Arbitrator ineligibility by operation of law: a post‑Bhadra analysis of section 12(5) of the arbitration and conciliation act, 1996
“Law, however, is law, and we are powerless to modify it”
Introduction
This judgment in M/S. M.V. Omni Projects (India) Ltd. V/s. the Union of India through the Central Public Works was delivered by the High Court of Delhi (“Court”) in FAO(OS)(COMM) 110/2024 on 14.01.2026. This appeal arose from an order passed under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”), whereby a learned Single Judge of the Court in OMP (Comm) 355/2023 set aside an arbitral award dated 30.05.2023
Factual Background
The dispute arose out of a public works contract dated 12.01.2016 for construction of the IIIDEM Campus at Dwarka, New Delhi between M/s. M.V. Omni Projects (India) Ltd. (“Appellant”) as a contractor and the Union of India through the Central Public Works Department (“Respondent”) as an employer. The dispute resolution mechanism appeared in Clause 25 of the General Conditions of Contract, which provided for adjudication of disputes by a sole arbitrator to be appointed by the Chief Engineer of CPWD or, if there was no Chief Engineer, by the Additional Director General, Central Public Works Department (“ADG, CPWD”), or failing that by the Special Director General or the Director General of CPWD. Clause 25 further stated that no person other than a person so appointed should act as arbitrator and that if such an appointment was not possible the matter should not be referred to arbitration at all.
After disputes had arisen, the contractor issued a notice under Section 21 of the Act on 11.10.2018 to the Chief Engineer, IITD Project Zone, invoking Clause 25 and recording that the contract had been terminated by the employer’s letter dated 01.10.2018, dispatched on 03.10.2018. The contractor requested the appointment of an independent arbitrator and stated that the invocation was without prejudice to its right to file claims separately.
When no appointment followed, the contractor instituted ARB.P. 199/2019 under Section 11(6) of the Act before the High Court of Delhi, praying for the appointment of a sole arbitrator to adjudicate the disputes arising from the agreement dated 12.01.2016. Vide order dated 23.08.2019, the Court disposed of the petition after recording the Respondent’s statement that an arbitrator would be appointed in terms of the contract. In the same order, it was noted that the Dispute Resolution Committee had already rejected the contractor’s claims. On 11.09.2019, the Court corrected paragraph 5 of the order to read that the Respondent would appoint an “Arbitrator” within four weeks. The record showed that in the interregnum on 06.09.2019 the ADG, CPWD issued an Office Memorandum appointing Shri Anil Kumar Sharma, Advocate, as the sole arbitrator to adjudicate the disputes between the parties, with reference to the claims and counter‑claims enclosed.
Arbitral proceedings commenced and continued without protest from either side, resulting in an award on 30.05.2023 against the Respondent. Aggrieved, Respondent challenged the same under section 34 of the Act before the Court in OMP (Comm) 355/2023. Vide judgment dated 08.05.2024, learned Single Judge set aside the award solely on the ground that the appointment of the sole arbitrator had violated Section 12(5) read with the Seventh Schedule of the Act. The contractor filed the intra‑court appeal, FAO(OS)(COMM) 110/2024, challenging the set‑aside order.
