2026 INSC 6

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 37-38 of 2026

[Arising out of Special Leave Petition (C) Nos. 16107-16108 of 2025]

BHADRA INTERNATIONAL (INDIA)

PVT. LTD. & ORS. …APPELLANT S

VERSUS

AIRPORTS AUTHORITY OF INDIA …RESPONDENT

J U D G M E N T

SLP(C) Nos. 16107-16108 of 2025 Page 1 of 72

J.B. PARDIWALA, J.:

For the convenience of exposition, this judgment is divided into the

following parts:-

INDEX

I. FACTUAL MATRIX .................................................................................................... 3

II. JUDGMENT OF THE SINGLE JUDGE ON APPLICATION UNDER

SECTION 34 OF THE ACT, 1996 ................................................................................. 8

III. IMPUGNED JUDGMENT ...................................................................................... 9

IV. SUBMISSIONS ON BEHALF OF THE APPELLANTS .................................. 11

V. SUBMISSIONS ON BEHALF OF THE RESPONDENT .................................. 14

VI. ISSUES FOR CONSIDERATION ....................................................................... 16

VII. ANALYSIS ............................................................................................................. 17

i. Whether the sole arbitrator could be said to have become “ineligible

to be appointed as an arbitrator” by virtue of sub-section (5) of Section

12 of the Act, 1996? .................................................................................................. 17

a. Interplay between Equal Treatment of Parties and Party Autonomy .................... 17

b. Scope and Application of sub-section (5) of Section 12 of the Act, 1996 ................ 21

c. Appointment of the sole arbitrator in light of sub-section (5) of Section 12 of the

Act, 1996 ............................................................................................................................... 26

d. De Jure inability of the arbitrator to perform his functions ..................................... 35

SLP(C) Nos. 16107-16108 of 2025 Page 2 of 72

ii. Whether the parties could be said to have waived the applicability of sub-

section (5) of Section 12 of the Act, 1996, by way of their conduct, either

expressed or implied? ............................................................................................... 40

a. Meaning and Import of the expression “express agreement in writing” used in

proviso to sub-section (5) of Section 12 of the Act, 1996 ............................................... 41

b. “Statement of Claim” as a parameter of waiver ....................................................... 49

c. “Extension of Time” under Section 29A of the Act, 1996 as a parameter of waiver

............................................................................................................................................... 50

d. “Continued Participation” as a parameter of waiver ............................................... 52

iii. Whether the appellants could have raised an objection to the appointment

of the sole arbitrator for the first time in an application under Section 34 of

the Act, 1996? .............................................................................................................. 54

a. Challenge to the ineligibility of the arbitrator during the proceedings .................. 55

b. Challenge to the ineligibility of the arbitrator after arbitral award has been passed

............................................................................................................................................... 60

c. Challenge to the ineligibility of the arbitrator at any stage of the proceedings .... 64

VIII. CONCLUSION .................................................................................................... 70

SLP(C) Nos. 16107-16108 of 2025 Page 3 of 72

1. Leave granted.

2. Since the issues raised in both the captioned appeals are the same, the

parties are same, and the challenge is also to the self-same judgment

and order passed by the High Court, those were taken up for hearing

analogously and are being disposed of by this common judgment and

order.

3. These appeals arise from the common judgment and order dated

11.02.2025 passed by a Division Bench of the High Court of Delhi in

FAO(OS) (COMM) Nos. 23 and 24 of 2025 respectively (hereinafter, the

“Impugned Judgment”), by which the appeals filed by the appellants

herein under Section 37 of the Arbitration and Conciliation Act, 1996

(for short, the “Act, 1996”) came to be dismissed thereby affirming the

order dated 19.02.2022 passed by a learned Single Judge of the High

Court in OMP (COMM) Nos. 414 and 415 of 2018 respectively under

Section 34 of the Act, 1996 (hereinafter, the “Single Judge”) dismissing

the preliminary objection raised by the appellants as regards unilateral

appointment of a sole arbitrator by the respondent.

I. FACTUAL MATRIX

4. The facts giving rise to the appeals may be summarized as under:-

i. The appellant no. 1 and appellant no. 2, viz. Bhadra International

(India) Pvt. Ltd., and Novia International Consulting Aps,

SLP(C) Nos. 16107-16108 of 2025 Page 4 of 72

respectively executed an agreement to form a joint consortium

namely Bhadra International (India) Pvt. Ltd. and Novia

International Consulting Aps, for the purposes of undertaking

ground handling services at various airports in India. The

consortium is the appellant no. 3 before us.

ii. The respondent (Airports Authority of India) floated two tender

notices inviting tenders for appointment of an agency for ground

handling services at some airports. In response to these notices,

the appellant no. 3 emerged as the successful bidder. Pursuant

to the two notices, the parties executed two License Agreement

dated 29.11.2010 (“License Agreement”). As per the License

Agreement, the appellant no. 3 was permitted to provide ground

handling services at the specified airports.

iii. The aforesaid License Agreement, more particularly, Clause 78

provided that in the event of any dispute or difference arising

out of the said license agreement the same would have to be

resolved through arbitration. The said clause read as under:-

“78. All disputes and differences, arising out of or, in any way,

touching or concerning this Agreement, (except those the

decision whereof is otherwise hereinbefore expressly provided

for or to which the Public Premises (Eviction of Unauthorised

Occupants) Act, 1971 and the rules framed hereunder which are

now in force or which may hereafter come in to force, are

applicable) shall be referred to the sole arbitration of a person, to

be appointed by the Chairman of the Authority or, in case the

SLP(C) Nos. 16107-16108 of 2025 Page 5 of 72

designation of Chairman is changed or his office is abolished, by

the person, for the time being entrusted, whether or not, in

addition to other functions, with the functions of the Chairman,

Airports Authority of India, by whatever designation such

person may be called, and, if the Arbitrator, so appointed, is

unable or unwilling to act, to the sole arbitrations or some other

person to be similarly appointed. It will be no objection to such

appointment that the Arbitrator so appointment is a servant of

the Authority, that he had to deal with the matters to which this

Agreement relates and that in the course of his duties, as such

servant of the Authority, he had expressed views on all or any

of the matters in dispute or differences. The award of the

arbitrator, so appointment, shall be final and binding on the

Parties. The Arbitrator may, with the consent of the parties,

enlarge, from time to time, the time for making and publishing

the award. The venue of the arbitration shall be at New Delhi.”

(Emphasis is ours)

iv. On 23.10.2015, the Arbitration and Conciliation (Amendment)

Act, 2015 came into effect (for short, “the Amendment Act,

2015”), by which sub-section (5) was inserted into Section 12. The

provision reads thus:-

“[(5) Notwithstanding any prior agreement to the contrary, any

person whose relationship, with the parties or counsel or the

subject-matter of the dispute, falls under any of the categories

specified in the Seventh Schedule shall be ineligible to be

appointed as an arbitrator:

Provided that parties may, subsequent to disputes having

arisen between them, waive the applicability of this sub-section

by an express agreement in writing.]”

v. Sometime, in the year 2015, various disputes cropped up

between the appellants and the respondent herein. Accordingly,

SLP(C) Nos. 16107-16108 of 2025 Page 6 of 72

the appellants vide notice dated 27.11.2015 invoked the

arbitration clause and requested the respondent to appoint an

arbitrator in terms of Clause 78 of the aforesaid License

Agreement. The relevant part of the notice reads thus:-

“We also like to bring out most humbly that it is incumbent

upon the Chairman AAI to appoint the Sole Arbitrator within

a reasonable time, least we might not be left with no recourse,

but to seek a relief under Section 11, Sub Section 6, Chapter III

of the Arbitration & Reconciliation Act 1996.”

vi. On 22.03.2016, the sole arbitrator passed the first procedural

order recording that none of the parties had any objection to his

appointment. The procedural order reads thus:-

“PROCEDURAL ORDER NO. 1

With

Minutes of, and the Directions made at, the hearing on

22.03.2016 at 1:00 pm

[AT D-247 (Basement), Defence Colony, New Delhi-110024]

This preliminary meeting of the Tribunal was held D-247

(Basement), Defence Colony, New Delhi-110024 on 22nd

March, 2016 at 1:00 PM. None of the parties have any objection

to my appointment as the Sole Arbitrator. I declare that I have

no interest in any of the Parties, or in the disputes referred to

the Sole Arbitrator.[…]”

(Emphasis supplied)

vii. At the joint request of the parties, two applications were filed

under Section 29A of the Act, 1966, seeking extension of time for

the completion of the proceedings. On both the occasions, the

applications were allowed by the High Court.

SLP(C) Nos. 16107-16108 of 2025 Page 7 of 72

viii. Ultimately, the sole arbitrator passed the arbitral awards dated

30.07.2018 whereby the claims and counter-claims of the

respective parties were rejected. In effect, the arbitrator passed a

‘Nil’ award.

ix. Aggrieved by the dismissal of its claim, the appellants

challenged the award by filing applications under Section 34 of

the Act, 1996, bearing O.M.P. (COMM) Nos. 414 and 415 of 2018

respectively, before the Single Judge of the High Court.

x. Thereafter, by way of applications bearing I.A. Nos. 1834 and

1842 of 2022 respectively, the appellants sought to amend the

aforesaid applications to contend that since the arbitrator was

appointed unilaterally, the award was liable to be set aside

(“Amendment Application”).

xi. The aforesaid applications filed by the appellants came to be

rejected by the Single Judge vide order dated 24.12.2024.

xii. Being aggrieved by the aforesaid, the appellants preferred

appeals under Section 37 of the Act, 1996, bearing FAO(OS)

(COMM) Nos. 23 and 24 of 2025 respectively, seeking to

challenge the judgment and order passed by a learned Single

SLP(C) Nos. 16107-16108 of 2025 Page 8 of 72

Judge. The said appeals came to be dismissed vide the impugned

judgment.

xiii. In such circumstances referred to above, the appellants are here

before this Court with the present appeals.

II. JUDGMENT OF THE SINGLE JUDGE ON APPLICATION

UNDER SECTION 34 OF THE ACT, 1996

5. Aggrieved by the awards passed by the sole arbitrator, the appellants

filed applications under Section 34 of the Act, 1996, raising the

preliminary objection that since the appointment of the sole arbitrator

was made unilaterally by the respondent, the award was liable to be

set aside.

6. The learned Single Judge held that the appointment of the arbitrator

was in accordance with the procedure agreed upon by the parties

under Clause 78 of the License Agreement. Consequently, it rejected

the challenge to the appointment of the sole arbitrator on the following

grounds:-

i. First, it observed that the sole arbitrator appointed by the

respondent did not suffer from any disqualification under the

Fifth or Seventh Schedule read with Section 12(5) of the Act,

1996. The parties themselves had agreed to the procedure of

appointment. Moreover, the appellants did not raise any

objection regarding the independence and impartiality of the

SLP(C) Nos. 16107-16108 of 2025 Page 9 of 72

arbitrator. Accordingly, the appointment of the arbitrator could

not have been belatedly called into question.

ii. Secondly, on the issue of waiver, the learned Single Judge

observed that the proviso to Section 12(5) of the Act, 1996,

stipulates the requirement of clear and positive manifestation of

waiver in writing. It observed that mere participation in the

arbitral proceedings without raising any objection would not

constitute an express waiver in writing as per the requirement of

the proviso. However, it arrived at the conclusion that the first

procedural order passed by the sole arbitrator explicitly

recorded that parties had no objection to his appointment.

iii. Thus, according to the learned Single Judge, the appellants could

be said to have waived the applicability of Section 12(5) by not

raising an objection before the sole arbitrator in the first

procedural order.

III. IMPUGNED JUDGMENT

7. Feeling aggrieved and dissatisfied with the order passed by the

learned Single Judge dismissing the preliminary objection in so far as

the appointment of the sole arbitrator, the appellants preferred appeals

under Section 37 of the Act, 1996.

SLP(C) Nos. 16107-16108 of 2025 Page 10 of 72

8. The High Court, in its impugned judgment, held that the appointment

of the sole arbitrator was not unilateral, as the respondent had

proceeded to appoint arbitrator only pursuant to the written request

made by the appellants. Therefore, it could not be said that the

appellants had not consented to the appointment. The High Court

further noted that the sole arbitrator had expressly obtained the

consent of the parties, and at no point of time the appellants asserted

that their consent was incorrectly recorded or that they had not

consented.

9. The High Court observed that the appellants continued to participate

in the arbitral proceedings without raising any objection. It also

observed that the challenge to the jurisdiction of the arbitrator was not

raised in the first instance but rather made belatedly through the

Amendment Application.

