Severability of “No-Appointment-No-Arbitration” Clauses and Limits on Review of Section 11 Orders: Commentary on Hindustan Construction Co. Ltd. v. BRPNNL (2025 INSC 1365)

Severability of “No-Appointment-No-Arbitration” Clauses and Limits on Review of Section 11 Orders: Commentary on Hindustan Construction Company Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd. (2025 INSC 1365)

1. Introduction

The Supreme Court of India’s decision in Hindustan Construction Company Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd. & Ors., 2025 INSC 1365 (decided on 28 November 2025, per R. Mahadevan, J.) is a significant addition to Indian arbitration jurisprudence on three interrelated fronts:

  • The extent to which a High Court can review or recall its own order under Section 11 of the Arbitration and Conciliation Act, 1996 (“A&C Act”).
  • The validity and severability of arbitration clauses which:
    • vest unilateral appointment power in one party; and
    • add a negative covenant that “if for any reason” such appointment is not possible, “the matter shall not be referred to arbitration at all”.
  • The interplay between waiver under Section 4, ineligibility and waiver under Section 12(5), and joint extensions of mandate under Section 29A of the A&C Act.

The case arises from a bridge construction contract dated 4 March 2014 between Hindustan Construction Company Ltd. (HCC) and Bihar Rajya Pul Nirman Nigam Ltd. (BRPNNL), a State-owned undertaking. Clause 25 of the agreement provided for dispute resolution through a multi-tier mechanism culminating in arbitration by a sole arbitrator appointed exclusively by the Managing Director (MD) of BRPNNL, with an additional stipulation that if an arbitrator “appointed by such Managing Director” could not act “for any reason”, “the matter shall not be referred to arbitration at all”.

Two separate sets of disputes under the same contract went to arbitration. The first culminated in an award which BRPNNL accepted and satisfied. The second, relating to claims for the extended period of the contract, was referred to arbitration pursuant to a Section 11(6) order of the Patna High Court in 2021. After more than seventy sittings and multiple extensions of the arbitrator’s mandate under Section 29A, BRPNNL sought review of the Section 11 order. The High Court, relying on subsequent case law, not only stopped the ongoing arbitration but ultimately dismissed the Section 11 request altogether in 2024, effectively holding that no arbitration agreement existed.

HCC’s appeal to the Supreme Court challenged both the High Court’s assumed power to review its Section 11 appointment order and its conclusion that Clause 25 did not constitute a valid arbitration agreement in light of unilateral appointment restrictions and the “no arbitration if appointment fails” language.

2. Summary of the Judgment

The Supreme Court allowed the appeal, setting aside the Patna High Court’s judgment and issuing consequential directions. In essence, the Court held:

  1. No merits review of Section 11 appointment orders: Once a High Court has appointed an arbitrator under Section 11(6) and that order has attained finality and been acted upon, the High Court is functus officio on the merits of that appointment. It cannot, through review, reopen the existence or validity of the arbitration agreement on the basis of subsequent case law or changed legal opinion, save for very narrow procedural corrections.
  2. Existence of a valid arbitration agreement and severability of offending terms:
    • Clause 25, read as a whole and in light of the parties’ conduct, is a valid “arbitration agreement” under Section 7 A&C Act.
    • The parts of Clause 25 that:
      • confer unilateral appointment power on the MD of BRPNNL; and
      • state that “if for any reason that is not possible, the matter shall not be referred to arbitration at all”
      are void and unenforceable as contrary to the equality principle in arbitration (Section 18), to Article 14 of the Constitution, and to the pro-arbitration policy of the A&C Act, but they are severable.
    • The core agreement to arbitrate disputes survives and can be given effect by judicial appointment of an independent arbitrator under Section 11(6).
  3. Waiver and Section 29A:
    • Section 12(5) ineligibility (based on the Seventh Schedule) can be waived only by an express post-dispute written agreement.
    • For other kinds of procedural irregularities and non-jurisdictional defects, Section 4 applies; parties who proceed without timely objection are deemed to waive such objections.
    • Joint applications under Section 29A by both parties to extend the arbitrator’s mandate are a strong form of consent and constitute waiver under Section 4 of procedural objections and challenges to the tribunal’s continued authority (save for non-waivable Section 12(5) ineligibility).
    • In this case, no Seventh Schedule disqualification was attracted, and BRPNNL’s continued participation, including joint Section 29A applications, amounted to waiver of its later jurisdictional objections.
  4. Directions:
    • The Patna High Court’s judgment dismissing the Section 11 request was set aside.
    • The High Court was directed to appoint a substitute arbitrator within two weeks, who shall continue the arbitration from the stage at which it was interrupted and endeavour to conclude within one year (subject to Section 29A).
    • The Court admonished the then Managing Director of BRPNNL as a public officer for failing to respond to arbitration invocation and acting contrary to the model litigant standard, but refrained from imposing costs.

