[Cites 9, Cited by 0]
Delhi High Court
Northern Railways Senior Divisional ... vs M/S Jagran Engage on 13 January, 2026
Author: Subramonium Prasad
Bench: Subramonium Prasad
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 13th JANUARY, 2026
IN THE MATTER OF:
+ O.M.P. (COMM) 259/2024, I.A. 31802/2024, I.A. 31804/2024 &
I.A. 31805/2024
NORTHERN RAILWAYS SENIOR DIVISIONAL COMMERCIAL
MANAGER .....Petitioner
Through: Mr. Om Prakash along with Ms.
Swati Mishra,, Mr. Chandresh Pratap
and Ms. Komal Yadav, Advocates.
versus
M/S JAGRAN ENGAGE .....Respondent
Through: Mr. B. K. Mishra, Ms. Poonam Atey,
Mr. Siraj malik Ms. Alankrita Shukla,
Advocates
CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT
1. The present Petition under Section 34 of the Arbitration and
Conciliation Act, 1996 has been filed by the Petitioner challenging the
Award dated 28.02.2019, passed by the learned Sole Arbitrator.
2. The primary ground taken by the Petitioner is that the appointment of
Arbitrator was unilateral in nature and, therefore, the award be set aside. The
question which therefore, arose before this Court was as to whether a party
which appoints the arbitrator can turn around and challenge the Award on
the ground of unilateral appointment or not.
3. The facts, in brief, leading to the present Petitions, are that on
03.02.2017, the Petitioner herein invited tenders for grant of advertisement
rights through vinyl wrapping on the exterior of Shatabdi trains running on
the New Delhi-Amritsar (Train Nos. 12029/30) and New Delhi-Kalka
(Train Nos. 12005/06) routes. It is stated that pursuant thereto, the Petitioner
herein entered into two Licence Agreements dated 03.02.2017 with the
Respondent herein, granting advertisement rights to the Respondent for a
period of three years. It is stated that in terms of the said Agreements, the
Respondent deposited security amounts of Rs. 4,50,000/- and Rs. 4,23,000/-
respectively, and also paid licence fees for the first half year amounting to
Rs. 22,50,000/- and Rs. 21,15,000/-, respectively along with applicable
service tax. It is stated that after commencement of the contract, disputes
arose between the parties regarding utilisation of the granted advertisement
rights. It is stated that on 11.05.2017, the Respondent expressed its
unwillingness to continue and requested surrender of the contract before
completion of the agreed tenure. Clause 27 of the Agreements contain an
Arbitration Clause which reads as under:
"27. Arbitration
In the event of any dispute, claim or difference of
opinion arising out of this Agreement or any special
condition of contract or in connection with this
agreement, the same shall be referred to the
arbitration of a Gazetted Railway officer not below the
rank of J.A grade appointed by the General
Manager/Northern Railway. The Gazetted officer
appointed as arbitrator however will not be one of
those who had an opportunity to deal with the matter
to which the contract relates or who, in the course of
their duties as Railway servants, have expressed views
on all or any of the aspects of the matter under dispute
or differences. The award of the arbitrator shall be
final and binding on the parties to the contract
Subject to aforesaid, The Arbitration & Conciliation
Act, 1996 and the rules made there under or any
statutory modification thereof for the time being in
force shall be deemed to apply to the arbitration
proceeding under this clause. The venue of arbitration
shall be the place from which the acceptance note is
issued.
"Where the arbitral award is for the payment of money,
no interest shall be payable on whole or any part of the
money for any period till the date on which the award
is passed."
4. It is stated that the Respondent invoked arbitration and filed Claim
Petition No. 7PUB/TN/VINYL WRAPPING/GROUP-D/2018, seeking
refund of security deposit and other amounts. It is stated that vide letter
dated 09.10.2017, the Petitioner herein appointed Shri Indra Ghosh, Retired
GM/ECoR, as the Sole Arbitrator to adjudicate on the disputes between the
parties. It is stated that the Petitioner herein filed its reply and also raised a
counter-claim claiming outstanding licence fees, damages, and other
charges.
5. By an award dated 28.02.2019, the learned Sole Arbitrator rejected
the counter-claim of the Petitioner, and directed the Petitioner to refund the
security deposit of Rs. 8,73,000/- to the Respondent, along with interest.
