FAO(OS) (COMM) 103/2026 & connected matters Page 1of25

$~75 & 76

* IN THE HIGH COURT OF DELHI AT NEW DELHI

+ FAO(OS) (COMM) 103/2026, CM APPLs.24033-34/2026

TITAGARH RAIL SYSTEMS LIMITED

.....Appellant

Through: Ms. Akanksha Mehra, Mr.

Tanay Agarwal, Mr. Shivam Bhimsaria, Mr.

Abhiraj Choudhary and Ms. Mili Tomar

versus

RAILWAY BOARD, MINISTRY OF RAILWAYS,

GOVERNMENT OF INDIA .....Respondent

Through: Mr. Sandeep Kumar Mahapatra,

CGSC, Ms. Mrinmayee Sahu, Mr. Amit

Acharya, GP, Mr. Tribhuvan, Mr.

Abhimanyu and Ms. Anushka Sarraf,

Advocates and Mr Vinay Kaushik

Government Pleader

+ FAO(OS) (COMM) 104/2026, CM APPL. 24043/2026

TITAGARH RAIL SYSTEMS LIMITED .....Appellant

Through: Mr. Rajshekhar Rao, Sr.

Advocate with Ms. Akanksha Mehra, Mr.

Tanay Agarwal, Mr. Shivam Bhimsaria, Mr.

Abhiraj Choudhary and Ms. Mili Tomar,

Advocates

versus

RAILWAY BOARD, MINISTRY OF

RAILWAYS .....Respondent

Through: Mr. Sandeep Kumar Mahapatra,

CGSC, Ms. Mrinmayee Sahu, Mr. Amit

Acharya, GP, Mr. Tribhuvan, Mr.

Abhimanyu and Ms. Anushka Sarraf,

FAO(OS) (COMM) 103/2026 & connected matters Page 2of25

Advocates and Mr Vinay Kaushik

Government Pleader

CORAM:

HON'BLE MR. JUSTICE C. HARI SHANKAR

HON'BLE MR. JUSTICE OM PRAKASH SHUKLA

JUDGMENT (ORAL)

% 13.04.2026

C. HARI SHANKAR, J.

A.Thelis

1.These appeals, under Section 37 of the Arbitration &

Conciliation Act, 1996

1

, assail a judgment and an order, both dated 26

February 2026, in OMP (Comm) 475/2024

2

and OMP (Comm)

503/2024

3

, rendered by a learned Single Judge of this Court. The

principal judgment stands rendered in OMP (Comm) 475/2024, with

the order in OMP (Comm) 503/2024 merely recording that the arbitral

award, which formed subject matter of challenge in both OMPs,

already stood set aside in OMP (Comm) 475/2025 and that, therefore,

no separate orders were called for. The impugned judgment and order

have, needless to say, been rendered under Section 34 of the 1996 Act.

2.The learned Single Judge has allowed the OMPs filed by the

Respondent-Railway Board on the ground that the learned arbitrator,

who had rendered the award forming subject matter of challenge,

having been a serving employee of the Railway Board, his very

1

"the 1996 Act" hereinafter

2

Railway Board v. Titagarh Rail Systems Ltd

3

Railway Board v. Titagarh Rail Systems Ltd

FAO(OS) (COMM) 103/2026 & connected matters Page 3of25

appointment as an arbitrator was in the teeth of Section 12(5)

4

read

with the VII Schedule to the 1996 Act. Resultantly, the award

rendered by the learned arbitrator has been held to be unsustainable, as

the learned arbitrator was incompetent to arbitrate. In arriving at his

conclusion, the learned Single Judge has placed exhaustive reliance on

the recent decision of the Supreme Court inBhadra International

(India) (P) Ltd. v. Airport Authority of India

5

.

3.Aggrieved by the decision of the learned Single Judge, Titagarh

Rail Systems Ltd

6

has preferred the present appeals under Section 13

of the Commercial Courts Act, 2015 read with Section 37 of the 1996

Act.

4.We have heard Mr. Raj Shekhar Rao, learned Senior Counsel

for TRSL and Mr. Sandeep Kumar Mahapatra, learned CGSC, at

length.