3. Factual Background and Procedural History

3.1 The contract and Clause 25

On 4 March 2014, BRPNNL awarded HCC a contract for construction of a bridge over the River Sone in Aurangabad and Rohtas districts in Bihar. Clause 25 of the agreement, titled “Settlement of Disputes and Arbitration”, provided:

  • A three-step pre-arbitral process: (i) reference to the Deputy Chief Engineer; (ii) appeal to the Managing Director; and (iii) request to the MD for appointment of an arbitrator within fixed timelines.
  • On failure of the MD’s decision or on dissatisfaction, the dispute was to be referred to a sole arbitrator “appointed by the Managing Director, the administrative head” of BRPNNL.
  • If the initially appointed arbitrator was unable to act, the MD was to appoint a substitute, who would continue from the stage left by the predecessor.
  • A critical negative stipulation: “no person other than a person appointed by such Managing Director or administrative head of the Nigam as aforesaid should act as arbitrator and if for any reason that is not possible, the matter shall not be referred to arbitrator at all.”
  • Express incorporation of the A&C Act, 1996 and a Patna seat/venue.

3.2 First arbitration and award

In 2018, HCC raised claims for additional costs/losses incurred during the original contract period. After the pre-arbitral steps were exhausted or not acted upon, HCC moved the Patna High Court under Section 11. By order dated 2 August 2019 in Request Case No. 4 of 2019, Justice P.K. Sinha (Retd.) was appointed as sole arbitrator. He rendered an award on 31 December 2021, which BRPNNL accepted and complied with. Thus, the same Clause 25 had already been treated by both parties as a valid arbitration clause.

3.3 Second arbitration and extensive proceedings

Later, HCC raised fresh claims regarding the extended period of the contract (time extensions and additional costs in the extended period). It again followed Clause 25:

  • Approached the Deputy Chief Engineer and then appealed to the MD.
  • Notified intention to arbitrate by notice dated 10 January 2020 and sought appointment of an arbitrator.
  • On the MD’s inaction, filed Request Case No. 53 of 2020 under Section 11 before the Patna High Court.

On 18 August 2021, the High Court appointed Justice Shivaji Pandey (Retd.) as sole arbitrator. The arbitration proceeded in earnest:

  • Arbitration commenced on 13 September 2021.
  • Pleadings were exchanged; evidence was recorded.
  • More than 70 hearings were held.
  • Both parties jointly sought extensions of the arbitrator’s mandate under Section 29A; the arbitrator granted extensions, and the High Court itself extended the mandate twice (October 2023 and May 2024).
  • By July 2023, HCC’s oral arguments were complete; the matter was close to conclusion. HCC incurred around Rs. 50 lakhs in fees and costs.

3.4 Review applications and High Court’s reversal

Despite this procedural history, BRPNNL filed Civil Review Application No. 293 of 2024, seeking review of the 18 August 2021 Section 11 order, contending:

  • That Clause 25 was not a valid arbitration clause in light of decisions such as State of Bihar v. Kashish Developers (Patna HC) and CORE v. ECI-SPIC-SMO-MCML (JV) (as then understood); and
  • That unilateral appointment by the MD had become invalid, and Clause 25 foreclosed arbitration if the MD could not appoint.

On 4 October 2024, the High Court:

  • Directed the arbitrator not to proceed further; and
  • Indicated that Request Case No. 53 of 2020 would be listed for appointment of a new arbitrator (partly triggered by the fact that Justice Pandey had, in the meantime, been appointed President of the State Consumer Disputes Redressal Commission, Meghalaya).

Surprisingly, when the matter was finally decided on 9 December 2024, the High Court went beyond appointing a new arbitrator and dismissed the Section 11 request itself, holding that Clause 25 did not constitute a valid arbitration agreement in the changed legal landscape. This effectively nullified its own subsisting Section 11 order and shut the door on arbitration altogether.

HCC appealed to the Supreme Court, challenging both the maintainability of the review and the High Court’s construction of Clause 25.

