O.M.P. (COMM) 475/2024 Page 1 of 15

* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Judgment reserved on: 20.02.2026

Judgment pronounced on: 26.02.2026

+ O.M.P. (COMM) 475/2024, CAV 546/2024, I.A. 44540/2024,

I.A. 2435/2025, I.A. 4546/2025

RAILWAYS BOARD, MINISTRY OF

RAILWAYS .....Petitioner

Through: Mr. Shashank Garg, Sr. Adv.

with Mr. Husain Taqvi, Ms.

Nishtah Jain, Ms. Aradhya

Chaturvedi and Ms. Vidhi

Gupta, Advs.

versus

TITAGARH RAIL SYSTEMS LIMITED .....Respondent

Through: Mr. Akhil Sibbal, Sr. Adv. with

Mr. Rishi Agarwal, Ms.

Aanchal Mullick, Mr. Daksh

Arora, Ms. Shubhi Agarwal,

Mr. Krishneshbapat and Mr.

Manan Bansal, Advs.

CORAM:

HON'BLE MR. JUSTICE AVNEESH JHINGAN

J U D G M E N T

1. This petition under Section 34 of the Arbitration and

Conciliation Act, 1996 (for short „the Act‟) is filed aggrieved of the

arbitral award dated 05.08.2024 (hereinafter „the award‟).

O.M.P. (COMM) 475/2024 Page 2 of 15

BRIEF FACTS

2. The brief facts are that the petitioner issued a notice inviting

tender for „Manufacture and Supply of BCNAHSM1 Wagons‟. The

respondent was the successful bidder. On 30.09.2020 a contract

valuing Rs.499,56,48,000/- for 1652 wagons was awarded.

2.1 There was a dispute between the parties with regard to re-

fixation of the delivery period, the imposition of liquidated damages

(for short „LD‟) and denial clause. The petitioner on 20.03.2023 short-

closed the contract; cancelled the supply of balance 390 wagons and

forfeited the bank guarantee.

2.2 On 29.05.2023, the respondent issued a notice under Section 21

of the Act and vide letter dated 11.08.2023 proposed the name of one

arbitrator. Petition filed by the respondent under Section 11 of the Act

was withdrawn on 03.10.2023. The respondent on 17.10.2023

consented for fast-track arbitration as provided in clause 2905(c)(ii)(a)

of the Indian Railway Standard Conditions of Contract (for short

„IRS‟). On 16.11.2023, the petitioner proposed four names of its

serving employees for appointment as arbitrator and asked the

respondent to suggest two names from the proposed list. On

24.01.2024, the respondent shortlisted two names. The petitioner on

30.01.2024 appointed its serving employee to be a sole arbitrator.

2.3 The award was passed allowing the claim of the respondent.

The petitioner was directed to refund LD to the extent of

Rs.5,19,15,870/- for supply of 272 wagons after 29.03.2022. The

respondent was held entitled to price variation upto the date of actual

supply with base month as May, 2019. The cancellation of the contract

O.M.P. (COMM) 475/2024 Page 3 of 15

was set aside and the respondent was to supply the balance 390

wagons with price variation of such supply with the base month as

May, 2019. Hence, the present petition.

SUBMISSIONS OF THE PARTIES

3. Learned senior counsel for the petitioner contended that the

arbitrator was appointed in contravention of Section 12 (5) of the Act,

there was no express waiver in writing by the parties and the award is

nullity. The notices issued by the respondent on 29.05.2023 and

11.08.2023 are relied upon to contend that the respondent had

categorically stated that the applicability of Section 12(5) of the Act

was not waived. Reliance is placed upon the decision of the Supreme

Court in Bhadra International (India) Pvt. Ltd. & Ors. v. Airports

Authority of India, 2026 INSC 6 and on the Division Bench of this

court in Mahavir Prasad Gupta and Sons v. Govt. of NCT of Delhi,

2025 SCC OnLine Del 4241.

4. Per contra by proposing four names of its serving employees

and proceeding under clause 2905(a) of IRS which is only applicable

in cases where Section 12(5) of the Act is waived, the petitioner

agreed not to be subjected to rigours of Section 12(5) of the Act. The

submission is by short listing two names from the proposed list and by

consenting for adoption of the fast-track arbitration, the respondent

also waived applicability of Section 12(5) of the Act. It is submitted

that there is no prescribed language for waiver. The emphasis is that

the petitioner was well-aware of the provisions of Section 12(5) of the

Act and after appointing arbitrator under clause 2905(a) of IRS, on

O.M.P. (COMM) 475/2024 Page 4 of 15

being unsuccessful in the arbitration proceedings is now taking a u-

turn.

