In a significant ruling on arbitral neutrality, the Supreme Court of India has held that a sole arbitrator appointed unilaterally by the Airports Authority of India (AAI) was legally ineligible. The Court ruled that such an appointment violated Section 12(5) of the Arbitration and Conciliation Act, 1996, rendering the arbitral process void from the outset.
The verdict came in appeals filed by Bhadra International (India) Pvt. Ltd. and its consortium partners, challenging earlier decisions of the Delhi High Court that had upheld the arbitral award.
Read also:- Supreme Court Acquits Anjani Singh in 2004 Ballia Firing Case, Grants Benefit of Doubt
Background of the Case
The dispute traces back to licence agreements executed in 2010 between AAI and a consortium led by Bhadra International for providing ground handling services at select Indian airports. The agreements contained an arbitration clause allowing the Chairman of AAI to appoint a sole arbitrator in case of disputes.
After disagreements arose in 2015, Bhadra invoked arbitration. Acting under the contract, the AAI Chairman appointed a sole arbitrator. Proceedings continued for over two years, culminating in a “nil award” in 2018, where both claims and counter-claims were rejected.
Bhadra later challenged the award under Section 34 of the Act, arguing that the arbitrator’s appointment itself was illegal because it was unilateral and made by an authority interested in the dispute.
Read also:- Supreme Court Orders ₹3.99 Lakh Stamp Refund, Closes Contempt Against Agra Development Authority
The Delhi High Court dismissed Bhadra’s challenge. It reasoned that:
- The arbitrator was appointed following a request by Bhadra itself.
- The parties had recorded “no objection” to the arbitrator in the first procedural order.
- Continued participation in arbitration amounted to consent.
The High Court concluded that Bhadra had effectively waived its right to object.
Supreme Court’s Observations
The Supreme Court disagreed, firmly. Writing for the Bench, Justice J.B. Pardiwala examined the impact of Section 12(5), introduced by the 2015 amendment to ensure neutrality in arbitration.
“The moment an arbitrator falls within the Seventh Schedule, the ineligibility strikes at the root of the appointment,” the Bench observed.
The Court clarified that:
- The Chairman of AAI, being part of the management of one party, fell squarely within the Seventh Schedule.
- Once the appointing authority itself is ineligible, it cannot nominate or appoint any arbitrator.
- A notice invoking arbitration does not amount to consent for a future unilateral appointment.
Rejecting the High Court’s reasoning, the Bench noted that neutrality must exist not only during arbitration but also at the stage of constituting the tribunal.
“One who cannot sit on the chair himself cannot authorise another to sit on it either,” the Court remarked.
A central issue was whether Bhadra had waived the statutory bar by participating in arbitration.
The Court drew a clear line. It held that waiver under Section 12(5) is possible only through an “express agreement in writing” entered into after disputes arise.
Read also:- Supreme Court Restores ₹3.73 Lakh Compensation in Driver Death Case
Mere conduct, silence, participation, filing of claims, or a procedural note recording “no objection” does not meet this legal threshold.
“The law requires a conscious, written waiver. It cannot be inferred,” the Bench said.
Final Decision
Allowing the appeals, the Supreme Court held that:
- The unilateral appointment of the sole arbitrator by AAI was void ab initio.
- The arbitrator was de jure ineligible to act.
- The arbitral award could not survive in law.
Accordingly, the judgments of the Delhi High Court were set aside.
Case Title: Bhadra International (India) Pvt. Ltd. & Ors. v. Airports Authority of India
Case No.: Civil Appeal Nos. 37–38 of 2026
Case Type: Arbitration – Unilateral Appointment Dispute
Decision Date: 5 January 2026
