1. Appeal against dismissal of petition under Section 34, Arbitration Act challenging arbitral award on grounds of arbitrator ineligibility and mandate expiry. (Para 1 , 2 , 3 , 4 , 5 , 6 )
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2026 Supreme(Raj) 860
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR
ARUN MONGA, ASHUTOSH KUMAR, JJ.
Mechelonic Industries, Through Its Sole Proprietor Shri Satish Sharma - Appellant
Versus
Union of India, Through Chief Engineer/ Ts North Western Railway, Jaipur - Respondent
D.B. Civil Miscellaneous Appeal No. 2132 of 2026
Decided On : 10-09-2026
Advocates Appeared:
For the Appellant : Mr. Sahil Duseja, Mr. Aditya Jain for Mr. Yash Soni.
For the Respondent: Mr. Parag Rastogi.
For the Appellant : Mr. Sahil Duseja, Mr. Aditya Jain for Mr. Yash Soni.
For the Respondent: Mr. Parag Rastogi.
Waiver of statutory ineligibility under Section 12(5) and the Seventh Schedule of the Arbitration and Conciliation Act, 1996, must be an express written agreement made after the constitution of the tribunal and specifically referencing the individual arbitrator appointed.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 12(5) and Seventh Schedule - Appointment of departmental officer as Sole Arbitrator - Statutory ineligibility - Waiver under the proviso to Section 12(5) - Must be an express agreement in writing given after the constitution of the Arbitral Tribunal and with reference to the particular Arbitrator - A general no-objection furnished before the constitution of the Tribunal regarding the appointment mechanism does not constitute a valid waiver of ineligibility of a specific individual (Paras 18, 19, 20)
(B) Arbitration and Conciliation Act, 1996 - Section 4 - Waiver of right to object - Participation in proceedings does not necessarily cure a fundamental ineligibility that goes to the root of the Tribunal’s constitution, particularly where the waiver does not satisfy the specific requirements of the proviso to Section 12(5). (Paras 8, 18)
Facts of the case:
A supplier of metal liners challenged an arbitral award and the subsequent dismissal of its petition under Section 34 of the Act. The appellant contended that the Sole Arbitrator's mandate had expired under Section 29A and that the appointment of a departmental officer as arbitrator was invalid under Section 12(5) read with the Seventh Schedule. The lower court had rejected these objections, holding that the appellant had waived its right by participating in the proceedings and providing a prior no-objection to the appointment mechanism.
Findings of Court:
The court found that the appellant's prior communication expressing no objection to the appointment of a departmental officer was issued before the constitution of the Tribunal. Such a pre-constitution waiver does not meet the statutory requirement of an informed written waiver concerning the specific individual appointed. Consequently, the appointment of the departmental officer as Sole Arbitrator was invalid.
Issues: Whether a communication of "no-objection" provided before the constitution of the Arbitral Tribunal satisfies the proviso to Section 12(5) of the Act to waive the ineligibility of a departmental officer appointed as arbitrator.
Ratio Decidendi: The proviso to Section 12(5) requires an express agreement in writing after disputes have arisen, and the waiver must specifically relate to the particular Arbitrator rendered ineligible by the Seventh Schedule. A general no-objection to the mechanism of appointment provided before the identity of the arbitrator is known is ineffective to cure statutory ineligibility. (Paras 18-20)
Result: Appeal allowed; order dated 24.02.2026 and arbitral award dated 03.05.2024 set aside.
Legal Category Hierarchy
- arbitration
- practice and procedure
Table of Contents
2. Appellant argued arbitrator appointment invalid under Section 12(5) and mandate expired under Section 29A; respondent argued waiver and valid continuance. (Para 7 , 8 , 9 , 10 , 11 , 12 )
3. A pre-constitution waiver of Section 12(5) ineligibility is ineffective as it cannot be an informed waiver regarding a specific arbitrator. (Para 14 , 15 , 16 , 17 , 18 , 19 , 20 )
4. Waiver under proviso to Section 12(5) Arbitration Act must be an express written agreement after tribunal constitution, referencing a specific ineligible arbitrator. (Para 19 , 20 )
5. Appeal allowed; order and arbitral award set aside; appellant may seek fresh arbitrator appointment after refunding received amounts. (Para 21 , 22 , 23 , 24 )
6. Does a pre-constitution waiver satisfy the proviso to Section 12(5) of the Arbitration and Conciliation Act, 1996?
No, a pre-constitution waiver is ineffective. The proviso requires an express agreement in writing after the tribunal is constituted, referencing the specific arbitrator who is ineligible under the Seventh Schedule. (Para 16 , 17 , 18 , 19 , 20 )
7. Can mere participation in arbitration proceedings after the statutory mandate period waive an objection under Section 29A of the Act?