B.The Issue

5.Mr. Raj Shekhar Rao does not dispute the fact that the learned

arbitrator was facially ineligible to be appointed as an arbitrator in

terms of the main body of Section 12(5) of the 1996 Act. His precise

contention is that the facts of the present case attract the proviso to

4

(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.

5

2026 SCC OnLine SC 7

6

"TRSL" hereinafter

FAO(OS) (COMM) 103/2026 & connected matters Page 4of25

Section 12(5), as the parties had, subsequent to the disputes arising

between them, expressly waived the applicability of Section 12(5). To

that extent, he submits that the decision inBhadra Internationaldoes

not operate against the arbitral award or its legality. The learned

Single Judge has, therefore, according to Mr. Rao, erred in setting

aside the arbitral award on the ground that the appointment of the

arbitrator was illegal in view of Section 12(5) of the 1996 Act read

with the judgment inBhadra International.

6.The dispute, therefore, actually narrows down to the issue of

whether, in the facts of the present case, the proviso to Section 12(5)

of the 1996 applies.

C.Facts

7.Given the limited nature of the controversy, it is not necessary

to advert to the specifics of the controversy between the parties.

Suffice it, therefore, to state that the arbitral proceedings related to a

contract dated 30 September 2020, whereby the Railway Board had

contracted with TRSL for supply of railway wagons. Clause 18.0 of

the contract read as under:

“18.0 TERMS AND CONDITIONS : The contract shall be

governed by the General Conditions & Special Conditions of

Contract for manufacture of wagons as enclosed (Annexure – I &

IA) and Indian Railways Standard (IRS) Conditions of contract.”

Thus, the contract between TRSL and the Railway Board was

governed by the Indian Railways General Conditions of Contract for

FAO(OS) (COMM) 103/2026 & connected matters Page 5of25

the Manufacture and Supply of Wagons

7

. Clause 18.0 of the GCC

envisaged settlement of disputes by arbitration, and read thus:

“18.0 Settlement of Disputes (Arbitration) : The contract will be

governed by the arbitration clause with amendments as specified in

the Railway Board’s Letter No.2018/TF/Civil/Arbitration Policy

dated 12.12.2018.”

The letter dated 12 December 2018 of the Railway Board, to which

Clause 18.0 of the GCC made reference, set out the arbitration policy

of the Railway Board. The relevant clauses thereof, which are

pertinent to the dispute before us, maybe reproduced as under:

“2903: Demand for Arbitration:

2903(i): In the event of any dispute or difference between the

parties hereto as to the construction or operation of this contract, or

the respective rights and liabilities of the parties on any matter in

question, dispute or difference on any account, or if the Railway

fails to make a decision within 120 days (as referred in 2902), then

and in any such case, but except in any of the “excepted matters”

referred to in Clause 2902 of these Conditions, parties to the

contract, after 120 days but within 180 days of their presenting

their final claim on disputed matters shall demand in writing that

the dispute or difference be referred to arbitration. Provided that

where the claim is raised by Railways para 2903(i) shall not apply.

2903(ii)(b): The parties may waive off the applicability of Sub-

Section 12(5) of Arbitration and Conciliation Act, 1996 (as

amended), if they agree for such waiver in writing, after dispute

having arisen between them.

2903(iii)(a): The Arbitration proceedings shall be assumed to

have commenced from the day, a written and valid demand for

arbitration is received by the Railway.

2905: Appointment of Arbitrator:

7

"the GCC" hereinafter

FAO(OS) (COMM) 103/2026 & connected matters Page 6of25

2905(a): Appointment of Arbitrator where applicability of

section 12(5) of Arbitration and Conciliation Act has been waived

off :

(i): In cases where the total value of all claims in question

added together does not exceed ₹1,00,00,000/- (Rupees One Crore

only), the Arbitral Tribunal shall consist of a Sole Arbitrator, who

shall be a Gazetted Officer of Railway not below Junior

Administrative Grade, nominated by the General Manager. The

sole arbitrator shall be appointed within 60 days from the day when

a written and valid demand for arbitration is received by General

Manager.

