Harshitha J S | CORD Intern
Jalaram Fabrics v. Nisarg Textiles Pvt. Ltd. (2026- BomHC)
Arbitration Petition No. 267 of 2024 Bombay High Court | Justice Sandeep V. Marne
Judgment Pronounced: 8 January 2026
Facts
The Respondent supplied fabrics to the Petitioner under invoices containing an arbitration clause referring disputes to the Bharat Merchants' Chamber (BMC). When a dispute arose regarding unpaid dues, the Respondent initiated arbitration before BMC. Despite receiving notices and filing a statement of defence, the Petitioner neither nominated an arbitrator nor participated in the hearings. Consequently, BMC appointed an arbitrator on the Petitioner's behalf in accordance with its rules. The Tribunal subsequently passed an award in favour of the Respondent, which the Petitioner challenged under Section 34 of the Arbitration and Conciliation Act, 1996.
Issues
- Whether a valid arbitration agreement existed between the parties.
- Whether the Tribunal was constituted through an impermissible unilateral appointment.
- Whether the Petitioner could raise objections to the Tribunal's composition at the Section 34 stage.
- Whether the arbitrator's alleged non-disclosure vitiated the proceedings.
- Whether the discrepancy in dates rendered the award invalid.
- Whether the award was liable to be set aside on merits.
Law
The Court considered Sections 7, 11(6), 12(1)(a) & (b), 12(5), 16(2), and 34(2)(a)(v) & 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996. These provisions govern the validity of arbitration agreements, appointment and eligibility of arbitrators, disclosure requirements, jurisdictional objections, and the grounds on which an arbitral award may be set aside. The Court also relied on principles laid down in MTNL v. Canara Bank, TRF Ltd., Perkins Eastman, and CORE concerning arbitration agreements and arbitral appointments.
Analysis
The Court found that the Petitioner had accepted and acted upon the invoices containing the arbitration clause, thereby establishing a valid arbitration agreement. It further held that the appointment process was not unilateral because BMC, an independent arbitral institution, appointed the arbitrator after the Petitioner failed to nominate one. The Court distinguished cases dealing with party-controlled appointments and noted that BMC's panel was independent.
The Court also held that objections under Section 12(5) may be raised at the Section 34 stage, but found no merit in the Petitioner's challenge because the arbitrators had made the required disclosures. The discrepancy in dates was treated as a clerical error and not a ground for setting aside the award. Finally, the Court observed that the Petitioner had failed to produce evidence supporting its claims regarding cash payments and defective goods, leaving no basis to interfere with the Tribunal's findings.
Conclusion
The Bombay High Court dismissed the petition with costs of ₹50,000 and upheld the arbitral award. It held that appointments made by an independent arbitral institution upon a party's default do not amount to unilateral appointments, reaffirmed the enforceability of invoice-based arbitration clauses, and emphasised that courts will not interfere with arbitral awards in the absence of valid grounds under Section 34.
Key Takeaways
- Institutional appointments are not unilateral appointments
Appointments made by an independent arbitral institution are valid and differ from situations where one party directly appoints an arbitrator of its choice.
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Arbitration clauses in invoices can be binding
A party that accepts invoices and acts upon them, including making payments, may be bound by the arbitration clause contained in those invoices.
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Waiver under Section 12(5) must be express and in writing
Merely participating in arbitration proceedings or failing to object at an earlier stage does not amount to a waiver of objections relating to arbitrator eligibility.
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A Section 12(5) challenge can be raised at the Section 34 stage
A party is not necessarily barred from raising such an objection merely because it did not file an application under Section 16 before the Tribunal.
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Earlier precedents must be read in context
The Chhabriya Cloth Stores decision was based on the provisions of the 1940 Arbitration Act and its specific facts, and does not invalidate all awards administered by BMC.
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Non-participation can weaken a later challenge
A party that ignores notices, fails to present evidence, or does not actively participate in the proceedings cannot later expect the Court to re-evaluate the factual findings of the Tribunal.