Tarsem Jain v. Bharat Forge Limited and Another

What happened

Tarsem Jain sold shares to BF Infrastructure Limited, a subsidiary of Bharat Forge Limited (BFL), under a Share Purchase Agreement of 18 December 2010 for 100% of three mining companies and 90% of the shares of Aggressive Projects Private Limited, and was engaged by BFL as Advisor-Global Mining by a letter of 18 January 2011. BF Infra terminated the agreement on 16 August 2012 and BFL ended his engagement. Clause 20 of the agreement provided for amicable settlement and then arbitration before a single arbitrator appointed in accordance with the Arbitration and Conciliation Act, 1996 on the request of either party, with the seat in New Delhi. On 3 June 2013 Mr. Jain invoked arbitration asking BF Infra to appoint a sole arbitrator with his consent, sent a reminder on 24 July 2014, and on 15 December 2014 nominated the sole arbitrator himself. After the statement of claim of 12 August 2015, BF Infra objected on 9 September 2015 to the unilateral appointment, and on 9 January 2016 it said it was participating under protest. BFL's application under section 16 that it was not a party to the arbitration agreement was dismissed on 16 December 2015. By the award of 10 May 2019 the arbitrator awarded ₹77 crore and dismissed the counter-claims. On 26 May 2025 the Single Judge allowed the section 34 petitions, held the appointment void ab initio and dismissed the execution petition, and Mr. Jain appealed. He argued that the appointment was not unilateral because the respondents did not respond to the notices, that they never invoked section 11(6) after their objection was rejected, that section 4 and waiver applied, and that sections 12 and 18 did not govern appointments.

Questions before the court

• Was the sole arbitrator's unilateral appointment valid in an arbitration that began before the 2015 amendment, and did the respondents waive the objection?

Why the court ruled this way

The scope of interference under section 37 is limited to the grounds under section 34, and grounds not pressed before the Single Judge, such as those argued here on waiver and the pre-amendment ground of public policy, cannot be raised for the first time in appeal (paragraphs 7–9 and 19). Under clause 20 and section 11, where the parties do not agree on the arbitrator within thirty days of a request, the Court makes the appointment, and it was the appellant, who invoked arbitration, who had to approach the Court and not the respondents (paragraphs 10 and 13). Participation in the proceedings did not ratify an appointment made contrary to clause 20 and the Act, especially as the respondents objected at the first instance and participated under protest, and the remedy against the rejection of their objection was under section 34 after the award (paragraph 12). A unilateral appointment itself casts doubt on independence and impartiality, as the Supreme Court held in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), and that principle is unaffected by the amendment of the Act; the equal treatment in section 18 cannot be confined to the proceedings and excluded at the time of appointment (paragraphs 14–16). Section 12(5), as inserted in 2015, does not apply to arbitrations that began before October 2015, but this does not validate an appointment made in contravention of clause 20 and section 11(6), and a void appointment makes the award a nullity, a ground available under the amended and the unamended Act; the amended section 34 applies to section 34 petitions filed after the amendment (paragraphs 17–20).

Controlling point

A unilateral appointment of a sole arbitrator in breach of the agreed procedure and section 11 is void, makes the award a nullity, and is not cured by participation under protest, whether or not the arbitration began before the 2015 amendment.

Order and next steps

No case was made out for interference, the appointment having been rightly held void for violating clause 20 of the agreement and section 11, and the appeal was dismissed with the pending application disposed of. The Court noted that the appellant had issued a fresh notice under section 21 after the award was set aside.

Practical implications

A party invoking arbitration under a clause that requires a sole arbitrator by agreement or by the Court should obtain the other side's consent or apply under section 11, and should not nominate the arbitrator itself.

Limits of this ruling

• The Court dealt with the appointment and did not decide the merits of the claims or the counter-claims, and it recorded that the appellant could and did start fresh arbitration proceedings.