(ii): In cases where the total value of all claims in question

added together exceeds ₹1,00,00,000 (Rupees One Crore Only), the

Arbitral Tribunal shall consist of a panel of three Gazetted Railway

Officers not below Junior Administrative Grade or 2 Railway

Gazetted Officers not below Junior Administrative Grade and a

retired Railway Officer, retired not below the rank of Senior

Administrative Grade Officer, as the arbitrators. For this purpose,

the Railway will send a panel of at least four (4) names of Gazetted

Railway Officers of one or more departments of the Railway which

may also include the name(s) of retired Railway Officer(s)

empanelled to work as Railway Arbitrator to the Contractor within

60 days from the day when a written and valid demand for

arbitration is received by the General Manager.

Contractor will be asked to suggest to General Manager at least 2

names out of the panel for appointment as Contractor’s nominee

within 30 days from the date of dispatch of the request by Railway.

The General Manager shall appoint at least one out of them as the

Contractor’s nominee and will, also simultaneously appoint the

balance number of arbitrators either from the panel or from outside

the panel, duly indicating the ‘presiding arbitrator’ from amongst

the 3 arbitrators so appointed. General Manager shall complete this

exercise of appointing the Arbitral Tribunal within 30 days from

the receipt of the names of Contractor’s nominees. While

nominating the arbitrators, it will be necessary in ensure that one of

them is from the Accounts Department. An officer of Selection

Grade of the Accounts Department may be considered of equal

status to the officers in Senior Administrative Grade of other

departments of the Railway for the purpose of appointment of

arbitrator

iii: The serving railway officer working in arbitral tribunal in

the ongoing arbitration cases as per clause 2905(a)(i) and clause

FAO(OS) (COMM) 103/2026 & connected matters Page 7of25

2905(a)(ii) above, can continue as arbitrator in the tribunal even

after his retirement.

2905(b): Appointment of Arbitrator where applicability of

Section 12 (5) of Arbitration and Conciliation Act has not been

waived off:

(i)In cases where the total value of all claims in question

added together does not exceed 50,00,000/- (Rupees Fifty Lakh

only), the Arbitral Tribunal shall consist of a Retired Railway

Officer, retired not below the rank of Senior Administrative Grade

Officer, as the arbitrator. For this purpose, the Railway will send a

panel of at least four (4) names of retired Railway Officer(s)

empanelled to work as Railway Arbitrator duly indicating their

retirement dates to the Contractor within 60 days from the day

when a written and valid demand for arbitration is received by the

General Manager

Contractor will be asked to suggest so General Manager at least 2

names out of the panel for appointment as arbitrator within 30 days

from the date of dispatch of the request by Railway. The General

Manager shall appoint at least one out of them as the arbitrator

(ii) In cases where the total value of all claims in question

added together exceeds 50,00,000/- (Rupees Fifty Lakh only), the

Arbitral Tribunal shall consist of three (3) retired Railway Officers,

retired not below the rank of Senior Administrative Grade Officer,

For this purpose, the Railway will send a panel of at least four (4)

names of retired Railway Officers) empanelled to work as Railway

Arbitrators duly indicating their retirement date to the Contractor

within 60 days from the day when a written and valid demand for

arbitration is received by the General Manager.

Contractor will be asked to suggest to General Manager at least 2

names out of the panel for appointment as Contractor's nominee

within 30 days from the date of dispatch of the request by Railway.

The General Manager shall appoint at least one out of them as the

Contractor's nominee and will, also simultaneously appoint the

balance number of arbitrators either from the panel or from outside

the panel, duly indicating the "Presiding Arbitrator from amongst

the 3 arbitrators so appointed. General Manager shall complete this

exercise of appointing the Arbitral Tribunal within 30 days from

the receipt of the names of Contractor's nominees. While

nominating the arbitrators, it will be necessary to ensure that one of

them has served in the Accounts Department.

FAO(OS) (COMM) 103/2026 & connected matters Page 8of25

2905(c)(ii)(a) Fast Track procedure:Parties to the

arbitration agreement may, at any stage either before or at the time

of appointment of the arbitral tribunal, agree in writing to have

their dispute resolved by fast track procedure specified in Section

29B

8

of the Arbitration & Conciliation Act, 1996, as amended”

8.The Railway Board short-closed the contract on 20 March 2023,

cancelled the contract insofar as it related to the supply of the

remaining 390 wagons and forfeited the bank guarantee provided by

TRSL.

