Unilateral Arbitrator Appointments Can't Be Cured Without Express Written Waiver: Delhi High Court Upholds Setting Aside of Award

Introduction

In a significant reaffirmation of the principles of arbitrator independence and impartiality under Indian arbitration law, the Delhi High Court has dismissed an appeal against the setting aside of an arbitral award, ruling that a unilateral appointment of an arbitrator by one party violates Section 12(5) of the Arbitration and Conciliation Act, 1996 (the "1996 Act"), and cannot be cured without an express written waiver by the parties. The Division Bench, comprising Justice C. Hari Shankar and Justice Om Prakash Shukla, in the case of M/s M.V. Omni Projects (India) Ltd. v. Union of India (FAO(OS) (COMM) 110/2024), upheld a Single Judge's decision to quash the award dated May 30, 2023, which had been rendered in favor of the contractor against the Central Public Works Department (CPWD), a wing of the Union of India. This ruling, delivered on January 14, 2026, draws heavily on the Supreme Court's recent judgment in Bhadra International (India) (P) Ltd. v. Airports Authority of India (2026 SCC OnLine SC 7), emphasizing that implied consent or participation in proceedings does not substitute for the statutory requirement of a formal, written agreement waiving ineligibility. The decision underscores the evolving jurisprudence on arbitration neutrality, particularly in government contracts, and serves as a cautionary note for parties relying on unilateral appointment clauses post the 2015 amendments to the 1996 Act.

The case stems from a 2016 construction contract dispute, highlighting ongoing tensions between contractual autonomy and mandatory impartiality standards. By dismissing the appeal with no costs, the High Court reinforces that violations of Section 12(5) render arbitral proceedings void ab initio, potentially impacting numerous public sector arbitrations where such clauses are common.

Case Background

The dispute originated from a construction agreement dated January 12, 2016, between M/s M.V. Omni Projects (India) Ltd. (the appellant/contractor) and the Union of India through the Executive Engineer, CPWD (the respondent). The contract involved the construction of the IIIDEM Campus at Plot No. 1, Sector-13, Dwarka, New Delhi, including hostel blocks, auditoriums, institutional buildings, and associated infrastructure like water supply, electrical installations, and fire safety systems (Agreement No. 01/EE/IIIDEMPD/2015-16).

Clause 25 of the General Conditions of Contract governed dispute resolution, stipulating that disputes would be referred to a sole arbitrator appointed unilaterally by the Chief Engineer, CPWD, or, in their absence, by the Additional Director General (ADG), Special Director General, or Director General of CPWD. This clause explicitly barred any other person from acting as arbitrator and required the process to follow the 1996 Act.

Tensions escalated when CPWD terminated the contract on October 1, 2018, citing alleged defaults by the contractor. On October 11, 2018, the contractor invoked arbitration by issuing a notice under Section 21 of the 1996 Act, demanding the appointment of an independent arbitrator to adjudicate claims related to wrongful termination, unpaid dues, and other contractual breaches. CPWD did not respond by appointing an arbitrator as per the notice.

Consequently, on an unspecified date in 2019, the contractor filed ARB.P. 199/2019 under Section 11(6) of the 1996 Act before the Delhi High Court, seeking court-appointed arbitration due to CPWD's failure to act under the agreed procedure. During hearings, counsel for CPWD conceded that the Dispute Resolution Committee had rejected the contractor's claims and undertook to appoint an arbitrator "in terms of the contract" within four weeks. On August 23, 2019, the Single Judge disposed of the petition accordingly, recording the undertaking but not appointing an arbitrator themselves. A corrigendum on September 11, 2019, clarified this as an appointment by CPWD within the stipulated time.

True to its word, on September 6, 2019, the ADG (PRD), CPWD, issued an Office Memorandum appointing Advocate Anil Kumar Sharma as the sole arbitrator, explicitly under Clause 25 of the contract. The memorandum referenced the contractor's representation and enclosed a list of claims, directing the arbitrator to provide reasoned awards where claims exceeded Rs. 1,00,000.

