The Division bench comprising of J. Vibhu Bakhru and J. Tejas Karia, of the Hon'ble High Court of Delhi in a recent judgement dated 31.05.2025 titled in M/s. Mahavir Prasad Gupta & Sons v. NCT of Delhi, in an appeal filed under Section 37 of the Arbitration & Conciliation Act, 1996 ("Arbitration Act") discussed the controversial issue of appointment of a sole arbitrator unilaterally by one party and the basis on which such appointment can be contested, through a on the grounds that the appointment of arbitrator was void ab initio under Section 12(5) read with the Seventh Schedule of the Arbitration Act The Court denied the Contractor's Appeal and maintained the Commercial Court's ruling to set aside an Arbitral Award of ₹1.76 crore.
The present article discusses at length, the judgement dated 31.05.2025 in M/s. Mahavir Prasad Gupta & Sonsv. NCT of Delhi, FAO (COMM) 170/2023 (“the Judgement”), and further puts forth a critique on the effect of this precedent on the dynamic landscape of Arbitration in India.
FACTUAL MATRIX:
The dispute between parties had arisen out of Contract entered for construction of road project which was awarded to M/s Mahavir Prasad Gupta and Sons who had emerged as the successful bidder in response to the notice issued by and the Government of NCT of Delhi, relating to the strengthening of Road No. 58 in Delhi (“Project”) and issued the Work Order in favour of the Appellant on 25.11.2014. After the work was completed, the Appellant submitted the final bill on 16.11.2015, however, the Government withheld the final payment citing alleged defects. In rise of these disputes, when the dispute was referred to arbitration vide a Notice invoking Arbitration dated 18.10.2018, the Government unilaterally appointed Shri A.K. Singhal, a former CPWD official, as the Sole Arbitrator.
The Arbitrator passed an Award in favor of the Appellant herein, granting over ₹1.76 crore along with 10% interest. However, the Commercial Court, upon challenge under Section 34 of the Arbitration Act, set aside the Award on the ground that the appointment of the Arbitrator was in contravention of Section 12(5) read with the Seventh Schedule of the Act. Being aggrieved by the Impugned Order, the Appellant preferred the present Appeal under Section 37 of the Arbitration Act before the Hon'ble High Court of Delhi.
CONTENTIONS RAISED BY THE PARTIES:
The Appellant, in support of its challenge presented the following contentions:
- Throughout the arbitration process, the Respondent made no objections to the appointment of the knowledgeable Sole Arbitrator. Conversely, the Respondent took an active part in the arbitration and consented to the learned Sole Arbitrator's mandate being extended under Section 29A of the Act.
- The Respondent has for the first time, raised a plea against the unilateral appointment of the Arbitrator in its application filed under S. 34, upon a query raised by the Ld. Commercial Court.1 When no objections were raised throughout the proceedings, a challenge could not be raised at the stage of S. 34, in view of the judgements of Arjun Mall Retail Holdings (P) Ltd. v. Gunocen Inc.2and Bhadra International India (P) Ltd. v. Airports Authority of India3.
- Reliance was placed on Kanodia Infratech Limited v. Dalmia Cement (Bharat) Limited4 to contend that the Respondent has been prevented from contesting the basis of unilateral appointment due to their active participation in the arbitration proceedings.
- An application under Section 34 of the Act cannot be allowed on the ground of unilateral appointment of the arbitrator, since it is not a ground laid out for such challenge in the Act.
On the contrary, the Respondent put forth the following contentions:
- The Appellant failed to provide the express written waiver required by the proviso to Section 12(5) of the Act, and without this waiver, the Learned Sole Arbitrator's award is void and, as a result, unenforceable. Reliance was placed on PerkinsEastman Architects DPC v. HSCC (India) Ltd.5
- If an arbitrator is deemed ineligible to serve as an arbitrator, their award will not be deemed valid, in view of Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat6
- The clause in the agreement between the parties allowing one of the parties to unilaterally appoint an arbitrator is in violation of the principle of equality, substantial reliance was placed on Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) A Joint Venture Co.,7 (hereinafter referred as “CORE‟)
FINDINGS OF THE COURT:
The legal contentions posed before the Hon'ble Delhi High Court were majorly two-fold:
- Can parties be considered to have waived objections to a unilateral appointment simply by participating in arbitration, even though the proviso to Section 12(5) requires express writing?
- Is an award made by an arbitrator who is ineligible and appointed unilaterally null and void in and of itself, allowing objections at any point, even from the party who appointed them?