6. Aggrieved by the said award, Petitioner filed a Petition, being OMP
(COMM) No. 119/2019, under Section 34 of the Arbitration and
Conciliation Act, 1996 before the District Judge (Commercial Court),
Patiala House Courts, New Delhi. Vide dated 23.09.2021, the said Petition
was returned for want of pecuniary jurisdiction, liberty being granted to the
Petitioner to file an appropriate Petition before the competent Court. The
Petitioner has, thereafter, approached this Court.
7. The short question which arises before this Court is as whether the
process adopted by the Petitioner/AAI amounts to unilateral appointment of
Arbitrator or not.
8. In the opinion of this Court, the issue as to whether asking a party to
select an arbitrator from a truncated panel of arbitrators to adjudicate on the
disputes is valid or not is no longer res integra and is squarely covered by
the Judgment of the Apex Court in Voestalpine Schienen GmbH v. DMRC,
(2017) 4 SCC 665, has held as under:
"28. Before we part with, we deem it necessary to make
certain comments on the procedure contained in the
arbitration agreement for constituting the Arbitral
Tribunal. Even when there are a number of persons
empanelled, discretion is with DMRC to pick five
persons therefrom and forward their names to the
other side which is to select one of these five persons
as its nominee (though in this case, it is now done
away with). Not only this, DMRC is also to nominate
its arbitrator from the said list. Above all, the two
arbitrators have also limited choice of picking upon the
third arbitrator from the very same list i.e. from
remaining three persons. This procedure has two
adverse consequences. In the first place, the choice
given to the opposite party is limited as it has to
choose one out of the five names that are forwarded
by the other side. There is no free choice to nominate
a person out of the entire panel prepared by DMRC.
Secondly, with the discretion given to DMRC to
choose five persons, a room for suspicion is created
in the mind of the other side that DMRC may have
picked up its own favourites. Such a situation has to
be countenanced. We are, therefore, of the opinion
that sub-clauses (b) & (c) of Clause 9.2 of SCC need
to be deleted and instead choice should be given to
the parties to nominate any person from the entire
panel of arbitrators. Likewise, the two arbitrators
nominated by the parties should be given full freedom
to choose the third arbitrator from the whole panel.
29. Some comments are also needed on Clause 9.2(a)
of GCC/SCC, as per which DMRC prepares the panel
of "serving or retired engineers of government
departments or public sector undertakings". It is not
understood as to why the panel has to be limited to
the aforesaid category of persons. Keeping in view the
spirit of the amended provision and in order to instil
confidence in the mind of the other party, it is
imperative that panel should be broadbased. Apart
from serving or retired engineers of government
departments and public sector undertakings,
engineers of prominence and high repute from
private sector should also be included. Likewise panel
should comprise of persons with legal background
like Judges and lawyers of repute as it is not
necessary that all disputes that arise, would be of
technical nature. There can be disputes involving
purely or substantially legal issues, that too,
complicated in nature. Likewise, some disputes may
have the dimension of accountancy, etc. Therefore, it
would also be appropriate to include persons from
this field as well.
30. Time has come to send positive signals to the
international business community, in order to create
healthy arbitration environment and conducive
arbitration culture in this country. Further, as
highlighted by the Law Commission also in its report,
duty becomes more onerous in government contracts,
where one of the parties to the dispute is the
Government or public sector undertaking itself and the
authority to appoint the arbitrator rests with it. In the
instant case also, though choice is given by DMRC to
the opposite party but it is limited to choose an
arbitrator from the panel prepared by DMRC. It,
therefore, becomes imperative to have a much
broadbased panel, so that there is no misapprehension
that principle of impartiality and independence would
be discarded at any stage of the proceedings, specially
at the stage of constitution of the Arbitral Tribunal.
We, therefore, direct that DMRC shall prepare a
broadbased panel on the aforesaid lines, within a
period of two months from today." (emphasis supplied)
9. The abovementioned Judgment has been referred to and quoted with
approval in a Judgment delivered by a Bench of five Judges of the Apex
Court in Central Organisation for Railway Electrification v. ECI SPIC SMO
MCML (JV), (2025) 4 SCC 641, wherein the Apex Court held as under:
"132. In Voestalpine [Voestalpine Schienen GmbH v.