4. Issues Before the Supreme Court

The Supreme Court framed three principal issues:

  1. Jurisdictional issue: Whether the High Court had jurisdiction to review or recall its earlier Section 11(6) order appointing an arbitrator, and whether such exercise of review power was valid.
  2. Arbitration agreement issue: Whether a valid and subsisting arbitration agreement existed between the parties within the meaning of Section 7 A&C Act, and whether Clause 25 met the statutory requirements of an arbitration clause.
  3. Waiver issue: Whether the joint applications filed by both parties under Section 29A to extend the arbitrator’s mandate amounted to waiver (express or implied) of objections under Section 4 and/or cured any ineligibility under Section 12(5).

5. Detailed Analysis

5.1 Limits on Review: Can a High Court Revisit a Section 11 Order?

5.1.1 Statutory framework and minimal judicial intervention

The Court began from first principles. Section 5 A&C Act enshrines a non-obstante bar on judicial intervention “except where so provided” in Part I. Sections 8, 9, 11, 16, 29A, 34 and 37 are the principal gateways through which courts may enter the arbitral domain. The 2015 and 2019 amendments, particularly insertion of Section 11(6A), were specifically intended to:

  • confine the Section 11 court to a prima facie examination of the existence of an arbitration agreement; and
  • leave validity, scope, and jurisdictional questions principally to the arbitral tribunal (Section 16, the competence-competence doctrine).

The seven-Judge Bench in Interplay Between Arbitration Agreements under A&C Act, 1996 and Stamp Act, 1899, In re (2024) 6 SCC 1 (“Interplay”) was extensively quoted. It held, inter alia:

  • The A&C Act is a self-contained code. Where it prescribes a mechanism, resort to general procedural law is impliedly barred.
  • Section 11(6A) requires only an “examination” of the existence of an arbitration agreement, which is a limited, non-evidentiary inquiry, distinct from the tribunal’s power to “rule” on its jurisdiction under Section 16.
  • Referral courts must avoid “mini trials” at the Section 8 or Section 11 stage; deeper jurisdictional issues are for the arbitral tribunal and then for the Section 34 court.

This position was reaffirmed in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) (2025) 4 SCC 641 (“CORE II”), where the Constitution Bench held that the referral court’s remit under Section 11(6A) is confined to existence, not detailed validity, of the arbitration agreement or appointment procedure.

5.1.2 Review vs recall: Grindlays and BHEL v Jyothi Turbopower

The Court drew on Grindlays Bank Ltd. v. CGIT (1980 Supp SCC 420) to distinguish:

  • Procedural review / recall – to correct an order passed under misapprehension, in ignorance of a vital fact, or due to a patent procedural defect. This power is inherent in all tribunals and courts.
  • Review on merits – to reconsider the correctness of a decision in law or on facts. This requires an express statutory conferment and is not inherent.

Relying on its own earlier reasoning in Bharat Heavy Electricals Ltd. v. Jyothi Turbopower Services (P) Ltd., 2016 SCC OnLine Mad 4029 (a Madras High Court decision where Mahadevan J. was on the bench), the Supreme Court emphasised that while arbitral tribunals (and, by parity, constitutional courts) have limited procedural review power, they lack any generic, inherent power to review decisions on merits in the absence of statutory authority.

Applied to the A&C Act, this means:

  • Review may be available to correct a patent procedural error in a Section 11 order (for example, if an appointment order names the wrong person or was obtained by suppression of a crucial fact).
  • But a court cannot use review to reopen its legal interpretation of the arbitration agreement or to apply later case law to undo a concluded appointment decision.

5.1.3 Why the Patna High Court lacked jurisdiction here

The Section 11 appointment order of 18 August 2021 had:

  • Attained finality, with no appeal or SLP filed.
  • Been acted upon for more than three years of active arbitration, including multiple sittings, evidence, and near-completion of arguments.
  • Been affirmed implicitly through the High Court’s own orders under Section 29A extending the arbitrator’s mandate.

BRPNNL did not raise any jurisdictional objection under Section 16 before the arbitral tribunal; nor did it challenge the award or seek termination of the mandate under Section 14. Instead, it belatedly attempted to reopen the Section 11 order via review, citing a later Patna High Court decision in Kashish Developers and subsequent SLP dismissals.

The Supreme Court held:

  • Once a Section 11 appointment order is passed and acted on, the High Court is functus officio as to the merits of that order.
  • A later judgment (even of the Supreme Court) cannot retrospectively convert a correctly decided, final Section 11 order into an erroneous one, so as to justify review.
  • The High Court’s review was filed after an inordinate, unexplained delay (over three years). Even assuming review power, it was exercised outside permissible limits and timelines.
  • The High Court’s subsequent judgment effectively amounted to an appeal in disguise against its own Section 11 order, which is impermissible.