Statutory Framework and Doctrinal Setting
Section 12(5) of the Act renders a person ineligible to be appointed as an arbitrator if his or her relationship with the parties, counsel, or the subject matter falls within the categories listed in the Seventh Schedule. The proviso to Section 12(5) of the Act permitted the parties, after disputes had arisen, to waive the applicability of Section 12(5) of the Act by an express agreement in writing. The Supreme Court in TRF Ltd. v. Energo Engineering Projects Ltd. (“TRF Ltd.”)1TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377 held that a person who is ineligible to act as an arbitrator is also ineligible to nominate an arbitrator. In Perkins Eastman Architects DPC v. HSCC (India) Ltd. (“Perkins”)2Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760, the Supreme Court had applied the principle by holding that a party interested in the outcome could not unilaterally appoint the arbitrator. In Bharat Broadband Network Ltd. v. United Telecoms Ltd.3Bharat Broadband Network Ltd. v. United Telecoms Ltd., (2019) 5 SCC 755 (“Bharat Broadband”), the Supreme Court had clarified that the expression “express agreement in writing” in the proviso to Section 12(5) of the Act meant an agreement made in words, and not one to be inferred by conduct or participation. In Haryana Space Application Centre v. Pan India Consultants (P) Ltd4Haryana Space Application Centre v. Pan India Consultants (P) Ltd., (2021) 3 SCC 103 (“HSAC”), the Supreme Court had reaffirmed that a person who had been ineligible under Section 12(5) of the Act could not be appointed, and that any such appointment was invalid. More recently, in Bhadra International (India) (P) Ltd. v. Airports Authority of India (“Bhadra”)5Bhadra International (India) (P) Ltd. v. Airports Authority of India, 2026 SCC OnLine SC 7 , the Supreme Court had restated the position and had explained in a comprehensive manner, the scope of the proviso to Section 12(5) of the Act and the impermissibility of inferring waiver from conduct, participation, or procedural orders
Proceedings before the Court
The Appellant submitted that the challenge under Section 34 of the Act ought not to have succeeded because the appointment of the sole arbitrator had not been a unilateral act in the sense proscribed by Section 12(5) read with the Seventh Schedule of the Act. The Appellant submitted that it had first served a notice under Section 21 of the Act and had then invoked Section 11(6) of the Act. The Court while dealing with ARB.P. 199/2019, being seized of the appointment process had vide order dated 23.08.2019 recorded the Respondent’s statement that an arbitrator would be appointed by it. On this footing, the Appellant argued that the subsequent appointment by the ADG, CPWD was traceable to a Court‑controlled process under Section 11(6) of the Act and therefore, did not offend the principle against unilateral appointments. The Appellant emphasized that the order dated 23.08.2019 had not been appealed and had thus attained finality, which meant that the later appointment ought to have been treated as one made in the shadow of Section 11(6) of the Act. The Appellant relied on the correction order dated 11.09.2019 to show that the Court had consciously recorded that an “arbitrator” would be appointed, and pointed out that the parties, thereafter, proceeded without protest until the award dated 30.05.2023. In this procedural setting, the Appellant submitted that the appointment could not be regarded as void ab initio and that the Single Judge erred in applying Section 12(5) of the Act , to set aside the award on that solitary ground. The Appellant further sought to distinguish Bhadra6Ibid on the basis that, unlike the present matter, the case there had not traversed the route of Section 11 of the Act. In this case the Section 11 petition had been filed, argued, and disposed of before the before the appointment of the arbitrator by the Respondent, which, according to the Appellant, warranted treating the appointment as Court‑sanctioned rather than unilateral.
Analysis
The Court analyzed the statutory position under Section 12(5) and the Seventh Schedule of the Act. It reiterated that once the relationship of the appointing person or authority fell within any category of the Seventh Schedule, ineligibility attached by operation of law. It recorded that the only means to overcome such ineligibility lay in the proviso to Section 12(5) of the Act, which required a waiver by an express agreement in writing executed after disputes had arisen. It noted that the learned Single Judge had set aside the award on this sole ground and had applied Bharat Broadband7Supra 3 and Perkins8 Supra 2. It then considered whether the subsequent judgment of the Supreme Court in Bhadra9Supra 5 altered or clarified the analysis and concluded that it did.
The Court set out the governing legal principles enunciated in Bhadra10Supra 5. It noted that once any entry in the Seventh Schedule had been attracted, disclosures by the arbitrator did not save the mandate and that the only route to sustain the appointment was the proviso, which insisted on an express agreement in writing executed after disputes had arisen. It explained that Section 12(5) did not bar unilateral appointment in the abstract, rather it rendered an arbitrator ineligible whenever the statutory bar applied. It clarified that consent recorded in a procedural order, continued participation in the proceedings, a notice under Section 21, a joint request for extension under Section 29A, replies under Section 33 of the Act, or similar conduct did not amount to an express agreement in writing. It affirmed that unilateral appointment offended the basic tenet of arbitration, namely mutual confidence in the tribunal, and that such appointments were void ab initio. The Court adopted these propositions as determinative of the present appeal and relied on the detailed passages in Bhadra11Ibid that described a unilaterally appointed arbitrator as de jure ineligible and insisted that only a post‑dispute written waiver could validate the appointment.