ISSUE

5. The issue involved is whether in the facts and circumstances of

the case there was compliance of proviso to Section 12(5) of the Act?

ANALYSIS

6. The Supreme Court in Bhadra International (India) Pvt. Ltd.

(supra) dealt with the following three issues:

“29.…..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?

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?”

[

Held:

“123... 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

O.M.P. (COMM) 475/2024 Page 5 of 15

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.

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.”

7. The Division Bench of this court in Mahavir Prasad Gupta

and Sons (supra) dealt with the following issues:

“74……a) When a party itself has unilaterally appointed

the arbitrator, whether that party can object to

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the unilateral appointment of the arbitrator at

any stage during or after the arbitration

proceedings?

b) If a party has unilaterally appointed an arbitrator,

can that party be deemed to have given express

waiver in writing under Section 12(5) of the Act

while making the appointment itself?”

The court concluded:

“84…..a) Mandatory Requirement: Any arbitration

agreement providing unilateral appointment of the

sole or presiding arbitrator is invalid. A unilateral

appointment by any party in the arbitrations seated

in India is strictly prohibited and considered as null

and void since its very inception. Resultantly, any

proceedings conducted before such unilaterally

appointed Arbitral Tribunal are also nullity and

cannot result into an enforceable award being

against Public Policy of India and can be set aside

under Section 34 of the Act and/or refused to be

enforced under Section 36 of the Act.

b) Deemed Waiver: The proviso to Section 12(5) of

the Act requires an express agreement in writing.

The conduct of the parties, no matter how

acquiescent or conducive, is inconsequential and

cannot constitute a valid waiver under the proviso to

Section 12(5) of the Act. The ineligibility of a

unilaterally appointed arbitrator can be waived only

by an express agreement in writing between the

parties after the dispute has arisen between them.

Section 12(5) of the Act is an exception to Section 4

of the Act as there is no deemed waiver under

Section 4 of the Act for unilateral appointment by

O.M.P. (COMM) 475/2024 Page 7 of 15

conduct of participation in the proceedings. The

proviso to Section 12(5) of the Act requires an

„express agreement in writing‟ and deemed waiver

under Section 4 of the Act will not be applicable to

the proviso to Section 12(5) of the Act.

c) Award by an Ineligible Arbitrator is a

Nullity: An award passed by a unilaterally

appointed arbitrator is a nullity as the ineligibility

goes to the root of the jurisdiction. Hence, the award

can be set aside under Section 34(2)(b) of the Act by

the Court on its own if it „finds that‟ an award is

passed by unilaterally appointed arbitrator without

even raising such objection by either party.

d) Stage of Challenge: An objection to the lack of

inherent jurisdiction of an arbitrator can be taken at

any stage during or after the arbitration proceedings

including by a party who has appointed the sole or

presiding arbitrator unilaterally as the act of

appointment is not an express waiver of the

ineligibility under proviso to Section 12(5) of the

Act. Such objection can be taken even at stage of

challenge to the award under Section 34 of the Act

or during the enforcement proceedings under

Section 36 of the Act.”

8. The legal position is that under Section 12(5) read with

Schedule VII of the Act an employee of the party in dispute is

ineligible to be appointed as an arbitrator and cannot nominate or

appoint any other person as an arbitrator. The unilateral appointment

in absence of express agreement in writing between the parties to

waive applicability of Section 12(5) of the Act is void ab initio. The

O.M.P. (COMM) 475/2024 Page 8 of 15

filing of the claim statement or participation in the arbitration

proceedings cannot be construed to be waiver under the proviso to

Section 12(5) of the Act. The unilateral appointment of the arbitrator

can be objected to for the first time under Section 34 of the Act.

9. Clause 2905 of IRS deals with the appointment of the arbitrator.

Sub-clause (a)(i) lays down the procedure for appointment of

arbitrator where the applicability of Section 12(5) of the Act is

waived. In cases of claim upto rupees one crore, a Gazetted Officer of

Railways not below the rank of Junior Administrative Grade (for short

„JAG‟) is to be nominated by the General Manager (for short „GM‟) as

sole arbitrator.

9.1 Sub-clause (a)(ii) deals with the cases of claim exceeding

rupees one crore. The tribunal shall consist of three Gazetted Railway

Officers not below the rank of JAG or of two Gazette Railway

Officers and a Retired Officer of the Railway having served not below

the rank of Senior Administrative Grade Officer (for short „SAG‟).

The Railways within sixty days of the demand for the arbitration shall

send to contractor the names of at least four Gazetted Railways

Officer which may include name(s) of Retired Officer(s). The

contractor had to within thirty days shortlist at least two names out of

the panel. The GM was obligated to appoint at least one of the

nominee of the contractor, the balance arbitrators were to be appointed

either from the panel or outside the panel and the presiding arbitrator

was to be indicated. The exercise was to be completed within thirty

days of the receipt of the names from the contractor.