Accordingly, the Court answered Issue 1 in the negative: the Patna High Court had no jurisdiction to reopen or recall its Section 11(6) appointment order on merits, and its reversal of that order was unsustainable.

5.2 Existence and Content of the Arbitration Agreement: Clause 25 Under Section 7

5.2.1 Section 7 and conduct-based arbitration agreements

Section 7 defines an “arbitration agreement” as an agreement to submit disputes to arbitration. Section 7(3) requires it be in writing; Section 7(4) elaborates how it may be “in writing”, including:

  • By a signed contract (Section 7(4)(a));
  • By exchange of letters or communications (Section 7(4)(b)); or
  • By exchange of statements of claim and defence in which one party asserts the existence of an arbitration agreement and the other does not deny it (Section 7(4)(c)).

The Court emphasised that Section 7(4)(c), derived from the UNCITRAL Model Law, reflects a liberal, intention-centric approach: active participation in arbitration without disputing the existence of an arbitration agreement can itself prove the agreement.

Relying on precedents such as:

the Court reaffirmed that:

  • “Statements of claim and defence” in Section 7(4)(c) are not limited to arbitral pleadings; judicial pleadings can also qualify.
  • Where one party alleges the existence of an arbitration agreement and the other does not deny it, or where both parties actively participate in arbitration, a valid arbitration agreement can be inferred even if formalities are imperfect.

5.2.2 Parties’ conduct as conclusive evidence of an arbitration agreement

In the present case:

  • Clause 25 was a written arbitration clause in a signed contract.
  • It had already been invoked by both parties in the earlier 2019 arbitration, leading to an award which BRPNNL honoured.
  • For the second arbitration, both parties:
    • participated in Section 11 proceedings;
    • took part in over seventy arbitral sittings;
    • filed statements of claim and defence;
    • jointly moved Section 29A extension applications, effectively endorsing the tribunal’s continuance; and
    • never disputed the existence of an arbitration agreement until the belated review petition.

This consistent and prolonged conduct led the Court to conclude that, even assuming some technical ambiguity in Clause 25, Section 7(4)(c) was fully satisfied. Both the textual clause and the parties’ conduct independently established a valid arbitration agreement.

5.2.3 Dissecting Clause 25: agreement to arbitrate vs appointment mechanism and negative covenant

The Court carefully parsed Clause 25 and identified two main components:

  1. Substantive agreement to arbitrate: A broad, mandatory agreement that all disputes “whatsoever in any way arising out of or relating to” the contract shall, after exhaustion of internal steps, be referred to arbitration.
  2. Procedural mechanism and negative covenant:
    • The sole arbitrator was to be appointed by the Managing Director/administrative head of BRPNNL.
    • No person “other than a person appointed by such Managing Director” could act as arbitrator.
    • “If for any reason that is not possible, the matter shall not be referred to arbitrator at all.”

The respondents argued that Clause 25 was a contingent contract under Sections 31 and 33 of the Contract Act: arbitration would exist only if the MD could validly appoint; if that contingency became impossible (due to subsequent law invalidating unilateral appointments), the second limb (no arbitration) was triggered and the arbitration agreement was extinguished.

5.2.4 Severability and the treatment of unilateral appointment clauses

The Court rejected this position by invoking the modern Indian line of authorities on unilateral appointment:

  • TRF Ltd. v. Energo Engineering Projects Ltd. (2017) 8 SCC 377;
  • Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2019) SCC OnLine SC 1517;
  • CORE (I) v. ECI-SPIC-SMO-MCML (JV) (2020) 14 SCC 712; and
  • the Constitution Bench in CORE (II) v. ECI-SPIC-SMO-MCML (JV) (2025) 4 SCC 641.

These decisions cumulatively establish that:

  • Where a named arbitrator or appointing authority is himself ineligible (e.g. a managing director of a party, or an interested official), he cannot unilaterally appoint another arbitrator; the “interest” disability travels to the appointment function.
  • Unilateral appointment clauses in public–private contracts offend the nemo judex principle and are arbitrary under Article 14; they are therefore invalid to that extent.
  • But such invalidity attaches to the appointment mechanism, not to the underlying agreement to arbitrate. The latter, being conceptually distinct (Section 16(1)(a) – separability), survives.

