1 CGHC010099612023 2026:CGHC:41470 NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR WP227 No. 281 of 2023 1 - Tata Capital Financial Services Limited Through Its Authorized Officer, Having Its Office At, Tower - A, 1201, Peninsula Business Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400013, Having Local Office At, Purjari Complex, Pachpedi Naka, Raipur, Chhattisgarh. ... Petitioner(s) versus 1 - Dynamic (Cg) Equipments Private Limited Having Office At, 33/7, Dakshin Gangotri, G E Raod, Bhilai, Durg, Chhattisgarh - 490021. 2 - Ashiwani Kumar Mahendru, S/o Shri Kuldeep Mahendru Aged About 63 Years R/o At 6/7, Nehru Nagar (East), Bhilai, Durg, Chhattisgarh Director Of Dynamic (Cg) Equipments Private Limited. 3 - Mrs. Tanuja Ashiwani Kumar Mahendru W/o Shri Ashiwani Kumar Mahendru Aged About 57 Years R/o At 6/7, Nehru Nagar (East), Bhilai, Durg, Chhattisgarh. 4 - Rajiv Kapila Aged About 72 Years, R/o At Rutuvilla, Near Gotrilakatnaka, Vadodara, Gujarat - 390021. ... Respondent(s) 2 For Petitioner(s) : Mr. Ankit Singhal, Advocate For Respondents No.1 & 2 : None present though served. For Respondent(s) : Mr. Rishabh Garg, Advocate through VC assisted by Mr. Kartik Kachuriya, Advocate ({Hon’ble Shri Justice Ravindra Kumar Agrawal) Order on Board 23/09/2026 Present is a writ petition filed by the petitioner claiming the following reliefs: 10.1. That this Hon’ble Court may kindly be pleased to call for the entire records pertaining to the instant case; 10.2. That this Hon’ble Court may kindly be pleased to pass any appropriate writ, order or direction to allow the present writ and set aside the impugned order dated 20.10.2022 passed by the learned Commercial Court (Ditricit Level) and consequently direct the executing court to decide the application for execution of arbitral award dated 06.09.2018 filed by the petitioner afresh in accordance with law, in the interest of justice; 10.3. That this Hon’ble Court may kindly be pleased to pass any appropriate writ, order or direction to award cost of the present petition in favour of the petitioner; 10.4 Any other relief or relief(s) which this Hon’ble Court may deem fit and proper in view of the facts and circumstances of the case, may also kindly be granted.” 2. Learned counsel appearing for the petitioner submits that a Channel Finance Agreement was executed between the petitioner and 3 respondent No.1 on 24.10.2013, whereby a finance facility of Rs.5 crores was extended to respondent No.1. The said facility was renewed from time to time and was lastly renewed on 23.12.2015 for an enhanced finance facility of Rs.15 crores. Respondent Nos.2 to 4 stood as guarantors under the said finance arrangement. It is submitted that respondent No.1 failed to discharge its repayment obligations towards the petitioner. Consequently, a demand notice dated 02.03.2017 was issued calling upon the respondents to pay a sum of Rs.11,18,39,488.91, inclusive of interest and penal charges, outstanding as on 27.02.2017. As the respondents failed to liquidate the outstanding dues despite service of the demand notice, the petitioner initiated proceedings under the SARFAESI Act for recovery of the outstanding amount. Pursuant thereto, a sum of Rs.4,65,00,000/- was recovered from the mortgaged property and adjusted towards the outstanding liability of respondent No.1. 3. It is further submitted that, after giving credit for the aforesaid amount, a sum of Rs.6,43,51,547.78/- remained outstanding. The petitioner, therefore, invoked the arbitration clause contained in Clause XV of the Channel Finance Agreement dated 27.01.2016 and Clause 29 of the Deed of Guarantee dated 27.01.2016. In exercise of the power thereunder, the petitioner appointed Mr. K.J. Paratwar, retired District and Sessions Judge and former Presiding Officer of DRT-II, Mumbai, as the Sole Arbitrator to adjudicate the disputes between the parties. 4 4. The learned Sole Arbitrator, upon following the prescribed procedure, proceeded ex parte and passed an award dated 06.09.2018 in favour of the petitioner, holding the petitioner entitled to a sum of Rs.6,43,51,548/-, together with interest. A further sum of Rs.2,95,000/- was awarded towards litigation expenses and a sum of Rs.4,00,000/- towards arbitration fees. It is further submitted that, thereafter, the petitioner filed an application dated 26.06.2019 seeking execution of the aforesaid arbitral award, registered as Execution Case No.12 of 2019, before the Commercial Court (District Level), Nava Raipur, Atal Nagar. Upon service of notice in the said execution proceedings, respondent Nos.3 and 4 entered appearance and, on 25.04.2022, filed objections under Section 47 of the Code of Civil Procedure, raising, inter alia, an objection with regard to the unilateral appointment of the Arbitrator by the petitioner and seeking setting aside of the arbitral award. 5. The learned Commercial Court accepted the objection raised by the respondents and dismissed the execution proceedings, holding that the Arbitrator had been appointed unilaterally by the petitioner and that such unilateral appointment vitiated the entire arbitral proceedings. It is against the said order that the present petition has been preferred by the petitioner. 