9.Disputes, thereby, arose between TRSL and the Railway Board.

10.On 29 May 2023, TRSL wrote to the Railway Board, seeking a

reference of the disputes which had arisen to arbitration in terms of

Clause 18.0 of the GCC read with letter dated 12 December 2018 of

the Railway Board. The notice also stated that TRSL was not waving

8

29-B. Fast track procedure. –

(1) Notwithstanding anything contained in this Act, the parties to an arbitration agreement,

may, at any stage either before or at the time of appointment of the arbitral tribunal, agree in

writing to have their dispute resolved by fast track procedure specified in sub-section (3).

(2) The parties to the arbitration agreement, while agreeing for resolution of dispute by fast

track procedure, may agree that the arbitral tribunal shall consist of a sole arbitrator who shall be

chosen by the parties.

(3) The arbitral tribunal shall follow the following procedure while conducting arbitration

proceedings under sub-section (1):

(a) The arbitral tribunal shall decide the dispute on the basis of written pleadings,

documents and submissions filed by the parties without any oral hearing;

(b) The arbitral tribunal shall have power to call for any further information or

clarification from the parties in addition to the pleadings and documents filed by them;

(c) An oral hearing may be held only, if, all the parties make a request or if the

arbitral tribunal considers it necessary to have oral hearing for clarifying certain issues;

(d) The arbitral tribunal may dispense with any technical formalities, if an oral

hearing is held, and adopt such procedure as deemed appropriate for expeditious disposal

of the case.

(4) The award under this section shall be made within a period of six months from the date

the arbitral tribunal enters upon the reference.

(5) If the award is not made within the period specified in sub-section (4), the provisions of

sub-sections (3) to (9) of Section 29-A shall apply to the proceedings.

(6) The fees payable to the arbitrator and the manner of payment of the fees shall be such as

may be agreed between the arbitrator and the parties.

FAO(OS) (COMM) 103/2026 & connected matters Page 9of25

the provisions of Section 12(5) of the 1996 Act. Paras 9 to 12 of the

notice dated 29 May 2023 may be reproduced as under:

“9. In light of the above facts and circumstances, it is evident

that disputes and differences have arisen and still subsist between

the parties out of and/or in relation to the contract.

10. As such, we, hereby invoke the arbitration clause in the

contract being clause 18 of the Indian Railways General Conditions

of Contract for the Manufacture and Supply of Wagons (read with

the Railway Board's letter no. 2018/TF/Civil/Arbitration Policy

dated 12

th

December 2018) and refer all and any disputes arising

out of and/or in relation to the contract to arbitration before an

arbitral tribunal consisting of 3 arbitrators. We reserve our right to

furnish particulars and make appropriate claims in respect of the

aforesaid disputes and differences before the arbitral tribunal, once

constituted.

11. Titagarh does not waive the provisions of Section 12 (5) of

the Arbitration and Conciliation Act, 1996 ('said Act').

12. We are in the process of nominating an arbitrator on our

behalf by a separate letter and will call upon you to nominate a

nominee on your behalf. The two arbitrators so nominated will

appoint a third arbitrator as the presiding arbitrator to adjudicate the

disputes and differences between ourselves.”

11.Following this, TRSL wrote to the Railway Board on 11 August

2023, invoking the arbitration clause in the agreement between the

parties, again stating that it was not waving the provisions of Section

12(5) of the 1996 Act and proposing the name of a learned retired

Supreme Court judge as the nominee arbitrator of TRSL. The letter

may be reproduced,in extenso, thus:

To, Date: 11.08.2023

The Executive Director Railway Stores (S)

Railway Board,

Ministry of Railways,

Government of India,

New Delhi.

