Introduction:

In the matter of VIRGO SOFTECH LIMITED & ANR. VS SREI EQUIPMENT FINANCE LTD. (Case No: AP-COM/361/2025), the Calcutta High Court, presided over by Justice Shampa Sarkar, addressed the legality of an arbitral award rendered by an arbitrator unilaterally appointed by one party. The petitioners challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, citing patent illegality and violation of the fundamental policy of Indian law, particularly the principles of impartiality and independence in arbitration proceedings.

Arguments Presented:

Petitioners’ Submissions:

The petitioners contended that the arbitrator’s unilateral appointment by the respondent contravened established legal principles, rendering the award patently illegal. They emphasised that the arbitrator’s prior association with the respondent as counsel further compromised the impartiality of the proceedings. Citing precedents such as Perkins Eastman Architects DPC v. HSCC (India) Ltd. and TRF Ltd. v. Energo Engineering Projects Ltd., the petitioners argued that unilateral appointments are impermissible and violate the Arbitration Act’s mandate for an independent and impartial tribunal.

Respondent’s Defence:

The respondent maintained that the arbitration clause in the agreement permitted such an appointment and that the petitioners had acquiesced to the process. They argued that the arbitrator’s prior representation did not influence the proceedings and that the award was based on merit.

Court’s Judgment:

Justice Shampa Sarkar observed that the unilateral appointment of the arbitrator by the respondent was impermissible in law, especially in light of the Supreme Court’s rulings in Perkins Eastman and TRF Ltd. The court noted that the arbitrator’s prior association with the respondent raised justifiable doubts about his independence and impartiality. Furthermore, the court emphasised that non-consideration of binding Supreme Court judgments amounts to patent illegality, a valid ground for setting aside an arbitral award under Section 34 of the Arbitration Act. Consequently, the court allowed the application and set aside the arbitral award.