The Delhi High Court has clarified that a party who unilaterally appoints an arbitrator is not barred from challenging that appointment under Section 12(5) of the Arbitration and Conciliation Act, 1996. The Division Bench of Justice Tejas Karia and Justice Vibhu Bakhru held that without an express written waiver, such an appointment is invalid—even if made by the challenging party itself.
"The objection with regard to award being nullity due to unilateral appointment can be raised for the first time at the stage of Section 34 of the Act," the Court observed, emphasizing that awards passed by ineligible arbitrators are unenforceable.
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Background of the Case
The case stems from a contract dispute between M/s Mahavir Prasad Gupta and Sons and the Government of NCT of Delhi concerning the strengthening of Road No. 58 (Maharaja Surajmal Marg). The Appellant was awarded a ₹5.16 crore contract in 2014 and completed the work in 2015. Discrepancies over road thickness led to a payment dispute.
Despite a favorable third-party audit by IIT Roorkee and the PWD confirming the work was within permissible limits, the Respondent withheld payment. The Appellant invoked arbitration, and the Respondent appointed a sole arbitrator unilaterally. The arbitrator awarded ₹1.76 crore with 10% interest to the Appellant. However, the Commercial Court later set aside the award citing the arbitrator’s ineligibility under Section 12(5) and the Seventh Schedule.
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The Appellant argued that the Respondent had participated in the arbitration and had even extended the arbitrator’s mandate under Section 29A. The objection to the arbitrator's appointment was only raised during the court’s query under Section 34. They contended that such conduct amounted to waiver.
However, the Respondent countered that no express written waiver had been provided, making the appointment void under the Arbitration Act.
The High Court referred to key judgments like Perkins Eastman, Bharat Broadband, and the Constitution Bench ruling in CORE, concluding that:
"Waiver under Section 12(5) requires an express written agreement. Mere participation or procedural consent does not validate the arbitrator’s appointment."
The Court also emphasized that such appointments are void ab initio and courts are empowered under Section 34(2)(b) to set aside awards on grounds of public policy—even suo motu.
“The principle of equal treatment of parties applies at all stages of arbitration, including the appointment of arbitrators,” the Court stated, affirming that arbitration clauses favoring unilateral appointments breach Article 14 of the Constitution.
The appeal was ultimately dismissed, upholding the Commercial Court’s decision to set aside the arbitral award.
Case Title: M/s Mahavir Prasad Gupta and Sons vs Govt. of NCT of Delhi
Case Number: FAO (COMM) 170/2023
Judgment Date: May 31, 2025
Advocates: Mr. M.K. Ghosh & Ms. Tina Garg for the Appellant; Mr. Tushar Sannu & Ms. Ankita Bhadouriya for the Respondent