FAO(OS) (COMM) 103/2026 & connected matters Page 10of25

Sub: 2020/RS(I)/954/130/1863 DATED 30

TH

SEPTEMBER 2020

AND REFERENCE OF DISPUTES TO

ARBITRATION

Re: Our letter dated 29.05.2023

Sir,

This letter has reference to the subject contract and the disputes

arising out of it as well as our letter dated 29.05.2023. The details

of the disputes are omitted here for the sake of brevity as we

specifically refer to our letter dated 29.05.2023, (a copy of whereof

is enclosed herewith for your ready reference) where we accepted

your decision to short close the subject Contract No

2020/RS(1)/954/130/1863 dated 20.03.2023, by cancelling the

balance quantity of 390 BCNA wagons, and submitted that the

following penalties aggregating Rs. 14,68,98,663/- levied by you

are grossly unfair, unjust, and hence not legally tenable:

1. Forfeiture, of the Bank Guarantee submitted by us towards

the Security Deposit of Rs 5,00,00,000/-

2. Liquidated damages amounting to Rs 5,19,15,870/- and

3. Not allowing us the benefit of price variance resulting in

loss of Rs 4,49,82,793/- approx.

We have not received any reply from Indian Railway to the

abovementioned letter, and in view of the same we, hereby invoke

the arbitration clause in the contract being clause 18 of the Indian

Railways General Conditions of Contract for the Manufacture and

Supply of Wagons (read with the Railway Board's letter no.

2018/TF/Civil/Arbitration Policy dated 12

th

December 2018) and

refer all and any disputes arising out of and/or in relation to the

contract to arbitration before an arbitral tribunal consisting of 3

arbitrators.

Titagarh does not waive the provisions of Section 12 (5) of the

Arbitration and Conciliation Act, 1996 ('said Act'). In view thereof

we propose the appointment of Mr. Justice Deepak Gupta, (Retd.

Judge, Supreme Court of India) as our nominee Arbitrator for

adjudicating the disputes between us. We reserve our right to

furnish particulars and make appropriate claims in respect of the

aforesaid disputes and differences before the arbitral tribunal, once

constituted.

FAO(OS) (COMM) 103/2026 & connected matters Page 11of25

This letter is being issued without prejudice to our lawful rights and

contentions.

Yours faithfully,

For Titagarh Rail Systems Limited

(formerly Titagarh Wagons Limited)

(Dinesh Arya)

Company Secretary”

12.As the Railway Board did not respond to the above notice

issued by TRSL, TRSL filed Arb P 970/2023 before this Court under

Section 11(6) of the 1996 Act, praying that a sole arbitrator be

appointed by this Court to arbitrate on the disputes between TRSL and

the Railway Board. On 3 October 2023, the Railway Board submitted,

to this Court, that the arbitration would be decided by the Fast Track

procedure envisaged in the Railway Board Circular dated 12

December 2018. Accordingly, this Court disposed of Arb P 970/2023

as withdrawn.

13.Following this, on 17 October 2023, TRSL addressed the

following communication to the Railway Board:

“No.: BCNA/Arbit/23/01 17 October 2023

To, Director, RS(W)

Railway Board

New Delhi

Subject: Arbitration in the matter w.r.t. Contract No.

2020/RS(I)/954/130/1863 dated 30.09.2020 between M/s Titagarh

Wagons Limited, Kolkata and Ministry of Railways

Ref: Our letter dated 29.05.2023

Dear Sir,

FAO(OS) (COMM) 103/2026 & connected matters Page 12of25

With reference to the abovementioned letter the Claimant hereby

gives its consent for conduct of arbitration through the Fast Track

Procedure as per para 2905(c)(ii)(a) of the IRS Conditions of

Contract as revised by circular No.2018/TF/Civil/Arbitration

Policy dated 12.12.2018, r.w. Section 298 of the Arbitration and

Conciliation Act, 1996, (as amended).

Thanking You.

Yours Sincerely,

For Titagarh Rail Systems Limited

(formerly Titagarh Wagons Limited)

Sd/-

Dinesh Arya

Company Secretary & Chief Compliance Officer”

14.The Railway Board responded, on 16 November 2023, thus:

“No.2020/RS(1)/954/130/1863

New Delhi-110001, Dated: 16.11.2023

M/s. Titagarh Rail Systems Limited,

Titagarh Towers,

756, Anandapur,

E.M. Bypass,

Kolkata-700107.

Dear Sir,

Sub: Arbitration request in the Contract No.

