Synopsis

The petitioner (BHEL) challenged an arbitral award on the ground that the sole arbitrator was unilaterally appointed by the petitioner itself under a contract clause that empowered the General Manager (an employee of the petitioner) or his nominee to act as arbitrator. The respondent argued that the petitioner had itself made the appointment and had participated in the arbitral proceedings without objection, and that the award should be set aside only partially (since major payments had been made). Relying on Bhadra International (India) Pvt. Ltd. v. Airports Authority of India (2026 INSC 6) and Mahavir Prasad Gupta and Sons v. Govt. of NCT of Delhi (2025 SCC OnLine Del 4241), the court held that: (i) unilateral appointment of an arbitrator by a party is void ab initio under Section 12(5) read with the Seventh Schedule; (ii) participation in proceedings or failure to object earlier does not constitute waiver under the proviso to Section 12(5), which requires an express agreement in writing after the dispute has arisen; (iii) the issue of inherent lack of jurisdiction can be raised for the first time in a Section 34 petition; (iv) an award passed by a unilaterally appointed arbitrator is a nullity and cannot be sustained even in parts. The award was set aside in its entirety.

Court: High Court of Delhi

Coram: Honourable Mr. Justice Avneesh Jhingan

Date of Judgment: 23rd April 2026

Citation: O.M.P. (COMM) 273/2018 (2026:DHC:3390) (unreported)

Core Law: Arbitration and Conciliation Act, 1996 – Sections 12(5) (ineligibility of arbitrator), Seventh Schedule, Section 14, Section 15, Section 34 (setting aside award)

2. Legal Framework

Major laws and provisions involved

• Arbitration and Conciliation Act, 1996 – Section 12(5) (ineligibility to act as arbitrator if relationship falls within Seventh Schedule), proviso to Section 12(5) (express agreement in writing to waive ineligibility); Seventh Schedule (categories of relationships that make a person ineligible); Section 14 (termination of mandate of arbitrator), Section 15 (appointment of substitute arbitrator), Section 34 (setting aside of award), Section 18 (equal treatment of parties), Section 4 (waiver by conduct)

Key legal principles applied

Unilateral appointment of arbitrator is prohibited: Under Section 12(5) read with the Seventh Schedule, an employee of a party to the dispute (or a person in a relationship that gives rise to justifiable doubts as to independence and impartiality) is ineligible to be appointed as an arbitrator. Moreover, a party cannot unilaterally appoint an arbitrator on behalf of both parties. Such appointment is void ab initio and the resulting award is a nullity.

Waiver under proviso to Section 12(5) requires express agreement in writing: The proviso to Section 12(5) states that parties may, by an express agreement in writing, waive the applicability of Section 12(5). This waiver must be clear, unequivocal, and made after the dispute has arisen. Conduct of the parties – such as participating in arbitral proceedings, filing statements of claim, or not objecting earlier – does not constitute a valid waiver. Section 4 of the Act (deemed waiver by conduct) does not apply to Section 12(5) because the proviso specifically requires an “expres

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