DMRC Ltd., (2017) 4 SCC 665 : (2017) 2 SCC (Civ)
607] and CORE [Central Organisation for Railway
Electrification v. ECI-SPIC-SMO-MCML (JV),
(2020) 14 SCC 712] , one of the parties curated a
panel of arbitrators and mandated the other party to
select their arbitrator from the panel. Since the
curation of the list is exclusively undertaken by one
party, the other party is effectively excluded from the
process of curating the panel from which exclusively,
the appointment of an arbitrator is to be made. The
other party has to mandatorily select its arbitrator
from a curated panel, restricting their freedom to
appoint an arbitrator of their choice. This is against
the principle of equal treatment contained under
Section 18. In this situation, there is no effective
counterbalance because both parties do not
participate equally in the process of appointing
arbitrators. The party curating the panel can restrict
the choice of the party only to a person who is on the
panel selected by the other party and to no other
person.
133. Many PSUs are regularly involved in arbitration
disputes and constantly need the services of
arbitrators. Such institutions often maintain a pool of
potential arbitrators with the sole object of having a
ready pool of qualified professionals who have
committed their time and consented to act as
arbitrators for fixed fees. The Arbitration Act does not
prohibit parties to an arbitration agreement from
maintaining a curated panel of potential arbitrators.
However, the problem arises when the PSUs make it
mandatory for other parties to select their nominees
from the curated panel of arbitrators. When a PSU
exercises its discretion to curate a panel, the very
factor that the PSU is choosing only a certain number
of persons as potential arbitrators and not others will
raise a reasonable doubt in the mind of a fair-minded
person. The PSUs may conceivably have nominated a
person on the panel of potential arbitrators because
they have a certain predisposition in favour of the
former. This doubt is reinforced when the other party
is given no choice but to select its arbitrator from the
curated panel.
134. In CORE [Central Organisation for Railway
Electrification v. ECI-SPIC-SMO-MCML (JV), (2020)
14 SCC 712] , the three-member tribunal was sought
to be constituted in the following manner : (i) the
Railways would suggest at least four names of retired
railway officers; (ii) the contractor would select two
names out of the panel for appointment as their
arbitrator; (iii) The General Manager (of the
Railways) would thereafter choose at least one person
out of the two to be appointed as the contractor's
arbitrator; and (iv) The General Manager would
proceed to appoint the balance arbitrators from the
panel or outside the panel and also indicate the
presiding arbitrator.
135. Such an arbitrator-appointment clause is likely
to give rise to justifiable doubts as to the
independence and impartiality of arbitrators for two
reasons : (i) the contractor is restricted to choosing its
arbitrator from the panel of four arbitrators
nominated by the party who is a disputant; and (ii)
the contractor's choice is further constrained because
it is made subject to the decision of the General
Manager who will choose one among the two persons
suggested by the party. Since the contractor has to
select its arbitrator from a curated panel, the
arbitration clause does not allow the contractor equal
participation in the appointment of their arbitrator.
Moreover, the clause allows the General Manager to
appoint the balance arbitrators from either the panel
or outside the panel. Thus, the process of appointing
the arbitrators is unequal because the General
Manager can go beyond the panel of four potential
arbitrators, while the contractor is bound by the
names enlisted in the panel." (emphasis supplied)
10. Applying the procedure for appointment of an Arbitrator, as detailed
in the foregoing judgments, shows that the Petitioner herein vide letter dated
09.10.2017 had appointed Sh. Indra Ghosh as the Sole Arbitrator. Such an
appointment has been held to be bad in law by the Apex Court in Core
(supra).
11. The second issue that arises for consideration is as to whether the
Petitioner, who appointed the Arbitrator, can turn around and challenge the
award on the ground of unilateral appointment. This issue is also no longer
res integra and has been decided by the Division Bench of this Court in
Mahavir Prasad Gupta & Sons v. Govt. of NCT of Delhi, 2025 SCC
OnLine Del 4241, wherein the Division Bench has held as under:
"74. This issue requires consideration of following
questions:
a) When a party itself has unilaterally appointed the
arbitrator, whether that party can object to the
unilateral appointment of the arbitrator at any stage
during or after the arbitration proceedings?
b) If a party has unilaterally appointed an arbitrator,
can that party be deemed to have given express waiver
in writing under Section 12(5) of the Act while making
the appointment itself?
75. The analysis of the above questions would require
consideration of the act of appointment of the
arbitrator by a party and nature of such exercise of
right. Section 12(4) of the Act provide that a party may
challenge an arbitrator appointed by him, or in whose
appointment he has participated, only for reasons of
which he becomes aware after the appointment has
been made.