2020/RS(I)/954/130/1863 dated 30.09.2020 between M/s. Titagarh

Wagons Limited, Kolkata (Now M/s. Titagarh Rail Systems Ltd.)

and Ministry of Railways.

Ref: Your Letter No. BCNA/Arbit/23/01 dated 17.10.2023.

Your above referred letter regarding conducting Arbitration

through Fast Track Procedure against the subject contract is under

consideration in Board's office.

FAO(OS) (COMM) 103/2026 & connected matters Page 13of25

In this regard, the names of 04 Railway Officers for appointment of

Sole Arbitrator in the subject contract are as under:

(a) Shri Ajeet Singh Yadav – EDRS/P, Railway Board

(b) Shri V. Appa Rao – EDRS/RS, Railway Board

(c) Shri Randhir Sahay – EDF/S, Railway Board

(d) Shri M.K. Gupta – EDRS/G, Railway Board

It is requested to suggest names of two Railway Officers indicated

above for the appointment of Sole Arbitrator in the subject

contract. Out of two Railway Officers, one Officer will be

appointed as Sole Arbitrator to resolve the dispute against the

subject contract.

Yours faithfully

Sd/-

(Vipul Kanaujia)

Director, Railway Stores (W)”

We may note, here, that it is one of Mr. Rao’s principal submissions

that, by adopting the Fast Track Procedure envisaged by Clause

2905(c)(ii)(a) of the Circular dated 12 December 2018, the Railway

Board had effectively waived the applicability of Section 12(5), as the

Fast Track Procedure applied only in such a case.

15.TRSL, vide its reply dated 24 January 2024, shortlisted the

names of two of the Railway Board officers named in the afore-

extracted communication dated 16 November 2023 of the Railway

Board. This communication read as under:

“No.: BCNA/Arbit/23/03 24 January 2024

To,

Director, RS(W)

Railway Board

New Delhi

FAO(OS) (COMM) 103/2026 & connected matters Page 14of25

Subject: Arbitration in the matter w.r.t. Contract No.

2020/RS(I)/954/130/1863 dated 30.09.2020 between M/s Titagarh

Wagons Limited, Kolkata and Ministry of Railways

Ref: 1. Your letter dated 16.11.2023

2. Our letter dated 29.12.2024

Dear Sir,

With reference to the abovementioned letters, we would request

you to note our suggestion as follows:-

1. Shri Ajeet Singh Yadav

2. Shri Randhir Sahay

Please treat our letter dated 29.12.2023 as withdrawn.

We await your response on the nomination of the Sole Arbitrator

from the aforesaid proposed name,

Thanking You,

Yours Sincerely,

For Titagarh Rail Systems Limited

(formerly Titagarh Wagons Limited)

Sd/-

Dinesh Arya

Company Secretary & Chief Compliance Officer”

16.The Railway Board, vide its response data 30 January 2024,

appointed Shri Randhir Sahay, Executive Director, Finance(S) in the

Railway Board, as the sole arbitrator to arbitrate on the disputes

between TRSL and the Railway Board.

17.Thereafter, arbitral proceedings commenced before Shri

Randhir Sahay, as the learned Sole Arbitrator. These proceedings

culminated in arbitral award dated 5 August 2024, whereby the

learned arbitrator directed reinstatement of the contract, extended the

FAO(OS) (COMM) 103/2026 & connected matters Page 15of25

delivery period for the wagons by 4½ months from the date of the

award without liquidated damages for delivery of the remaining 390

wagons and also held TRSL to be entitled to refund of liquidated

damages to the extent of ₹ 5,19,15,870.

18.The arbitral award was challenged, before the learned Single

Judge, by TRSL as well as by the Railway Board.

19.TRSL, vide OMP (Comm) 503/2024, challenged the arbitral

award to the extent that it (i) did not grant interest on the amount

awarded in favour of TRSL, (ii) granted only 4 ½ months to TRSL for

supplying the remaining 390 wagons and (iii) did not direct refund of

the security deposit paid by TRSL with interest.

20.The Railway Board, vide OMP (Comm) 475/2024, also

challenged the arbitral award on the ground that the appointment of

the learned arbitrator was illegal in view of Section 12(5) of the 1996

Act.