The Supreme Court treated the offending portions of Clause 25 (exclusive MD appointment and “no one else can act”) as being severable:

  • The core intent was clearly to submit disputes to arbitration, reflected in both the text and parties’ actual behaviour.
  • The appointment mechanism had become unenforceable because it vested a unilateral and constitutionally suspect power in a State entity.
  • Following Offshore Infrastructures Ltd. v. Bharat Petroleum Corporation Ltd. 2025 SCC OnLine SC 2147, the Court stressed that a purposive interpretation must preserve the arbitration agreement even if the appointment mechanism fails:
    • The clause referring disputes to arbitration is the “core” of the contract in relation to dispute resolution.
    • Merely because the procedure has become non-operative cannot mean that the parties forgo arbitration altogether.
    • The statutory scheme in Section 11(6) exists precisely to cure such breakdowns in the agreed appointment procedure.

As the Court in Offshore Infrastructures observed (and reiterated here), reading the clause literally to allow the unilateral appointment mechanism to kill arbitration would confer on the stronger party a “nuclear veto” over arbitration, which is incompatible with:

  • the pro-arbitration policy of the A&C Act;
  • Section 18’s requirement of equal treatment; and
  • Article 14’s prohibition on arbitrariness, especially where the State or a PSU is involved.

5.2.5 Negative covenants excluding arbitration upon failure of unilateral appointment

The truly novel feature of Clause 25 was its negative covenant:

“It is also a term of this contract that no person other than a person appointed by such Managing Director or administrative head of the Nigam as aforesaid should act as arbitrator and if for any reason that is not possible, the matter shall not be referred to arbitrator at all.”

The respondent framed this as an expression of party autonomy: the parties had agreed that arbitration was conditional on this specific mode of appointment and that failing this, there would be no arbitration at all, leaving them to the ordinary civil courts.

The Court, however, treated this clause as:

  • Vague and overbroad: “if for any reason” confers an unguided, absolute veto power on one party.
  • Manifestly arbitrary: particularly undesirable in a public contract where the State/PSU is the beneficiary of this veto.
  • Incompatible with Section 18 and Article 14: it structurally undermines equality and impartiality in the arbitral process.

It accordingly held that:

  • Party autonomy cannot be stretched to permit a public entity to draft a clause that effectively immunises it from arbitration by making arbitration contingent on its own unilateral, and now legally impermissible, action.
  • The negative “no arbitration if MD can’t appoint” limb is itself void as contrary to public policy and the mandatory structure of the A&C Act.
  • Both the unilateral appointment provision and the negative covenant are therefore severable; excising them still leaves the core agreement to arbitrate intact.

The Court thus declined to accept the “contingent contract” theory under Sections 31–33 Contract Act. Instead, it relied on:

  • the statutory framework of Sections 7, 11, 16 and 18 A&C Act;
  • constitutional scrutiny of State contracts under Article 14; and
  • the modern arbitration doctrine that favours preserving, not destroying, the parties’ chosen method of private dispute resolution.

5.2.6 Answer to Issue 2

The Supreme Court held, therefore, that:

  • A valid and subsisting arbitration agreement existed between HCC and BRPNNL within the meaning of Section 7.
  • Clause 25, once the unilateral appointment and negative “no arbitration” covenant are severed, continues to function as a valid arbitration clause.
  • The contrary view of the Patna High Court was unsustainable in law and on facts.

5.3 Waiver, Ineligibility and Section 29A: Harmonising Sections 4, 12(5) and 29A

5.3.1 Distinguishing statutory ineligibility from procedural defects

The Court drew a careful distinction between:

  1. Statutory ineligibility under Section 12(5) (read with the Seventh Schedule) – where certain categories of relationships (e.g. employee, consultant, advisor, or having a significant financial, business or professional relationship with a party) make a person de jure ineligible to act as arbitrator; and
  2. Ordinary procedural non-compliance – such as non-observance of certain contractual appointment timelines or procedural irregularities, which can be waived.

Key precedents:

  • Bharat Broadband Network Ltd. v. United Telecoms Ltd. (2019) 5 SCC 755:
    • Section 12(5) ineligibility is automatic and non-derogable except through the proviso.
    • An arbitrator who is ineligible under the Seventh Schedule is a de jure non-arbitrator; his mandate terminates under Section 14(1)(a).
    • Such ineligibility can be waived only by an express agreement in writing entered into after disputes have arisen.
  • Ellora Paper Mills Ltd. v. State of M.P. (2022) 3 SCC 1:
    • Mere participation in arbitration does not constitute waiver of Section 12(5) ineligibility.

