A unilateral appointment of an arbitrator from an ineligible party is void ab initio without an express written waiver of Section 12(5) of the Arbitration and Conciliation Act, which cannot be implied from conduct.

JUDGMENT :

AVNEESH JHINGAN, J.

1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (for short 'the Act') is filed aggrieved of the arbitral award dated 05.08.2024 (hereinafter 'the award').

BRIEF FACTS

2. The brief facts are that the petitioner issued a notice inviting tender for 'Manufacture and Supply of BCNAHSM1 Wagons'. The respondent was the successful bidder. On 30.09.2020 a contract valuing Rs.499,56,48,000/- for 1652 wagons was awarded.

2.1 There was a dispute between the parties with regard to re- fixation of the delivery period, the imposition of liquidated damages (for short 'LD') and denial clause. The petitioner on 20.03.2023 short- closed the contract; cancelled the supply of balance 390 wagons and forfeited the bank guarantee.

2.2 On 29.05.2023, the respondent issued a notice under Section 21 of the Act and vide letter dated 11.08.2023 proposed the name of one arbitrator. Petition filed by the respondent under Section 11 of the Act was withdrawn on 03.10.2023. The respondent on 17.10.2023 consented for fast-track arbitration as provided in clause 2905(c)(ii)(a) of the Indian Railway Standard Conditions of Contract (for short 'IRS'). On 16.11.2023, the petitioner proposed four names of its serving employees for appointment as arbitrator and asked the respondent to suggest two names from the proposed list. On 24.01.2024, the respondent shortlisted two names. The petitioner on 30.01.2024 appointed its serving employee to be a sole arbitrator.

2.3 The award was passed allowing the claim of the respondent. The petitioner was directed to refund LD to the extent of Rs.5,19,15,870/- for supply of 272 wagons after 29.03.2022. The respondent was held entitled to price variation upto the date of actual supply with base month as May, 2019. The cancellation of the contract was set aside and the respondent was to supply the balance 390 wagons with price variation of such supply with the base month as May, 2019. Hence, the present petition.

SUBMISSIONS OF THE PARTIES

3. Learned senior counsel for the petitioner contended that the arbitrator was appointed in contravention of Section 12 (5) of the Act, there was no express waiver in writing by the parties and the award is nullity. The notices issued by the respondent on 29.05.2023 and 11.08.2023 are relied upon to contend that the respondent had categorically stated that the applicability of (5) of the Act was not waived. Reliance is placed upon the decision of the Supreme Court inBhadra International (India) Pvt. Ltd. & Ors. v. Airports Authority of India, 2026 INSC 6 and on the Division Bench of this court in Mahavir Prasad Gupta and Sons v. Govt. of NCT of Delhi , 2025 SCC OnLine Del 4241

4. Per contra by proposing four names of its serving employees and proceeding under clause 2905(a) of IRS which is only applicable in cases where Section 12 (5) of the Act is waived, the petitioner agreed not to be subjected to rigours of (5) of the Act. The submission is by short listing two names from the proposed list and by consenting for adoption of the fast-track arbitration, the respondent also waived applicability of (5) of the Act. It is submitted that there is no prescribed language for waiver. The emphasis is that the petitioner was well-aware of the provisions of (5) of the Act and after appointing arbitrator under clause 2905(a) of IRS, on being unsuccessful in the