Arbitral proceedings commenced without objection from either party. The contractor submitted its statement of claims, and hearings proceeded over several years, culminating in an award on May 30, 2023, favoring the contractor on merits, including compensation for wrongful termination and related losses. CPWD, aggrieved by the adverse outcome, challenged the award under Section 34 of the 1996 Act via OMP (Comm) 355/2023.

On May 8, 2024, a Single Judge allowed the challenge, setting aside the award solely on the ground that the arbitrator's unilateral appointment by CPWD violated Section 12(5) read with the Seventh Schedule of the 1996 Act, rendering it ineligible ab initio. The contractor appealed this decision, leading to the Division Bench's judgment.

The timeline—from contract execution in 2016 to the appeal's dismissal in 2026—illustrates the protracted nature of such disputes in public infrastructure projects, where arbitration clauses often favor government entities but now face stringent judicial scrutiny.

Arguments Presented

The appellant (contractor) was represented by Senior Advocate Raj Shekhar Rao, alongside a team of advocates, while the respondent (Union of India/CPWD) was argued by Ankur Mahindro and associates. The appeal centered on interpreting the interplay between the Section 11 petition, the contract's appointment clause, and Section 12(5)'s rigors.

The appellant's primary contention was that the unilateral appointment could not be deemed violative of Section 12(5) due to the procedural history. They argued that the Section 21 notice explicitly sought an independent arbitrator, and CPWD's non-response necessitated the Section 11(6) petition. Once filed, CPWD lost its unilateral right to appoint, and the court's disposal on CPWD's undertaking effectively sanctioned the process. Rao distinguished the Supreme Court's Bhadra ruling, noting that Bhadra did not involve a Section 11 route; here, the court's involvement transformed the appointment into a quasi-judicial one, not purely contractual. The appellant emphasized that no protest was raised during proceedings, and participation without objection implied waiver. They further contended that the award's merits were unassailable, and setting it aside solely on appointment grounds would undermine party autonomy and prolong disputes unnecessarily.

In response, CPWD argued that the appointment remained unilateral and contractual, as the court's order merely recorded their undertaking without exercising Section 11 powers. The Single Judge's reliance on Bharat Broadband Network Ltd. v. United Telecoms Ltd. (2019) 5 SCC 755 and Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2020) 20 SCC 760 was apt, as these precedents invalidated nominee appointments by interested parties. Citing Bhadra , counsel stressed that Section 12(5) prohibits persons with Seventh Schedule relationships (here, CPWD's hierarchical control over the ADG) from appointing arbitrators, and the proviso requires an express agreement in writing post-dispute—absent here. Participation or procedural orders do not constitute waiver, as implied consent cannot override statutory mandates for neutrality. CPWD urged upholding the Single Judge to prevent bias in public contracts, where government unilateralism has historically raised impartiality concerns.

Both sides delved into factual nuances: the appellant highlighted the Section 21 notice's demand for independence and the court's disposal as elevating the process, while CPWD pointed to the Office Memorandum's explicit invocation of Clause 25, underscoring its unilateral nature despite the court's imprimatur.

Legal Analysis

The Division Bench's reasoning meticulously dissects the evolution of Indian arbitration law post the 2015 amendments, which introduced Section 12(5) to bolster tribunal impartiality by deeming certain persons ineligible based on the Seventh Schedule relationships. The court aligned with the Supreme Court's trinity of precedents— TRF Ltd. v. Energo Engg. Projects Ltd. (2017) 8 SCC 377, Bharat Broadband , and Perkins Eastman —extending ineligibility from the arbitrator to their appointor if similarly situated. In government contracts like this, where the ADG (a CPWD official) appoints under Clause 25, the appointment is inherently unilateral and suspect, fostering apprehensions of bias.

Central to the analysis is Bhadra , which the court deems dispositive. Bhadra clarified that unilateral appointments violate Section 18's equal treatment principle and are void ab initio under Section 12(5), irrespective of consent during proceedings. The proviso to Section 12(5)—allowing waiver post-dispute via "express agreement in writing"—demands a deliberate, informed relinquishment, not inferred from conduct like filing claims or procedural orders. The court quoted Bhadra extensively: "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." Implied waivers under Section 4 (deemed by conduct) do not apply; the proviso's heightened threshold protects against coerced neutrality.