Thus, Section 12(5) represents a high-threshold, structural safeguard for impartiality, not easily displaced by conduct.

5.3.2 Section 4’s general waiver regime

Section 4 states that a party who knows:

  • that a derogable provision of Part I; or
  • a requirement under the arbitration agreement,

has not been complied with, and yet proceeds with the arbitration without timely objection, “shall be deemed to have waived his right to so object”.

In Quippo Construction Equipment Ltd. v. Janardan Nirman (P) Ltd. (2020) 18 SCC 277, the Supreme Court held that a party who chooses non-participation, allowing ex parte proceedings, and later complains, has effectively waived objections under Section 4.

The Court in HCC v. BRPNNL harmonised these provisions as follows:

  • Section 12(5) + Seventh Schedule = exceptional regime, waiver only via express written agreement post-dispute.
  • Section 4 = default regime for all other waivable defects – procedural missteps, appointment irregularities (not rising to Section 12(5) ineligibility), non-compliance with certain contractual preconditions, etc.

5.3.3 Section 29A and joint extension as a strong form of consent

Section 29A regulates the time limits for making an arbitral award and permits:

  • Parties by consent to extend the period by up to six months (Section 29A(3)); and
  • Court-ordered extensions under Section 29A(5), with power to substitute arbitrators under Section 29A(6).

A joint application under Section 29A by both parties is qualitatively different from routine procedural participation:

  • Each party has the right to either oppose extension (which may lead to termination of mandate) or to seek substitution of the arbitrator.
  • Where both parties jointly seek extension, they are affirmatively signalling continued confidence in and consent to the arbitral tribunal.

The Court reasoned that:

  • Jointly invoking Section 29A is a strong act of waiver under Section 4 in respect of procedural and jurisdictional objections (other than strict Section 12(5) ineligibility).
  • However, such joint applications cannot substitute for the specific “express written agreement” required by the proviso to Section 12(5) in cases of true Seventh Schedule ineligibility.

In the present case:

  • The MD was the appointing authority, not the arbitrator; the appointed arbitrator (a retired judge) was not within any of the Seventh Schedule categories.
  • Section 12(5) disqualification was, therefore, not attracted.
  • BRPNNL’s extensive participation, including joint Section 29A applications, amounted to a waiver under Section 4 of any objection that Clause 25 did not provide for arbitration or that the arbitral tribunal lacked jurisdiction.

5.3.4 Answer to Issue 3

The Court effectively held:

  • Joint applications under Section 29A reflect heightened consent and constitute a clear waiver of procedural and non-Section 12(5) objections under Section 4.
  • They cannot, however, be construed as an implied waiver of Section 12(5) ineligibility, which demands an express written post-dispute waiver.
  • In this case, as there was no Section 12(5) ineligibility, BRPNNL’s late-stage jurisdictional objections were barred by waiver.

5.4 Kashish Developers, Dismissal of SLPs, and Precedential Value

BRPNNL and the Patna High Court had relied on the earlier decision in State of Bihar v. Kashish Developers (Patna HC), where a similar clause was interpreted against the existence of a valid arbitration agreement, and the subsequent dismissal of SLPs by the Supreme Court was claimed as “affirmation”.

The Supreme Court addressed this in two steps:

  1. Factual distinction: In Kashish Developers, the State contended that it had no opportunity to oppose the appointment before the High Court, and the factual context was materially different. Here, BRPNNL had full opportunity, participated extensively, and even sought extensions of mandate.
  2. Doctrinal point: Non-speaking SLP dismissals do not create precedent. Relying on: the Court reiterated that:
    • A non-speaking dismissal of an SLP under Article 136 signifies only that the Court has declined to exercise its discretionary jurisdiction.
    • It does not amount to approval of the reasoning of the lower court.
    • The doctrine of merger does not apply; such orders do not constitute “law declared” under Article 141.

Thus, Kashish Developers had, at most, persuasive value, and could not justify the High Court in undoing a long-standing Section 11 order and stopping an advanced arbitration.

5.5 Consequential Directions and the Court’s Admonition to BRPNNL

Having found that:

  • the High Court had no jurisdiction to review its Section 11 order; and
  • a valid arbitration agreement existed and had been acted on for years,

the Supreme Court held that the appropriate remedial course was not to restart arbitration de novo. Instead, it:

  • Set aside the Patna High Court’s impugned judgment.
  • Directed the High Court to appoint a substitute arbitrator under Sections 14–15 read with Section 29A(6–7), within two weeks.
  • Ordered that the substituted arbitrator should:
    • continue from the stage already reached (preserving earlier evidence and costs); and
    • endeavour to conclude within one year, subject to any further Section 29A extension.