6. Learned counsel for the petitioner further submits that, although the Arbitrator had been appointed by the petitioner, due notice of the arbitral proceedings was duly served upon the respondents. Despite having been afforded an opportunity to appear before the learned Sole Arbitrator and contest the claim of the petitioner, the respondents 5 consciously chose not to participate in the arbitral proceedings. It is contended that it was only after the commencement of the execution proceedings that the respondents raised an objection with regard to the appointment of the Arbitrator. 7. It is submitted that the executing Court cannot travel beyond the award or sit in appeal over the same and is required to execute the award in accordance with its terms. According to learned counsel for the petitioner, the validity of the appointment of the Arbitrator could not have been examined by the executing Court at the stage of execution so as to render the award unenforceable. It is, therefore, submitted that the impugned order passed by the learned Commercial Court is unsustainable in law and deserves to be set aside, with a consequential direction to the executing Court to proceed with execution of the arbitral award in accordance with law. 8. Per contra, learned counsel appearing for respondent Nos.3 and 4 opposes the submissions advanced on behalf of the petitioner. He submits that the very foundation of the arbitral proceedings, namely, the appointment of the Arbitrator, was legally invalid. According to him, the unilateral appointment of the Sole Arbitrator by the petitioner rendered the entire arbitral process vitiated and consequently rendered the award incapable of enforcement. 9. He further submits that the issue relating to unilateral appointment of an Arbitrator and its legal consequences has already been considered by the Supreme Court in TRF Limited v. Energo 6 Engineering Projects Limited, (2017) 8 SCC 377, and Perkins Eastman Architects DPC v. HSCC (India) Ltd., AIR 2020 SC 59. It is, therefore, contended that the learned Commercial Court was justified in holding the arbitral award to be inexecutable and in dismissing the execution proceedings initiated by the petitioner. According to learned counsel, the impugned order suffers from neither any illegality nor any jurisdictional error warranting interference in exercise of the writ jurisdiction of this Court and, accordingly, the writ petition deserves to be dismissed. 10. I have heard learned counsel appearing for the parties and have perused the material placed on record along with the petition. 11. The controversy involved in the present petition pertains to the validity of the unilateral appointment of the Sole Arbitrator. The said issue has already fallen for consideration before a Coordinate Bench of this Court in W.P. No.1162 of 2024, wherein the Coordinate Bench has held that— Section 12(5) of the Amendment Act, 2015 read with Schedule 7 is reproduced herein below:- “S.12[(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator: Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in 7 writing.] THE SEVENTH SCHEDULE [See section 12(5)] Arbitrator's relationship with the parties or counsel 1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party. 2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties. 3. The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties. 4. The arbitrator is a lawyer in the same law firm which is representing one of the parties. 5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration. 6. The arbitrator's law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself. 7. The arbitrator's law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties. 8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom. 9. The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company. 10. A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties. 11. The arbitrator is a legal representative of an entity that is a party in the arbitration. 12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties. 13. The arbitrator has a significant financial interest in one of the parties or the outcome of the case. 8 14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom. Relationship of the arbitrator to the dispute 15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties. 16. The arbitrator has previous involvement in the case. Arbitrator's direct or indirect interest in the dispute 17. The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held. 18. A close family member of the arbitrator has a significant financial interest in the outcome of the dispute. 19. The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute.” 7. A bare reading of this Section would make it clear that the unilateral appointment of the sole arbitrator is not valid in the eyes of the law. 8. In the present case, the respondent appointed the sole arbitrator and this fact is not in dispute. 9. In the matter of TRF Limited Vs. Energo Engineering Projects Limited, 2017(8) SCC 377, the Hon’ble Supreme Court in para 54 held that the arbitrator who has become ineligible by operation of law, cannot nominate another as an arbitrator. It is further held that the arbitrator becomes ineligible as per the prescription contained in Section 12(5) of the Act. Relevant para 54 reads as under:- “54. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned 9 with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless7to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so. 10. In the matter of Perkins Eastman Architects DPC and another vs. HSCC (India) Ltd., AIR 2020 SC 59, the law has been reiterated that a person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. The Hon’ble Supreme Court in paras 15 & 16 made the following observations which read as under:- “15. It was thus held that as the Managing Director became ineligible by operation of law to act as an arbitrator, he could not nominate another person to act as an arbitrator and that once the identity of the Managing Director as the sole arbitrator was lost, the power to nominate someone else as an arbitrator was also obliterated. The relevant Clause in said case had nominated the Managing Director himself to be the sole arbitrator and also empowered said Managing Director to nominate another person to act as an arbitrator. The Managing Director thus had two capacities under said Clause, the first as an arbitrator and the second as an appointing authority. In the present case we are concerned with only one capacity of the Chairman and Managing Director and that is as 10 an appointing authority. We thus, have two categories of cases. The first, similar to the one dealt with in TRF Limited(supra) where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself but is empowered or authorized to appoint any other person of his choice or discretion as an arbitrator. If, in the first category of cases, the Managing Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or result of the dispute. The element of invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be the test, similar invalidity would always arise and spring even in the second category of cases. If the interest that he has in the outcome of the dispute, is taken to be the basis for the possibility of bias, it will always be present irrespective of whether the matter stands under the first or second category of cases. We are conscious that if such deduction is drawn from the decision of this own and it would always be available to argue that a party or an disentitled to make appointment of an Arbitrator. Court in TRF Limited(supra), all cases having clauses similar to that with which we are presently concerned, a party to the agreement would be disentitled to make any appointment of an Arbitrator on its official or an authority having interest in the dispute would be disentittled to make appointment of an Arbitrator. 16. But, in our view that has to be the logical deduction from TRF Limited(supra). Paragraph 50 of the decision shows that this Court was concerned with the issue, "whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an Arbitrator" The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but 11 must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator. The next sentences in the paragraph, further show that cases where both the parties could nominate respective arbitrators of their choice were found to be completely a different situation. The reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter balanced by equal power with the other party. But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016) and recognized by the decision of this Court in TRF Limited(supra).” 11. Further, a similar issue came up for consideration before the High Court of Gujarat at Ahmadabad in Special Civil Application No.728/2023 along with other connected matters wherein an ex-parte award was passed in Chennai and the same was challenged in the writ petition at Gujarat High Court raising a similar nature of objection which was allowed and the ex-parte award was set-aside. At Para 19 and 20, the following was materially observed:- “19.Therefore the Sample under Seed Not the petitioners are required to challenge the petitioners have been able circumstances and bad faith on the part of to show respondent NBFC to invoke the remedy under Article 226 and 227 of the 12 Constitution of India whose ambit is broad and pervasive as held by the Hon'ble Supreme Court in case of Bhaven Construction (Supra) after considering the position of law with regard to the challenge to the arbitration proceedings under Article 226 and 227 of the Constitution of India. Therefore, in the exceptional circumstances as emerging from the facts of these petitions, these petitions are entertained instead of relegating the petitioners to avail appropriate remedy under Section 34 of the Act. 20. In light of above discussion and considering the facts of the case, it becomes evident that from the very inception i.e. from the stage of appointment of the sole arbitrator, the proceedings were vitiated and the impugned ex parte arbitral awards are therefore rendered unsustainable. The impugned awards are therefore liable to be quashed and set aside with a liberty to the respondent NBFC to initiate fresh proceedings in accordance with the settled legal position as held by the Hon'ble Division Bench of this Court in case of Pahal Engineers vs. The Gujarat Water Supply and Sewerage Board(Special Civil Application No.8727 of 2019) dated 30.01.2023 by appointing the arbitrator either with the