The court held that unilateral appointment of arbitrators by one party without consent is invalid, leading to lack of jurisdiction for the Arbitral Tribunal and grounds to set aside the award.

ORDER :

N. Anand Venkatesh, J.

This petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 [for brevity ‘the Act’] challenging the award passed by the Arbitral Tribunal dated 26.02.2022.

2. The petitioner participated in the tender process and was awarded the contract by respondents vide Letter of Acceptance dated 17.11.2017. The agreement was executed on 08.02.2018 and as per the agreement, the petitioner was required to complete the work within a period of nine months from the date of Letter of Acceptance. The contract period was extended from time to time. The further case of the petitioner is that they were required to execute additional works, which was not initially part of the scope of work made in the agreement and thereby, it increased the magnitude of the work and the value of the contractual work.

3. It is the further case of petitioner that the petitioner completed the entire work assigned as per the terms of the Agreement on 13.03.2021 to the tune of Rs.4,14,54,212/- as against the agreement value of Rs.3,21,24,118/-.

4. The petitioner alleges that outstanding payments were not paid in spite of repeated requests and demands and the respondents also failed to issue the work completion certificate. Thus, disputes arose between the parties and the petitioner invoked the arbitration by letter dated 08.06.2021.

5. The specific case of the petitioner is that the petitioner neither waived their right for the constitution of the Arbitral Tribunal nor consented for the constitution of the Arbitral Tribunal by respondents. The petitioner made nearly 18 claims before the Arbitral Tribunal to the tune of Rs.2,43,37,981/-.

6. The respondents denied the claim made by the petitioner and they made a counter claim to the tune of Rs.20,16,485/-.

7. Based on the pleadings, issues were framed by the Arbitral Tribunal. On completion of trial, the Arbitral Tribunal partly allowed the claim made by the petitioner to the tune of Rs.5,29,277/- and rejected the counter claim made by respondents. Aggrieved by the same, the present petition came to be filed before this Court.

8. When the petition came up for final hearing on 06.01.2026, learned counsel for petitioner raised a preliminary objection on the constitution of the Arbitral Tribunal and on hearing the learned counsel for petitioner and taking note of the judgments relied upon, the following order came to be passed by this Court:

“Learned counsel for petitioner raised a preliminary objection on the constitution of the Arbitral Tribunal by the Southern Railways. Learned counsel submitted that even in the notice dated 08.06.2021 (Ex.C53) through which the petitioner invoked Section 21 of the Arbitration and Conciliation Act, 1996 [for brevity ‘the Act’], it was made clear that the petitioner is not waiving their right under Section 12(5) of the Act. Learned counsel further pointed out to the letter dated 24.07.2021 where the petitioner had specifically not agreed to waive their right under Section 12(5) of the Act. In view of this stand taken by the petitioner, the respondent proceeded further to appoint an Arbitral Tribunal consisting three members and while doing so, the stand taken by the petitioner shall also be taken note of. This document has been marked as Ex.C54.

2. Learned counsel for petitioner, by relying upon the latest judgment of the Delhi High Court inDaulat Ram Brake Mfg. Co. v. Union of India [2025 SCC OnLine Del 5106] submitted that where the party has not given any waiver or consent and the respondent has unilaterally appointed an Arbitral Tribunal, the award passed by the Arbitral Tribunal