The court noted this issue but did not decide it dispositively, as the appeal was allowed on the separate ground of invalid arbitrator appointment under Section 12(5). (Para 10 , 14 )
8. What is the nature of the 'express agreement in writing' required to waive an arbitrator's ineligibility under the Seventh Schedule?
It must be a waiver against the specific person appointed, given after that person's identity is known, to remove their personal ineligibility for lack of neutrality and independence. (Para 17 , 18 , 19 )
ORDER :
Arun Monga, J.
1. The appellant seeks setting aside of the order dated 24.02.2026 passed by the learned Commercial Court No. 03, Jaipur Metro-II, Jaipur, whereby its petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) was dismissed and the arbitral award dated 03.05.2024 was upheld.
2. The appellant is a proprietorship firm engaged in the manufacture and supply of metal liners for Indian Railways. It participated in the respondent’s tender dated 05.03.2019 for manufacture and supply of metal liners for use with on 25T concrete sleepers. The appellant was awarded 20% of the tendered quantity, i.e., 2,32,024 sets, followed by execution of a Rate Contract Agreement dated 02.12.2019 and a supply order dated 05.12.2019.
3. Disputes arose during execution of the contract. The respondent appointed a Sole Arbitrator by letter dated 21.04.2022. The appellant raised claims for: deduction of liquidated damages of Rs.31,08,966/-; short payment of Rs.47,44,198/- towards price variation; release of bank guarantee of Rs.10,52,000/-; and interest and arbitration costs.
4. By award dated 03.05.2024, the Sole Arbitrator partly allowed the appellant’s claims. Refund of Rs.24,06,366/- deducted as liquidated damages was directed, of which 95% had already been paid under the Vivad Se Vishwas Scheme. The bank guarantee of Rs.10,52,000/- was also directed to be released, without interest. The claims relating to price variation, interest and arbitration costs were rejected.
5. The appellant challenged the award under Section 34 of the Act, however, the Commercial Court rejected the objections by order dated 24.02.2026.
6. Hence, this appeal under Section 37 of the Act.
7. Learned counsel for the appellant submits that the impugned order is illegal and suffers from patent illegality. It is argued that the Commercial Court failed to properly examine the objections under Section 34(2)(b)(ii).
8. It is submitted that the appointment of a departmental officer as Sole Arbitrator was invalid under Section 12(5) read with the Seventh Schedule to the Act. Such an Arbitrator is de jure unable to perform his functions under Section 14(1)(a). Mere participation in the proceedings, that too by protesting before the Arbitral Tribunal, cannot cure an ineligibility that goes to the root of the Tribunal’s constitution.
9. It is further submitted that the pleadings were completed on 04.11.2022 upon filing of the statement of defence and counter-claim. Therefore, the statutory twelve-month period under Section 29A expired on 04.11.2023. No written consent was given by the parties for extension, nor was any order obtained from the competent Court. Consequently, the Arbitrator became functus officio, and the award dated 03.05.2024 was rendered without jurisdiction.
10. Learned counsel for the appellant also contends that continued participation after expiry of the statutory period cannot be treated as consent to extension of the mandate. The Commercial Court, therefore, erred in invoking Section 4 of the Act to hold that the appellant had waived its objection.
11. It is thus submitted that the award and the impugned order passed by the deserve to be set aside.
12. Per contra, learned counsel for the respondent supports the impugned order and submits that no ground for interference is made out. It is contended that the Arbitrator’s mandate continued validly and that the award was rendered within a subsisting mandate.
13. We have heard learned counsel for the parties and perused the case file.
14. The appellant challenged the award, primarily on the grounds that: (i) the Arbitrator’s mandate had expired under Section 29A; and (ii) the appointment of the departmental Sole Arbitrator was invalid. However, the Commercial Court held that the parties continued to participate in the arbitration proceedings and did not raise any objection regarding expiry of the mandate. Relying on Section 4 of the Act, it concluded that the appellant had waived its right