76. Accordingly, if the party that has the power to
make unilateral appointments exercises the right by
making the appointment of the arbitrator, that party
can challenge the appointment made by him only for
reasons that he comes to know after the appointment is
made. In cases of unilateral appointment, it is
presumed that the party is aware of the disqualification
of the arbitrator at the time of the appointment itself.
77. Further, Section 12(5) of the Act provides that
notwithstanding any prior agreement to the contrary,
any person whose relationship, with the parties or
counsel or the subject-matter of the dispute, falls under
any of the categories specified in the Seventh Schedule
of the Act shall be ineligible to be appointed as an
arbitrator. The proviso to Section 12(5) of the Act
provides that parties may, subsequent to disputes
having arisen between them, waive the applicability of
Section 12(5) of the Act by an express agreement in
writing.
78. A conjoint reading of Sections 12(4) and 12(5) of
the Act would make clear that even if there is an
agreement for the appointment of unilateral
appointment, such clause would be invalid except when
both parties mutually agree to waive the same in
writing.
79. Hence, exercise of power to unilaterally appoint
the arbitrator by a party cannot be termed as express
agreement to waive the invalidity of the arbitration
agreement providing for unilateral appointment. For
waiver under Section 12(5) of the Act after the dispute
have arisen, the parties are required to consciously
agree in writing to waive the ineligibility of the
arbitrator. Grounds of ineligibility of the arbitrator
under Seventh Schedule are derived from Red List of
IBA Rules on Conflict of Interest in International
Commercial Arbitration. The Act was as amended in
2015 to provide a detailed framework to address
arbitrator bias. This framework includes the Fifth and
Seventh Schedules, which draw from the Orange and
Red Lists of the IBA Guidelines, respectively. The Fifth
Schedule requires arbitrators to disclose any
circumstances that might reasonably affect their
impartiality, including relationships with the parties,
counsel, or subject matter of the dispute. The Seventh
Schedule reflecting the Red List, outlines scenarios of
relationship conflict that would result in de jure
ineligibility of an arbitrator.
80. The Sixth Schedule complements this by
prescribing the format and content of such disclosures.
In HRD Corpn. v. GAIL (India) Ltd., (2018) 12 SCC
471, the Supreme Court observed that the categories
listed under the Fifth and Seventh Schedules must be
construed by taking a "broad commonsensical
approach", without restricting or enlarging the words.
81. Accordingly, the party that unilaterally appointed
the arbitrator cannot be deemed to have agreed in
writing to waive the ineligibility of the arbitrator by act
of appointment. When appointment itself is ineligible
under the provisions of Section 12(5) of the Act read
with Seventh Schedule of the Act, it does not take away
the right of the party to challenge such an appointment
merely because that party had made the appointment in
absence of express agreement in writing between the
parties to waive the applicability of Section 12(5) of
the Act.
82. Hence, a party which unilaterally appointed the
arbitrator has right to object to such appointment
irrespective of fact that that party itself made the
appointment of the arbitrator. Mere fact of making
appointment in writing will not make the ineligible
appointment a valid appointment unless there is
express agreement in writing waiving such ineligibility.
83. Although it appears disingenuous, a party
appointing an the sole or presiding arbitrator
unilaterally can challenge the award on the ground
that the award has been rendered in contravention of
Section 12(5) of the Act read with Seventh Schedule of
the Act notwithstanding that the said party itself made
such an appointment. When the Arbitral Tribunal
inherently lacked jurisdiction to act, the arbitration
proceedings are void ab initio, rendering the award
unenforceable irrespective of which party made such
unilateral appointment. The arbitral proceedings and
an award made by an unilaterally appointed sole or
presiding arbitrator, who is de jure ineligible to be
appointed as an arbitrator by virtue of the Seventh
Schedule of the Act are void ab initio. The waiver
under the proviso to Section 12(5) of the Act must be
express and subsequent to the disputes having been
arisen between the parties. Hence, the party which
appointed the sole or presiding arbitrator unilaterally
can also challenge the award under Section 34 of the
Act on the ground of such ineligibility."
12. In view of the above, the Award dated 31.07.2023 is set aside.
13. The Petition is disposed of. Pending applications, if any, also stands
disposed of.
SUBRAMONIUM PRASAD, J
JANUARY 13, 2026
Rahul
