Unilateral sole arbitrator appointment is invalid where neutrality is compromised; severable arbitration agreements may still support substitution.

A party with an interest in the dispute cannot unilaterally appoint a sole arbitrator because such appointment offends neutrality, fairness, and independence; the arbitrator is therefore de jure unable to act and the Court may terminate the mandate. The invalid appointment did not extinguish the arbitration agreement, as the clause was severable and the parties' intention to arbitrate remained clear. Allegations of fraud and forgery, without a prima facie showing that no valid arbitration agreement exists, do not bar substitution; jurisdictional objections may still be raised before the tribunal. The existing mandate was terminated and a substitute arbitrator could be appointed.

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Issues: (i) Whether the unilateral appointment of the sole arbitrator by one party rendered the appointment impermissible and the mandate liable to termination under the Arbitration and Conciliation Act, 1996; (ii) Whether the arbitration clause stood extinguished or the alleged fraud and forgery prevented appointment of a substitute arbitrator.

Issue (i): Whether the unilateral appointment of the sole arbitrator by one party rendered the appointment impermissible and the mandate liable to termination under the Arbitration and Conciliation Act, 1996.

Analysis: The governing principle is that a person having an interest in the dispute or in the outcome cannot unilaterally appoint a sole arbitrator. The invalidity attaches to the exclusive power of appointment because it offends neutrality, fairness, and independence. Where the appointment is hit by ineligibility under the statutory scheme, the arbitrator becomes de jure unable to perform his functions and the Court can decide termination of the mandate under the relevant provisions.

Conclusion: The unilateral appointment was impermissible and the mandate of the arbitrator stood terminated.

Issue (ii): Whether the arbitration clause stood extinguished or the alleged fraud and forgery prevented appointment of a substitute arbitrator.

Analysis: The invalid portion of the arbitration clause could be severed without destroying the parties' underlying agreement to arbitrate. The intention to refer disputes to arbitration remained clear, so substitution of an arbitrator was not barred. Mere allegations of fraud and forgery, without a prima facie showing that no valid arbitration agreement existed, do not oust arbitration. Objections as to jurisdiction and validity of the arbitration agreement could be raised before the arbitral tribunal.

Conclusion: The arbitration agreement survived, and appointment of a substitute arbitrator was justified despite the challenge based on fraud and forgery.

Final Conclusion: The Court terminated the existing mandate and provided for continuation of the arbitral process through a court-appointed substitute, thereby preserving the parties' agreement to arbitrate.

Ratio Decidendi: A party with an interest in the dispute cannot unilaterally appoint a sole arbitrator, and an invalid appointment does not destroy an otherwise severable arbitration agreement; the Court may terminate the mandate and appoint a substitute unless a prima facie case shows that no valid arbitration agreement exists.

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