10. The appellants had argued before the High Court that prior to the

insertion of sub-section (5) they had no occasion to challenge the

appointment of the sole arbitrator. Such a challenge, according to

them, could have been raised only after the introduction of sub-section

(5) of Section 12. However, the High Court held that it was immaterial

as to when the amendment was introduced. The High Court took the

view that, the appellants by their conduct could be said to have

submitted to the jurisdiction of the sole arbitrator.

SLP(C) Nos. 16107-16108 of 2025 Page 11 of 72

11. In the aforesaid context, the High Court observed the fact that the

appellants had called upon the respondent to appoint an arbitrator, the

sole arbitrator was accordingly appointed, and having unequivocally

consented to the arbitral proceedings had no bearing on the insertion

of the provision through an amendment. It was further observed that

even after the introduction of sub-section (5), the arbitral proceedings

continued for more than two years, still the appellants did not, at any

stage, raise an objection.

12. Lastly, the High Court observed that the case of the appellants cannot

be equated with cases in which an objection to the appointment of the

arbitrator have been raised throughout the proceedings, or at every

stage.

IV. SUBMISSIONS ON BEHALF OF THE APPELLANTS

13. Mr. Navin Pahwa, the learned Senior Counsel appearing for the

appellants would argue that the sole arbitrator was ineligible to act as

an arbitrator as he was unilaterally appointed by the Chairman of the

respondent. Such an appointment was void ab initio and non-est in law,

and therefore, the arbitral awards would be a nullity. He relied on the

decision of this Court in Bharat Broadband Network Ltd. v. United

Telecoms Ltd., reported in (2019) 5 SCC 755, to submit that an

appointment made by an ineligible person is void ab initio.

SLP(C) Nos. 16107-16108 of 2025 Page 12 of 72

14. In the same breath, Mr. Pahwa submitted that since the appointment

of the arbitrator was void, the proceedings conducted pursuant to such

appointment would also be a nullity. As a result, the awards passed

by the sole arbitrator would also be contrary to the public policy of

India, and thus, liable to be set aside.

15. He further submitted that where the right to appoint a sole arbitrator

rests solely with one party, that party’s choice would inevitably carry

an element of exclusivity in determining the course of the arbitration.

To fortify his submission, he relied on the decision of this Court in TRF

Ltd. v. Energo Engineering Projects Ltd., reported in (2017) 8 SCC 377.

He submitted that a Managing Director, ineligible to act as an

arbitrator under Section 12(5) read with Seventh Schedule of the Act,

1996, could not have appointed an arbitrator or nominate any other

person to be an arbitrator.

16. He highlighted that this Court has affirmed the decision in TRF (supra)

in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd.,

reported in (2020) 20 SCC 760. In the present case, the Chairman of the

respondent was ineligible to act as an arbitrator by virtue of Items 1, 5,

and 12 of the Seventh Schedule respectively. Consequently, any

arbitrator appointed by such an ineligible person would be, by

operation of law, equally ineligible to act as an arbitrator.

SLP(C) Nos. 16107-16108 of 2025 Page 13 of 72

17. It was further submitted that an objection to the unilateral

appointment may be raised at any stage, including for the first time in

Section 34 proceedings. He added that the appellants by participating

in the proceedings did not waive their right to raise an objection in

terms of the proviso to Section 12(5) of the Act, 1996. To fortify his

submission, he relied on the decision in Lion Engineering Consultants

v. State of Madhya Pradesh, reported in (2018) 16 SCC 758, Hindustan

Zinc Ltd. v. Ajmer Vidyut Vitran Nigam Ltd., reported in (2019) 17

SCC 82, Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat,

reported in 2023 SCC OnLine Del 3148 respectively.

18. Mr. Pahwa further submitted that the proviso to Section 12(5) makes it

limpid that ineligibility of an arbitrator could only be waived by an

“express agreement in writing” between the parties, and such an

agreement must be entered into after disputes have arisen. To make

good his case, Mr. Pahwa placed reliance on the decisions of this Court

in Bharat Broadband (supra) and Central Organization for Railway

Electrification v. ECI SPIR SMO MCML (JV) A Joint Venture

Company, reported in (2025) 4 SCC 641 (“CORE II”).

19. He would submit that the law requires a conscious waiver, reduced

into writing and signed by both parties. In this regard, he submitted

that mere participation in proceedings, filing of statement of claim,

silence, or not objecting to the appointment is insufficient to constitute

a waiver. In the present case, the notice of invocation of arbitration, or

SLP(C) Nos. 16107-16108 of 2025 Page 14 of 72

not objecting in the first procedural order, or participating in the

proceedings, or filing application under Sections 17 or 29A

respectively would not amount to an “express agreement in writing”.

20. In such circumstances referred to above, the learned Senior Counsel

appearing for the appellants-claimants would submit that there being

merit in his appeals, the same may be allowed and the impugned

judgment passed by the High Court may be set aside.

V. SUBMISSIONS ON BEHALF OF THE RESPONDENT

21. Mr. Parag Tripathi, the learned Senior Counsel appearing for the

respondent would submit that no error, not to speak of any error of

law, could be said to have been committed by the High Court in

passing the impugned judgment.

22. Mr. Tripathi submitted that the limited question that falls for the

consideration of this Court is whether the present case falls within the

proviso to Section 12(5) of the Act, 1996. In other words, whether there

was a waiver by an “express agreement in writing”.

23. He submitted that the first procedural order recording the consent of

the appellants would constitute an “express agreement in writing” as per

the proviso as it was subsequent to the dispute arising between the

parties. Mr. Tripathi emphasized that the provision does not provide

a format for an “express agreement”. He added that in so far as proposal

SLP(C) Nos. 16107-16108 of 2025 Page 15 of 72

or acceptance of any promise is made in words, the promise is said to

be express. To make good this submission, he relied on the decision in

the case of Bharat Broadband (supra).

24. It was further submitted that no objection/consent of the appellants

recorded in the first procedural order acts as an acknowledgment in

writing with respect to the qualifications as well as the appointment of

the sole arbitrator. The appellants had also filed their statement of

claim before the sole arbitrator. This is suggestive of the fact that the

appellants in explicit terms had submitted to the jurisdiction of the sole

arbitrator, and agreed to get the dispute resolved by the sole arbitrator.

25. Mr. Tripathi relied on McLeod Russel India Ltd. & Ors. v. Aditya Birla

Finance Ltd. & Ors., reported in 2023 SCC OnLine Cal 330, and Anuj

Kumar v. Franchise India Brands Ltd., reported in 2023 SCC OnLine

Del 2560, to submit that the contents of pleadings or communication

constitute an express agreement in writing, and the decision in Anuj

Kumar (supra) is not in conflict with the decision of this Court in

Bharat Broadband (supra).

26. Mr. Tripathi further submitted that although sub-section (5) of Section

12 read with Seventh Schedule of the Act, 1996 was introduced during

the pendency of the arbitral proceedings, yet the appellants chose not

to raise an objection to the appointment of the sole arbitrator.

Accordingly, he submitted that the appellants did not raise any

SLP(C) Nos. 16107-16108 of 2025 Page 16 of 72

objection as to the constitution, appointment, jurisdiction,

independence or impartiality of the sole arbitrator under Sections 13,

14, or 16 of the Act, 1996, respectively throughout the proceedings.

27. He added that the appellants raised the objection to the appointment

of the sole arbitration only by way of an amendment to the Section 34

application. The appellants did so as an afterthought, more than three

years after filing the said application.

28. In such circumstances referred to above, the learned Senior Counsel

prayed that there being no merit in the appeals, the same may be

dismissed.

VI. ISSUES FOR CONSIDERATION

29. Having heard the learned counsel appearing for the parties and having

gone through the materials on record, the following questions fall for

our consideration:-

i. Whether the sole arbitrator could be said to have become

“ineligible to be appointed as an arbitrator” by virtue of sub-section

(5) of Section 12 of the Act, 1996?

ii. Whether the parties could be said to have waived the applicability

of sub-section (5) of Section 12 of the Act, 1996, by way of their

conduct, either expressed or implied?

SLP(C) Nos. 16107-16108 of 2025 Page 17 of 72

iii. Whether the appellants could have raised an objection to the

appointment of the sole arbitrator for the first time in an

application under Section 34 of the Act, 1996?

VII. ANALYSIS

i. Whether the sole arbitrator could be said to have become

“ineligible to be appointed as an arbitrator” by virtue of sub-

section (5) of Section 12 of the Act, 1996?

30. It was submitted on behalf of the appellants herein that the sole

arbitrator appointed by the Chairman of the respondent was ineligible

to act as an arbitrator as he was appointed unilaterally. Further, such

an appointment was void ab initio and non-est in law.

31. On the aforesaid issue, the High Court, in its impugned judgment, held

that the appointment of the sole arbitrator was not unilateral, as the

respondents had proceeded to appoint the arbitrator only pursuant to

the written request of the appellants. Therefore, the notice invoking

arbitration operated as the appellants’ consent to the appointment of

the arbitrator.

a. Interplay between Equal Treatment of Parties and Party

Autonomy

32. In order to address this issue, we shall first look into Section 18 of the

Act, 1996. It reads thus:-

SLP(C) Nos. 16107-16108 of 2025 Page 18 of 72

“18. Equal treatment of parties.—The parties shall be treated

with equality and each party shall be given a full opportunity to

present this case.”

33. Section 18 outlines two principles: first, equal treatment of parties; and

secondly, right to a fair hearing. The principle of equal treatment of

parties applies not only to the arbitral proceedings, but also to the

procedure for appointment of arbitrators. The section casts a

responsibility on the arbitrator to act impartially, objectively, and

without bias, and also on the parties to adhere to standards of fairness.

The principle of ‘equal treatment of the parties’ means that the parties

must have the possibility of participating in the constitution of the

arbitral tribunal on equal terms.

34. Equal participation of the parties in the process of appointment of

arbitrators entails that the contracting parties have an equal say in the

constitution of the arbitral tribunal. Such participation eliminates the

likelihood of challenges to the arbitrator at a later stage. It is needless

to say that independence and impartiality in arbitral proceedings

would be served only when the parties participate equally at all stages.

35. It would be apposite to refer to the following observations of P.S.

Narasimha, J., in CORE II (supra):-

“Distinct duties of arbitrators and arbitrating parties

231. There are two distinct obligations. The first is the

obligation of the parties to the agreement, and the second is the

neutrality and objectivity that an arbitrator must maintain. The

SLP(C) Nos. 16107-16108 of 2025 Page 19 of 72

obligations on the parties to the arbitration agreement to

constitute an independent and impartial Arbitral Tribunal is

distinct from the objectivity and impartiality that an

arbitrator(s) must himself maintain. The foundation of the

former is within the statutory framework, coupled with certain

public policy considerations. The latter is simply the duty to act

judicially, it is not superimposed by any statute or public policy,

but arises because of the very nature of the calling i.e. to judge

what is right and what is wrong.[…]”

(Emphasis supplied)

36. The principle of equal treatment of parties is not new to the arbitration

regime in India. It has long been recognised that equal participation in

the constitution of the arbitral tribunal is integral in ensuring

impartiality and preserving fairness of the arbitral process. Even prior

to the Amendment Act, 2015, this Court in Dharma Prathishthanam

v. Madhok Construction (P) Ltd., reported in (2005) 9 SCC 686, held

that a unilateral appointment, without the consent of the other party is

illegal and alien to law. The relevant observations read thus:-

“12. On a plain reading of the several provisions referred to

hereinabove, we are clearly of the opinion that the procedure

followed and the methodology adopted by the respondent is

wholly unknown to law and the appointment of the sole

arbitrator Shri Swami Dayal, the reference of disputes to such

arbitrator and the ex parte proceedings and award given by the

arbitrator are all void ab initio and hence nullity, liable to be

ignored. In case of arbitration without the intervention of the

court, the parties must rigorously stick to the agreement entered

into between the two. If the arbitration clause names an

arbitrator as the one already agreed upon, the appointment of an

arbitrator poses no difficulty. If the arbitration clause does not

name an arbitrator but provides for the manner in which the

arbitrator is to be chosen and appointed, then the parties are

SLP(C) Nos. 16107-16108 of 2025 Page 20 of 72

bound to act accordingly. If the parties do not agree then arises

the complication which has to be resolved by reference to the

provisions of the Act. One party cannot usurp the jurisdiction

of the court and proceed to act unilaterally. A unilateral

appointment and a unilateral reference — both will be illegal. It

may make a difference if in respect of a unilateral appointment

and reference the other party submits to the jurisdiction of the

arbitrator and waives its rights which it has under the

agreement, then the arbitrator may proceed with the reference

and the party submitting to his jurisdiction and participating

in the proceedings before him may later on be precluded and

estopped from raising any objection in that regard.[…]”

(Emphasis supplied)

37. What flows from the aforesaid is that the principle of equal treatment

of parties which has always formed part of the Act, 1996, has been

articulated with greater clarity and precision by the legislature

through the Amendment Act, 2015. The Amendment Act, 2015, just

crystallizes what was previously implicit. It makes the statutory

guarantee of equal treatment in the process of appointment of the

arbitrator explicit.