The Court also commented sharply on BRPNNL’s conduct:

  • The Managing Director did not respond to HCC’s notices seeking appointment of an arbitrator despite contractual obligations.
  • BRPNNL, as a public sector undertaking, failed to act as a “model litigant”, contrary to the standards laid down in:
  • The Court invoked Articles 14 and 298 of the Constitution to emphasise that public authorities must act fairly, promptly, and with constitutional fidelity, not resort to evasion and delay.

While the Court considered imposing costs, it ultimately chose instead to issue a stern warning to the then Managing Director of BRPNNL, cautioning that similar future conduct could attract adverse remarks or personal accountability.

6. Complex Concepts Simplified

6.1 Arbitration agreement and separability

  • An arbitration agreement is the parties’ agreement to submit disputes to arbitration rather than courts.
  • Separability (Section 16(1)(a)) means the arbitration clause is legally independent from the rest of the contract:
    • Even if the main contract is invalid or frustrated, the arbitration clause can survive.
    • Similarly, even if parts of the appointment mechanism are invalid, the core agreement to arbitrate can remain valid.

6.2 Unilateral appointment and negative covenants

  • Unilateral appointment clause: One party (often a State agency or employer) reserves to itself the exclusive right to appoint the arbitrator.
    • After TRF, Perkins and CORE II, such clauses are generally invalid where the appointing authority is itself interested/bias-prone.
  • Negative covenant (“no arbitration if appointment fails”): A term saying arbitration will not occur at all if the designated unilateral appointment mechanism cannot be implemented.
    • This judgment clarifies that, especially in public contracts, such negative covenants are contrary to equality and fairness and can be severed as void.

6.3 Contingent contracts (Sections 31 & 33 Contract Act)

  • A contingent contract is one which becomes enforceable only if a specified uncertain event happens (or does not happen).
  • The respondents argued that arbitration here was contingent on valid appointment by the MD; if that became impossible, the contract dictated no arbitration.
  • The Court rejected treating the arbitration clause as a pure contingent contract, holding that mandatory statutory and constitutional norms limit what the parties can validly “contingentise”.

6.4 Competence-competence

  • Under Section 16 A&C Act, an arbitral tribunal can rule on its own jurisdiction, including:
    • whether a valid arbitration agreement exists; and
    • whether it has jurisdiction over particular disputes.
  • This principle supports minimal court intervention at the referral/appointment stage.

6.5 Section 12(5) ineligibility vs Section 4 waiver

  • Section 12(5) + Seventh Schedule:
    • Bars certain categories of persons (e.g. employees, close business associates) from serving as arbitrator in any circumstances, unless the parties expressly and in writing waive this bar after disputes arise.
    • Participation or silence does not cure this ineligibility.
  • Section 4 waiver:
    • If a party is aware of a non-compliance with the arbitration agreement or a derogable rule in Part I, but proceeds without timely objection, it is deemed to have waived the right to object later.
    • This covers a broad range of defects except strict Section 12(5) ineligibility.

6.6 Section 29A extensions

  • Section 29A fixes a time limit for making an award (normally 12 months + 6 months by party consent).
  • Beyond that, the court can extend time and may:
    • continue the same arbitrator; or
    • substitute the arbitrator(s) under Section 29A(6), with proceedings continuing from the current stage.
  • Joint applications under Section 29A by both parties are a strong indicator that both accept the tribunal and wish it to continue.

6.7 Functus officio

  • Once a court has rendered a final decision on a matter, it becomes functus officio in respect of that matter, i.e. it has exhausted its jurisdiction and cannot reopen it except through specifically provided remedies (appeal, review on limited grounds, etc.).
  • Applied here, once the High Court validly appointed an arbitrator under Section 11 and that order attained finality, it could not re-decide the same issue through a fresh merits review.

6.8 Model litigant doctrine

  • State entities and PSUs are expected to act as “model litigants”:
    • not to take technical or dilatory points;
    • to respond promptly and fairly to contractual obligations; and
    • to avoid needless litigation and obstruction.
  • The Court reiterated this moral-constitutional standard in admonishing BRPNNL.

