No Safe Harbour for Unilateral Arbitrator Appointments:
Delhi High Court Re-affirms Strict Bar, Non-deemable Waiver and Post-Award Challenge Rights

1. Introduction

In M/s. Mahavir Prasad Gupta & Sons v. Government of NCT of Delhi (FAO (COMM) 170/2023, decided 31 May 2025), a Division Bench of the Delhi High Court (Justices Vibhu Bakhrú & Tejas Karia) addressed the contentious issue of unilateral appointment of a sole arbitrator by one party and the stage at which such appointment may be challenged. The Court dismissed the contractor’s appeal and upheld the Commercial Court’s decision to set aside an arbitral award of ₹1.76 crore on the ground that the arbitrator was ineligible ab initio under Section 12(5) read with the Seventh Schedule of the Arbitration & Conciliation Act, 1996 (“A&C Act”).

Background Facts

• Project: Road No. 58 ­– strengthening works awarded to the Appellant contractor for ₹5.16 crore.
• Dispute: PWD withheld payments alleging insufficient road-layer thickness. Third-party audit by IIT Roorkee/PWD found work acceptable, yet payments were still not released.
• Arbitration: Contractor invoked clause 25. Respondent (GNCTD) unilaterally appointed Sh. A.K. Singhal as sole arbitrator, who awarded the contractor ₹1.76 crore plus 10% interest.
• Challenge: GNCTD sought setting aside under §34, arguing the arbitrator’s appointment contravened §12(5) & Seventh Schedule. Commercial Court agreed; contractor appealed under §37.

2. Summary of the Judgment

The High Court framed two core questions:

1. Can parties, by mere participation in arbitration, be deemed to have waived objections to a unilateral appointment, despite the express-writing requirement in the proviso to §12(5)?
2. Is an award by an ineligible, unilaterally appointed arbitrator per se null, allowing objections at any stage, even by the appointing party?

Answering both in the affirmative, the Bench held:

• No deemed waiver: The proviso to §12(5) mandates an express, post-dispute written waiver. Silence, participation, or extension-of-mandate requests under §29A do not satisfy this test (Bharat Broadband followed).
• Award is a nullity: An arbitrator unilaterally appointed by an ineligible official lacks de jure jurisdiction; the resultant award violates Indian public policy and Article 14 (equality). Such a defect can be raised any time—during §34, §36, or even suo motu by the court.
• Appointing party may also object: The absence of express waiver preserves the right of even the appointing party to challenge; the illegal appointment cannot be validated by its own act.
• The judgments relied upon by the Appellant (Arjun Mall, Kanodia Infratech, Bhadra International) were declared per incuriam for ignoring binding precedent.
• The appeal was dismissed; Commercial Court’s order setting aside the award was affirmed.

3. Detailed Analysis

3.1 Precedents Cited & Their Influence

• TRF Ltd. v. Energo Engineering (2017) – Once a person is ineligible to act, he cannot nominate; foundation for invalidating unilateral nominations.
• Perkins Eastman v. HSCC (2019) – Extended TRF logic: a party interested in the outcome cannot unilaterally appoint even an independent third person.
• Bharat Broadband v. United Telecoms (2019) – Differentiated §4 (deemed waiver) from §12(5) (express written waiver).
• CORE (Constitution Bench) (2024) – Held unilateral appointment clauses (sole or panel-restricted) violate Article 14; prospective on 3-member tribunals, but confirms bar on sole-arbitrator appointments.
• Lion Engineering, Hindustan Zinc – Plea of jurisdiction can be raised at any stage or collateral proceedings.
• Division Bench authorities (Govind Singh, Kotak Mahindra Bank, MCD v. Almass India) – Unilateral-appointment awards unenforceable; no waiver by conduct.

The Court analysed decisions seemingly contrary (Arjun Mall, Kanodia Infratech, VR Dakshin) and declared them non-binding as they overlooked Supreme Court / prior DB rulings, thereby applying the doctrine of per incuriam.

3.2 Legal Reasoning

1. Statutory Hierarchy: §12(5) (introduced 2015) is a mandatory, later enactment that overrides general waiver under §4; only an express, post-dispute, written waiver can legitimise an otherwise ineligible appointment.
2. Inherent Jurisdiction Principle: Appointment by an ineligible person is void ab initio; award is non-est, akin to a decree by a court lacking subject-matter jurisdiction (Sushil Kumar Mehta analogy).
3. Public Policy & Article 14: Unilateral appointment offends equality of arms and impartiality (CORE, §70, §129). Awards violating fundamental policy cannot survive §34(2)(b).
4. Stage of Objection: Because the defect is jurisdictional and statutory, challenge can surface at any point; courts themselves must refuse enforcement once noticed.
5. Appointing Party’s Right: §12(4) allows even the appointing party to challenge if no express waiver exists; the illegal act cannot estop statutory rights.

3.3 Impact on Future Arbitration Practice

• Government entities and PSUs must immediately revise arbitration clauses; unilateral appointment or panel-restriction clauses invite annulment risk.
• Arbitral awards rendered by such clauses remain vulnerable in enforcement; lenders, investors, and insurers will insist on compliant dispute-resolution frameworks.
• Parties can no longer rely on “participation equals waiver”; counsel must secure a separate written waiver post-dispute or re-constitute the tribunal.
• Court’s emphasis on suo motu duty emboldens judges to weed out invalid awards, increasing certainty but also initial litigation over legacy contracts.
• Encourages growth of independent institutional appointment mechanisms (SIAC, MCIA, DIAC) to replace unilaterally driven models.

4. Complex Concepts Simplified

• Section 12(5) & Seventh Schedule: A 2015 amendment that automatically disqualifies certain persons (e.g., employee, consultant, advisor of a party) from being arbitrators. They are de jure ineligible.
• Express Written Waiver: Both parties, after the dispute arises, must sign a document saying they waive this disqualification. Mere silence or attendance does not suffice.
• Section 34 vs §36: §34 lets a court set aside an award; §36 governs enforcement once the set-aside window closes. A null award can be attacked at either stage.
• Public Policy of India: A narrow ground for refusing enforcement; includes violations of fundamental legal principles (equality, justice, morality).
• Per Incuriam: A judgment delivered in ignorance of binding precedent; it has no precedential force.
• De Jure Ineligibility: Inability arising by operation of law (statute), as opposed to factual or discretionary disqualification.

5. Conclusion

The Delhi High Court’s ruling cements four pivotal propositions: (i) unilateral appointment of a sole arbitrator is void; (ii) waiver requires an explicit, post-dispute written agreement, not passive conduct; (iii) an award rendered by an ineligible arbitrator is a nullity and can be questioned at any stage, even by the appointing party; and (iv) courts themselves must refuse enforcement when such illegality surfaces.

These clarifications advance India’s arbitration jurisprudence towards stricter neutrality standards, align domestic practice with international norms, and serve as a cautionary tale for public bodies and private players alike: procedural shortcuts in constitution of tribunals can unravel even meritorious awards.