38. One another good reason to hold the aforesaid is that, although Section

11(2) of the Act, 1996, stipulates that the parties are free to agree on a

procedure for appointing the arbitrator or arbitrators, yet this freedom

is not unbridled. The exercise of party autonomy must operate within

the framework of the Act, 1996. In case of conflict, mandatory

provisions of the Act, 1996, prevail over the arbitration agreement.

SLP(C) Nos. 16107-16108 of 2025 Page 21 of 72

39. The principle of party autonomy does not obliterate the principle of

equal treatment of the parties, either in the procedure for appointment

of arbitrators or in the arbitral proceedings. The exercise of party

autonomy has to be in consonance with the principles of equal

treatment of parties, which impliedly include the independence and

impartiality of arbitrators.

b. Scope and Application of sub-section (5) of Section 12 of the

Act, 1996

40. The Amendment Act, 2015, was introduced with the objective of

ensuring neutrality of an arbitrator when he is approached in

connection with a possible appointment. Therefore, with a view to

inculcate the principles of independence and impartiality, the

Amendment Act, 2015, brought amendments, inter alia, to Section 12

of the Act, 1996. The amended section reads thus:-

“12. Grounds for challenge.—4 [(1) When a person is

approached in connection with his possible appointment as an

arbitrator, he shall disclose in writing any circumstances,—

(a) such as the existence either direct or indirect, of any past

or present relationship with or interest in any of the parties or

in relation to the subject-matter in dispute, whether financial,

business, professional or other kind, which is likely to give rise

to justifiable doubts as to his independence or impartiality; and

(b) which are likely to affect his ability to devote sufficient

time to the arbitration and in particular his ability to complete

the entire arbitration within a period of twelve months.

Explanation1.—The grounds stated in the Fifth Schedule

shall guide in determining whether circumstances exist which

SLP(C) Nos. 16107-16108 of 2025 Page 22 of 72

give rise to justifiable doubts as to the independence or

impartiality of an arbitrator.

Explanation 2.—The disclosure shall be made by such

person in the form specified in the Sixth Schedule.]

(2) An arbitrator, from the time of his appointment and

throughout the arbitral proceedings, shall, without delay,

disclose to the parties in writing any circumstances referred to

in sub-section (1) unless they have already been informed of

them by him.

(3) An arbitrator may be challenged only if—

(a) circumstances exist that give rise to justifiable doubts as

to his independence or impartiality, or

(b) he does not possess the qualifications agreed to by the

parties.

(4) A party may challenge an arbitrator appointed by him, or in

whose appointment he has participated, only for reasons of

which he becomes aware after the appointment has been made.

[(5) Notwithstanding any prior agreement to the contrary, any

person whose relationship, with the parties or counsel or the

subject-matter of the dispute, falls under any of the categories

specified in the Seventh Schedule shall be ineligible to be

appointed as an arbitrator:

Provided that parties may, subsequent to disputes having

arisen between them, waive the applicability of this sub-section

by an express agreement in writing.]”

41. Sub-section (1) of Section 12 stipulates that when a person is

approached to be an arbitrator, he must disclose in writing any

circumstance which may fall under clauses (a) and (b) of sub-section

(1) respectively. Clause (a) relates to circumstances that may give rise

to justifiable doubts as to his independence or impartiality. Whereas,

clause (b) relates to disclosures about the person’s ability to devote

SLP(C) Nos. 16107-16108 of 2025 Page 23 of 72

sufficient time to the arbitration and to complete the proceedings

within the prescribed time period.

42. For disclosure under clause (a), the Fifth Schedule, consisting of 34

items, is of aid. The items enumerated in the Fifth Schedule provides

for the circumstances that may give rise to justifiable doubts about an

arbitrator’s independence or impartiality after appointment.

43. While the information required to be disclosed under clause (b) is

personal to the individual and could be disclosed only by him. The

disclosure has to be made in the form specified in the Sixth Schedule,

and has to be made by all proposed arbitrators. It is noteworthy to

mention that sub-section (1) comes into application prior to the

appointment of a person as an arbitrator.

44. Sub-section (2) of Section 12 states that from the appointment of the

arbitrator and throughout the arbitral proceedings, the arbitrator

must, without delay, disclose in writing any circumstance referred to

in sub-section (1) that arises after his appointment. However, if the

arbitrator has already informed the parties of the said circumstance

earlier, he is not required to make a disclosure again.

45. Sub-section (3) of Section 12 lays down two grounds for challenge to

appointment of an arbitrator: first, if any circumstances exist that give

rise to justifiable doubts about an arbitrator’s independence or

SLP(C) Nos. 16107-16108 of 2025 Page 24 of 72

impartiality. Secondly, if the arbitrator does not possess the

qualifications agreed to by the parties. Sub-section (4) prescribes a

caution. It states that a challenge to the appointment of an arbitrator

could be maintained only on the grounds that were not disclosed

during or after the appointment.

46. Sub-section (5) of Section 12 states that any person whose relationship

with the parties or counsel, or the subject-matter of the dispute, falls

under any of the grounds mentioned in the Seventh Schedule would

be ineligible to be appointed as an arbitrator. It invalidates any prior

agreement to the contrary, i.e., an agreement providing for

appointment of an arbitrator who would become ineligible on the

application of sub-section (5). The proviso to the sub-section provides

that after dispute arises between the parties, they may waive the

applicability of this provision by entering into an express agreement

in writing.

47. The Seventh Schedule lists 19 items, which also form part of the 34

items of the Fifth Schedule. In other words, the Seventh Schedule is a

subset of the Fifth Schedule. It is the duty of an arbitrator to keep in

mind the items enlisted in the Fifth Schedule and make a disclosure in

accordance with the Sixth Schedule. Out of the said 34 items, the

legislature has placed 19 items in the Seventh Schedule which make an

arbitrator ineligible for appointment. We clarify with a view to obviate

SLP(C) Nos. 16107-16108 of 2025 Page 25 of 72

any confusion that the Seventh Schedule applies irrespective of

whether the appointment has been made unilaterally.

48. If any entry in the Seventh Schedule is attracted, the consequences

under Section 12(5) follow. In such circumstances, the disclosure made

by the arbitrator does not save the mandate of the arbitrator, and an

agreement referred to in the proviso assumes importance. We shall

discuss the scope and application of the sub-section (5), as well as its

proviso, in more detail in the latter part of this judgment.

49. We may now proceed to address the aforesaid issue. There have been

submissions by the parties on the applicability of the Amendment Act,

2015, to the present case as the parties executed the License Agreement

in 2010. Section 26 of the Amendment Act, 2015, makes it limpid that

the Amendment Act, 2015, would apply to arbitral proceedings

commenced on or after 23.10.2015. It is a well settled position of law

that in the absence of any contrary stipulation in the agreement,

arbitral proceedings commence when a notice invoking arbitration is

received by the respondent. [See: Board of Control for Cricket in India

v. Kochi Cricket Pvt. Ltd. & Ors., (2018) 6 SCC 287]

50. In the present case, the parties have not agreed to a different

commencement date. As a sequitur, the date of commencement of the

arbitral proceedings was 27.11.2015, i.e., when the notice invoking

arbitration was received by the respondent. Thus, the Amendment

SLP(C) Nos. 16107-16108 of 2025 Page 26 of 72

Act, 2015, more particularly, sub-section (5) of Section 12 of the Act,

1996, would apply to the matter at hand.

c. Appointment of the sole arbitrator in light of sub-section (5) of

Section 12 of the Act, 1996

51. There is a conspectus of decisions of this Court which lay down that,

Section 12 was amended with the objective of ensuring independence

and impartiality of arbitrators. By virtue of sub-section (5) of Section

12, any person whose relationship with the parties or counsel, or the

dispute, whether direct or indirect, falls within any of the categories

specified in the Seventh Schedule is rendered ineligible to be

appointed as an arbitrator. We need not discuss all the decisions, but

rather intend to refer and rely upon only a few of them.

52. In TRF (supra), the arbitration agreement stated that any dispute or

difference between the parties in connection with the agreement shall

be referred to the sole arbitration of the Managing Director or his

nominee. The issue before this Court was whether the Managing

Director, after becoming ineligible by operation of law, is still eligible

to nominate an arbitrator.

In this context, a three Judge Bench of this Court categorically

held that if any person falls under any of the categories mentioned in

the Seventh Schedule, he would be ineligible to be appointed as an

arbitrator. In the facts of the case, it was held that the Managing

Director, by virtue of sub-section (5) of Section 12, acquired the

SLP(C) Nos. 16107-16108 of 2025 Page 27 of 72

disqualification under the Seventh Schedule. Thus, as he became

ineligible by operation of law to act as an arbitrator, he could not have

nominated another person as an arbitrator. The relevant observations

read thus:-

“54. In such a context, the fulcrum of the controversy would be,

can an ineligible arbitrator, like the Managing Director,

nominate an arbitrator, who may be otherwise eligible and a

respectable person. As stated earlier, we are neither concerned

with the objectivity nor the individual respectability. We are

only concerned with the authority or the power of the Managing

Director. By our analysis, we are obligated to arrive at the

conclusion that once the arbitrator has become ineligible by

operation of law, he cannot nominate another as an arbitrator.

The arbitrator becomes ineligible as per prescription contained

in Section 12(5) of the Act. It is inconceivable in law that person

who is statutorily ineligible can nominate a person. Needless to

say, once the infrastructure collapses, the superstructure is

bound to collapse. One cannot have a building without the

plinth. Or to put it differently, once the identity of the

Managing Director as the sole arbitrator is lost, the power to

nominate someone else as an arbitrator is obliterated. Therefore,

the view expressed by the High Court is not sustainable and we

say so.”

(Emphasis supplied)

53. In a similar fact situation wherein the arbitration agreement

empowered the Chairman and Managing Director of the respondent

to appoint a sole arbitrator, the issue before this Court in Bharat

Broadband (supra) was whether the CMD, after becoming ineligible by

operation of law, is still eligible to appoint an arbitrator.

SLP(C) Nos. 16107-16108 of 2025 Page 28 of 72

The Court held that where a person falls within any of the

categories set out in the Seventh Schedule, which could be by virtue of

a relationship with the parties, or their counsel, or the subject-matter

of the dispute, such a person becomes ineligible to be appointed as an

arbitrator. The ineligibility could be removed after dispute has arisen,

and only if the parties waive the applicability of the provision by an

“express agreement in writing”. The arbitrator becomes de jure unable to

perform his function as he falls within the categories mentioned in the

Seventh Schedule. The relevant observations read thus:-

“15. Section 12(5), on the other hand, is a new provision which

relates to the de jure inability of an arbitrator to act as such.

Under this provision, any prior agreement to the contrary is

wiped out by the non obstante clause in Section 12(5) the

moment any person whose relationship with the parties or the

counsel or the subject-matter of the dispute falls under the

Seventh Schedule. The sub-section then declares that such

person shall be “ineligible” to be appointed as arbitrator. The

only way in which this ineligibility can be removed is by the

proviso, which again is a special provision which states that

parties may, subsequent to disputes having arisen between

them, waive the applicability of Section 12(5) by an express

agreement in writing. What is clear, therefore, is that where,

under any agreement between the parties, a person falls within

any of the categories set out in the Seventh Schedule, he is, as a

matter of law, ineligible to be appointed as an arbitrator. The

only way in which this ineligibility can be removed, again, in

law, is that parties may after disputes have arisen between

them, waive the applicability of this sub-section by an “express

agreement in writing”. Obviously, the “express agreement in

writing” has reference to a person who is interdicted by the

Seventh Schedule, but who is stated by parties (after the

disputes have arisen between them) to be a person in whom they

SLP(C) Nos. 16107-16108 of 2025 Page 29 of 72

have faith notwithstanding the fact that such person is

interdicted by the Seventh Schedule.”

(Emphasis supplied)

54. We may also look into the decision of this Court in Perkins Eastman

(supra), where the arbitration clause empowered the Chairman and

Managing Director of the respondent to appoint a sole arbitrator.

Following TRF (supra), this Court held that the Managing Director was

incompetent to appoint the sole arbitrator because he would be deemed

to have an interest in the outcome of the dispute. Since, the ineligibility

stems from the operation of law, not only is a person having an interest

in the dispute or its outcome ineligible to act as an arbitrator, but

appointment by such a person would be ex facie invalid. The relevant

observations read thus:-

“20. We thus have two categories of cases. The first, similar to

the one dealt with in TRF Ltd. [TRF Ltd. v. Energo Engg.

Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] where

the Managing Director himself is named as an arbitrator with

an additional power to appoint any other person as an

arbitrator. In the second category, the Managing Director is not

to act as an arbitrator himself but is empowered or authorised to

appoint any other person of his choice or discretion as an

arbitrator. If, in the first category of cases, the Managing

Director was found incompetent, it was because of the interest

that he would be said to be having in the outcome or result of

the dispute. The element of invalidity would thus be directly

relatable to and arise from the interest that he would be having

in such outcome or decision. If that be the test, similar invalidity

would always arise and spring even in the second category of

cases. If the interest that he has in the outcome of the dispute, is

taken to be the basis for the possibility of bias, it will always be

SLP(C) Nos. 16107-16108 of 2025 Page 30 of 72

present irrespective of whether the matter stands under the first

or second category of cases. We are conscious that if such

deduction is drawn from the decision of this Court in TRF

Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC

377 : (2017) 4 SCC (Civ) 72] , all cases having clauses similar

to that with which we are presently concerned, a party to the

agreement would be disentitled to make any appointment of an

arbitrator on its own and it would always be available to argue

that a party or an official or an authority having interest in the

dispute would be disentitled to make appointment of an

arbitrator.

21. But, in our view that has to be the logical deduction

from TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017)

8 SCC 377 : (2017) 4 SCC (Civ) 72] Para 50 of the decision

shows that this Court was concerned with the issue, “whether

the Managing Director, after becoming ineligible by operation

of law, is he still eligible to nominate an arbitrator” The

ineligibility referred to therein, was as a result of operation of

law, in that a person having an interest in the dispute or in the

outcome or decision thereof, must not only be ineligible to act as

an arbitrator but must also not be eligible to appoint anyone else

as an arbitrator and that such person cannot and should not

have any role in charting out any course to the dispute

resolution by having the power to appoint an arbitrator. The

next sentences in the paragraph, further show that cases where

both the parties could nominate respective arbitrators of their

choice were found to be completely a different situation. The

reason is clear that whatever advantage a party may derive by

nominating an arbitrator of its choice would get counter-

balanced by equal power with the other party. But, in a case

where only one party has a right to appoint a sole arbitrator, its

choice will always have an element of exclusivity in determining

or charting the course for dispute resolution. Naturally, the

person who has an interest in the outcome or decision of the

dispute must not have the power to appoint a sole arbitrator.

That has to be taken as the essence of the amendments brought

SLP(C) Nos. 16107-16108 of 2025 Page 31 of 72

in by the Arbitration and Conciliation (Amendment) Act, 2015

(3 of 2016) and recognised by the decision of this Court in TRF

Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC

377 : (2017) 4 SCC (Civ) 72]”

(Emphasis supplied)

55. The Bombay High Court, in Lite Bite Foods Pvt. Ltd. v. AAI, reported

in 2019 SCC OnLine Bom 5163, dealt with a submission similar to the

one arising from Clause 75 of the License Agreement before us. It was

contended that only when an employee of the respondent is the named

arbitrator does such person become ineligible to act, and equally

ineligible to nominate another arbitrator.

The Court held that the embargo under sub-section (5) of Section

12 is against granting any single party a unilateral or one-sided

authority in constituting the arbitral tribunal. We are in complete

agreement with the observations of G. S. Patel, J., that, “The guiding

principle is neutrality, independence, fairness and transparency even in the

arbitral-forum selection process”. The relevant observations read thus:-

“23. The present case may not be within the confines of TRF

Ltd., i.e. the tender approving authority is not both arbitrator

and, if disqualified, the sole repository of arbitrator-appointing

power. He is only the latter. But that now matters at all. Perkins

Eastman clearly holds the field and it covers a situation

precisely such as the present one where AAI — and only AAI

— has the exclusive right of appointed (not merely nominating)

an arbitrator. The question is not, as Ms. Munim would have

it, the perceived bias or impartiality of the arbitrator. He may

well be an unknown entity. The question is of one-sidedness in

the arbitral tribunal appointment procedure itself. This is the

destination to which Perkins Eastman takes us for it requires

SLP(C) Nos. 16107-16108 of 2025 Page 32 of 72

that there be neutrality in the dispute resolution process

throughout. If I might be permitted a license, in my reading of

it, what Perkins Eastman says is this : that you cannot have an

impartial arbitration free from all justifiable doubt if the manner

in which the arbitral tribunal is constituted itself is beset by

justifiable doubt.”

xxx

25. Ms. Munim's last submission is that the only prohibition is

against a named person being the arbitrator or empowered to

appoint an arbitrator. This is clearly incorrect. The interdiction

runs against any one party being given unilateral or one-sided

power in the matter of constitution of the arbitral tribunal.”

(Emphasis supplied)

56. The phrase “operation of law” mentioned in the aforesaid decisions

covers the Act, 1996, as well as the Constitution of India and any other

Central of State law. In Lombardi Engg. Ltd. v. Uttarakhand Jal Vidyut

Nigam Ltd., reported in (2024) 4 SCC 341, where one of us, J.B.

Pardiwala, J., speaking for the Bench held that an arbitration

agreement has to comply with the requirements of (i) Section 7 of the

Act, 1996; (ii) any other provisions of the Act, 1996, and Central/State

law; (iii) Constitution of India. We may refer to the following

observations for the benefit of exposition:-

“79.5. In State of A.P. v. P. Laxmi Devi [State of A.P. v. P.

Laxmi Devi, (2008) 4 SCC 720] , this Court observed : (SCC p.

737, paras 33-34)

“33. According to Kelson, in every country there is a

hierarchy of legal norms, headed by what he calls as the

“grundnorm”. If a legal norm in a higher layer of this

hierarchy conflicts with a legal norm in a lower layer the

former will prevail…

SLP(C) Nos. 16107-16108 of 2025 Page 33 of 72

34. In India the grundnorm is the Indian Constitution,…”

80. Thus, in the context of the arbitration agreement, the layers

of the Grundnorm as per Kelsen's theory would be in the

following hierarchy:

(i) Constitution of India, 1950;

(ii) Arbitration and Conciliation Act, 1996 & any other

Central/State law;

(iii) Arbitration agreement entered into by the parties in light

of Section 7 of the Arbitration and Conciliation Act, 1996.

81. Thus, the arbitration agreement, has to comply with the

requirements of the following and cannot fall foul of:

(i) Section 7 of the Arbitration and Conciliation Act;

(ii) any other provisions of the Arbitration and Conciliation

Act, 1996 & Central/State Law;

(iii) Constitution of India, 1950.”

(Emphasis supplied)

57. When an arbitration agreement is in violation of sub-section (5) of

Section 12 of the Act, 1996, the parties can neither insist on

appointment of an arbitrator in terms of the agreement nor would any

appointment so made be valid in the eyes of law.

58. Unilateral appointments are not consistent with the basic tenet of

arbitration, i.e., mutual confidence in the arbitrator. It would not be

unreasonable for a party to apprehend that an arbitrator unilaterally

appointed by the opposite party may not act with complete

impartiality.

SLP(C) Nos. 16107-16108 of 2025 Page 34 of 72

59. The test to determine bias is not actual proof of bias but reasonable

apprehension of bias. The moment this apprehension takes birth in the

mind of a party, the trust in the arbitral proceedings dies. A

Constitution Bench of this Court in CORE II (supra), wherein one of

us, J. B. Pardiwala, J., was a part of the Bench, laid down the test for

real likelihood of bias. It reads thus:-

“(b) Real likelihood of bias

92. The nemo judex rule may be applicable where a Judge's

conduct or circumstances give rise to an apprehension of bias.

In such situations, the Judge does not have a financial or cause-

based interest in the outcome of the dispute but provides benefit

to a party by failing to be neutral and impartial. The

determination of bias does not depend upon actual proof of bias

but whether there is a real possibility of bias based on the facts

and circumstances.

xxx

(iv) Indian approach to the bias test

103. This Court has consistently adopted the real likelihood test

to determine bias. [Rattan Lal Sharma v. Hari Ram (Co-

Education) Higher Secondary School, (1993) 4 SCC 10, para 11

: 1993 SCC (L&S) 1106] In Manak Lal v. Prem Chand

Singhvi [Manak Lal v. Prem Chand Singhvi, 1957 SCC

OnLine SC 10, para 4] , P.B. Gajendragadkar, J. (as the learned

Chief Justice then was) observed that the test to determine bias

is whether a litigant could reasonably apprehend that a bias

attributable to a member of the tribunal might have operated

against him in the final decision. In S. Parthasarathi v. State of

A.P. [S. Parthasarathi v. State of A.P., (1974) 3 SCC 459, para

14 : 1973 SCC (Cri) 580 : 1973 SCC (L&S) 580] , K.K. Mathew,

J. observed that the test of likelihood of bias is based on the

reasonable apprehension of a reasonable man fully cognizant of

the facts. The learned Judge further observed that the question

of whether the real likelihood of bias exists is to be determined

on the probabilities to be inferred from the objective

SLP(C) Nos. 16107-16108 of 2025 Page 35 of 72

circumstances by a court or based on impressions that might

reasonably be left on the minds of the aggrieved party or the

public at large. [S. Parthasarathi, (1974) 3 SCC 459, p. 465,

para 16. It was observed:“16. The tests of “real likelihood” and

“reasonable suspicion” are really inconsistent with each other.

We think that the reviewing authority must make a

determination on the basis of the whole evidence before it,

whether a reasonable man would in the circumstances infer that

there is real likelihood of bias.[…].”

(Emphasis supplied)

60. It is apposite to understand that Section 12(5) does not prohibit

unilateral appointment of an arbitrator. It provides that whenever an

appointment of an arbitrator is hit by the bar under Section 12(5), the

arbitrator would be ineligible to act, irrespective of whether the

appointment was unilateral or with consent of both parties. In such

circumstances, the parties may, in the manner provided under the

proviso, waive the ineligibility. We shall discuss the scope and

application of the proviso in more detail in the latter part of this

judgment.

d. De Jure inability of the arbitrator to perform his functions

61. In the aforesaid context, it would be apposite to briefly explain what

constitutes as de jure ineligibility under Section 12(5). The expression

de jure denotes a condition rooted in strict compliance with the

requirements of law. De jure inability refers to a situation in which an

arbitrator is legally incapable of performing his functions and is, by

operation of law, barred from continuing in office. Such inability

strikes at the very root of the arbitrator’s authority to act, thereby

SLP(C) Nos. 16107-16108 of 2025 Page 36 of 72

affecting his inherent capacity to discharge his functions as an

arbitrator. It is this legal incapacity, arising from statutory

disqualifications, that results in the termination of the “mandate of an

arbitrator” under Section 14(1)(a) of the Act, 1996.

62. De jure inability referred to under Section 14(1)(a) may arise from the

provisions of the Act, 1996, or from any other existing law that renders

an arbitrator legally incapable of performing his functions. As regards

de jure ineligibility, it flows from sub-section (5) of Section 12 read with

the Seventh Schedule, which disqualifies certain persons from being

appointed or continuing as arbitrators.

63. In other words, the ineligibility under Section 12(5) precedes de jure

inability under Section 14(1)(a). In other words, de jure ineligibility is

the specie and de jure inability is the genus. To put this in context, de

jure inability is determined when an aggrieved party is able to indicate

that the circumstances under the Seventh Schedule have been met.

64. It would be worthwhile to refer to the observations made by this Court

in HRD Corpn v. GAIL (India) Ltd., reported in (2018) 12 SCC 471. It

was observed thus:-

“12. After the 2016 Amendment Act, a dichotomy is made by

the Act between persons who become “ineligible” to be

appointed as arbitrators, and persons about whom justifiable

doubts exist as to their independence or impartiality. Since

ineligibility goes to the root of the appointment, Section 12(5)

SLP(C) Nos. 16107-16108 of 2025 Page 37 of 72

read with the Seventh Schedule makes it clear that if the

arbitrator falls in any one of the categories specified in the

Seventh Schedule, he becomes “ineligible” to act as arbitrator.

Once he becomes ineligible, it is clear that, under Section

14(1)(a), he then becomes de jure unable to perform his

functions inasmuch as, in law, he is regarded as

“ineligible”.[…]”

(Emphasis supplied)

65. The Madras High Court in Clarke Energy India Pvt. Ltd. v. SAS EPC

Solution Pvt. Ltd. & Anr., reported in 2021 SCC OnLine Mad 6121,

observed thus:-

“22. Turning to de jure inability to perform functions, it should

be noted at the threshold that the expression is not defined in the

Arbitration Act. The word ‘de jure’ in Latin means “as a matter

of law”. It has been defined in Black's Law Dictionary, 11

Edition (2019), as “existing by right or according to law”.

Thus, it appears that the expression de jure applies undoubtedly

to legal disability. One illustration of legal disability would be

if the arbitrator is ineligible in terms of the Seventh Schedule.

