HEADNOTE
Jalaram Fabrics v. Nisarg Textiles Pvt. Ltd.
Court: Bombay High Court
Jurisdiction: Ordinary Original Civil Jurisdiction
Bench: Justice Sandeep V. Marne
Date of Judgment: January 8, 2026
Citation: 2026:BHC-OS:398
Laws / Sections Involved: Arbitration and Conciliation Act, 1996 – Sections 7, 12(5), 16, 34, 36; Bharat Merchants’ Chamber Arbitration Rules
Keywords: Institutional arbitration, unilateral appointment, Bharat Merchants’ Chamber, Section 34 challenge, invoice arbitration clause
Summary
The Bombay High Court dismissed a Section 34 petition challenging an arbitral award passed under the aegis of the Bharat Merchants’ Chamber, holding that institutional arbitration conducted as per agreed rules does not suffer from the vice of unilateral appointment. The Court found that the arbitration clause printed on invoices constituted a valid arbitration agreement, duly acted upon by the parties. It held that both parties were given an equal opportunity to nominate arbitrators from a broad-based institutional panel, and the petitioner’s failure to nominate its arbitrator resulted in appointment by the institution—not the respondent. Distinguishing unilateral appointments barred under Section 12(5), the Court reaffirmed that appointments made by independent arbitral institutions pursuant to party agreement are valid, and refused to interfere with the award.
Court’s decision
The Bombay High Court dismissed Arbitration Petition No. 267 of 2024 and upheld the arbitral award dated July 21, 2022 passed by the three-member tribunal of the Bharat Merchants’ Chamber. The Court held that the award did not suffer from any infirmity under Section 34 of the Arbitration and Conciliation Act, 1996, and specifically rejected the challenge based on alleged unilateral appointment of arbitrators.
Facts
The petitioner, a proprietary concern engaged in garment trading, purchased fabrics from the respondent company under multiple invoices containing an arbitration clause referring disputes to the Bharat Merchants’ Chamber. Disputes arose regarding unpaid invoice amounts. The respondent invoked arbitration before the Chamber. Despite receiving notices and the panel of arbitrators, the petitioner failed to nominate its arbitrator. Consequently, as per institutional rules, the Chamber appointed an arbitrator on the petitioner’s behalf and constituted a three-member tribunal, which passed an award directing payment of ₹17.81 lakh with interest and costs.
Issues
Whether an arbitral award rendered through institutional arbitration conducted by the Bharat Merchants’ Chamber could be set aside under Section 34 on the ground that the arbitral tribunal was unilaterally appointed by one party.
Petitioner’s arguments
The petitioner contended that the arbitral tribunal was unilaterally constituted by the respondent, rendering the award a nullity under Section 12(5) of the Arbitration Act. It was argued that the petitioner was not a member of the Chamber, that disclosures regarding arbitrator independence were inadequate, and that the proceedings were sham. Reliance was placed on precedents invalidating awards passed by unilaterally appointed arbitrators.
Respondent’s arguments
The respondent argued that the parties had expressly agreed to institutional arbitration under the Bharat Merchants’ Chamber through invoice terms. Both parties were given equal opportunity to nominate arbitrators from a neutral panel, and the petitioner’s failure to do so led to appointment by the institution, not by the respondent. It was further contended that the petitioner never challenged jurisdiction under Section 16 and participated by filing a defence.
Analysis of the law
The Court analysed Sections 7 and 12(5) of the Arbitration Act and emphasised the distinction between unilateral appointment by a party and appointment by an independent arbitral institution. It held that when parties consciously opt for institutional arbitration, the appointment mechanism under institutional rules governs. Such appointments do not violate the principle of equal treatment or statutory neutrality requirements.
Precedent analysis
The Court relied on recent Supreme Court and High Court decisions including TRF Ltd. v. Energo Engineering, Perkins Eastman Architects v. HSCC, and CORE v. ECI-SPIC-SMO-MCML, clarifying that the bar on unilateral appointments does not apply where arbitrators are appointed by an independent institution from a broad-based panel. The earlier Bombay High Court ruling in Chhabriya Cloth Stores under the 1940 Act was distinguished.
Court’s reasoning
Justice Sandeep V. Marne held that the respondent had no control over the arbitral appointments beyond nominating its own arbitrator from the panel. The petitioner was given the same right but failed to exercise it. The presiding arbitrator and the petitioner’s nominee were appointed by the institution in accordance with its rules. The Court observed that encouraging institutional arbitration aligns with legislative policy and provides cost-effective dispute resolution.
Conclusion
The Court concluded that the arbitral award was valid and enforceable, having been passed by a properly constituted tribunal. The Section 34 petition was dismissed.
Implications
This judgment provides significant clarity that institutional arbitration clauses in trade invoices are enforceable, and that failure of a party to participate in the appointment process cannot be used later to allege unilateral appointment. It strengthens confidence in chamber-based arbitration mechanisms, particularly for commercial and textile trade disputes.
Case law references
• TRF Ltd. v. Energo Engineering Projects Ltd. (2017)
Holding: A party interested in the dispute cannot unilaterally appoint an arbitrator.
Application: Distinguished; appointment here was by an institution.
• Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2020)
Holding: Unilateral appointment violates neutrality.
Application: Held inapplicable to institutional arbitration.
• CORE v. ECI-SPIC-SMO-MCML (JV) (2025)
Holding: Appointment processes must ensure equal treatment of parties.
Application: Used to uphold broad-based institutional panels.
FAQs
Q1. Are arbitration clauses printed on invoices valid?
Yes, if consistently acted upon and not disputed, they constitute a valid arbitration agreement.
Q2. Does institutional arbitration amount to unilateral appointment?
No. Appointments made by an independent institution under agreed rules are valid.
Q3. What happens if a party fails to nominate its arbitrator?
The arbitral institution may appoint an arbitrator on that party’s behalf as per its rules.
