Can Sole Arbitrator be Appointed Unilaterally without the Consent of the Opposite Party?

In a recent decision by the Delhi High Court in Sital Dass Jewellers and Ors. v. Asian Hotels (North) Ltd., in ARB.P, 661 of 2021, delivered on 06th of August 2021 the court examined the question as to whether sole arbitrator can be appointed unilaterally by a party to the arbitration agreement when the opposite party had not consented to the same.

The petition was filed before the Hon’ble High Court under section 11(6) of the Arbitration and Conciliation Act 1996 for appointment of arbitrator. The present case involves a license agreement between the petitioner firm and the respondent which is renewable every 5 years at the option of the petitioner which was executed on 01/09/1982 for allotment of shops in the shopping arcade. Later, the respondent vide notice dated 29.05.2020 revoked the license in respect of shop No.L-79 extn (L-81); L-79, license L-73 and L-78 w.e.f. 01.06.2020. The petitioners filed a suit for illegal eviction which was summarily dismissed on the ground that there exists an arbitration agreement between the parties, the existence of which was not being challenged by either party, now the sole question before Hon’ble court is whether the petitioners are justified in seeking appointment of arbitrator of their choice unilaterally.

The court held that “no party can be permitted to unilaterally appoint an Arbitrator, as it would defeat the purpose of unbiased adjudication of dispute between the parties.” The court further relied on the landmark judgement, Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd 2019 SCC Online SC 1517, where the court held that no person who has an interest in the outcome of the judgement should be allowed to appoint the sole arbitrator while concurring with other judgements such as Proddatur Cable Tv Digi Services Vs. Siti Cable Network Limited (2020) 267 DLT 51 and VSK Technologies Private Limited and Others Vs. Delhi Jal Board 2021 SCC Online Del 3525. Hence this case categorically upheld the position that no single party to an arbitration agreement be allowed to unilaterally appoint a sole arbitrator as this is in violation of established law as well as the principles of natural justice.