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by Admin
14 December 2025 5:24 PM
"Clause That Vests Sole Control Over Tribunal in One Party Defeats Party Autonomy, Neutrality, and Public Confidence" — Delhi High Court delivered a critical judgment reiterating the non-negotiable requirement of independence and impartiality in arbitral tribunals, particularly under Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996.
Justice Jasmeet Singh held that the appointment of an arbitral tribunal solely by DMRC—comprised entirely of its former employees, without the written waiver required under the proviso to Section 12(5)—was void, and therefore the award rendered by it stood vitiated.
“There was no waiver, no consent and the respondent unilaterally appointed the Arbitral Tribunal. The Arbitral Tribunal was constituted in clear violation of Section 12(5)... the petition is allowed and the award is hereby set aside.” [Para 52]
The dispute arose from a construction contract between G.S. Buildtech Pvt. Ltd. and DMRC for civil works. When disputes regarding additional compensation emerged, arbitration was invoked.
However, DMRC unilaterally constituted the arbitral tribunal by appointing three retired railway officers from a limited panel. Despite explicit objections by the petitioner—denying consent to waive Section 12(5) and demanding independent arbitrators—DMRC proceeded with the constitution, and the arbitral tribunal passed an award on 16.11.2023 rejecting the petitioner’s claims.
The petitioner approached the Delhi High Court under Section 34 of the Arbitration Act, challenging the validity of the award on grounds including ineligibility of arbitrators, absence of waiver, and violation of party autonomy.
Was There a Valid Waiver Under Section 12(5)?
Held: No.
The Court emphasized that under Section 12(5), once a person is ineligible under the Seventh Schedule, they cannot act as arbitrators unless the parties expressly waive the disqualification in writing, after the dispute has arisen.
“The requirement of a written waiver ensures that the party unequivocally agrees... and avoids any ambiguity.” [Para 32]
The petitioner categorically denied waiver vide letter dated 02.05.2022, requesting an independent arbitrator. Merely participating in arbitral proceedings or nominating names from a constrained panel does not constitute a waiver.
“The statute does not permit an implied waiver through conduct or participation in arbitral proceedings.” [Para 32]
Relying on Bharat Broadband v. United Telecoms Ltd. (2019) 5 SCC 755, the Court reiterated that:
“The expression ‘express agreement in writing’ refers to an agreement made in words as opposed to an agreement which is to be inferred by conduct.” [Para 32 quoting SCC]
Were the Arbitrators De Jure Ineligible?
Held: Yes.
The arbitral tribunal comprised retired officers of DMRC. This, the Court held, squarely falls under Entry 1 of the Seventh Schedule, which bars anyone with past employment or business relationship from acting as an arbitrator.
“The members of the Arbitral Tribunal are clearly barred under Serial No. 1 of the Seventh Schedule.” [Para 43]
Furthermore, the Court ruled that the waiver of disqualification must occur only after the identity of arbitrators is disclosed. A waiver prior to knowing who is being appointed is legally ineffective.
“A waiver without knowledge of who the arbitrators will be, is not a valid waiver.” [Para 45]
This reasoning echoed the Court’s earlier decision in M.V. Omni Projects (India) Ltd. v. Union of India, 2025 SCC OnLine Del 3379.
Was the Mode of Appointment Itself Illegal?
Held: Yes.
DMRC’s appointment process, under Clause 2905 of IRS, was criticized for granting unilateral control to DMRC over the tribunal’s composition, including the presiding arbitrator.
“Such a mechanism vests unilateral control over the constitution of the Arbitral Tribunal with one party... which is not in consonance with the principles laid down in Voestalpine.” [Para 47]
Citing Voestalpine Schienen GmbH v. DMRC (2017) 4 SCC 665, the Court condemned narrow, curated panels and emphasized the requirement for a “broad-based panel” to protect fairness and neutrality in appointments.
Can an Ineligible Person (General Manager) Appoint Arbitrators?
Held: No. The Court rejected the respondent’s argument that only acting as an arbitrator triggers ineligibility, not appointing one. Relying on Perkins Eastman Architects v. HSCC (2020) 20 SCC 760 and TRF Ltd. v. Energo Engg. Projects (2017) 8 SCC 377, the Court held:
“A person who is disqualified from acting as an arbitrator is equally disqualified from appointing one.” [Para 49]
The Court found that DMRC’s General Manager, being an interested party, had no legal competence to unilaterally appoint the tribunal.
Significance of Central Organisation for Railway Electrification Judgment
The Court also relied heavily on the latest authoritative pronouncement in Central Organisation for Railway Electrification v. ECI-SPIC SMO MCML (JV), 2024 SCC OnLine SC 3219, which clarified:
Equal treatment of parties must exist at all stages including appointment;
Unilateral appointment clauses in government contracts are unconstitutional;
Mandating selection from a curated panel violates party autonomy;
Such mechanisms are violative of Article 14 of the Constitution.
“In the appointment of a three-member panel, mandating the other party to select its arbitrator from a curated panel... is against the principle of equal treatment.” [Para 50 quoting SCC]
Award Set Aside for Fundamental Violation of Arbitrator Eligibility
Summing up, the Court held that the arbitral award stood vitiated due to:
Invalid constitution of the arbitral tribunal;
Absence of a valid waiver under Section 12(5);
Appointment by an ineligible authority (General Manager of DMRC);
Violation of principles of party autonomy and neutrality.
“For the reasons noted above, the present petition is allowed and the Impugned Award is hereby set aside.” [Para 52]
Date of Decision: 31 July 2025