9.2 Sub-Clause (b) lays down the procedure for appointment of

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arbitrator in case the applicability of Section 12(5) of the Act is not

waived. In cases involving claim upto Rs. 50 lakhs, the tribunal shall

consist of a Retired Officer of the Railways not below the rank of

SAG. The Railway within sixty days of receipt of the demand for

arbitration has to propose to contractor at least four names of Retired

Railway Officers for appointment as arbitrators. Within thirty days

contractor has to suggest two names from proposed names and GM is

to appoint at least one arbitrator out of nominees of the contractor. In

cases involving claim of more than Rs.50 lakhs the tribunal shall

consist of at least three retired Railways Officers not below the rank of

SAG and a similar procedure as in clause 2905(b)(i) of IRS of sending

four names and nomination by contractor was to be followed.

9.3 Clause 2905 (c)(ii)(a) provides that the parties by agreement in

writing either before or at the time of the appointment of the arbitrator

can agree for fast-track procedure of arbitration to be adopted for

dispute resolution.

10. It is an admitted position of the parties that the serving

employee of the Railways appointed as arbitrator was ineligible under

Section 12(5) read with Schedule VII of the Act for appointment

except by an express written agreement between the parties.

11. The respondent issued a notice dated 29.05.2023 for

appointment of the arbitrator and stated that “Titagarh does not waive

the provisions of Section 12(5) of the Arbitration and Conciliation

Act, 1996”. While proposing the name of one arbitrator vide

communication dated 11.08.2023, it was reiterated that “Titagarh does

not waive the provisions of Section 12 (5) of the Arbitration and

O.M.P. (COMM) 475/2024 Page 10 of 15

Conciliation Act, 1996”. The petition under Section 11 of the Act filed

by respondent was withdrawn on 03.10.2023. The respondent by letter

dated 17.10.2023 consented for fast-track arbitration as provided

under clause 2905(c)(ii)(a) of IRS. In none of the documents relied

upon there is an express agreement in writing waiving the rigours of

Section 12(5). There is no requirement under clause 2905(c)(ii)(a) of

IRS that for fast-track arbitration, there has to be unilateral

appointment of the arbitrator. The short-listing of two names from the

four names proposed by the petitioner cannot be considered to be

compliance of proviso to Section 12(5) of the Act, the waiver has to

be specific and not to be implied from conduct.

12. The Supreme Court in Bhadra International (India) Pvt. Ltd

(supra) held that waiver involves a conscious decision to abandon the

existing legal right and can be made only by a person fully aware of

such right. A legal right cannot be taken away by implications. The

waiver has to be an unequivocal expression and it cannot be lost sight

of that by such waiver the restriction imposed by Section 12(5) is

sought to be overcome.

13. The contention of learned senior counsel for the respondent that

by short-listing of two names by the respondent out of the list

proposed by the petitioner there was an express agreement for waiver

of Section 12(5) of the Act, is ill-founded. In the letter dated

24.01.2024, wherein two names were short-listed, there is no

statement that the applicability of Section 12(5) of the Act is waived.

It is mentioned therein that the respondent withdraws the letter dated

29.12.2023. This letter has not been produced by either party and its

O.M.P. (COMM) 475/2024 Page 11 of 15

contents are not known. On a specific query during the hearing,

learned senior counsel for the parties on instructions submitted that

this letter is not available with either of the parties.

14. There being no prescribed format for express agreement in

writing shall not mean that the waiver can be inferred by implication

or through conduct. It would be relevant to quote following paragraph

from Bhadra International (India) Pvt. Ltd. (supra).

“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 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.”

15. The argument of the respondent that the petitioner by

proceeding under clause 2905(a) of IRS which was applicable only in

cases where Section 12(5) of the Act has been waived off had

exercised waiver under proviso to Section 12(5) of the Act, lacks

merit. For accepting the plea that clause 2905(a) of IRS was

applicable, it is to be seen that there was an express written agreement

between the parties for waiver of rigours of Section 12(5) of the Act or

not. The contention that the petitioner waived the right to object to the

applicability of Section 12(5) of the Act cannot be accepted, relying

upon the fact that the petitioner proposed the names of four serving

employees for appointment of the arbitral tribunal. The right to object

to the ineligibility of the arbitrator cannot be taken away from the

O.M.P. (COMM) 475/2024 Page 12 of 15

party appointing the arbitrator for having appointed the arbitrator. The

phrase used in proviso to Section 12(5) of the Act has a clear mandate

of an express agreement in writing. It would be fruitful to quote the

following paragraphs from Mahavir Prasad Gupta and Sons

(supra):

“81. Accordingly, the party that unilaterally appointed the

arbitrator cannot be deemed to have agreed in writing to

waive the ineligibility of the arbitrator by act of

appointment. When appointment itself is ineligible under

the provisions of Section 12(5) of the Act read with

Seventh Schedule of the Act, it does not take away the

right of the party to challenge such an appointment

merely because that party had made the appointment in

absence of express agreement in writing between the

parties to waive the applicability of Section 12(5) of the

Act.

