025. Even insofar
as the list of institutions recognised by the International
Council for Commercial Arbitration, the MCCI is recognised
as one of the institutions in India.
34. At this juncture, it will be relevant to take note of the
judgment of the Kerala High Court in Sundaram Finance Ltd.
Case referred supra. In that case, the Arbitral Clause was
almost the same and the arbitral institution was MCCI. The
learned Single Judge of the Kerala High Court took into
consideration Article 22 of the Loan Agreement and held as
follows:
15. The petitioner’s senior counsel, Shri. S. Mukunth,
distinguished the present case from the Hedge
Finance Ltd. (supra) ruling. He contended that the
latter was irrelevant as the arbitrator’s appointment
was not unilateral by either party. Instead, he
pointed out that Article 22 of the Agreement(Uploaded on 02/05/2026 at 11:32:24 AM)
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[2026:RJ-JP:17337] (20 of 31) [CW-17398/2024]mandated a request to the Madras Chamber of
Commerce and Industry (MCCI) for the appointment
of the sole arbitrator. He relied on a judgment of the
supreme court in Nandan Biomatrix Limited v. D1
Oils Limited, [(2009) 4 SCC 495 : (2009) 2 SCC (Civ)
227], Sanjeev Kumar Jain v. Raghubir Saran
Charitable Trust, [(2012) 1 SCC 455 : (2012) 1 SCC
(Civ) 275] and Amazon.com NV Investment Holdings
LLC v.Future Retail Limited, [(2022) 1 SCC 209 :
(2022) 1 SCC (Civ) 384].
16. On the other hand, the counsel for the
respondent relied on Hedge Finance (supra), wherein
this court held thus:
“On an analysis of the amended provisions of the
Arbitration and Conciliation Act, 1996 and the
exposition of the law laid down by the Hon’ble
Supreme Court in the afore – cited decisions, it is
abundantly clear that the law mandates that there
should be neutrality not only for the Arbitrator but
also in the arbitrator selection process as well. Thus,
in the post-2015 amendment era, there are only two
modes of appointment of a sole Arbitrator (i) by
express agreement in writing between the parties,
post the dispute, agreeing to waive the applicability
of Section 12 of the Act or (ii) by order of
appointment by the High court under Section 11 of
the Act. If the appointment of a sole arbitrator is
made other than by the above 2 methods, the
appointment is ex facie bad and is in contravention
of the provisions of the Act, which goes to the roots
of the matter, and the Arbitrator becomes de jure
ineligible to act as an arbitrator by the operation of
law.”.
17. In the present case, Article 22 of the loan
agreement stipulates that the sole arbitrator shall be
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[2026:RJ-JP:17337] (21 of 31) [CW-17398/2024]
nominated by the MCCI Arbitration, Mediation and
Conciliation Centre (MAMC), an entity operated by
the Madras Chamber of Commerce and Industry
(MCCI). Thus, the arbitrator’s nomination does not
originate from either party. The petitioner requested
the institution to make the nomination, and the
nomination was subsequently carried out by this
independent body, which adheres to its own rules for
Arbitration and Conciliation. Consequently, this
nomination cannot be construed as one prescribed by
the petitioner. The court’s judgment in Hedge
Finance (supra) addressed a scenario where one
party unilaterally nominated the arbitrator without
the other party’s concurrence or a prior agreement
as contemplated under Section 12(5) or its proviso of
the Arbitration Act.
18. The apex court in Nandan Biomatrix Limited
(supra) held that the crucial determination for the
court is the existence of an agreement to refer the
dispute to arbitration, with the intention to be
discerned from the clauses within the loan
agreement. A reading of Article 22 of the loan
agreement unequivocally demonstrates the parties’
agreement to resolve disputes through institutional
arbitration, as opposed to an ad-hoc arrangement.
19. When an institution is approached for arbitration,
it is the institution itself that nominates the
arbitrator in accordance with its established rules.
Neither party holds the prerogative to choose the
arbitrator. The apex court in Sanjeev Kumar (supra),
in paragraph 39, affirmed that an arbitrator can be
appointed directly by the parties, without court
intervention, or by an institution specified in the
arbitration agreement. In the absence of consensus
regarding the arbitrator’s appointment, or if the
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designated institution fails to fulfill its function, the
party seeking arbitration is entitled to file an
application under Section 11 of the Act for the
appointment of arbitrators.
20. Section 2(6) of the Arbitration Act grants parties
the autonomy to determine certain issues, including
the right to authorize any person or institution to
resolve disputes between them. Furthermore, Section
19(2) of the Act empowers parties to agree on the
procedural rules to be followed by the arbitral tribunal
in conducting its proceedings.
