The Supreme Court of India has set aside an arbitral award passed by a sole arbitrator who was unilaterally appointed by the Airports Authority of India (AAI), holding that such an appointment is void ab initio. The Court ruled that mere participation in arbitral proceedings, filing of pleadings, or silence does not constitute a waiver of the arbitrator’s ineligibility under Section 12(5) of the Arbitration and Conciliation Act, 1996. The Bench emphasized that the waiver must be an “express agreement in writing” entered into after the dispute has arisen.
The Division Bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan allowed the appeals filed by Bhadra International (India) Pvt. Ltd., setting aside the judgment of the Delhi High Court which had upheld the appointment and the subsequent award.
Background of the Case
The dispute arose from a License Agreement executed on November 29, 2010, between the appellant, a consortium led by Bhadra International, and the respondent, Airports Authority of India (AAI), for ground handling services. Clause 78 of the agreement provided that any dispute shall be referred to the “sole arbitration of a person, to be appointed by the Chairman of the Authority.”
Following disputes, the appellants invoked the arbitration clause on November 27, 2015. Consequently, the Chairman of the AAI appointed a sole arbitrator. On March 22, 2016, the arbitrator passed the first procedural order recording that “None of the parties have any objection to my appointment as the Sole Arbitrator.” The proceedings continued for over two years, with parties also seeking extensions under Section 29A of the Act.
On July 30, 2018, the sole arbitrator passed a ‘Nil’ award, rejecting the claims of the appellants. The appellants challenged the award under Section 34 of the Act before the Delhi High Court. Later, they sought to amend their application to raise a specific objection that the unilateral appointment of the arbitrator was invalid in light of the insertion of Section 12(5) into the Act by the 2015 Amendment.
The Single Judge dismissed the Section 34 application, holding that the appellants had waived the applicability of Section 12(5) by not objecting during the proceedings. The Division Bench of the High Court affirmed this view, noting that the appellants had participated in the proceedings and raised the objection belatedly.
Arguments of the Parties
The appellants, represented by Senior Advocate Mr. Navin Pahwa, argued that the sole arbitrator was ineligible to act as he was unilaterally appointed by the Chairman of the respondent, who himself was ineligible to act as an arbitrator under the Seventh Schedule of the Act. Relying on Supreme Court decisions in TRF Ltd. v. Energo Engineering Projects Ltd. and Perkins Eastman Architects DPC v. HSCC (India) Ltd., they contended that an appointment made by an ineligible person is void ab initio and non-est in law. They further argued that participation in proceedings does not amount to a waiver under the proviso to Section 12(5), which requires an “express agreement in writing.”
The respondent, represented by Senior Advocate Mr. Parag Tripathi, argued that the first procedural order recording the parties’ consent constituted an “express agreement in writing.” He contended that by filing a statement of claim and seeking extensions under Section 29A, the appellants had submitted to the jurisdiction of the arbitrator. The respondent emphasized that the objection was raised as an afterthought after the award was passed.
The Court’s Analysis
The Supreme Court examined three key issues: the ineligibility of the arbitrator, the question of waiver, and whether the objection could be raised for the first time under Section 34.
1. Unilateral Appointment and Ineligibility
The Court reiterated the principle established in TRF Ltd. and Perkins Eastman that a person who is ineligible to act as an arbitrator under Section 12(5) read with the Seventh Schedule cannot nominate another person as an arbitrator. The Bench observed that the Chairman of the AAI was ineligible under Items 1, 5, and 12 of the Seventh Schedule.
Justice Pardiwala, writing for the Bench, stated:
“Once the Chairman is rendered ineligible by operation of law, he cannot nominate or appoint another person as an arbitrator. To illustrate, one who cannot sit on a chair himself cannot authorise another to sit on it either.”
The Court held that the appointment was void ab initio and the arbitrator was de jure ineligible.
2. Waiver Requires Express Agreement in Writing
The Court firmly rejected the argument that participation in proceedings or recording “no objection” in a procedural order constitutes a valid waiver under the proviso to Section 12(5).
The Court observed:
“The expression ‘express agreement in writing’ demonstrates a deliberate and informed act that although a party is fully aware of the arbitrator’s ineligibility, yet it chooses to forego the right to object against the appointment of such an arbitrator.”
The Bench clarified that a waiver cannot be inferred by conduct or implication. Specifically, the Court held that the following do not constitute an “express agreement in writing”:
- A notice invoking arbitration.
- A procedural order recording no objection.
- Submission of a Statement of Claim.
- Filing applications for extension of time under Section 29A.
- Continued participation in the proceedings.
The Court stated:
“The mandate of an express agreement in writing in the present case may looked at from one another angle… Such written waiver supplies the very consent that was previously missing, thereby placing the appointment on the same footing as a mutually agreed appointment.”
3. Objection Can Be Raised at Any Stage
The Court held that since the appointment was void ab initio due to statutory ineligibility, the defect went to the root of the jurisdiction. Therefore, the objection could be raised at any stage, including in proceedings under Section 34 to set aside the award.
The judgment noted:
“The Act, 1996, does not recognize the conferral of jurisdiction on an arbitral tribunal without the consent of the parties… When an arbitral tribunal is unilaterally constituted, such consent is absent, thereby divesting the tribunal of subject-matter jurisdiction.”
The Court overruled High Court decisions that had taken a contrary view regarding waiver by conduct.
The Decision
The Supreme Court allowed the appeals and set aside the impugned judgment of the Delhi High Court. Consequently, the arbitral awards dated July 30, 2018, were also set aside.
The Court concluded:
“We have reached the conclusion that the High Court committed an egregious error in passing the impugned judgment… It would be open to the parties to initiate fresh arbitration proceedings in accordance with law.”
Case Details
Case Title: Bhadra International (India) Pvt. Ltd. & Ors. vs. Airports Authority of India
Case No.: Civil Appeal Nos. 37-38 of 2026 (Arising out of SLP (C) Nos. 16107-16108 of 2025)
Bench: Justice J.B. Pardiwala and Justice K.V. Viswanathan
