Delhi court sets aside ₹90 lakh award in favour of BMW Financial Services after car buyer contests arbitration proceedings

A Delhi court on Monday set aside a ₹90 lakh arbitral award in favour of BMW India Financial Services Private Limited..Commercial Courts District Judge Anurag Sain of the Patiala House Court stated that as per settled law, unilateral appointment of sole arbitrators was not permissible and vitiated the entire process."The Sole Arbitrator has been appointed by respondent no.1 unilaterally without the consent of the petitioner and thus, the entire arbitration proceedings stands vitiated and also nothing further survives and all the proceedings held thereafter and thereunder are void ab initio."The judge, therefore, allowed the plea of a petitioner who had moved court under Section 34 of the Arbitration and Conciliation Act..The petitioner, one Piyush Jain, had taken a loan of around ₹95 lakh from BMW India Financial Services to buy a BMW car, which was subsequently auctioned after he could not repay the loan.BMW had also initiated arbitration proceedings in line with a 2018 loan agreement signed between the arbitrators. As per the same, the sole arbitrator was to be appointed by BMW alone.Sole arbitrator advocate Sanjay Aggarwal in April 2019 awarded BMW a sum of ₹89,68,666 with interest set at 24 per cent annually, effective from February that year till payment..Counsel for the petitioner alleged bias on conduct of the arbitrator as no notice of proceedings starting was served, and that the appointment was in violation of law. The judge at the outset made it clear that it could not re-assess evidence at this stage unless there was some patent illegality in the findings."It is not open to the court to set aside a finding of fact arrived at by the arbitrator and only grounds on which the award can be cancelled are those mentioned in the Arbitration Act. Where the arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the court in exercise of the power vested in it."However, the appointment of the sole arbitrator was a pure question of law, the judge added..The Court went through the arbitration agreement and held that the provision paving the way for unilateral apppointment was bad in law post the 2015 amendment to the Arbitration Act."This clause is exfacie bad and is in contravention of the provision of the Arbitration and Conciliation Act which goes to the root of the matter and arbitrator become de jure ineligible to act as an arbitrator by operation of law."It discussed a number of Supreme Court decisions to hold that the unilateral appointment by BMW could not survive..Advocates Saurabh Sachan and KK Sharma appeared for the petitioner. Advocates Diwakar Maheshwari and Shreyas Edupuganti represented BMW..[Read judgment]