Unilateral Appointments Before 23 October 2015: Bombay High Court Confines Bhadra International And Protects Pre-Amendment Awards In Execution

Unilateral Appointments Before 23 October 2015: Bombay High Court Confines Bhadra International and Protects Pre-Amendment Awards in Execution

High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction (Commercial Jurisdiction), Jitendra Jain, J., judgment dated 4 August 2026, in Interim Application No. 2007 of 2026 in Commercial Execution Application No. 59 of 2016 (S.E. Investments Ltd., now Paisalo Digital Limited v. Star Bazaar Private Limited & Ors.) and connected applications.

Background and Context

Section 12(5) of the Arbitration and Conciliation Act, 1996, inserted by Act 3 of 2016 with retrospective effect from 23 October 2015, renders a person whose relationship with the parties, counsel or subject matter falls within the Seventh Schedule ineligible to act as arbitrator, subject only to an express written waiver executed after disputes have arisen.

Before that date, the position was materially different. The Supreme Court had repeatedly upheld arbitration clauses under which one contracting party named the arbitrator, identified the arbitrator by designation, or was authorised to make the appointment: Datar Switchgears Ltd. v. Tata Finance Ltd. (2000) 8 SCC 151, ACE Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corporation Ltd. and Indian Oil Corporation Ltd. v. Raja Transport (P) Ltd. (2009) 8 SCC 520, the last carving out a narrow exception where the named arbitrator is an employee of a private entity rather than the State or its instrumentalities.

The present controversy arose from Bhadra International (India) Pvt. Ltd. v. Airport Authority of India, 2026 SCC OnLine SC 7, decided on 5 January 2026. Arbitration there had been invoked after 23 October 2015 under a pre-amendment licence agreement. The Supreme Court held the appointment void for contravention of Section 12(5) and the award incapable of execution, relying on Dharma Prathishthanam v. Madhok Construction (P) Ltd. (2005) 9 SCC 686 and observing, in paragraph 37, that what was implicit prior to 23 October 2015 has now been made explicit.

Judgment debtors in several execution proceedings seized on that observation, arguing that if neutrality and equality were always implicit in Sections 7, 11, 12 and 18, then pre-2015 unilateral appointments were equally void and the resulting awards unenforceable even absent any challenge under Section 34. The Execution Court framed two questions on 1 July 2026 and appointed Mr. Jay Sanklecha as amicus curiae.

Questions Framed

First, whether unilateral appointment of an arbitrator prior to 23 October 2015 is without jurisdiction, rendering all proceedings arising therefrom void ab initio. Second, if so, whether an Executing Court may consider the effect of such an appointment where the award has never been challenged.

The Court’s Threefold Classification

The analytical pivot of the judgment is the Court’s insistence that the expression "unilateral appointment" conceals three distinct situations, and that conflating them is the source of the confusion in the case law. The Court identified: (a) appointment by a party of a person who is evidently not impartial or independent, such as an office bearer of that party; (b) appointment by a party expressly entitled under the arbitration agreement to appoint, where the appointee is unconnected with that party; and (c) appointment by a party where the agreement contains no clause naming an arbitrator or conferring any right of appointment, made without the consent of the other side.

Holding

On the first question, the Court held that unilateral appointment prior to 23 October 2015 pursuant to an arbitration clause that names an arbitrator, identifies the arbitrator by designation, or authorises one party to appoint, is not without jurisdiction, and the proceedings arising from it are not void ab initio. The exception is the third category, where there is no contractual foundation for the appointment at all. Such an appointment is void.

On the second question, the Court held that it does not arise save in the third category, where an Executing Court would be justified in treating the award as void. Significantly, even there, if a challenge to the appointment was made and failed, the Executing Court cannot treat the award as void.

The Court’s Reasoning

The reasoning proceeds along several independent strands, each sufficient in itself.

The Court first applied settled principles on the reading of precedent. Bhadra International was concerned, as its paragraph 29 records, with an invocation after 23 October 2015 and with whether ineligibility under Section 12(5) could be raised for the first time under Section 34. Paragraphs 32 to 37 were reasoning directed to that question, and read with paragraph 38 the reference to mandatory provisions is a reference to Section 12(5). It is therefore neither the ratio nor the obiter of that decision that all pre-2015 unilateral appointments are void. The Court drew on Ashwani Kumar Singh v. U.P. Public Service Commission (2003) 11 SCC 584, Commissioner of Income Tax v. Sun Engineering Works (P) Ltd. (1992) 4 SCC 363 and Deepak Bajaj v. State of Maharashtra (2008) 16 SCC 14 for the principle that a judgment is an authority for what it decides and cannot be read as a statute divorced from context.