D.The Impugned Judgment

21.The learned Single Judge has, in the judgment under challenge,

noted, at the outset, the fact that TRSL had, in its notices dated 29

May 2023 and 11 August 2023, specifically stated that it was not

waiving Section 12(5) of the 1996 Act. The learned Single Judge

notes that there was, in fact, no written waiver either by TRSL or by

the Railway Board, of the applicability of Section 12(5). The learned

FAO(OS) (COMM) 103/2026 & connected matters Page 16of25

Single Judge has found no substance in TRSL’s contention that the

adoption of the Fast Track Procedure as envisaged in Clause

2905(c)(ii)(a) of the Railway Board Circular dated 12 December 2018,

the suggestion of four serving Railway Board employees by the

Railway Board to TRSL in order to enable TRSL to choose a name

therefrom, and the selection, by TRSL, of one name from the said

panel of four names as the arbitrator to arbitrate on the disputes

between the parties, constituted waiver of Section 12(5) as envisaged

in the proviso thereto. In this context, the learned Single Judge has

placed extensive reliance on the judgment of the Supreme Court in

Bhadra International.

22.Aggrieved by the said decision, TRSL has filed the present

appeal.

E.Submissions of Mr. Rajshekhar Rao

23.Appearing for TRSL, Mr. Rao submits that there is a stark

difference between the facts of the present case and those which

obtained inBhadra International. He submits that the contract

between TRSL and the Railway Board specifically envisaged a

situation in which the parties waived the applicability of Section 12(5)

and where the parties did not do so. Different procedures were to be

followed, depending on whether Section 12(5) was, or was not,

waived. The question of selection of a sole Arbitrator out of a panel of

four arbitrators to be provided by the Railway Board, from its serving

employees was specifically contemplated, in Clause 2905(a)(ii), only

FAO(OS) (COMM) 103/2026 & connected matters Page 17of25

where there was waiver of Section 12(5) of the 1996 Act. As such,

Mr. Rao’s contention is that, by calling upon the Railway Board to

suggest a panel of its officers, in response to which the Railway Board

suggested a panel of four of its serving officers, from which TRSL

selected one as the sole Arbitrator, the parties had consciously adopted

and followed the procedure envisaged in a case where Section 12(5)

was waived. He submits that, having done so, the Railway Board

could not seek to wish away an adverse arbitral award by attempting

to invoke Section 12(5) after the award had been rendered. The

impugned judgment of the learned Single Judge, he submits, has not

holistically taken into account all these factors and has mechanically

applied theratio decidendiofBhadra International,unmindful of the

factual and legal differences between this case and that. Ergo, submits

Mr. Rao, the impugned judgment cannot sustain in law or on facts.

F.Analysis

24.AfterBhadra International, it is not possible for us to accept

the line of reasoning canvassed by Mr. Rao.Bhadra International,

we may note, arose out of a judgment rendered by one of us (C. Hari

Shankar, J.) sitting singly inBhadra International (India) (P) Ltd. v.

Airport Authority of India

9

.In that case, the parties had, in fact,

openly stated before the learned Arbitrator that they were agreeable to

his arbitrating on the dispute between the parties and that consent had

been reduced to writing by the Arbitrator in one of the orders passed

in the arbitral proceedings. It was in these circumstances that this

9

2024 SCC OnLine Del 10223

FAO(OS) (COMM) 103/2026 & connected matters Page 18of25

Court adopted the view that there was, in effect, written agreement to

the arbitration of the dispute by the Arbitrator in that case.

25.Even in such a case, the Supreme Court has held, while

reversing the judgment of this Court, that Section 12(5) of the 1996

Act requires a written agreement in writing, waiving the applicability

of Section 12(5) and nothing less than that. There cannot be any

implied waiver of Section 12(5). We may reproduce, to advantage the

following passages fromBhadra International, which evocatively lay

down the law:

“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.

*****

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

10

]

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 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

10

(2011) 14 SCC 770

FAO(OS) (COMM) 103/2026 & connected matters Page 19of25

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.

*****

81.It isonlythrough 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.

