In a pivotal ruling, the Gujarat High Court has quashed and nullified three arbitral awards where non-banking financial companies (NBFCs) unilaterally appointed sole arbitrators. The court’s decision was in line with the Apex Court’s stance on Section 12(5) of the Arbitration and Conciliation Act, 1996.

The above ruling came in a petition whereby the petitioners had challenged the awards passed by the Sole Arbitrator appointed by the respondent no.1 – NBFC, on the ground that the arbitration awards were passed ex parte by the Sole Arbitrator and Sole Arbitrator could not have been unilaterally appointed by the respondent no.1 as per the settled legal position.

The petitioners claimed that they had received financial assistance from the respondent NBFC but were unable to repay the outstanding amount. Consequently, the respondent initiated arbitration proceedings by appointing a Sole Arbitrator to resolve the dispute between the parties.