21. The Counsel also invoked Section 13 of the Act,
which mandates that a party intending to challenge an
arbitrator must, within 15 days of becoming aware of
the arbitral tribunal’s composition or any
circumstances outlined in Section 12(3), submit a
written statement detailing the reasons for the
challenge to the arbitral tribunal. Section 12(3)
specifies that unless the challenged arbitrator
withdraws or the other party agrees to the challenge,
the arbitral tribunal shall rule on the challenge. If the
challenge is unsuccessful, the arbitral tribunal shall
continue the arbitral proceedings and issue an arbitral
award. In the present case, the respondent has, to
date, not approached the Arbitral Tribunal to
challenge the arbitrator’s appointment.
22. As previously noted, the appointment in Hedge
Finance (supra) was made unilaterally by one of the
parties to the agreement, namely Hedge Finance. The
relevant clause in Hedge Finance (supra) stipulated
that all differences or disputes arising from the loan
agreement would be settled by arbitration in
accordance with the Arbitration and Conciliation Act,
1996, or its statutory amendments, and referred to a
sole arbitrator appointed by ‘HFL’. Thus, in that case,
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the sole arbitrator was appointed by HFL, a party to
the agreement, without the other party’s consent and
without an express agreement under the proviso to
Section 12 of the Act.
23. Turning to the facts of this case, there was no
unilateral appointment by the petitioner. The
appointment resulted from a nomination by an
institution. Therefore, the court’s judgment in Hedge
Finance (supra) is not applicable to the present
circumstances. Therefore, the appointment in this
case stands on a distinct footing.
24. As mentioned earlier, it is true that Hedge
Finance (supra) explicitly stated that, following the
2015 amendment to the Arbitration Act, there are
only two permissible modes of appointment : (1) by
express written agreement waiving the application of
Section 12, or (2) by the High Court under Section
11 of the Act. Consequently, it is evident that the
decision in Hedge Finance (supra) did not address a
situation where an institution was requested to
nominate a sole arbitrator. The District Judge failed
to consider this crucial distinction while dismissing
the aforementioned CMA (Arb) cases. In these
circumstances, I am firmly of the opinion that the
impugned orders warrant interference, and I hereby
do so.
35. It is also relevant to take note of the judgment of the
Bombay High Court in Jalaram Fabrics case referred supra. In
that case, the institution involved was the Bharat Merchants’
Chamber. The Bombay High Court followed the judgment of
the Kerala High Court in Sundaram Finance case and it was
held as follows:
23. The issue of institutional arbitration not suffering
from the vice of unilateral appointment is otherwise(Uploaded on 02/05/2026 at 11:32:24 AM)
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[2026:RJ-JP:17337] (24 of 31) [CW-17398/2024]no more res integra and is covered by several
decisions of various High Courts. In Sundaram
Finance (supra), a Single Judge of Kerala High Court
has dealt with the case where arbitration agreement
provided for nomination of arbitrator by MCCI
Arbitration Mediation and Conciliation Centre run by
the Madras Chamber of Commerce and Industry
(MCCI). The Petitioner therein had invoked
arbitration clause and referred the dispute to MCCI
for nomination of arbitrator. The Registrar of MCCI
was requested to appoint arbitrator and accordingly
the sole Arbitrator was appointed by MCCI. In the
light of the above position, the Kerala High Court
held in paras-17, 18, 19, 21 and 23 as under:
17. In the present case, Article 22 of the loan
agreement stipulates that the sole arbitrator shall
be nominated by the MCCI Arbitration, Mediation
and Conciliation Centre (MAMC), an entity
operated by the Madras Chamber of Commerce
and Industry (MCCI). Thus, the arbitrator’s
nomination does not originate from either party.
The petitioner requested the institution to make
the nomination, and the nomination was
subsequently carried out by this independent
body, which adheres to its own rules for
Arbitration and Conciliation. Consequently, this
nomination cannot be construed as one prescribed
by the petitioner. The court’s judgment in Hedge
Finance (supra) addressed a scenario where one
party unilaterally nominated the arbitrator without
the other party’s concurrence or a prior
agreement as contemplated under Section 12(5)
or its proviso of the Arbitration Act.
18. The apex court in Nandan Biomatrix Limited
(supra) held that the crucial determination for the
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[2026:RJ-JP:17337] (25 of 31) [CW-17398/2024]
court is the existence of an agreement to refer the
dispute to arbitration, with the intention to be
discerned from the clauses within the loan
agreement. A reading of Article 22 of the loan
agreement unequivocally demonstrates the
parties’ agreement to resolve disputes through
institutional arbitration, as opposed to an ad-hoc
arrangement.
