On June 5, 2025, the Karnataka High Court, presided over by Justice Suraj Govindaraj, ruled that an arbitrator named in a notice under Section 21 of the Arbitration and Conciliation Act, 1996, cannot enter reference or pass orders without either the consent of the opposing party or a formal appointment under Section 11 of the Act by a court or designated institution .

The case involved Shriram Transport Finance Company Ltd., which sought to recover vehicle loans totaling approximately ₹28.3 lakh from the family of the late Manjunath, who had passed away in August 2018. On July 27, 2019, Shriram issued legal notices to Manjunath’s widow and son, stating that an arbitrator would be appointed if payments were not made. However, evidence revealed that Shriram had already approached an arbitrator on July 12, 2019, and obtained an order under Section 17 of the Act, directing the repossession of the hypothecated vehicles—15 days before the notices were sent to the family .

Justice Govindaraj noted that the arbitrator’s order was issued prior to the formal notice, indicating a procedural lapse. He emphasized that unilateral appointment of an arbitrator without the other party’s consent or a court’s intervention under Section 11 is impermissible, especially when the loan agreement did not specify a named arbitrator. The court found that Shriram had abused the arbitration process by nominating its own arbitrator, who acted without proper appointment.

In response to these findings, the court directed the Director General of Police to assign a senior officer to investigate the seizure of the vehicles and submit a report within six weeks.

This ruling underscores the importance of adhering to due process in arbitration proceedings and the necessity of mutual consent or judicial appointment in the selection of arbitrators.

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