This was expressly dealt with by the Hon'ble Supreme Court

in HRD Corporation as well as Bharat Broadband.[…]

However, ineligibility is only one illustration of de

jure inability to function. It is conceivable that an arbitrator

may be afflicted by some form of cognitive impairment. If such

cognitive impairment is serious enough to lead to an inference

that such arbitrator is not of sound mind, whether on account

of schizophrenia, Alzheimer's disease or the like, as understood

in the Indian Contract Act, 1872, it would result in de

jure inability to function even if the arbitrator concerned

declines to withdraw. Less serious forms of cognitive

impairment, such as bipolar disorder and the like, may, on the

other hand, may pose greater challenges. Besides, an arbitrator

may be adjudged insolvent after entering upon reference. By

relying upon the applicable insolvency statute, it could be

SLP(C) Nos. 16107-16108 of 2025 Page 38 of 72

contended with a fair measure of justification that he is de

jure unable to function.”

(Emphasis supplied)

66. It would be apposite to refer to the relevant Items under the head

“Arbitrator’s relationship with the parties or counsel” in the Seventh

Schedule of the Act, 1996, for the purpose of matter at hand. It reads

thus:-

“THE SEVENTH SCHEDULE

[See section 12(5)]

Arbitrator’s relationship with the parties or counsel

1. The arbitrator is an employee, consultant, advisor or has any

other past or present business relationship with a party.

2. The arbitrator currently represents or advises one of the

parties or an affiliate of one of the parties.

xxx

5. The arbitrator is a manager, director or part of the

management, or has a similar controlling influence, in an

affiliate of one of the parties if the affiliate is directly involved in

the matters in dispute in the arbitration.

xxx

12. The arbitrator is a manager, director or part of the

management, or has a similar controlling influence in one of the

parties.

13. The arbitrator has a significant financial interest in one of

the parties or the outcome of the case. […]”

67. From the above exposition of law, the Chairman of the respondent was

wholly ineligible to appoint an arbitrator. The Items 1, 2, 5, 12, and 13

of the Seventh Schedule respectively, clearly attach to the Chairman of

the respondent. Once the Chairman is rendered ineligible by operation

of law, he cannot nominate or appoint another person as an arbitrator.

SLP(C) Nos. 16107-16108 of 2025 Page 39 of 72

To illustrate, one who cannot sit on a chair himself cannot authorise

another to sit on it either.

68. We are in complete agreement that the present case is squarely covered

by the decisions of this Court in Perkins Eastman (supra) and Bharat

Broadband (supra) respectively. The unilateral appointment of a sole

arbitrator is void ab initio, and the sole arbitrator so appointed is de jure

ineligible to act as an arbitrator in terms of Section 12(5) read with the

Seventh Schedule of the Act, 1996.

69. Thus, we have no hesitation in saying that its High Court, in the

impugned judgment, committed an error in holding that the

appointment was not unilateral merely because the respondent

proceeded to appoint the sole arbitrator pursuant to notice invoking

arbitration.

70. We would like to clarify that a notice under Section 21 of the Act, 1996,

is an expression to set the arbitration agreement into motion upon

arising of disputes between the parties. The section states that the date

of commencement of arbitration would be the date on which the

recipient receives the notice from the claimant that the dispute be

referred to arbitration. The notice acts as a communication that the

sender is aggrieved and seeks to invoke the arbitration agreement. It

does not, by itself, operate as consent to any appointment to be made

in the future.

SLP(C) Nos. 16107-16108 of 2025 Page 40 of 72

ii. Whether the parties could be said to have waived the

applicability of sub-section (5) of Section 12 of the Act, 1996,

by way of their conduct, either expressed or implied?

71. It was submitted on behalf of the appellants herein that the appellants

never waived their right to object in terms of the proviso to Section 12(5)

of the Act, 1996. The proviso to Section 12(5) requires that the

ineligibility of an arbitrator could only be waived by an “express

agreement in writing” between the parties, and such agreement must be

entered into after the dispute has arisen. It was further canvassed by

the appellants that no agreement was executed, signed, or even

contemplated by the parties to this effect after the dispute arose.

72. In this regard, the respondent vociferously submitted that the present

case falls within the proviso to Section 12(5). To indicate the same,

instances like recording of “no objection” in the first procedural order,

submission of statement of claim, the joint request to extend the

mandate under Section 29A, and continued participation in the

proceedings, were highlighted to submit that the appellants had

waived their right to object. The procedural order constitutes an

“express agreement in writing” and satisfies the requirement under the

proviso to Section 12(5) of the Act, 1996. At the cost of repetition, the

procedural order reads thus:-

“PROCEDURAL ORDER NO. 1

With

SLP(C) Nos. 16107-16108 of 2025 Page 41 of 72

Minutes of, and the Directions made at, the hearing on

22.03.2016 at 1:00 pm

[AT D-247 (Basement), Defence Colony, New Delhi-110024]

This preliminary meeting of the Tribunal was held D-247

(Basement), Defence Colony, New Delhi-110024 on 22nd

March, 2016 at 1:00 PM. None of the parties have any objection

to my appointment as the Sole Arbitrator. I declare that I have

no interest in any of the Parties, or in the disputes referred to

the Sole Arbitrator.[…]”

(Emphasis supplied)

73. On the aforesaid issue, the High Court, in its impugned judgment,

observed that the sole arbitrator obtained the consent of the parties for

the purpose of continuing to arbitrate in the form of the procedural

order. What weighed with the High Court was that the appellants

participated in the proceedings, which continued for over two years,

and did not they invoke Section 12(5), or object against the jurisdiction

of the arbitrator at any stage.

a. Meaning and Import of the expression “express agreement in

writing” used in proviso to sub-section (5) of Section 12 of the

Act, 1996

74. Sub-section (5) of Section 12 of the Act, 1996, reads thus:-

“[(5) Notwithstanding any prior agreement to the contrary, any

person whose relationship, with the parties or counsel or the

subject-matter of the dispute, falls under any of the categories

specified in the Seventh Schedule shall be ineligible to be

appointed as an arbitrator:

Provided that parties may, subsequent to disputes having

arisen between them, waive the applicability of this sub-section

by an express agreement in writing.]”

SLP(C) Nos. 16107-16108 of 2025 Page 42 of 72

75. The essentials of the proviso to Section 12(5) are:-

i. The parties can waive their right to object under sub-section (5)

of Section 12;

ii. The right to object under the sub-section can be waived only

subsequent to a dispute having arisen between the parties;

iii. The waiver must be in the form of an express agreement in

writing.

76. The proviso to sub-section (5) of Section 12 stipulates that parties, after

disputes have arisen, must expressly agree in writing to waive the

ineligibility of the proposed arbitrator. This impliedly means that the

parties are waiving their right to object to the arbitrator’s ineligibility

in terms of Section 12(5) of the Act, 1996.

77. Waiver means the intentional giving up of a right. It involves a

conscious decision to abandon an existing legal right, benefit, claim, or

privilege that a party would otherwise have been entitled to. It

amounts to an agreement not to enforce that right. A waiver can occur

only when the person making it is fully aware of the right in question

and, with complete knowledge, chooses to give it up. [See: State of

Punjab v. Davinder Pal Singh Bhullar, (2011) 14 SCC 770]

78. What flows from the aforesaid is when a right exists, i.e., the right to

object to the appointment of an ineligible arbitrator in terms of Section

SLP(C) Nos. 16107-16108 of 2025 Page 43 of 72

12(5), such a right cannot be taken away by mere implication. For a

party to be deprived of this right by way of waiver, there must be a

conscious and unequivocal expression of intent to relinquish it.

Needless to say, for a waiver to be valid, it is necessary that the actor

demonstrates the intention to act, and for an act to be intentional, the

actor must understand the act and its consequences.

79. The expression “express agreement in writing” demonstrates a deliberate

and informed act that although a party is fully aware of the arbitrator’s

ineligibility, yet it chooses to forego the right to object against the

appointment of such an arbitrator. The requirement of an express

agreement in writing has been introduced as it reflects awareness and

a conscious intention to waive the right to object under sub-section (5)

of Section 12. A clear manifestation of the expression of waiver

assumes greater importance in light of the fact that the parties are

overcoming a restriction imposed by law.

80. It is in the same breath we say that appointment of an arbitrator with

the consent of both parties is the general rule, while unilateral

appointment is an exception. When one party appoints an arbitrator

unilaterally, even if its own consent is implicit, the consent of the

opposite party stands compromised, and the choice of the former is

effectively imposed upon the latter.

SLP(C) Nos. 16107-16108 of 2025 Page 44 of 72

81. It is only through an express agreement in writing, waiving the bar

under sub-section (5) of Section 12, that the other party can be said to

have voluntarily consented to the unilateral appointment of such an

arbitrator. The proviso conveys that the arbitrator, although ineligible

to be appointed, yet can continue to perform his functions, as it is

oriented towards facilitating party autonomy. Thus, the proviso

reinforces party autonomy and equal treatment of parties in

arbitration.

82. In other words, even though the appointment had been made by one

of the parties, by the act of entering into an agreement in writing, the

other party expresses its consent. The manner of the agreement

prescribed by the statute demonstrates voluntariness by the parties.

83. In a case of unilateral appointment, the waiver mentioned in the

proviso is an indication of party autonomy in two ways: first, that the

parties, by entering into an agreement, are waiving the bar under

Section 12(5). Secondly, by the act of entering into an agreement, the

parties, more particularly, the non-consenting party, are expressing

their consent for appointment of the proposed arbitrator.

84. Undoubtedly, the statute does not prescribe a format for the

agreement. However, the absence of a prescribed format cannot be

construed to mean that the waiver may be inferred impliedly or

through conduct. We say so because the legislature has consciously

SLP(C) Nos. 16107-16108 of 2025 Page 45 of 72

prefaced the term “agreement” with the word “express” and followed it

with the phrase “in writing”. This semantics denote the intention of the

legislature that the waiver under the proviso to Section 12(5) must be

made only through an express and written manifestation of intention.

85. The conscious use of the prefatory expression also serves to

differentiate such waiver from ‘deemed waiver’ as stipulated under

Section 4 of the Act, 1996. We must be mindful of the fact that if the

legislature intended that waiver under Section 12(5) could similarly

arise by implication or conduct as mentioned under Section 4, it would

have refrained from introducing a heightened and mandatory

requirement, more particularly, in light of the rigours of the Seventh

Schedule. The statutory design therefore makes it evident that the bar

under Section 12(5) can be removed only by a clear, unequivocal, and

written agreement executed after the dispute has arisen, and not by

any form of tacit acceptance or procedural participation.

86. The mandate of an express agreement in writing in the present case

may looked at from one another angle. The unilateral appointment of

an arbitrator is assessed from the viewpoint of the parties. However,

when the parties later execute an express written agreement waiving

the ineligibility of the proposed arbitrator, the position gets altered.

Such written waiver supplies the very consent that was previously

missing, thereby placing the appointment on the same footing as a

SLP(C) Nos. 16107-16108 of 2025 Page 46 of 72

mutually agreed appointment and addresses concerns regarding

neutrality and fairness.

87. In Bharat Broadband (supra), this Court categorically held that the

expression “express agreement in writing” refers to an agreement made

in words and cannot be inferred by conduct. The word “express”

denotes that the agreement must be entered into with complete

knowledge that although the proposed arbitrator is ineligible to be

appointed as an arbitrator, yet they express their confidence in him to

continue as the arbitrator. The relevant observations read thus:-

“20. This then brings us to the applicability of the proviso to

Section 12(5) on the facts of this case. Unlike Section 4 of the

Act which deals with deemed waiver of the right to object by

conduct, the proviso to Section 12(5) will only apply if

subsequent to disputes having arisen between the parties, the

parties waive the applicability of sub-section (5) of Section 12

by an express agreement in writing. For this reason, the

argument based on the analogy of Section 7 of the Act must also

be rejected. Section 7 deals with arbitration agreements that

must be in writing, and then explains that such agreements may

be contained in documents which provide a record of such

agreements. On the other hand, Section 12(5) refers to an

“express agreement in writing”. 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.

Here, Section 9 of the Contract Act, 1872 becomes important. It

states:

“9. Promises, express and implied.—Insofar as the proposal

or acceptance of any promise is made in words, the promise

is said to be express. Insofar as such proposal or acceptance

is made otherwise than in words, the promise is said to be

implied.”

