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Unilateral Arbitrator Appointments Deemed "Null and Void" by Delhi High Court

In a significant ruling for arbitration practice in India, the Delhi High Court has declared that any unilateral appointment of an arbitrator—one of the parties to the dispute selecting the sole arbitrator—is void ab initio . The decision serves as a stern reminder that statutory requirements under the Arbitration and Conciliation Act, 1996, cannot be circumvented, even by the conduct of the parties involved.

The Backdrop of the Dispute

The case arose from a 2008 agreement between Engineering Projects India Limited (EPIL) and Allied Construction for the construction of an agriculture college in Agartala. The contract’s General Conditions of Contract contained a specific clause allowing the CMD of EPIL to unilaterally appoint a sole arbitrator, despite the person potentially being an employee of the state-owned enterprise.

When a dispute emerged years later, EPIL proceeded to appoint an arbitrator independently. The proceedings moved forward, and an arbitral award was subsequently passed in favor of Allied Construction. However, EPIL challenged the award in the High Court, invoking Section 12(5) of the Arbitration Act, which guards against conflicts of interest in arbitral appointments.

The Legal Tug-of-War

EPIL argued that the unilateral appointment was fundamentally flawed under the amended Section 12(5) and the Seventh Schedule of the Act. Conversely, Allied Construction contended that EPIL—having made the appointment itself—could not turn around and challenge the outcome after participating fully in the arbitration process without objection. They argued that by participating in the proceedings, EPIL had effectively waived its right to challenge the arbitrator's status.

The Court’s Analysis: A Zero-Tolerance Policy

Justice Avneesh Jhingan, presiding over the case, dismantled the argument of "deemed waiver." Relying heavily on the Supreme Court’s recent judgment in Bhadra International (India) Pvt. Ltd. v. Airports Authority of India , the Court clarified that an arbitrator’s ineligibility is a matter of law that goes to the very root of their jurisdiction.

The Court held that:

1. Mandatory Compliance: The requirement for an "express agreement in writing" to waive the ineligibility under Section 12(5) is absolute. Conduct, acquiescence, or participation does not constitute a valid waiver.

2. Jurisdictional Nullity: Because the appointment was made unilaterally without an express written agreement to waive the statutory protection, the appointment was invalid from the start.

3. No Prospective Limitation: The Court dismissed the Respondent’s claim that current legal precedents should not apply to past awards, noting that the law, as interpreted by the Supreme Court, applies universally and retrospectively to pending challenges.

Key Observations

The judgment offers clear guidance on the sanctity of arbitral appointments:

• "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 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."
• "An award passed by a unilaterally appointed arbitrator is a nullity as the ineligibility goes to the root of the jurisdiction."
• "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... must be made only through an express and written manifestation of intention."

Final Verdict: Resetting the Arbitration

Ultimately, the High Court set aside the arbitral award, declaring it a nullity. This decision reinforces the principle that procedural integrity in arbitration is non-negotiable. For corporate entities and government bodies, the message is clear: contractual clauses that grant unilateral powers to appoint arbitrators—even if accepted by the other party at the time of signing—face an uphill battle in court. Any appointment made in deviation from the statutory safeguards of Section 12(5) risks being struck down entirely, regardless of the time and resources spent on the underlying arbitration.