Recently, the Supreme Court was seized of a batch of civil appeals arising from a challenge to the appointment of a sole arbitrator under a licence agreement executed between the parties, raising important questions on unilateral appointments, statutory ineligibility of arbitrators, and the scope of waiver under the Arbitration and Conciliation Act, 1996.
Brief Facts:
The case arose from two Licence Agreements executed between the Appellants and the Respondent for providing ground handling services at various airports. Clause 78 of the Licence Agreement contained an arbitration clause empowering the Chairman of the Respondent authority to appoint a sole arbitrator. Disputes arose between the parties in 2015, following which arbitration was invoked by the Appellants. A sole arbitrator was appointed by the Respondent. The arbitral proceedings continued and culminated in an award. The Appellants thereafter challenged the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, and subsequently questioned the unilateral appointment of the arbitrator, invoking Section 12(5) read with the Seventh Schedule of the Act.
Contentions of the Appellants:
The counsel for the Appellants contended that the appointment of the sole arbitrator was void ab initio as it was made unilaterally by the Chairman of the respondent, who himself was ineligible under Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996. The Appellant argued that once the appointing authority is rendered statutorily ineligible, any appointment made by such authority is legally non-est. The Appellants submitted that participation in arbitral proceedings or recording of “no objection” cannot amount to waiver, as the proviso to Section 12(5) mandates an express agreement in writing after disputes have arisen. The Appellants further contended that the objection to the arbitrator’s ineligibility could be raised even at the stage of Section 34 proceedings, as the issue goes to the root of jurisdiction.
Contentions of the Respondents:
The counsel for the Respondent submitted that the appointment of the arbitrator was not unilateral, as it was made pursuant to the appellants’ own notice invoking arbitration under Clause 78 of the Licence Agreement.The counsel contended that the Appellants had expressly consented to the appointment, as recorded in the first procedural order of the arbitrator, and had participated in the proceedings without objection for several years. Such conduct, according to the respondent, constituted waiver under the proviso to Section 12(5) of the Arbitration and Conciliation Act, 1996.The Respondent further argued that the challenge to the arbitrator’s appointment was raised belatedly and only as an afterthought during Section 34 proceedings, and therefore deserved to be rejected.
Observations of the Court:
The Supreme Court observed that the principle of equal treatment of parties, as embodied in Section 18 of the Arbitration and Conciliation Act, 1996, is not confined to the conduct of arbitral proceedings alone but equally governs the procedure for appointment of arbitrators. The Court noted that “equal participation of the parties in the process of appointment of arbitrators entails that the contracting parties have an equal say in the constitution of the arbitral tribunal”, and that such participation eliminates the likelihood of challenges at a later stage while preserving the independence and impartiality of the arbitral process.
The Court held that Section 12(5) of the Act, 1996, introduced by the Arbitration and Conciliation (Amendment) Act, 2015, renders any person falling within the categories specified in the Seventh Schedule statutorily ineligible to be appointed as an arbitrator. Relying on Bharat Broadband Network Ltd. v. United Telecoms Ltd., the Court reiterated that such ineligibility “goes to the root of the appointment” and results in a de jure inability of the arbitrator to perform his functions, unless the ineligibility is waived strictly in terms of the proviso to Section 12(5).
Placing reliance on TRF Ltd. v. Energo Engineering Projects Ltd., the Court reaffirmed that once a person becomes ineligible by operation of law, such person also loses the authority to appoint or nominate another arbitrator. The Court restated that “it is inconceivable in law that a person who is statutorily ineligible can nominate another as an arbitrator”, and that an appointment made by such an ineligible authority is void ab initio and non est.
The Court further relied on Perkins Eastman Architects DPC v. HSCC (India) Ltd., observing that where only one party has the exclusive right to appoint a sole arbitrator, “its choice will always have an element of exclusivity in determining or charting the course for dispute resolution”. The Court emphasised that the test is not proof of actual bias but the existence of a reasonable apprehension of bias, which necessarily arises when one party unilaterally controls the constitution of the arbitral tribunal.
On the question of waiver, the Court categorically held that the proviso to Section 12(5) requires a clear, conscious and express agreement in writing, entered into subsequent to the disputes having arisen. The Court observed that mere participation in arbitral proceedings, recording of ‘no objection’ in procedural orders, or continued conduct before the arbitrator cannot be construed as an express waiver, as such an interpretation would defeat the mandatory and non-derogable nature of Section 12(5) of the Act.
The decision of the Court:
The Supreme Court allowed the appeals and set aside the impugned High Court judgment, holding that the unilateral appointment of the sole arbitrator by an ineligible authority was void ab initio under Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996. The Court held that no valid waiver existed in the absence of an express agreement in writing after disputes had arisen. Consequently, the arbitral proceedings and the award were rendered legally unsustainable.
Case Title: Bhadra International (India) Pvt. Ltd. & Ors. Versus Airports Authority Of India
Case No.: Civil Appeal Nos. 37-38 of 2026
Coram: Hon’ble Mr. Justice J. B. Pardiwala and Hon’ble Mr. Justice K. V. Viswanathan
Counsel for the Appellant: Sr. Adv. Navin Pahwa, Sr. Adv. Ashish Mohan, Adv. Akshit Mago, AOR Akshit Pradhan.
Counsel for the Respondent: Sr. Adv. Parag Tripathi, Adv. Sonal K. Singh, Adv. Ayan De, Adv. Shivang Singh, Adv. Anmol Adhrit, AOR Sukanya Lal.
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