SLP(C) Nos. 16107-16108 of 2025 Page 47 of 72

It is thus necessary that there be an “express” agreement in

writing. This agreement must be an agreement by which both

parties, with full knowledge of the fact that Shri Khan is

ineligible to be appointed as an arbitrator, still go ahead and say

that they have full faith and confidence in him to continue as

such. The facts of the present case disclose no such express

agreement. The appointment letter which is relied upon by the

High Court as indicating an express agreement on the facts of

the case is dated 17-1-2017. On this date, the Managing

Director of the appellant was certainly not aware that Shri Khan

could not be appointed by him as Section 12(5) read with the

Seventh Schedule only went to the invalidity of the appointment

of the Managing Director himself as an arbitrator. Shri Khan's

invalid appointment only became clear after the declaration of

the law by the Supreme Court in TRF Ltd. [TRF Ltd. v. Energo

Engg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72]

which, as we have seen hereinabove, was only on 3-7-2017.

After this date, far from there being an express agreement

between the parties as to the validity of Shri Khan's

appointment, the appellant filed an application on 7-10-2017

before the sole arbitrator, bringing the arbitrator's attention to

the judgment in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects

Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] and asking

him to declare that he has become de jure incapable of acting as

an arbitrator. Equally, the fact that a statement of claim may

have been filed before the arbitrator, would not mean that there

is an express agreement in words which would make it clear that

both parties wish Shri Khan to continue as arbitrator despite

being ineligible to act as such. This being the case, the impugned

judgment is not correct when it applies Section 4, Section 7,

Section 12(4), Section 13(2) and Section 16(2) of the Act to the

facts of the present case, and goes on to state that the appellant

cannot be allowed to raise the issue of eligibility of an arbitrator,

having itself appointed the arbitrator. The judgment under

appeal is also incorrect in stating that there is an express waiver

in writing from the fact that an appointment letter has been

issued by the appellant, and a statement of claim has been filed

SLP(C) Nos. 16107-16108 of 2025 Page 48 of 72

by the respondent before the arbitrator. The moment the

appellant came to know that Shri Khan's appointment itself

would be invalid, it filed an application before the sole arbitrator

for termination of his mandate.”

(Emphasis supplied)

88. In CORE II (supra), this Court underscored the rationale behind the

first two essentials of the proviso. It reads thus:-

“121. An objection to the bias of an adjudicator can be waived.

[Supreme Court Advocates-on-Record Assn. v. Union of India,

(2016) 5 SCC 808, para 30 : (2016) 3 SCC (Civ) 492 : (2016) 3

SCC (Cri) 173 : (2016) 2 SCC (L&S) 253] A waiver is an

intentional relinquishment of a right by a party or an agreement

not to assert a right. [State of Punjab v. Davinder Pal Singh

Bhullar, (2011) 14 SCC 770, para 41 : (2012) 4 SCC (Civ) 1034

: (2012) 4 SCC (Cri) 496 : (2014) 1 SCC (L&S) 208] The

Arbitration Act allows parties to waive the application of

Section 12(5) by an express agreement after the disputes have

arisen. However, the waiver is subject to two factors. First, the

parties can only waive the applicability of Section 12(5) after the

dispute has arisen. This allows parties to determine whether

they will be required or necessitated to draw upon the services

of specific individuals as arbitrators to decide upon specific

issues. To this effect, Explanation 3 to the Seventh Schedule

recognises that certain kinds of arbitration such as maritime or

commodities arbitration may require the parties to draw upon a

small, specialised pool. [ “Explanation 3.—For the removal of

doubts, it is clarified that it may be the practice in certain

specific kinds of arbitration, such as maritime or commodities

arbitration, to draw arbitrators from a small, specialised pool. If

in such fields it is the custom and practice for parties frequently,

to appoint the same arbitrator in different cases, this is a

relevant fact to be taken into account while applying the rules

set out above.”] The second requirement of the proviso to

Section 12(5) is that parties must consciously abandon their

SLP(C) Nos. 16107-16108 of 2025 Page 49 of 72

existing legal right through an express agreement. Thus, the

Arbitration Act reinforces the autonomy of parties by allowing

them to override the limitations of independence and

impartiality by an express agreement in that regard.”

(Emphasis supplied)

89. What can be discerned from the above discussion is that the

ineligibility of an arbitrator can be waived only by an express

agreement in writing. In the present case, there is no agreement in

writing, after the disputes arose, waiving the ineligibility of the sole

arbitrator or the right to object under Section 12(5) of the Act, 1996.

90. The conduct of the parties is inconsequential and does not constitute a

valid waiver under the proviso. The requirement of the waiver to be

made expressly in the form of agreement in writing ensures that

parties are not divested of their right to object inadvertently or by

procedural happenstance.

91. We are not impressed by the aforesaid submission of the respondent

for all the reasons stated above. The following decisions of this Court

and the High Court of Delhi respectively deal with the all the factual

submissions made by the respondent to submit that the present case

falls within the proviso to Section 12(5) of the Act, 1996.

b. “Statement of Claim” as a parameter of waiver

92. One another submission that was canvassed on behalf of the

respondent herein is that the appellants participated in the arbitral

SLP(C) Nos. 16107-16108 of 2025 Page 50 of 72

proceedings by submitting their statement of claim wherein it was

stated that they submit to the jurisdiction of the arbitrator. The

observations of this Court in paragraph 20 of Bharat Broadband

(supra) squarely cover this issue. It was held that filing a statement of

claim cannot be equated to an “express agreement in writing” in terms of

proviso to Section 12(5).

c. “Extension of Time” under Section 29A of the Act, 1996 as a

parameter of waiver

93. Recently, in Hindustan Construction Co. Ltd. v. Bihar Rajya Pul

Nirman Nigam Ltd., reported in 2025 SCC OnLine SC 2578, wherein

one of us, J. B. Pardiwala, J., was a part of the Bench, held that Section

29A amounts to a valid waiver under Section 4, save in cases of

statutory ineligibility under Section 12(5) of the Act, 1996. The relevant

observations read thus:-

“13.8. In the present case, the respondents had ample

opportunity to object. Instead, both parties jointly moved for

extension under Section 29A, not once but thrice. This leads

directly to the interplay between Sections 4, 12(5) and 29A.

13.9. Section 29A empowers courts to extend the mandate of an

arbitral tribunal, either on a party's application or upon

sufficient cause. Its object is to prevent termination of

proceedings by efflux of time and to ensure continuity. A joint

application under Section 29A stands on a distinct footing from

ordinary acts of participation such as filing pleadings. When

both parties jointly seek an extension, they signify continued

consent and confidence in the tribunal. Under Section 29A(5),

even a single party may apply; the other is free to oppose. The

SLP(C) Nos. 16107-16108 of 2025 Page 51 of 72

Court may, in its discretion, extend the mandate with or

without substituting the arbitrator.

13.10. Thus, when a party joins in seeking extension under

Section 29A despite having the opportunity to object or seek

termination, it signifies a higher degree of consent. However,

such consent cannot be equated with an express written waiver

under Section 12(5). The statutory language is categorical: only

an express written post-dispute waiver can cure Seventh

Schedule ineligibility.”

(Emphasis supplied)

94. In Man Industries (India) Ltd. v. Indian Oil Corporation Ltd.,

reported in 2023 SCC OnLine Del 3537, the petitioner had filed two

applications under Section 29A of the Act, 1996, seeking an extension

of time for completion of the arbitral proceedings. The respondent

therein had contended that filing of an application under Section 29A

would satisfy the requirement of the proviso to Section 12(5), and that

the ineligibility attached to the sole arbitrator would thereby stand

removed. The Court observed thus:-

“11. He submits that in the present case, the petitioner has

never challenged the eligibility of the learned Sole Arbitrator to

adjudicate on the disputes between the parties. He submits that,

in fact, the learned Arbitrator was appointed at the request of

the petitioner. The learned Arbitrator before entering upon the

reference submitted his disclosure as required under Section 12

of the Act. The petitioner never raised any objection to the

eligibility of the learned Sole Arbitrator. Thereafter, the

petitioner, in fact, twice filed applications under Section 29A of

the Act seeking extension of the mandate of the learned

Arbitrator. He submits that the filing of the application under

SLP(C) Nos. 16107-16108 of 2025 Page 52 of 72

Section 29A of the Act by the petitioner would, in fact, satisfy

the Proviso to Section 12(5) of the Act and the ineligibility, if at

all, attached to the learned Sole Arbitrator would be waived.

xxx

22. In view of the above authorities, there can be no doubt that

the learned Arbitrator appointed by the respondent was de

jure ineligible to act as such. The petitioner by its participation

in the arbitration proceedings or by its filing of applications

under Section 29A of the Act seeking extension of the mandate

of the learned Arbitrator, cannot be said to have waived the

ineligibility of the learned Arbitrator under Section 12(5) of the

Act, and, therefore, the Arbitral Award passed by the learned

Arbitrator is invalid.”

(Emphasis supplied)

d. “Continued Participation” as a parameter of waiver

95. In Govind Singh v. Satya Group Pvt. Ltd., reported in 2023 SCC

OnLine Del 37, the contention before the Delhi High Court was that

the appellant therein by its conduct had waived its right to object to

the unilateral appointment of the sole arbitrator. The Court

categorically held that it is not necessary to even examine whether the

appellant had raised an objection. Even if the appellant had

participated in the proceedings without raising any objection, it cannot

be said that he had waived his right under Section 12(5) of the Act,

1996. The relevant observations read thus:-

“19. The contention that the appellant by its conduct has

waived its right to object to the appointment of the learned

Arbitrator is also without merit. The question whether a party

can, by its conduct, waive its right under Section 12(5) of

the A&C Act is no longer res integra. The Supreme Court in

the case of Bharat Broadband Network Limited v. United

SLP(C) Nos. 16107-16108 of 2025 Page 53 of 72

Telecoms Limited : (2019) 5 SCC 755 had explained that any

waiver under Section 12(5) of the A&C Act would be valid only

if it is by an express agreement in writing. There is no scope for

imputing any implied waiver of the rights under

Section 12(5) of the A&C Act by conduct or otherwise.[…]

20. Thus, it is not necessary to examine the question whether

the appellant had raised an objection to the appointment of the

learned Arbitrator. Even if it is assumed that the appellant had

participated in the arbitral proceedings without raising any

objection to the appointment of the learned Arbitrator, it is not

open to hold that he had waived his right under Section 12(5) of

the A&C Act. Although it is not material, the record does

indicate that the appellant had objected to the appointment of

respondent no. 2 as an arbitrator.”

(Emphasis supplied)

96. The net effect of the aforesaid is that a notice invoking the arbitration

clause under Section 21 of the Act, 1996, a procedural order,

submission of statement of claim by the appellants, the filing an

application seeking interim relief, or a reply to an application under

Section 33 of the Act, 1996, cannot be countenanced to mean “an express

agreement in writing” within the meaning of the proviso to sub-section

(5) of Section 12 of the Act, 1996.

97. One could argue that a miscreant party may participate in the arbitral

proceedings up to the passing of the award, despite having full

knowledge of the arbitrator’s ineligibility. While after an adverse

award is rendered, such a party may then seek to challenge it with a

view to having it set aside. Such an apprehension is reasonable,

SLP(C) Nos. 16107-16108 of 2025 Page 54 of 72

however, to obviate the possibility of such misuse, the party making

unilateral appointment must endeavour to enter into an express

written agreement as stipulated in the proviso to Section 12(5), so as to

safeguard the proceedings from being rendered futile.

98. Thus, all the High Court decisions taking a contrary view to the

present judgment would stand overruled.

iii. Whether the appellants could have raised an objection to the

appointment of the sole arbitrator for the first time in an

application under Section 34 of the Act, 1996?

99. It was submitted by the appellants that an objection in relation to de

jure ineligibility of the sole arbitrator could be raised at any stage,

including for the first time in proceedings under Section 34 of the Act,

1996. In this regard reliance was placed on Section 34(2)(b) which

empowers the court to set aside an award if “the Court finds that” it is

in conflict with the public policy of India. Therefore, even if the

objection to unilateral appointment is not raised by a party, the Court

may itself declare an award to be null and void due to unilateral

appointment of the arbitrator in terms of Section 34(2)(b).

100. On the contrary, the respondent submitted that since the appellants

did not raise any objection to the constitution, appointment or

jurisdiction of the sole arbitrator under Sections 13 or 14 of the Act,

SLP(C) Nos. 16107-16108 of 2025 Page 55 of 72

1996, respectively, during the pendency of the arbitration, they are

barred from raising it under an application under Section 34.

101. On the aforesaid issue, the High Court held that the present case

cannot be equated with cases in which an objection to the appointment

of the arbitrator has been raised throughout the proceedings, or at

every stage. Further, even after sub-section (5) of Section 12 was

introduced in the statute, the appellants did not approach the court

under Section 14 of the Act, 1996, challenging the jurisdiction of the

arbitrator. Thus, the challenge to the appointment of the sole arbitrator

was clearly an “afterthought”.

a. Challenge to the ineligibility of the arbitrator during the

proceedings

102. The law in this regard is fairly settled. Where a party is aggrieved by

the ineligibility of an arbitrator under Section 12(5), it may directly

approach the court under Section 14 of the Act, 1996. There is no doubt

that when an arbitrator is ineligible under Section 12(5), i.e., he lacks

inherent jurisdiction to hold the position, his mandate stands

automatically terminated, and it is not necessary for the parties to

challenge his appointment under Section 12 read with Section 13.

