2025 Supreme(Online)(Del) 48607

Vibhu Bakhru, Tejas Karia, JJ
Mahavir Prasad Gupta And Sons – Appellant
Versus
Govt Of Nct Of Delhi – Respondent
FAO (COMM) 170/2023

A unilaterally appointed sole or presiding arbitrator is de jure ineligible. Such appointment is void ab initio, and any award rendered is a nullity. The requirement for a valid waiver of this ineligibility is mandatory, must be in writing, and occurs only after the dispute has arisen.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 12(4), 12(5), 14, 16, 29A, 34, and 36 - Seventh Schedule - Unilateral appointment of sole arbitrator - Independence and impartiality - Arbitrator appointed by one party unilaterally is ineligible to act - Such appointment is void ab initio - Public policy - Principle of equality in appointment process. (Paras 32, 33, 34, 37)

(B) Waiver - Proviso to Section 12(5) - Requirements for valid waiver - Must be an express agreement in writing subsequent to the dispute having arisen - Deemed waiver by conduct under Section 4 does not apply to unilateral appointment - Participation in proceedings or seeking extension of mandate does not constitute valid waiver. (Paras 38, 39, 43)

(C) Jurisdiction - Inherent lack of jurisdiction - Objection to validity of appointment can be raised for the first time at the stage of petition under Section 34 or enforcement under Section 36 - Even party who unilaterally appointed the arbitrator can raise such objection. (Paras 53, 56, 83)

Facts of the case:
Disputes arose between parties regarding construction work. A sole arbitrator was unilaterally appointed in accordance with the arbitration clause. The arbitrator passed an award in favor of one party. This award was challenged under Section 34, where the court set it aside on the ground that the arbitrator was ineligible under the relevant statutory schedule, making the appointment and subsequent award a nullity. The party aggrieved by the setting aside of the award filed the current appeal.

Findings of Court:
An arbitrator appointed unilaterally by one party is ineligible under the Act. Such ineligibility is de jure and goes to the root of the jurisdiction, rendering the appointment void ab initio. The requirement for a written express waiver is mandatory and cannot be inferred from conduct such as participation in proceedings. Courts may, and are expected to, set aside such awards as they violate public policy and the right to equality.

Issues: Whether parties can waive the objection to a unilaterally appointed arbitrator by conduct; whether such an objection can be raised for the first time at the stage of setting aside or enforcement proceedings; and whether the party who made the appointment can subsequently challenge it.

Ratio Decidendi: Unilateral appointment of a sole or presiding arbitrator is prohibited and nullifies the entire proceeding. There is no concept of deemed waiver by conduct for such ineligibility; only an express agreement in writing after the dispute has arisen suffices. Because this ineligibility pertains to the arbitrator's inherent jurisdiction, the objection can be raised at any stage, including enforcement, and even by the party who initiated the appointment.

Result: Appeal dismissed; Impugned order maintained.