The Court reiterated that Indian Arbitration Law prohibits the unilateral appointment of a single arbitrator under any circumstances. Making reference to TRF Ltd. v. . Engineers Energo Projects Ltd8, the Court ruled that an individual cannot even nominate an arbitrator if they are non- eligible to be appointed as one, under Section 12(5). The Supreme Court extended has furthered this line of thinking in Perkins Eastman Architects DPC v. HSCC (India) Limited9 which made it clear that one party's singular authority to choose the arbitrator is inadmissible in and of itself.
Additionally, the Court relied on the Constitution Bench's ruling in CORE to place the observation that unilateral appointment clauses in public private contracts are violative of Article 14 of the Constitution of India.10
It was further held against the Appellant's submissions that the Respondent's agreement to extend the arbitrator's mandate under Section 29A constituted an implied waiver of ineligibility. It made it clear that procedural actions like agreeing to an extension cannot take the place of an express written waiver made after the dispute arises, as required by Section 12(5). Neutrality and eligibility requirements are unaffected by behavior or convenience, as this reaffirmed.
The Court also held that in situations covered by Section 12(5) of the Act, Section 4, which addresses waiver by conduct, is not applicable. Any waiver of ineligibility must be made by express written agreement signed after the dispute has arisen, according to the latter clause. This observation was put forth in alignment with the Supreme Court's decision in the case of Bharat Broadband Network Ltd. v. American Telecoms Ltd.11 where it was decided that merely attending proceedings or failing to raise an objection does not, in accordance with Section 12(5), constitute a legitimate waiver. Thus, it is mandatory that a written waiver is provided under Section 12(5) of the Act, after the dispute arises in order for it to be deemed valid.
Lastly, the Court underlined in its observation that it is required by Section 34(2)(b) of the Arbitration Act, to set aside an arbitral award that is against Indian public policy. It restated that the "fundamental policy of Indian law" includes values like equality before the law and fair adjudication, which cannot be compromised by participation or silence. An award that transgresses these fundamental guidelines is void and unenforceable.12
CONCLUSION:
Four key points are firmly established by the Delhi High Court's decision in this Judgement: (i) appointment of an arbitrator unilaterally, is void; (ii) waivers require a clear written agreement following a dispute rather than passive behavior; (iii) an award made by an ineligible arbitrator is void and subject to challenge at any time, even by the party that made the appointment; and (iv) courts themselves must refuse enforcement when such illegality emerges.
The Court has particularly held that any conduct or participation cannot remedy ineligibility under Section 12(5), which is a jurisdictional defect. These objections hold true even if they are made by the person who is appointing. Thus, the most significant aspect of the decision is that the Court upheld- even the party who has unilaterally selected the arbitrator may challenge the award under Section 34 on the grounds of ineligibility under Section 12(5). In the present Judgement, the Respondent government successfully argued that the neutrality requirement was breached in this case by the party itself designating the sole arbitrator.
In the author's view, while it is certain that unilateral appointment of an arbitrator unilaterally, is void, and waiver must require a clear written agreement. It is clear from the facts of the Judgement that it was well known to the Respondent on the day that the notice invoking Arbitration was issued by the Appellant, that unilateral appointment stands barred in the absence of written waiver after emergence of such dispute, in terms of the amendment to the Arbitration Act brought into effect in 2015.
Thus, while the Courts have an unequivocal duty to refuse enforcement of any invalid Award, they also have a duty to uphold the interest of justice and commercial interests between two contracting parties. Further, It is well settled that ‘no one can take advantage of his own wrong'13, thus when a party challenges the appointment of a self-appointed Arbitrator, it is imperative on the Hon'ble Court to also balance the interests of the Parties. A balancing act that the Hon'ble Court could have endeavored to provide would be that the Appellant herein could have been granted the costs of the Arbitration proceedings, and the liberty to file an application before the appropriate forum for re-instigating the Dispute Resolution vide Arbitration through a Court appointed arbitrator, particularly in view of the fact that the challenge to the appointment of such arbitrator was made by the very party that had unilaterally appointed it. So that such act of belated challenges can be deterred from, and commercial viability of Arbitration can be upheld in the Indian dispute resolution landscape. It shall be interesting to note the observations of Hon'ble Supreme Court in the matter, lest the Appellant prefers an appeal to the present Judgement.
Footnotes
1. Para 13 of the Judgement.
2. (2024) 1 HCC (Del) 755.
3. 2025 SCC Online Del 698.
4. 2021 SCC Online Del 4883.
5. 2019 SCC OnLine SC 1517
6. 2023 SCC OnLine Del 3148
7. 2024 SCC OnLine SC 3219
8. (2017) 8 SCC 377
9. Supra at
10. Para36 of the Judgement
11. (2019) 5 SCC 755
12. Para 54
13. Union of India vs. Shakti LPG Lt., 2008 (223) ELT 129 (SC) (para-9)
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