consent of the petitioners or by approaching this Court under Section 11 of the Act.” 12. In the matter of Bharat Broadman Limited (supra), the Supreme Court held that the practice of unilateral appointment of an Arbitrator by one of the parties who is himself interested in the subject matter is a total nullity and bad in the eyes of law. The Hon’ble Supreme Court in para 15 held as under:- 13 “15. Section 12(5), on the other hand, is a new provision which relates to the de jure inability of an arbitrator to act as such. Under this provision, any prior agreement to the contrary is wiped out by the non- obstante clause in Section 12(5) the moment any person whose relationship with the parties or the counsel or the subject matter of the dispute falls under the Seventh Schedule. The sub-section then declares that such person shall be “ineligible” to be appointed as arbitrator. The only way in which this ineligibility can be removed is by the proviso, which again is a special provision which states that parties may, subsequent to disputes having arisen betweenthem, waive the applicability of Section 12(5) by an express agreement in writing. What is clear, therefore, is that where, under any agreement between the parties, a person falls within any of the categories set out in the Seventh Schedule, he is, as a matter of law, ineligible to be appointed as an arbitrator. The only way in which this ineligibility can be removed, again, in law, is that parties may after disputes have arisen between them, waive the applicability of this sub-section by an “express agreement in writing”. Obviously, the “express agreement in writing” has reference to a person who is interdicted by the Seventh Schedule, but who is stated by parties (after the disputes have arisen between them) to be a person in whom they have faith notwithstanding the fact that such person is interdicted by the Seventh Schedule.” 13. In the matter of Bhaven Construction v. Executive Engineer, Sardar Sarovar Narmada Nigam Limited and Another {(2022) 1 SCC 75}, it has been categorically observed that the ambit of Article 227 is broad and pervasive and it is well 14 settled that the High Court should be circumspect in interfering in any arbitration proceedings and the interference is restricted to orders which are patently lacking inherent jurisdiction. 14. In the case at hand, in the loan agreement itself, a clause exists with regard to the appointment of an arbitrator unilaterally and the said clause is in the teeth of the amendment in the Arbitration Act in the year 2015 in terms of Section 12(5) of the Act, 1996 read with Schedule 7. Now, the law is well settled that a person having any interest in the dispute or in the outcome thereof is ineligible not only to act as an arbitrator but is also rendered ineligible to appoint anyone else as an arbitrator. 15.Admittedly, in the instant case, a unilateral appointment of an arbitrator was made contrary to the law. Therefore, there was a patent lack of inherent jurisdiction of the arbitrator and the settled law discussed in the matter of TRF Limited (supra) and Perkins Eastman Architects DPC (supra) clarifies the legal issue that the award itself is a nullity in the eyes of the law and void ab initio and is liable to be set aside. 16.Now coming to the facts of the present case in the light of the judgments laid down by the Hon’ble Supreme Court, it is quite vivid that in the present case, a sole arbitrator was appointed by the respondent and it can safely be concluded that the arbitrator was appointed contrary to the provisions of Section 12(5) of the Act of 2015 read with Schedule 7. 17. In view of the aforesaid discussion, the impugned award is hereby set aside, however, the respondent is at liberty to initiate fresh proceedings in accordance with the settled legal proposition.” 12. Since the issue involved in the present petition is squarely covered by the decision of the Coordinate Bench of this Court in W.P. 15 (227) No.1162 of 2024, wherein the Coordinate Bench has held that unilateral appointment of an Arbitrator is not permissible in law and has affirmed the order impugned therein, the issue raised in the present petition also stands covered by the said decision. 13. The Coordinate Bench has further held that unilateral appointment of a Sole Arbitrator is impermissible in view of Section 12(5) of the Arbitration and Conciliation Act, 1996, read with the Seventh Schedule thereto. In view of the aforesaid pronouncement of the Coordinate Bench, this Court does not find it appropriate to take a view contrary to, or different from, the view already taken in W.P.(227) No.1162 of 2024. 14. Accordingly, the present writ petition also deserves to be dismissed. However, the petitioner shall be at liberty to initiate fresh proceedings in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and the law governing the field. Needless to observe, in the event of initiation of such fresh proceedings, the respondents shall be at liberty to raise all such grounds and objections as may be available to them in law. 15. With the aforesaid liberty and observations, the writ petition stands dismissed. Sd/- (Ravindra Kumar Agrawal) Judge SUGUNA DUBEY Digitally signed by SUGUNA DUBEY Date: 2026.09.25 11:34:28 +0530