Arbitral Award Passed by Ineligible Tribunal Comprising Respondent’s Employees Is Void Ab Initio: Delhi High Court Applies Section 12(5) to Strike Down Award

“No Written Waiver, No Jurisdiction — Appointment of Respondent’s Own Employees as Arbitrators Violates Fundamental Principles of Neutrality and Justice”: Delhi High Court delivered a significant verdict under Section 34 of the Arbitration and Conciliation Act, 1996, holding that an arbitral award passed by a tribunal consisting of serving employees of one of the parties — in this case, the Union of India — was void ab initio, patently illegal, and in violation of public policy.

Justice Jasmeet Singh, speaking for the Court, allowed the petition challenging the Arbitral Award dated 23.01.2020 and Supplementary Award dated 20.03.2020, ruling that the arbitrators were statutorily disqualified under Section 12(5) read with the Seventh Schedule of the Act, and that their appointment rendered the entire proceedings non est in law.

“The appointment of Arbitral Tribunal is void ab initio. Since the appointment goes to the root of the matter, the Award pronounced by an ineligible Arbitral Tribunal is also void ab initio and cannot be sustained as it violates the public policy of India and is patently illegal.”

Court Begins With Narrow Scope of Section 34 But Finds Award Fatally Flawed Due to Jurisdictional Defect

The Court reiterated at the outset that the scope under Section 34 is limited, and the court does not sit in appeal, nor re-appreciate evidence. However, where the jurisdiction of the tribunal itself is challenged, the Court is duty-bound to examine whether the arbitral proceedings were conducted in accordance with law.

Referring to the Supreme Court’s decision in OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd., (2025) 2 SCC 417, the Court noted:

“The award must contravene all or any of such fundamental principles that provide a basis for administration of justice… violation of the principles of natural justice and appointment of ineligible arbitrators shock the conscience of the Court and render the award unenforceable.”

“Statutory Modifications Clause in Arbitration Agreement Triggers Applicability of 2015 Amendment”: Court Rejects Pre-Amendment Shield

The Union of India argued that the arbitral proceedings commenced in 2006, and the tribunal was reconstituted in 2014, well before the 2015 Amendment Act came into force, and therefore, the amended provisions — including Section 12(5) — would not apply.

The Court decisively rejected this, relying on Clause 64(7) of the General Conditions of Contract (GCC), which stated:

“Subject to the provisions of the Arbitration and Conciliation Act, 1996 and the rules under and any statutory modifications thereof shall apply to the arbitration proceedings under this clause.”

Justice Jasmeet Singh held:

“Clause 64(7) of the GCC evidences the parties’ mutual understanding that subsequent legislative amendments including those introduced by the 2015 Amendment Act would apply to their arbitration.”

“Respondent Cannot Blow Hot and Cold — Invoked Amended Act, Then Denied Its Applicability”: Conduct of Parties Impliedly Attracted Amended Regime

The Court noted that both parties had in fact invoked provisions under the amended Act during the arbitration, particularly:

• Petitioner’s application dated 15.09.2017 invoking amended timelines
• Respondent’s application under Section 33 dated 16.03.2020, referencing the Amended Act, 2015

This conduct, the Court held, constituted implied agreement under Section 26 of the Amendment Act, 2015, which provides that the amended Act applies to pending proceedings if the parties otherwise agree.

“The conduct of both parties in invoking the amended provisions… constitutes strong evidence of an implied agreement to apply the Amendment Act, 2015.”

“Employees of One Party Cannot Be Judges in Their Own Cause”: Tribunal Held Ineligible Under Section 12(5)

Referring to the Seventh Schedule of the Arbitration Act and the landmark ruling in Bharat Broadband Network Ltd. v. United Telecom Ltd., (2019) 5 SCC 755, the Court found the appointment of serving railway officers as arbitrators hit by Item 1 of the Seventh Schedule, which disqualifies:

“The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.”

The Court ruled that there was no written post-dispute waiver as required under the proviso to Section 12(5). Therefore:

“The Award passed by an Arbitral Tribunal comprising employees of the respondent is void ab initio and contrary to the fundamental policy of Indian law.”

“Jurisdictional Challenge Strikes at the Root — Not a Mere Procedural Irregularity”: Appointment Held Illegal, Award Non Est

The Court distinguished the present case from Ratnam Sudesh Iyer v. Jackie Shroff, (2022) 4 SCC 206, noting that in the latter, the issue was Section 34 proceedings pending pre-amendment, whereas here, the very constitution of the Arbitral Tribunal itself was under challenge post-amendment.

Justice Singh clarified:

“The challenge here is to the mechanism of the appointment of the Arbitral Tribunal itself, which is a challenge to the root of the Arbitral proceedings. The petition under Section 34 was filed after the Amendment Act, 2015 was notified and therefore the controversy in question shall be governed by amended provisions.”

“Violation of Natural Justice and Absence of Opportunity to Be Heard in Supplementary Award” — Yet Court Declines to Enter Merits

Although the petitioner also raised concerns about lack of opportunity to respond to the Section 33 application leading to reduction of awarded sum from ₹3.58 lakhs to ₹1.35 lakhs, the Court declined to enter into merits, holding that:

“Since the Award… is set aside for want of jurisdiction, I am neither required to nor have dealt with the merits of the case.”

In a firm and unequivocal ruling, the Delhi High Court set aside the arbitral award and supplementary award, holding that the tribunal’s very constitution was illegal due to ineligibility of the arbitrators under Section 12(5). Relying on express contractual terms and the conduct of parties, the Court found that the 2015 Amendments were applicable.

The judgment underscores the non-negotiable requirement of neutrality and independence in arbitration, and affirms that even pre-constituted tribunals will not be immune from disqualification where parties have opted into the amended regime.

“The Award is void ab initio… violates the public policy of India… and shocks the conscience of the Court.”

Date of Decision: 30 October 2025