Distinguishing related concepts, the Bench clarified that while courts under Section 11 can appoint to cure defects, here the disposal was not an appointment but a deferral to the contract, preserving the unilateral taint. Precedents like Haryana Space Application Centre v. Pan India Consultants (P) Ltd. (2021) 3 SCC 103 reinforced this, holding nominee clauses unenforceable. The analysis rejects the appellant's Section 11 argument, noting the order's language tied the appointment to the contract, not judicial fiat. No written waiver emerged post-dispute, despite ample opportunity.

Integrating broader context from recent developments, this ruling echoes the Delhi High Court's own observation in related matters, such as the scope of Section 34(4) remands in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. , where curative powers are limited and irreparable defects like ineligibility warrant outright setting aside, not remand. Similarly, in public sector disputes, this decision aligns with Supreme Court directives on judicial service qualifications, emphasizing experience to ensure impartiality—paralleling arbitrator eligibility concerns. The judgment avoids speculation but highlights how unchecked unilateralism could erode trust in arbitration as an efficient alternative to litigation.

Key Observations

The court's pivotal excerpts underscore the strict statutory framework:

1. On the core violation: "The learned Single Judge has, by the impugned judgment, set aside the arbitral award, solely on the ground that the appointment of the arbitrator was in violation of Section 12(5) of the 1996 Act. In so holding, the learned Single Judge has followed the judgments of the Supreme Court in Bharat Broadband Network Ltd. v. United Telecoms Ltd. and Perkins Eastman Architects DPC v. HSCC (India) Ltd. ."

2. Explaining the proviso's rigor from Bhadra : "The proviso to sub-section (5) of Section 12 stipulates that parties, after disputes have arisen, must expressly agree in writing to waive the ineligibility of the proposed arbitrator. This impliedly means that the parties are waiving their right to object to the arbitrator's ineligibility in terms of Section 12(5) of the Act, 1996."

3. On implied vs. express waiver: "The expression 'express agreement in writing' refers to an agreement made in words as opposed to an agreement which is to be inferred by conduct... It is thus necessary that there be an 'express' agreement in writing."

4. Emphasizing party autonomy limits: "Waiver means the intentional giving up of a right... 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."

5. Broader implication: "Unilateral appointments are not consistent with the basic tenet of arbitration, i.e., mutual confidence in the arbitrator. It would not be unreasonable for a party to apprehend that an arbitrator unilaterally appointed by the opposite party may not act with complete impartiality."

These observations, drawn verbatim, illuminate the judgment's fidelity to Supreme Court precedents while addressing practical arbitration pitfalls.

Court's Decision

The Division Bench unequivocally dismissed the appeal, affirming the Single Judge's order in toto: "We, therefore, find no cause to interfere with the impugned judgment of the learned Single Judge, which is, accordingly affirmed in its entirety. The appeal is, accordingly, dismissed with no orders as to costs."

The court ordered no costs, reflecting a balanced approach amid the technical nature of the challenge. Practically, this vitiates the May 30, 2023, award, requiring fresh arbitration—likely via court appointment under Section 11—to resolve the underlying claims, potentially delaying resolution in this decade-old project.

Implications are profound for Indian arbitration, especially public contracts. It mandates explicit waivers for pre-2015 clauses, curbing government overreach and promoting neutrality. Future cases may see increased Section 11 interventions, reducing unilateralism's viability. For legal professionals, this signals rigorous pre-arbitration disclosures and waiver drafting; for contractors, it empowers challenges to biased appointments. In a landscape of rising infrastructure disputes, the ruling bolsters arbitration's credibility, aligning with global standards like the UNCITRAL Model Law, but at the cost of procedural certainty. As Bhadra overrules contrary High Court views, expect a ripple effect, possibly prompting legislative tweaks to balance efficiency and impartiality. This decision, while narrow, fortifies the 1996 Act's pro-neutrality ethos, ensuring arbitration remains a trusted dispute resolution mechanism.