19. When an institution is approached for
arbitration, it is the institution itself that
nominates the arbitrator in accordance with its
established rules. Neither party holds the
prerogative to choose the arbitrator. The apex
court in Sanjeev Kumar (supra), in paragraph 39,
affirmed that an arbitrator can be appointed
directly by the parties, without court intervention,
or by an institution specified in the arbitration
agreement. In the absence of consensus
regarding the arbitrator’s appointment, or if the
designated institution fails to fulfill its function,
the party seeking arbitration is entitled to file an
application under Section 11 of the Act for the
appointment of arbitrators.
21. The Counsel also invoked Section 13 of the
Act, which mandates that a party intending to
challenge an arbitrator must, within 15 days of
becoming aware of the arbitral tribunal’s
composition or any circumstances outlined in
Section 12(3), submit a written statement
detailing the reasons for the challenge to the
arbitral tribunal. Section 12(3) specifies that
unless the challenged arbitrator withdraws or the
other party agrees to the challenge, the arbitral
tribunal shall rule on the challenge. If the
challenge is unsuccessful, the arbitral tribunal
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[2026:RJ-JP:17337] (26 of 31) [CW-17398/2024]
shall continue the arbitral proceedings and issue
an arbitral award. In the present case, the
respondent has, to date, not approached the
Arbitral Tribunal to challenge the arbitrator’s
appointment.
23. Turning to the facts of this case, there was no
unilateral appointment by the petitioner. The
appointment resulted from a nomination by an
institution. Therefore, the court’s judgment in
Hedge Finance (supra) is not applicable to the
present circumstances. Therefore, the
appointment in this case stands on a distinct
footing.
(emphasis added)
24. In Balaji Enterprises (supra), the Division Bench
of the Delhi High Court has dealt with a case where
arbitration clause provided for resolution of disputes
by sole arbitrator nominated by Madras Chamber of
Commerce and Industry. The Award was sought to be
challenged on the ground that the appointment of
Arbitrator was unilateral. The issue before the Delhi
High Court is captured in para-2 of the judgment and
has been decided in paras-4 and 6 as under:
2. The short question that arises for consideration
in these appeals is whether the learned Arbitrator
had been unilaterally appointed by the
respondent, thereby rendering the Award a nullity
in terms of the Judgment of the Supreme Court on
this issue.
4. From the above clause, it is apparent that
where any dispute arises between the parties in
relation to the Agreement, the same was to be
referred to a Sole Arbitrator to be nominated
either by the Madras Chamber of Commerce &(Uploaded on 02/05/2026 at 11:32:24 AM)
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[2026:RJ-JP:17337] (27 of 31) [CW-17398/2024]Industry (in short ‘MCCI’) or by the Managing
Director of the lender. In the present case, the
respondent admittedly did not choose the second
option; instead, by notice dated 21.08.2023, they
invoked the Arbitration Agreement and requested
the MCCI to appoint an Arbitrator.
6. Upon receiving the said notice, the MCCI, by its
notice dated 27.09.2023, appointed a Sole
Arbitrator to adjudicate the disputes between the
parties. This notice was also duly sent to the
appellants herein. Therefore, it cannot be said
that the appointment of the learned Arbitrator was
unilaterally made by the respondent. On the
contrary, the appointment was made by the
Institution which, as per the agreement, had been
earmarked by the mutual consent of the parties,
as the appointing authority. Such an appointment,
in terms of Section 11 of the Arbitration and
Conciliation Act, 1996, would be a valid
appointment and would not fall foul of Section
12(5) of the said Act.
36. The Delhi High Court in the case of Balaji Enterprises
referred supra once again reiterated the above two
judgments and even in that case, MCCI was the arbitral
institution which appointed the Arbitral Tribunal.
37. Thus, the consistent view of atleast three High Courts
shows that such appointment of Arbitrator by an arbitral
institution, per se cannot be construed as unilateral
appointment of an Arbitrator. The credibility of MCCI was the
subject matter in two of the judgments and the Arbitrator
appointed by the said institution was upheld.”
(emphasis supplied)
12. However, in the present case the learned Commercial Court,
proceeded on the premise that the appointment was unilateral.
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This finding, in the considered opinion of this Court, suffers from a
patent misapplication of both facts and law. Once the parties have
contractually agreed to an institutional mechanism for
appointment, such procedure falls squarely within the ambit of
party autonomy as recognized under Section 11(2) and Section
20(1) of the Act of 1996 and hence, the sanctity of such
agreement cannot be lightly disregarded.
13. Further, testing upon touchstone of credibility of MCCI, it is
clear from the record that the MCCI was came into force much
before the law of Arbitration was even conceived. It was started in
the year 1836 and it is affiliated to Indian Council of Arbitration.
The same is evident from the website of the Indian Council of
Arbitration as on 12.11.2025. Even insofar as the list of
institutions recognised by the International Council for Commercial
Arbitration, the MCCI is recognised as one of the institutions in
India. Further, in view of the consistent view taken by the other
High Courts with regard to the credibility of the arbitral institution
namely MCCI, this Court is of the opinion that such appointment
of Arbitrator by an arbitral institution, per se cannot be construed
as unilateral appointment of an Arbitrator.