Second, the Court applied the discipline of coordinate benches. Datar Switchgears, ACE Pipeline and Indian Oil Corporation have not been expressly overruled and were decided by benches of the same strength as Bhadra International. To accept the judgment debtors’ reading would be to treat them as impliedly overruled, which a single judge cannot do.

Third, the Constitution Bench in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) (2025) 4 SCC 641 examined the pre-2015 line of authority in detail while analysing party autonomy, neutrality, the nemo judex principle and Sections 11, 12 and 18. It did not overrule those decisions; it disagreed with a post-2015 decision on panel appointments and made its own ruling prospective. That is decisive against the contention that the earlier decisions are no longer good law for pre-2015 invocations.

Fourth, the Court addressed the legislative choice directly. Section 12(5) was given retrospective effect from 23 October 2015 and no earlier. Had Parliament intended the Seventh Schedule disqualifications to reach earlier appointments, nothing prevented it from saying so, and disqualification cannot be ascribed impliedly and retrospectively. Law Commission of India Report No. 246 furnishes the rationale for the amendment but cannot supply a basis for applying it to appointments preceding it.

Fifth, the pre-amendment statute itself contained the safeguards now relied upon. Section 12(1) required disclosure, Section 12(3) permitted a challenge on justifiable doubts as to independence or impartiality, Section 13 governed the challenge procedure and Section 16 empowered the tribunal to rule on its own jurisdiction. Where that remedy was not availed, Section 4 operates as a deemed waiver and the party cannot resist execution on a ground it never took. In the Court’s formulation, the Act gave a full shield, and parties who declined to raise it cannot now use it as a sword against execution.

The conclusion also sits with the settled prospectivity jurisprudence: Board of Control for Cricket in India v. Kochi Cricket (P) Ltd. (2018) 6 SCC 287, Aravali Power Company (P) Ltd. v. Era Infra Engineering Ltd. (2017) 15 SCC 32, Rajasthan Small Industries Corporation Ltd. v. Ganesh Containers Movers Syndicate (2019) 3 SCC 282, S.P. Singla Constructions (P) Ltd. v. State of Himachal Pradesh (2019) 2 SCC 488 and Union of India v. Parmar Constructions Company (2019) 15 SCC 682, together with the Division Bench ruling in State of Maharashtra v. Morya Infrastructure (P) Ltd., which had already declined to apply Section 12(5) to pre-amendment appointments after considering Bhadra International.

The Delhi High Court decisions relied upon for the judgment debtors were distinguished on a basis that will matter in practice. Those were petitions under Section 34, in which awards were set aside because the appointments failed the tests of impartiality on the facts of those cases. A successful setting-aside challenge means the award never reaches execution; it does not follow that an Executing Court may itself declare an unchallenged pre-2015 award void.

Practical Implications

For lenders, non-banking financial companies and other holders of older awards, the judgment closes what had become a frequently used route of resistance at the execution stage. Where the documentation named the arbitrator or conferred a power of appointment and arbitration was invoked before 23 October 2015, Bhadra International will not by itself defeat enforcement.

For judgment debtors, the contractual text now determines the outcome. The threshold enquiry in every objection is whether the arbitration agreement in fact provided for the appointment made. Where it did not, and the appointment was made without consent, the objection survives in execution, unless a challenge was previously mounted and rejected.

More generally, the judgment reinforces that objections to the constitution of a tribunal belong to Sections 13, 16 and 34, not to Order XXI. Participation without protest, followed by silence at the setting-aside stage, will ordinarily be treated as waiver under Section 4.

Nothing in the decision dilutes the post-23 October 2015 regime. For arbitrations commenced on or after that date, Section 12(5) read with the Seventh Schedule continues to operate as a statutory bar, curable only by an express written waiver after disputes have arisen.

Concluding Observations

The judgment is a careful exercise in confining a recent Supreme Court ruling to the question it answered. Its central contribution is the taxonomy of unilateral appointments, which supplies a workable test for the execution proceedings in which the objection is now routinely taken. By locating the dividing line at the presence or absence of contractual consent to the appointment mechanism, rather than at the label of unilateralism, the Court has preserved the finality of a large body of pre-amendment awards while leaving intact the narrow category that Dharma Prathishthanam always treated as void. The matters stand listed on 15 September 2026, and the reasoning may in time be tested in appeal.

Source: Judgment dated 4 August 2026 in Interim Application No. 2007 of 2026 in Commercial Execution Application No. 59 of 2016 (CNR No. HCBM020116742026), High Court of Judicature at Bombay.

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