The Delhi High Court has refused to revive an arbitration award in a long-running construction dispute involving the Central Public Works Department (CPWD), holding that the arbitrator’s appointment itself was legally flawed. A Division Bench ruled that once an arbitrator is appointed in violation of statutory safeguards, the entire arbitration collapses, regardless of how far the proceedings have gone.
The decision reinforces the Supreme Court’s recent position that unilateral appointments of arbitrators are invalid unless there is a clear, written waiver by both sides.
Background of the Case
The dispute arose from a 2016 construction contract between M/s M.V. Omni Projects (India) Ltd. and the Union of India, represented through CPWD. Differences emerged after the contract was terminated, prompting the contractor to invoke the arbitration clause in October 2018.
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When CPWD did not appoint an arbitrator immediately, Omni Projects moved the Delhi High Court under Section 11 of the Arbitration and Conciliation Act, seeking court intervention. During those proceedings, CPWD stated that it would appoint an arbitrator as per the contract. Shortly thereafter, a senior CPWD officer appointed a sole arbitrator unilaterally.
The arbitration went ahead without objection, and in May 2023, the arbitrator passed an award against the government. CPWD then challenged the award under Section 34 of the Act.
In May 2024, a Single Judge of the High Court set aside the award, not on its merits, but on a fundamental legal ground. The court held that the arbitrator’s appointment violated Section 12(5) of the Arbitration Act, which bars appointments where one party has exclusive control, unless both sides expressly waive that restriction in writing after the dispute has arisen.
Issues Before the Division Bench
Omni Projects challenged that decision, arguing that once the matter had reached the High Court under Section 11, CPWD had lost the right to make a unilateral appointment. It was also argued that both parties had participated in the arbitration without protest, amounting to consent.
The appeal was heard by Justice C. Hari Shankar and Justice Om Prakash Shukla, who closely examined whether participation in proceedings could substitute the legal requirement of a written waiver.
Court’s Observations
The Bench squarely relied on the Supreme Court’s recent ruling in Bhadra International v. Airports Authority of India, which clarified that consent by conduct is not enough.
“The law now is unambiguous,” the court observed, noting that “no amount of participation in arbitral proceedings can replace an express agreement in writing waiving Section 12(5).”
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The judges explained that Section 12(5) exists to protect neutrality in arbitration. If one party controls the appointment, the arbitrator is legally ineligible, and any award delivered is vulnerable from the outset.
Rejecting the contractor’s argument, the Bench held that the High Court, in the earlier Section 11 proceedings, had not itself appointed the arbitrator. It had merely recorded CPWD’s statement that it would do so under the contract.
“That appointment,” the court said, “remained unilateral and was therefore hit by the statutory bar.”
The court emphasised that the proviso to Section 12(5) allows parties to waive the restriction only through an express agreement in writing, made after disputes arise. In this case, there was no such document.
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Mere silence, continued participation, or even joint procedural steps could not be treated as a waiver.
“The conduct of the parties is inconsequential where the statute demands a written and conscious waiver,” the Bench noted.
Final Decision
Finding no legal error in the Single Judge’s ruling, the Division Bench dismissed the appeal. The arbitral award dated May 30, 2023, remains set aside, and the court declined to interfere.
The appeal was dismissed without any order on costs, bringing the litigation, at least for now, to a close.
Case Title: M/s M.V. Omni Projects (India) Ltd. v. Union of India & Anr.
Case Number: FAO(OS) (COMM) 110/2024