*****

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 theprovisoto

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

FAO(OS) (COMM) 103/2026 & connected matters Page 20of25

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 mutually agreed appointment and addresses

concerns regarding neutrality and fairness.

87. InBharat Broadband (supra)

11

, 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

11

Bharat Broadband Network Ltd v. United Telecons Ltd, (2019) 5 SCC 755

FAO(OS) (COMM) 103/2026 & connected matters Page 21of25

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.”

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.

12

]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 inTRF

Ltd.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

12

(2017) 8 SCC 377

FAO(OS) (COMM) 103/2026 & connected matters Page 22of25

fact that an appointment letter has been issued by the

appellant, and a statement of claim has been filed 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.InCORE II (supra)

13

, this Court underscored the rationale

behind the first two essentials of theproviso. 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

14

] 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

15

]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. The second

requirement of the proviso to Section 12(5) is that parties

must consciously abandon their 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.

13

Central Organization for Railway Electrification v. ECI SPIR SMO MCML (JV) A Joint Venture

Company, (2025) 4 SCC 641

14

(2016) 5 SCC 808

15

(2011) 14 SCC 770

FAO(OS) (COMM) 103/2026 & connected matters Page 23of25

90. The conduct of the parties is inconsequential and does not

constitute a valid waiver under theproviso. 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.

******

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

theprovisoto 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, 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 theprovisoto 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.”

(Emphasis in the original)

26.There is no contest even by Mr. Rao to the finding of the

learned Single Judge that in the present case, there is, in fact no

written communication much less a written agreement, inter parties to

that effect, by either side waiving the applicability of Section 12(5).

27.While it may be true that the procedure followed by the parties

was that which was envisaged, in the contract between them, as

applying where there was waiver of Section 12(5), following of the

procedure cannot by itself result in such waiver. The argument

FAO(OS) (COMM) 103/2026 & connected matters Page 24of25

effectively puts the cart before the horse. There must, in the first

instance, be waiver of the applicability of Section 12(5) by written

agreement in writing as required by the proviso to the said clause read

with the decision inBhadra International, and, only thereafter, if

there exists such express waiver in writing, would the arbitral

procedure envisaged in that situation as contained in Clause

2905(a)(ii) apply. The situation cannot be read in reverse. We cannot

accept the argument that by invoking the procedure applicable in a

case of waiver of Section 12(5), Section 12(5) stands waived, despite

the absence of any written agreement in writing to that effect.

28.In fact, the situation which exists in the present case is that the

very invocation of the procedure, envisaged in the contract between

the parties as being applicable in a case in which Section 12(5) stood

waived, was itself illegal. That procedure applies only where there is

waiver of the applicability of Section 12(5). Inasmuch as there was no

such waiver in the present case, the procedure itself would not apply.

By erroneously invoking the procedure which applies where Section

12(5) has been waived, waiver of Section 12(5) cannot be implied.

29.Besides, we find this argument, emerging from TRSL,

surprising, as TRSL had initially, in its communication dated 29 May

2023 and 11 August 2023, expressly stated that it was not waiving

Section 12(5) of the 1996 Act. We have not been shown any

communication thereafter by which this earlier communication was

revoked. Nor have we been shown any communication by which

FAO(OS) (COMM) 103/2026 & connected matters Page 25of25

TRSL – or the Railway Board – stated that it was waiving the

applicability of Section 12(5) of the 1996 Act.

30.Mr. Rao’s submission that the selection of the learned

Arbitrator was from a panel which was discussed between the parties

cannot aid his case.Bhadra Internationalhas specifically held that

consensual appointment of the arbitrator, absent any written waiver of

Section 12(5), would be insufficient to render the proviso to Section

12(5) applicable.

31.In that view of the matter, the learned Single Judge is correct in

his view that Section 12(5) of the Act never stood waived between the

parties by express agreement in writing as required by the proviso

thereto and the law as it stands declared inBhadra International. The

learned Single Judge was also, therefore, right in setting aside the

arbitral award on that ground.

32.There is, therefore, no cause for us to interfere in the present

appeals which are accordingly dismissedinliminewith no orders as to

costs.

C. HARI SHANKAR, J.

OM PRAKASH SHUKLA, J.

APRIL 13, 2026/yg/aky