When such a challenge is made, the court is required to determine

whether the arbitrator suffers from de jure inability under Section

14(1)(a) of the Act, 1996.

SLP(C) Nos. 16107-16108 of 2025 Page 56 of 72

103. An application under Section 14 is made for the purpose of terminating

the mandate of the arbitrator, and, consequently, a substitute arbitrator

is appointed in terms of Section 15(2). As regards where the mandate

of the arbitrator has been terminated with the consent of both the

parties under Section 15(1)(b), it is not required for the parties to

approach the court to seek termination of the mandate of the arbitrator,

because it has been terminated by the parties themselves.

104. It is apposite to understand that in a case of ineligibility of the

arbitrator, the substitution of the arbitrator is sought because the

termination of mandate of the arbitrator does not result in the

termination of arbitral proceedings. The proceedings remain intact,

only the composition of the arbitral tribunal changes. The termination

of mandate of the arbitrator is distinguishable from the termination of

the arbitral proceedings and of the arbitral tribunal as well. By

substitution of the arbitrator, the proceedings would commence from

thereon and save the parties from initiating fresh proceedings.

105. In HRD (supra), it was held that once an arbitrator becomes ineligible

to act as an arbitrator, he is rendered de jure incapable of performing

his functions. In such circumstances, it is not necessary for the parties

to approach the arbitral tribunal under Section 13, for an arbitrator

who is de jure ineligible lacks the inherent jurisdiction to proceed any

further. In such a case, an application under Section 14(2) must be filed

SLP(C) Nos. 16107-16108 of 2025 Page 57 of 72

before the court for termination of the mandate of the arbitrator. The

relevant observations read thus:-

“12. […] Once he becomes ineligible, it is clear that, under

Section 14(1)(a), he then becomes de jure unable to perform his

functions inasmuch as, in law, he is regarded as “ineligible”. In

order to determine whether an arbitrator is de jure unable to

perform his functions, it is not necessary to go to the Arbitral

Tribunal under Section 13. Since such a person would lack

inherent jurisdiction to proceed any further, an application may

be filed under Section 14(2) to the Court to decide on the

termination of his/her mandate on this ground. As opposed to

this, in a challenge where grounds stated in the Fifth Schedule

are disclosed, which give rise to justifiable doubts as to the

arbitrator's independence or impartiality, such doubts as to

independence or impartiality have to be determined as a matter

of fact in the facts of the particular challenge by the Arbitral

Tribunal under Section 13. If a challenge is not successful, and

the Arbitral Tribunal decides that there are no justifiable doubts

as to the independence or impartiality of the

arbitrator/arbitrators, the Tribunal must then continue the

arbitral proceedings under Section 13(4) and make an award. It

is only after such award is made, that the party challenging the

arbitrator's appointment on grounds contained in the Fifth

Schedule may make an application for setting aside the arbitral

award in accordance with Section 34 on the aforesaid

grounds.[…].”

(Emphasis supplied)

106. We may refer with profit to the decision of this Court in Bharat

Broadband (supra), wherein it was observed that when a person

becomes “ineligible” to be appointed as an arbitrator, the challenge to

such appointment does not lie before the arbitrator himself. It was

further observed that an appointment hit by Section 12(5) attracts

SLP(C) Nos. 16107-16108 of 2025 Page 58 of 72

Section 14(1)(a), as the arbitrator becomes de jure unable to perform his

functions. As a result, the mandate of the arbitrator stands terminated.

The relevant observations read thus:-

“17. […] However, where such person becomes “ineligible” to

be appointed as an arbitrator, there is no question of challenge

to such arbitrator, before such arbitrator. In such a case i.e. a

case which falls under Section 12(5), Section 14(1)(a) of the Act

gets attracted inasmuch as the arbitrator becomes, as a matter

of law (i.e. de jure), unable to perform his functions under

Section 12(5), being ineligible to be appointed as an arbitrator.

This being so, his mandate automatically terminates, and he

shall then be substituted by another arbitrator under Section

14(1) itself. It is only if a controversy occurs concerning

whether he has become de jure unable to perform his functions

as such, that a party has to apply to the Court to decide on the

termination of the mandate, unless otherwise agreed by the

parties. Thus, in all Section 12(5) cases, there is no challenge

procedure to be availed of. If an arbitrator continues as such,

being de jure unable to perform his functions, as he falls within

any of the categories mentioned in Section 12(5), read with the

Seventh Schedule, a party may apply to the Court, which will

then decide on whether his mandate has terminated. Questions

which may typically arise under Section 14 may be as to

whether such person falls within any of the categories

mentioned in the Seventh Schedule, or whether there is a waiver

as provided in the proviso to Section 12(5) of the Act.[…].”

(Emphasis supplied)

107. In Chennai Metro Rail Ltd. v. Transtonnelstroy Afcons (JV), reported

in (2024) 6 SCC 211, this Court held that a party aggrieved by the

ineligibility of an arbitrator may approach the court under Section

14(1)(a) of the Act, 1996. The relevant observations read thus:-

SLP(C) Nos. 16107-16108 of 2025 Page 59 of 72

“29. At this stage it would be crucial to notice that the Court

made a differentiation. It stated, firstly, that a disclosure in

writing about circumstances likely to give justifiable doubts is

to be made, at the stage of appointment, and then stated that the

disclosure can be challenged under Sections 12(1) to 12(4) read

with Section 13. The Court however underlined that in the next

category where the person became ineligible to be appointed as

arbitrator, there was no need for a challenge to be laid before the

arbitrator. In such circumstances outlined in Section 12(5), the

party aggrieved could directly approach the court under Section

14(1)(a). It was further underlined that in all cases under

Section 12(5), there is no challenge procedure to be availed of

and that if the arbitrator continues at such, the ground of being

unable to perform his function since he falls in any of the

categories enumerated in the Seventh Schedule, the party

concerned may apply to the court.

xxx

33. The decisions in HRD [HRD Corpn. v. GAIL, (2018) 12

SCC 471 : (2018) 5 SCC (Civ) 401] and Bharat

Broadband [Bharat Broadband Network Ltd. v. United

Telecoms Ltd., (2019) 5 SCC 755 : (2019) 3 SCC (Civ) 1] are

unequivocal and to the effect that the issue of bias should be

raised before the same Tribunal at the earliest opportunity. The

advertence of the time-limit of 15 days is nothing but a statutory

incorporation of that idea. However, when the grounds

enumerated in the Seventh Schedule occur or are brought to the

notice of one party unless such party expressly waives its

objections, it is ipso facto sufficient for that party, to say that the

Tribunal's mandate is automatically terminated. The party

aggrieved then can go ahead and challenge the Tribunal's

continuation with the proceedings under Section 14.”

(Emphasis supplied)

108. The Constitution Bench in CORE II (supra) affirmed the

aforementioned decisions and reiterated that the ineligibility of a

SLP(C) Nos. 16107-16108 of 2025 Page 60 of 72

person to act as an arbitrator is a matter of law and goes to the root of

the appointment. Thus, when an arbitrator is de jure unable to perform

his function, his mandate would be automatically terminated under

Section 14(1)(a), and the parties would be within their rights to apply

to the court under Section 14(2) for termination of the arbitrator’s

mandate and appointment of a substituted arbitrator.

b. Challenge to the ineligibility of the arbitrator after arbitral

award has been passed

109. When an award has been passed, the proceedings before the arbitral

tribunal conclude, leaving no possibility of substituting the arbitrator

at this stage. In other words, once an award is passed, the mandate of

the arbitral tribunal also arrives at a conclusion. In such circumstances,

a party aggrieved by the arbitrator’s ineligibility may challenge the

award by filing an application under Section 34 of the 1996 Act, as an

award passed by an ineligible arbitrator is nullity, non-est, or void ab

initio, and against the public policy of India.

110. Even where an interim award has been passed, it is liable to be set

aside, as it is not capable of being enforced. The fate of an interim

award and that of an arbitral award, in this regard, is identical. In

either circumstance, the parties would be required to initiate fresh

arbitration proceedings as per law. In Alpro Industries v. Ambience (P)

Ltd., reported in 2025 SCC OnLine Del 8373, the petitioner assailed an

SLP(C) Nos. 16107-16108 of 2025 Page 61 of 72

interim award under Section 34 on the primary ground of unilateral

appointment. The Court observed thus:-

“41.⁠ ⁠In light of the findings in Mahavir Prasad (supra) and my

findings that the unilateral appointment of the Sole Arbitrator

in the present case is invalid and there has been no express

waiver in writing in terms of the proviso to clause 12(5) of the

Act, the Impugned Interim Award is liable to be set aside.

Consequently, the issue raised by the respondents as to whether

the Impugned Interim Award constitutes an ‘interim award’ or

not would not be relevant. The Court cannot permit

continuation of arbitral proceedings before an Arbitral Tribunal

which would be a nullity and cannot result into an enforceable

award. Hence, I do not deem it necessary to go into the merits

of the challenge to the Impugned Interim Award.”

(Emphasis supplied)

111. An award passed by an arbitrator who is found to be ineligible cannot

be enforced. In CORE II (supra), a Constitution Bench of this Court

held that the concept of “public policy of India” and “fundamental policy

of Indian law” means complying with statues and judicial precedents,

and principles of natural justice. It was categorically held that “the most

basic notions of morality and justice” mentioned in the Explanation 1 to

Section 34(b) includes bias. The observations of this Court in

paragraphs 163 and 164 respectively reproduced hereinbelow

squarely apply to the facts of the present case. The relevant extract has

been reproduced thus:-

“158. Section 34(2)(b) specifically provides that an arbitral

award may be set aside if the court finds that the arbitral award

conflicts with the public policy of India. The provision further

SLP(C) Nos. 16107-16108 of 2025 Page 62 of 72

clarifies “public policy of India” to only mean that : (i) the

making of the award was induced or affected by fraud or

corruption or was in violation of Section 75 or Section 81; (ii) it

is in contravention with the fundamental policy of Indian law;

or (iii) it is in conflict with the most basic notions of morality or

justice.

159. This Court has construed the expression “public policy of

India” appearing under Section 34 to mean the “fundamental

policy of Indian law”. [Ssangyong Engg. & Construction Co.

Ltd. v. NHAI, (2019) 15 SCC 131, para 34 : (2020) 2 SCC (Civ)

213; NHAI v. P. Nagaraju, (2022) 15 SCC 1 : (2024) 2 SCC

(Civ) 414, para 39] The concept of “fundamental policy of

Indian law” has been held to cover compliance with statutes and

judicial precedents, adopting a judicial approach, and

compliance with the principles of natural justice. [MMTC Ltd.

v. Vedanta Ltd., (2019) 4 SCC 163, para 11 : (2019) 2 SCC

(Civ) 293] In OPG Power Generation (India) (P) Ltd. v. Enexio

Power Cooling Solutions (India) (P) Ltd. [OPG Power

Generation (India) (P) Ltd. v. Enexio Power Cooling Solutions

(India) (P) Ltd., (2025) 2 SCC 417 : (2025) 1 SCC (Civ) 54] ,

this Court explained the concept of “fundamental policy of

Indian law” thus : (SCC pp. 467-68, paras 55-56)

“55. … The expression “in contravention with the

fundamental policy of Indian law” by use of the word

“fundamental” before the phrase “policy of Indian law”

makes the expression narrower in its application than the

phrase “in contravention with the policy of Indian law”,

which means mere contravention of law is not enough to

make an award vulnerable. To bring the contravention

within the fold of fundamental policy of Indian law, the

award must contravene all or any of such fundamental

principles that provide a basis for administration of justice

and enforcement of law in this country.

56. Without intending to exhaustively enumerate instances

of such contravention, by way of illustration, it could be said

that

SLP(C) Nos. 16107-16108 of 2025 Page 63 of 72

(a) violation of the principles of natural justice;

(b) disregarding orders of superior courts in India or the

binding effect of the judgment of a superior court; and

(c) violating law of India linked to public good or public

interest, are considered contravention of the fundamental

policy of Indian law.”

160. In Avitel Post Studioz Ltd. v. HSBC PI Holdings

(Mauritius) Ltd. [Avitel Post Studioz Ltd. v. HSBC PI

Holdings (Mauritius) Ltd., (2024) 7 SCC 197, para 34 : (2024)

3 SCC (Civ) 780] , this Court held that the most basic notions

of morality and justice under the concept of “public policy” will

include bias.