82. Hence, a party which unilaterally appointed the

arbitrator has right to object to such appointment

irrespective of fact that that party itself made the

appointment of the arbitrator. Mere fact of making

appointment in writing will not make the ineligible

appointment a valid appointment unless there is express

agreement in writing waiving such ineligibility.

83. Although it appears disingenuous, a party appointing

an the sole or presiding arbitrator unilaterally can

challenge the award on the ground that the award has

been rendered in contravention of Section 12(5) of the

Act read with Seventh Schedule of the Act

notwithstanding that the said party itself made such an

appointment. When the Arbitral Tribunal inherently

lacked jurisdiction to act, the arbitration proceedings

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are void ab initio, rendering the award unenforceable

irrespective of which party made such unilateral

appointment. The arbitral proceedings and an award made

by an unilaterally appointed sole or presiding arbitrator,

who is de jure ineligible to be appointed as an arbitrator

by virtue of the Seventh Schedule of the Act are void ab

initio. The waiver under the proviso to Section 12(5) of

the Act must be express and subsequent to the disputes

having been arisen between the parties. Hence, the party

which appointed the sole or presiding arbitrator

unilaterally can also challenge the award under Section

34 of the Act on the ground of such ineligibility.”

15.1 Another aspect to be considered is that under clause 2905(a) of

IRS in cases involving claim above one crore, an arbitral tribunal

consisting of three members was to be constituted but in this case the

sole arbitrator was appointed contrary to the clause.

16. The issue canvassed that the petitioner after making the

appointment of the arbitrator and upon failure in the arbitration

proceedings has taken a u-turn was taken note of by the Supreme

Court in Bhadra International (India) Pvt. Ltd. (supra). It was

observed that to avoid such a situation the parties must make an

endeavour to enter into an express written agreement as per proviso to

Section 12(5) of the Act so as to prevent such a misuse. The following

paragraph is reproduced below from the judgment:

“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

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reasonable, 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.”

17. There cannot be any doubt that the Railway Board inspite the

amendment to Section 12(5) of the Act in the year 2016 continues

with clauses providing for appointment of its serving employees or ex-

employees as arbitrators. Despite the two communications on record

that the respondent was not waving the applicability of Section 12(5)

of the Act the petitioner not only proceeded to appoint a serving

employee of the Railways as the arbitrator but waited for outcome of

arbitration and thereafter raised this objection in the petition under

Section 34 of the Act. Be that as it may, the law has to take its own

course irrespective of the conduct adopted by the Railways.

18. The reliance of the learned senior counsel for the respondent on

the decision of the Bombay High Court in R.B. Krishnani v. STEM

Water Distribution and Infrastructure Com. Pvt. Ltd. 2025 SCC

OnLine Bom 1518 is of no help. The decision of the Bombay High

Court is prior to the decision of the Supreme Court in Bhadra

International (India) Pvt. Ltd. (supra). The Bombay High Court to

conclude that proviso to Section 12(5) of the Act was complied with

relied upon the participation of objecting party in the arbitration

proceedings, not taking recourse to challenge the appointment under

Section 14 of the Act and giving acquiescence to the extension of the

mandate of the arbitrator. The Supreme Court in Bhadra

International (India) Pvt. Ltd. (supra) held that the objection can be

O.M.P. (COMM) 475/2024 Page 15 of 15

raised for the first time under Section 34 of the Act, the participation

in the arbitration proceedings cannot be considered as a waiver of the

right to object to the appointment of the arbitrator and that there has to

be an express agreement in writing. The waiver cannot be by

implication or by conduct of the parties. Moreover, all earlier

decisions of the High Courts contrary to the issues decided by the

Apex Court were overruled.

19. The appointment of a serving employee as an arbitrator falls

within the teeth of Section 12(5) read with schedule VII of the Act.

The appointment being void ab initio rendered impugned award

nullity. The petition is allowed and the award is set aside. Pending

applications stand disposed of.

AVNEESH JHINGAN , J.

FEBRUARY 26, 2026/Pa

Reportable:- Yes