In M/s Shivdei Automobiles v. CNH Industrial (India) Pvt. Ltd., O.M.P. (COMM) 51/2020 (reserved 30 September 2026, pronounced 29 October 2026), the Delhi High Court dismissed a Section 34 challenge to an award dated 9 January 2006, by which a sole arbitrator — a former Supreme Court judge appointed by the manufacturer under the dealership agreement in June 2004 — had awarded approximately Rs 1.29 crore with 12 per cent interest. Justice Om Prakash Shukla held that Section 12(5) of the Arbitration and Conciliation Act, introduced by the 2015 Amendment with effect from 23 October 2015, applies prospectively and cannot invalidate a 2004 appointment made in accordance with the arbitration clause; that non-issuance of a Section 21 notice was not fatal; and that the arbitrator's view on dues of the pre-agreement gap period was a plausible one.
A dispute older than the law invoked against it
Shivdei Automobiles became a tractor dealer for Sirsa and Fatehabad under a Dealership Agreement of 1 January 2002, preceded by a Letter of Intent of September 1998. The manufacturer claimed about Rs 1.29 crore in dues — including amounts from the gap period between the LoI's expiry and the 2002 agreement — and in June 2004 invoked Clause 25, appointing a retired Supreme Court judge as sole arbitrator, as the clause expressly permitted. The award of 9 January 2006 allowed the claim with 12 per cent interest. The Section 34 petition, heard two decades later, attacked the award on three fronts.
The three objections and their fate
| Objection | Holding |
|---|---|
| Unilateral appointment violates Section 12(5) | Rejected — Section 12(5) operates prospectively from 23 October 2015 and cannot reach a 2004 appointment made under an express contractual power; precedents invalidating unilateral appointments concern the post-amendment regime |
| No notice under Section 21, so arbitration never validly commenced | Rejected — following the Bhagheeratha Engineering line, non-issuance is not fatal where no limitation consequence or prejudice is shown and the agreed appointment procedure was followed |
| Gap-period dues fall outside the arbitration clause | Rejected — the arbitrator's finding that the LoI-based relationship continued until 2002, coupled with the clause preserving accrued financial liabilities, was a plausible view immune from Section 34 interference |
Why prospectivity matters
The 2015 Amendment transformed Indian arbitration's approach to neutrality: categories of relationship listed in the Seventh Schedule now render an appointment void, and unilateral appointment clauses have been struck down in the modern case law. But the transformation has a commencement date. Awards rendered under the pre-2015 dispensation — often in long-running commercial relationships like dealerships, construction contracts and supply arrangements — are tested against the law applicable when the tribunal was constituted. A contrary rule would destabilise every concluded arbitration of that era and convert the amendment into a retrospective annulment machine, which neither its text nor the transitional provisions contemplate.
Takeaways for commercial parties
- Date the objection: before attacking an appointment as unilateral, fix the date of appointment against 23 October 2015 — the entire argument turns on it.
- Raise Section 21 points early: commencement objections carry weight when tied to limitation or demonstrated prejudice, and wither when raised for the first time at the setting-aside stage.
- Scope objections need the contract: where successive instruments govern a continuing relationship, clauses preserving accrued liabilities will often carry pre-contract dues into arbitration.
- Respect the plausibility line: Section 34 is not a first appeal; a reasoned construction of the contract, even if debatable, stands.
Practice note: Parties still operating under old agreements with one-sided appointment clauses should not assume those clauses remain workable for new disputes — for arbitrations commenced today, neutrality requirements apply in full, and a fresh appointment mechanism by consent or under Section 11 is the safer course.
Frequently Asked Questions
Does the bar on unilateral arbitrator appointments apply to old arbitrations?
No. Section 12(5) and the Seventh Schedule, inserted by the 2015 Amendment, operate from 23 October 2015. An appointment made before that date, under a clause that expressly permitted one party to appoint, is tested by the law as it then stood. The modern line of authority invalidating unilateral appointments governs post-amendment arbitrations.
Is a Section 21 notice mandatory for a valid arbitration?
Section 21 fixes the commencement of arbitration, principally for limitation. Courts have held that where the respondent participated and shows neither a limitation consequence nor prejudice, the absence of a formal notice invoking arbitration does not by itself vitiate the proceedings or the award.
Can an arbitrator decide claims from a period before the contract containing the clause?
It depends on the agreement. Here the arbitrator found that the relationship begun under a 1998 Letter of Intent continued until the 2002 dealership agreement, whose clauses preserved accrued financial liabilities. The Court held that this was a plausible construction, and plausibility ends the Section 34 inquiry.
What is the practical scope of Section 34 review?
Setting aside is confined to the grounds in Section 34 — incapacity, invalid agreement, lack of notice, excess of jurisdiction, procedural infirmity, and conflict with public policy or patent illegality for domestic awards. A court does not sit in appeal over the merits or substitute its own reading of the contract.