161. […] As a corollary, Section 34 places a responsibility on

the Arbitral Tribunals to ensure that the arbitral proceedings

are consistent with the fundamental policy of Indian law.

[Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1, pp.

69-70, para 70:“70. Arbitrators, like the courts, are equally

bound to resolve and decide disputes in accordance with the

public policy of the law. Possibility of failure to abide by public

policy consideration in a legislation, which otherwise does not

expressly or by necessary implication exclude arbitration,

cannot form the basis to overwrite and nullify the arbitration

agreement. This would be contrary to and defeat the legislative

intent reflected in the public policy objective behind the

Arbitration Act. Arbitration has considerable advantages as it

gives freedom to the parties to choose an arbitrator of their

choice, and it is informal,flexible and quick. Simplicity,

informality and expedition are hallmarks of arbitration.

Arbitrators are required to be impartial and independent, adhere

to natural justice, and follow a fair and just procedure.

Arbitrators are normally experts in the subject and perform

their tasks by referring to facts, evidence, and relevant case

law.”]

xxx

SLP(C) Nos. 16107-16108 of 2025 Page 64 of 72

163. The possibility of bias is real in situations where an

arbitration clause allows a government company to unilaterally

appoint a sole arbitrator or control the majority of the

arbitrators. Since the Government has control over the Arbitral

Tribunal, it can chart the course of the arbitration proceedings

to the prejudice of the other party. Resultantly, unilateral

appointment clauses fail to provide an effective substitute for

judicial proceedings in India. Further, a unilateral appointment

clause is inherently exclusionary and violates the principle of

equal treatment of parties and procedural equality.

164. Unilateral appointment clauses in a public-private

contract fail to provide the minimum level of integrity required

in authorities performing quasi-judicial functions such as

Arbitral Tribunals. Therefore, a unilateral appointment clause

is against the principle of arbitration, that is, impartial

resolution of disputes between parties. It also violates the nemo

judex rule which constitutes the public policy of India in the

context of arbitration. Therefore, unilateral appointment clauses

in public-private contracts are violative of Article 14 of the

Constitution for being arbitrary in addition to being violative of

the equality principle under the Arbitration Act.”

(Emphasis supplied)

112. What emerges from the foregoing is that the appellants were well

within their right to challenge the ineligibility of the sole arbitrator in

an application under Section 34 of the Act, 1996.

c. Challenge to the ineligibility of the arbitrator at any stage of

the proceedings

113. A challenge to an arbitrator’s ineligibility could be raised at any stage

because an award passed in such circumstance is non-est, i.e., it carries

no enforceability or recognition in law. We say so because an arbitrator

SLP(C) Nos. 16107-16108 of 2025 Page 65 of 72

does not possess the jurisdiction to pass an award. In arbitration, the

parties vest the jurisdiction in the tribunal by virtue of a valid

arbitration agreement and an appointment made in accordance with

the provisions of the Act, 1996. This jurisdiction is grounded in the

consent of the parties as explained in the foregoing paragraphs of this

judgment.

114. In this context, jurisdiction means the authority of an arbitral tribunal

to render a decision affecting the merits of the case. An arbitrator who

lacks jurisdiction cannot make an award on the merits. With a view to

dispel any doubt and lend clarity, we deem it appropriate to observe

that the jurisdiction of the arbitral tribunal is distinct from the

admissibility of the dispute, i.e., the arbitrability of the claims.

115. A question pertaining to the jurisdiction of the arbitral tribunal arises

when the tribunal is fundamentally incompetent to render any

decision at all. In other words, a question of jurisdiction pertains to the

ability of the tribunal to hear a case, whereas questions of admissibility

presuppose that the tribunal has jurisdiction. An award passed by an

arbitrator who does not have jurisdiction strikes at the very authority

of the arbitrator.

116. This Court, in catena of decisions, has held that the validity of a decree

can be challenged even in execution proceedings if the court passing

such decree lacked subject-matter jurisdiction over the dispute. As a

SLP(C) Nos. 16107-16108 of 2025 Page 66 of 72

decree passed by a court without jurisdiction goes to the root of the

matter. Any decision passed by a court lacking jurisdiction would be

coram non judice, since a court cannot give itself jurisdiction. No act of

the parties can cure an inherent lack of jurisdiction.

117. In Hira Lal Patni v. Kali Nath, reported in 1961 SCC OnLine SC 42,

this Court held that competence of a court to decide a case goes to the

root of the matter, and incompetency results in inherent lack of

jurisdiction. As a result, a decision rendered by a court that lacks

jurisdiction is a nullity. The relevant observations read thus:-

“4. […] The validity of a decree can be challenged in execution

proceedings only on the ground that the court which passed the

decree was lacking in inherent jurisdiction in the sense that it

could not have seisin of the case because the subject-matter was

wholly foreign to its jurisdiction or that the defendant was dead

at the time the suit had been instituted or decree passed, or some

such other ground which could have the effect of rendering the

court entirely lacking in jurisdiction in respect of the subject-

matter of the suit or over the parties to it. But in the instant case

there was no such inherent lack of jurisdiction. The decision of

the Privy Council in the case of Ledgard v. Bull [13 Indian

Appeals 134] is an authority for the proposition that consent or

waiver can cure defect of jurisdiction but cannot cure inherent

lack of jurisdiction. In that case, the suit had been instituted in

the Court of the Subordinate Judge, who was incompetent to try

it. By consent of the parties, the case was transferred to the

Court of the District Judge for convenience of trial. It was laid

down by the Privy Council that as the court in which the suit

had been originally instituted was entirely lacking in

jurisdiction, in the sense that it was incompetent to try it,

whatever happened subsequently was null and void because

consent of parties could not operate to confer jurisdiction on a

SLP(C) Nos. 16107-16108 of 2025 Page 67 of 72

court which was incompetent to try the suit. […] It is well

settled that the objection as to local jurisdiction of a court does

not stand on the same footing as an objection to the competence

of a court to try a case. Competence of a court to try a case goes

to the very root of the jurisdiction, and where it is lacking, it is

a case of inherent lack of jurisdiction. On the other hand, an

objection as to the local jurisdiction of a court can be waived and

this principle has been given a statutory recognition by

enactments like Section 21 of the Code of Civil Procedure.[…]”

(Emphasis supplied)

118. We may look into the decision of this Court in Hindustan Zinc Ltd. v.

Ajmer Vidyut Vitran Nigam Ltd., reported in (2019) 17 SCC 82. The

submission canvassed before this Court was that an objection to

jurisdiction could not have been raised in a proceeding under Section

37 of the Act, 1996, once the parties had consented to arbitration. In the

said decision it was held that an objection to the inherent lack of

jurisdiction can be taken at any stage and also in collateral

proceedings. Furthermore, that a decree passed without jurisdiction is

a nullity. The relevant observations read thus:-

“17. We are of the view that it is settled law that if there is an

inherent lack of jurisdiction, the plea can be taken up at any

stage and also in collateral proceedings. This was held by this

Court in Kiran Singh v. Chaman Paswan [Kiran

Singh v. Chaman Paswan, (1955) 1 SCR 117 : AIR 1954 SC

340] as follows : (SCR p. 121 : AIR p. 342, para 6)

“6. … It is a fundamental principle well-established that a

decree passed by a court without jurisdiction is a nullity,

and that its invalidity could be set up whenever and

wherever it is sought to be enforced or relied upon, even at

the stage of execution and even in collateral proceedings. A

SLP(C) Nos. 16107-16108 of 2025 Page 68 of 72

defect of jurisdiction, whether it is pecuniary or territorial,

or whether it is in respect of the subject-matter of the action,

strikes at the very authority of the Court to pass any decree,

and such a defect cannot be cured even by consent of parties.

If the question now under consideration fell to be determined

only on the application of general principles governing the

matter, there can be no doubt that the District Court of

Monghyr was coram non judice, and that its judgment and

decree would be nullities.”

18. Therefore, it is a little difficult to countenance Shri

Vaidyanathan's argument that having consented, the

respondent cannot now turn around and challenge the very

appointment of the arbitrator as being invalid and without

jurisdiction.”

(Emphasis supplied)

119. In Bhim Bahadur v. Vikram Singh, reported in 2015 SCC OnLine Utt

1563, when the issue before the High Court was whether the subject

land therein was agricultural or abadi in nature. The Court held that

the matter had to be referred to a revenue court under the Uttar

Pradesh Zamindari Abolition & Land Reforms Act. The relevant

observations read thus:-

“11. In this regard, the law is well established to the effect that

competency of the jurisdiction or the lack of the same in a

particular Court cannot be determined by either of the parties

through their pleadings, viz., the Court having jurisdiction

under the law to decide a particular issue cannot be kept away

from deciding the same on the basis of averments made by the

parties and, in the same manner, the jurisdiction cannot be

conferred on a particular Court on the basis of pleadings and

admission thereof to decide a particular issue wherefor the law

does not confer jurisdiction to the Court.”

SLP(C) Nos. 16107-16108 of 2025 Page 69 of 72

(Emphasis supplied)

120. All that we are trying to convey is that, in civil law, the law itself

confers subject-matter jurisdiction on specific courts. For instance, a

suit seeking a declaration on the validity of marriage before the Civil

Court is not maintainable, as such disputes fall within the exclusive

jurisdiction of the Family Court. Similarly, in arbitration, the consent

of parties confers subject-matter jurisdiction, i.e., the authority to

decide the dispute. When an arbitral tribunal is unilaterally

constituted, such consent is absent, thereby divesting the tribunal of

subject-matter jurisdiction. The Act, 1996, does not recognize the

conferral of jurisdiction on an arbitral tribunal without the consent of

the parties. By entering into an express agreement in writing as per the

proviso to Section 12(5), the parties not only waive the ineligibility of

the proposed arbitrator but also consent to his appointment.

121. Before we part, we deem it fit to observe that an arbitrator is better

equipped with the position of law on appointments, more particularly,

unilateral appointments. Therefore, it becomes incumbent upon the

arbitrator that upon entering reference and at the very first hearing, to

ensure from the parties that they are willing to participate in the

proceedings and to insist upon a written agreement waiving the

requirement of Section 12(5) of the Act, 1996.

SLP(C) Nos. 16107-16108 of 2025 Page 70 of 72

122. Further, in such circumstances referred to above, if any party does not

appear despite receipt of notice, the arbitrator shall not proceed further

and shall immediately withdraw from the arbitral proceedings. The

arbitrator must, along with the waiver agreement, record the minutes

even when the parties are cooperating. This would certainly save time

and avoid multiplicity of proceedings.

VIII. CONCLUSION

123. A conspectus of the aforesaid detailed discussion on the position of

law as regards Section 12 of the Act, 1996, is as follows:-

i. The principle of equal treatment of parties provided in Section

18 of the Act, 1996, applies not only to the arbitral proceedings

but also to the procedure for appointment of arbitrators. Equal

treatment of the parties entails that the parties must have an

equal say in the constitution of the arbitral tribunal.

ii. Sub-section (5) of Section 12 provides that any person whose

relationship with the parties or counsel, or the dispute, whether

direct or indirect, falls within any of the categories specified in

the Seventh Schedule would be ineligible to be appointed as an

arbitrator. Since, the ineligibility stems from the operation of

law, not only is a person having an interest in the dispute or its

outcome ineligible to act as an arbitrator, but appointment by

such a person would be ex facie invalid.

SLP(C) Nos. 16107-16108 of 2025 Page 71 of 72

iii. 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. The agreement referred to in the proviso must be a

clear, unequivocal written agreement.

iv. When an arbitrator is found to be ineligible by virtue of Section

12(5) read with the Seventh Schedule, his mandate is

automatically terminated. In such circumstance, an aggrieved

party may approach the court under Section 14 read with Section

15 for appointment of a substitute arbitrator. Whereas, when an

award has been passed by such an arbitrator, an aggrieved party

may approach the court under Section 34 for setting aside the

award.

v. In arbitration, the parties vest jurisdiction in the tribunal by

exercising their consent in furtherance of a valid arbitration

agreement. An arbitrator who lacks jurisdiction cannot make an

award on the merits. Hence, an objection to the inherent lack of

jurisdiction can be taken at any stage of the proceedings.

124. For all the foregoing reasons, we have reached the conclusion that the

High Court committed an egregious error in passing the impugned

judgment. We are left with no other option but to set aside the

SLP(C) Nos. 16107-16108 of 2025 Page 72 of 72

impugned judgment. As a result, the arbitral awards dated 30.07.2018

passed by the sole arbitrator are also set aside.

125. It would be open to the parties to initiate fresh arbitration proceedings

in accordance with law.

126. In the result, the appeals succeed and are hereby allowed. Pending

applications, if any, shall stand disposed of.

….....……………………….J.

(J. B. PARDIWALA)

…...………………………...J.

(K. V. VISWANATHAN )

New Delhi

5

th

January, 2026