Arbitration Act | Unilateral Appointment Void Ab Initio; Participation in Proceedings Does Not Constitute Waiver: Supreme Court

“To illustrate, one who cannot sit on a chair himself cannot authorise another to sit on it either.”— In a seminal ruling the Supreme Court of India, comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan, set aside an arbitral award passed by a unilaterally appointed arbitrator, holding that mere participation in arbitral proceedings does not constitute a waiver of the statutory ineligibility of an arbitrator under Section 12(5) of the Arbitration and Conciliation Act, 1996.

Unilateral Appointment and Subsequent Conduct

The judgment arises from a dispute between Bhadra International (India) Pvt. Ltd. and the Airports Authority of India (AAI). The parties entered into a License Agreement in 2010, which contained a dispute resolution clause empowering the Chairman of AAI to appoint a sole arbitrator. Following disputes in 2015, the Chairman appointed a sole arbitrator. Crucially, the Appellants participated in the proceedings, filed a Statement of Claim, and even jointly sought an extension of the mandate under Section 29A, without raising an objection to the arbitrator's appointment during the proceedings.

After a 'Nil' award was passed rejecting their claims, the Appellants challenged the award under Section 34, raising the plea that the unilateral appointment was void ab initio in light of the 2015 Amendment to the Act. The Delhi High Court rejected this plea, holding that by participating in the proceedings and recording "no objection" in the first procedural order, the Appellants had waived their right to object. The Supreme Court has now reversed this view in a decisive verdict.

“A unilateral appointment and a unilateral reference — both will be illegal.”

Unilateral Appointment is Void Ab Initio

The Court reiterated the law laid down in TRF Ltd. and Perkins Eastman, holding that the Chairman of AAI, being an interested party, was ineligible to act as an arbitrator under the Seventh Schedule read with Section 12(5). Consequently, he was also legally incapacitated from appointing another person as an arbitrator. The Court clarified that such an appointment is void ab initio and the arbitrator so appointed lacks inherent jurisdiction (de jure inability).

Strict Interpretation of Waiver under Section 12(5)

The focal point of the judgment is the interpretation of the proviso to Section 12(5), which allows parties to waive the ineligibility of an arbitrator. The Court held that such waiver requires an "express agreement in writing" entered into after the dispute has arisen. The Bench firmly rejected the argument that conduct, silence, or participation could imply waiver.

The Court observed that the legislature consciously used the term "express agreement in writing" to prevent waiver by implication. The "no objection" recorded in a procedural order or the filing of pleadings does not satisfy the rigorous requirement of a written agreement specifically waiving the statutory ineligibility.

“The words ‘an express agreement in writing’ in the proviso to Section 12(5) means that the right to object to the appointment of an ineligible arbitrator cannot be taken away by mere implication.”

Participation and Section 29A Extension Not Waiver

Addressing the Respondent's arguments, the Court held that the following acts do not constitute a waiver under the proviso to Section 12(5):

Filing a Statement of Claim: Submission to jurisdiction in pleadings is insufficient.

Section 29A Applications: Joining a request to extend the tribunal's mandate is a distinct statutory step to prevent the termination of proceedings by efflux of time and does not equate to an express agreement to waive ineligibility.

Silence/No Objection: Failure to object during the proceedings does not cure the inherent lack of jurisdiction.

Jurisdictional Objection Can Be Raised at Any Stage

Perhaps the most significant procedural clarification is the Court's holding that an objection regarding the arbitrator's ineligibility goes to the root of the jurisdiction. Since a unilaterally appointed arbitrator lacks inherent subject-matter jurisdiction, the proceedings are coram non judice.

The Court held that such an objection can be raised at any stage, including for the first time in an application under Section 34 to set aside the award, or even in collateral proceedings. The Court overruled prior High Court decisions which held that failure to challenge the arbitrator under Sections 13 or 14 precluded a challenge under Section 34.

“An award passed by an arbitrator who does not have jurisdiction strikes at the very authority of the arbitrator.”

The Supreme Court set aside the judgment of the Delhi High Court and the arbitral awards, granting liberty to the parties to initiate fresh arbitration in accordance with the law. This judgment serves as a stern warning against unilateral appointments and clarifies that the statutory protection against bias cannot be eroded by the conduct of the parties unless there is a specific, written agreement to the contrary.

Date of Decision: January 5, 2026