The Court then examined the Applicant’s reliance on the Section 11 route. It considered the order dated 23.08.2019 in ARB.P. 199/2019 and held that the Court, in that proceeding, did not appoint the arbitrator. The order only recorded that the Respondent would appoint an arbitrator in terms of the contract. It inspected the Office Memorandum dated 06.09.2019 and observed that the ADG, CPWD appointed the arbitrator unilaterally in pursuance of the contractual mechanism in Clause 25. It held that if, on 23.08.2019, the Court had itself named the arbitrator, the position might have been different. It further stated that if, prior to 23.08.2019, the parties had placed on record an express agreement in writing waiving the bar under Section 12(5) of the Act, the analysis might have changed. Since neither event occurred, the unilateral character of the appointment remained and attracted the statutory ineligibility. The Court added that the correction order dated 11.09.2019, which replaced “contractor” with “arbitrator,” merely rectified a typographical error and did not convert a contractual appointment into a court appointment.
The Court addressed the consequences of ineligibility by applying TRF Ltd.12Supra 1 and Perkins13Supra 2. It held that a person ineligible to act as an arbitrator could not nominate or appoint. It further applied Bharat Broadband to hold that an “express agreement in writing” required an agreement in words, and that the deemed waiver contemplated by Section 4 of the Act did not apply to the proviso to Section 12(5) of the Act. It referred to HSAC14Supra 4 to reaffirm that statutory ineligibility rendered such appointments ex facie invalid.
The Court recorded the structured conclusions drawn in Bhadra15Supra 5 that equal treatment under Section 18 of the Act extended to the manner of constituting the tribunal and required that the parties enjoyed an equal say in the tribunal’s composition. It noted that where an arbitrator was found ineligible under Section 12(5) read with the Seventh Schedule of the Act, the mandate stood terminated and that the appropriate recourse during the pendency of the arbitration lay under Section 14 of the Act read with Section 15 of the Act for the appointment of a substitute. It added that where an award had been passed by an ineligible arbitrator, the correct remedy lay under Section 34 of the Act. It accepted that an objection based on inherent lack of jurisdiction could be raised at any stage. It further echoed Bhadra16Ibid in observing that the party seeking to appoint unilaterally ought, if it wished the appointment to stand, to obtain an express post‑dispute written waiver from the opposite side so that later challenges were avoided.
Upon applying these principles to the facts on record, the Court held that the appointment letter dated 06.09.2019 revealed a unilateral constitution of the tribunal under Clause 25 and that there had been no post‑dispute express agreement in writing waiving the bar under Section 12(5) of the Act. It held that participation and silence could not amount to the required waiver. It concluded that the learned Single Judge correctly set aside the award. It observed that while the Applicant’s submission had a degree of facial appeal, the Court was bound by the law declared by the Supreme Court under Articles 141 and 144 of the Constitution of India and that Bhadra17Ibid squarely governed the present case. The appeal was dismissed without costs.
Verdict
The Court dismissed the appeal and affirmed the order dated 08.05.2024 by which the learned Single Judge set aside the award dated 30.05.2023. It held that the appointment of the sole arbitrator by the ADG, CPWD after disputes had arisen, in the absence of an express agreement in writing under the proviso to Section 12(5) of the Act, had been void ab initio. The participation could not cure the inherent ineligibility, and that the Section 34 set‑aside therefore survived on that ground alone. There was no order as to costs.
Conclusion
This judgment reinforced that the bar under Section 12(5) of the Act was attracted by operation of law whenever a Seventh Schedule relationship existed, and that only a post‑dispute express agreement in writing could waive it. An order in a Section 11 proceeding merely recording that a party would appoint under the contract did not convert a contractual appointment into a court appointment, and later participation in the reference did not amount to waiver. Parties, particularly public authorities operating appointment clauses similar to Clause 25 of the General Conditions of Contract, ought to obtain a clear post‑dispute written waiver if they intend to proceed with an otherwise ineligible appointment, failing which any award rendered would remain vulnerable to a petition under Section 34 of the Act, for challenge on jurisdictional grounds.
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