7. Likely Impact on Future Cases and Arbitration Practice

7.1 Drafting implications for government and PSU contracts

This judgment has immediate consequences for standard form public works contracts, many of which historically contained clauses similar to Clause 25 – conferring unilateral appointment powers and including negative stipulations that no arbitration will lie if such appointment becomes impossible.

  • Such clauses will no longer serve as effective tools to block arbitration.
    • Courts will treat the unilateral and negative elements as void and severable.
    • The core arbitration agreement will be preserved and enforced via Section 11(6).
  • States that have shifted policy from ad hoc arbitration to statutory tribunals (e.g. Bihar’s 2019 notification substituting Clause 25 of the Standard Bidding Document to refer disputes to the Bihar Public Works Contract Disputes Arbitration Tribunal) cannot apply such policy retrospectively to override existing arbitration agreements.

Government departments and PSUs will be compelled to:

  • Revisit and revise their standard arbitration clauses to conform with:
    • Section 12(5) and the Seventh Schedule;
    • the equality principle in Section 18; and
    • Article 14 scrutiny under CORE II.
  • Avoid drafting negative veto clauses that risk being struck down as arbitrary and contrary to the A&C Act’s framework.

7.2 Clarifying the limits of Section 11 review

The decision strongly discourages attempts to use review jurisdiction to revisit Section 11 orders:

  • Once an arbitrator is appointed and the order attains finality, parties must ordinarily:
    • raise jurisdictional objections before the tribunal under Section 16; or
    • challenge the award under Section 34.
  • Review is confined to correcting procedural missteps or obvious mistakes; it is not a vehicle for invoking later legal developments to retroactively unsettle an appointment.

This will likely reduce midstream Section 11 challenges and support greater stability in arbitral proceedings.

7.3 Strengthening the Section 4 waiver doctrine

By recognising joint Section 29A applications as implicit waivers of various procedural objections, the Court gives teeth to Section 4 and discourages tactical conduct where a party:

  • participates fully in arbitration;
  • seeks extensions; and then
  • attempts to derail the process close to the end.

Future litigants must be far more cautious: proceeding without timely objection can and will be treated as waiver for most defects, barring strict Section 12(5) ineligibility.

7.4 Reinforcing pro-arbitration and constitutional oversight

The judgment:

  • Reaffirms India’s pro-arbitration stance: courts must enable, not obstruct, arbitration.
  • Subject State/PSU arbitration clauses to constitutional scrutiny under Article 14:
    • Unilateral appointment and negative vetoes are incompatible with the basic fairness required of State instrumentalities.
  • Encourages courts to rely on substitution under Sections 14–15 and 29A(6) to preserve proceedings rather than terminating them on technical grounds.

8. Conclusion

Hindustan Construction Company Ltd. v. BRPNNL is a landmark in three respects.

First, it sharply circumscribes the power of High Courts to review their own Section 11 orders. Once parties have acted upon such an order and arbitral proceedings are well underway, the Section 11 court is largely functus officio; it cannot, save for narrow procedural exceptions, reopen questions of existence or validity of the arbitration agreement on merits.

Second, the judgment decisively addresses the status of clauses that couple unilateral appointment mechanisms with negative “no arbitration if appointment fails” stipulations. By treating the latter as void and severable, particularly in public–private contracts, the Court preserves the substantive agreement to arbitrate and prevents stronger parties (especially State entities) from wielding a contractual veto over arbitration once unilateral appointment becomes invalid under contemporary law.

Third, it clarifies the interplay between Section 4 waiver, Section 12(5) ineligibility, and Section 29A extensions. Statutory ineligibility for arbitrators remains subject to a rigorous express waiver standard, while most other procedural objections can be waived by conduct, particularly where parties jointly seek continuance and extension of arbitral mandates.

In its remedial posture, the Court chose continuity over disruption: it ordered the appointment of a substitute arbitrator to pick up from where the earlier tribunal left off, minimising waste of time, cost, and judicial resources. At the same time, by admonishing the PSU for its non-responsive and obstructive conduct, the Court underscored that public bodies must live up to their role as constitutional and contractual trustees, not aggressive litigants exploiting technicalities.

Taken together, the decision strengthens the architecture of Indian arbitration law by:

  • protecting party autonomy within statutory and constitutional limits;
  • streamlining judicial oversight to its proper, limited role; and
  • ensuring that arbitration remains a viable, fair, and efficient mechanism for resolving public–private commercial disputes.

Case Details

Year: 2025
Court: Supreme Court Of India

Judge(s)

Justice R Mahadevan

Advocates

E. C. AGRAWALA

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