14. With regard to the other limb of arguments advanced by the
learned counsel for the petitioner pertaining to inherent
jurisdiction and the executing court, this Court is of the opinion
that the learned Commercial Court acted as an appellate body
over the award rather than an executing court. It is a well-
entrenched principle of law that an executing court cannot go
behind the decree or award unless it is shown to be a total nullity
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[2026:RJ-JP:17337] (29 of 31) [CW-17398/2024]
for a patent lack of inherent jurisdiction. Since the arbitrator was
appointed via a neutral institution and the respondents failed to
challenge the award under Section 34, the award attained finality.
As held in Vasudev Dhanjibhai Modi (supra), a Court will not
permit a collateral attack on an award at the execution stage on
grounds that were available during the trial or challenge stage.
The relevant paragraph of the judgment reads as below:
“6. A court executing a decree cannot go behind the
decree: between the parties or their representatives it
must take the decree according to its tenor, and cannot
entertain any objection that the decree was incorrect in
law or on facts. Until it is set aside by an appropriate
proceeding in appeal or revision, a decree even if it be
erroneous is still binding between the parties.
7. When a decree which is a nullity, for instance, where
it is passed without bringing the legal representative on
the record of a person who was dead at the date of the
decree, or against a ruling prince without a certificate,
is sought to be executed an objection in that behalf
may be raised in a proceeding for execution. Again,
when the decree is made by a court which has no
inherent jurisdiction to make objection as to its validity
may be raised in an execution proceeding if the
objection appears on the face of the record: where the
objection as to the jurisdiction of the Court to pass the
decree does not appear on the face of the record and
requires examination of the questions raised and
decided at the trial or which could have been but have
not been raised, the executing Court will have no
jurisdiction to entertain an objection as to the validity of
the decree even on the ground of absence of
jurisdiction. In Jnanendra Mohan Bhaduri v. Rabindra(Uploaded on 02/05/2026 at 11:32:24 AM)
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[2026:RJ-JP:17337] (30 of 31) [CW-17398/2024]Nath Chakravarti [LR 60 IA 71] the Judicial Committee
held that where a decree was passed upon an award
made under the provisions of the Indian Arbitration Act,
1899, an objection in the course of the execution
proceeding that the decree was made without
jurisdiction, since under the Indian Arbitration Act,
1899, there is no provision for making a decree upon an
award, was competent. That was a case in which the
decree was on the face of the record without
jurisdiction.”
15. A bare perusal of the record specifically letter dated
08.12.2022 at page 75 of the paper book of writ petition,
demonstrates that the Ld. Sole Arbitrator furnished a disclosure
under Section 12 of the Act of 1996. Thus, the finding of the
learned Commercial Court of de jure ineligibility under Section
12(5) of the Act of 1996 is a misapplication of law. As noted in
Keval Bai (supra), ineligibility only arises if the arbitrator falls
under the specific categories of the Seventh Schedule. However, in
the present case, the arbitrator was an independent professional
appointed through independent institution and there was no
evidence produced to show any relationship between the Ld. Sole
Arbitrator and the petitioner.
16. Further, the Act of 1996 provides a well-defined mechanism
for raising objections to the independence or eligibility of an
arbitrator. Challenges to impartiality are to be raised before the
arbitral tribunal under Sections 12 and 16, while questions of de
jure ineligibility fall within the domain of Section 14. The validity
of the award itself can only be assailed under Section 34. The
learned Commercial Court has conflated these distinct remedies
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[2026:RJ-JP:17337] (31 of 31) [CW-17398/2024]
and dismissed the execution suo-moto without any objections of
respondents, which is impermissible. The respondents, having
failed to participate in the arbitral proceedings and having chosen
not to challenge the award within the statutory period then the
executing court cannot suo moto dismiss the execution petition
when the appointment of arbitrator was not unilateral by the party
to the contract but the appointment was by an independent
reputed institution. Further this court finds that there is nothing
on record to demonstrate that in the functioning of MCCI in any
manner there is control of the petitioner.
17. In light of the aforesaid discussion, the writ petition deserves
to be and is hereby allowed. The impugned orders dated
09.05.2024 and 06.07.2024 passed by the learned Commercial
Court, Ajmer are quashed and set aside. The learned Commercial
Court is directed to proceed with the execution application afresh
and conclude the same expeditiously in accordance with law.
18. No order as to costs.
19. Record of the learned Commercial Court be sent henceforth.
20. Pending applications, if any, stand disposed of.
(BIPIN GUPTA),J
Anand Tanwar/131
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