Allied Construction vs Engineering Projects India Limited

* IN THE HIGH COURT OF DELHI AT NEW DELHI

rd
% Reserved on: 23 April, 2026
th
Pronounced on: 7 May, 2026


+ FAO(OS) (COMM) 114/2026 & CM APPL. 25929/2026, CM
APPL. 25930/2026, CM APPL. 25932/2026, CM APPL.
25933/2026

ALLIED CONSTRUCTION
B.R. TOWER, 21,
JANPATH LANE, ULUBARI,
GUWAHATI- 781007 (ASSAM) .... APPELLANT

Through: Mr. Rajat Joneja, Mr. Anmol
Kumar and Ms. Cheshta Dalal,
Advs.
versus

ENGINEERING PROJECTS INDIA LIMITED
CORE-3, SCOPE COMPLEX,
7- INSTITUTIONAL AREA, LODHI ROAD,
CGO COMPLEX,
NEW DELHI-110003 ..... RESPONDENT

Through: Mr. Sonal Kumar Singh, Mr. Ratik
Sharma and Mr. Yashvardhan
Singh Gohil, Advs.

CORAM:
HON’BLE MR. JUSTICE NITIN WASUDEO SAMBRE
HON’BLE MR. JUSTICE AJAY DIGPAUL


Signature Not Verified
Signed By:SHILPI
Signing Date:07.05.2026
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FAO(OS) (COMM) 114/2026 Page 1 of 9

JUDGMENT

AJAY DIGPAUL, J.
1. The present appeal is filed under Section 37 (1) (c) of the
1
Arbitration and Conciliation Act, 1996 , assails Order dated 25.03.2026
passed by a learned Single Judge of this Court whereby a petition filed
by the respondent filed under Section 34 of the Act was allowed, and
2
Award dated 06.07.2018 was set aside in its entirety.
2. In consideration of the limited ambit of this Court while
adjudicating an appeal under Section 37 of the Act, along with the fact
that the unilateral appointment of the arbitrator is the sole ground upon
which the award was set aside in the impugned order, only a brief
recitation of facts and events is necessary.
3. The respondent/EPIL entered into a Memorandum of
Understanding with the Department of Agriculture, Government of
Tripura, to construct a college of agriculture at Agartala. The Appellant
was awarded work vide Letter of Intent dated 10.03.2008, after which an
3
agreement was entered into between the parties on 23.04.2008 .
4. Clause 76 of the GCC provided for dispute resolution through
arbitration, whereby all disputes shall be referred to a sole arbitrator who
shall be the Chairman and Managing Director of the respondent (CMD),
or any person discharging such functions if the need arises, failing which
they would be referred to a person appointed by the CMD. The clause

1
The Act
2
The Award
3
General Conditions of Contract, GCC hereinafter
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also stipulated that no objection would lie if the arbitrator appointed is an
employee of the respondent.
5. The appellant issued a notice dated 14.03.2016 under Section 21 of
the Act to the respondent, which was alleged to have received no
response. Thereafter, the appellant filed a petition under Section 11 of the
Act before the High Court of Tripura, seeking appointment of a sole
arbitrator.
6. In the interregnum, the respondent vide letter dated 10.01.2017
appointed a sole arbitrator, owing to which the appellant withdrew its
petition under Section 11 on 30.01.2017.
7. On 06.07.2018, an award came to be passed by the learned Sole
Arbitrator whereby a sum of ₹ 3,70,74,265/- was directed as payable to
the appellant by the respondent, along with post award interest of 10%
per annum.
8. Aggrieved, the respondent instituted a petition under Section 34 on
06.10.2018 in challenge against the award dated 06.07.2018. The
appellant preferred a petition under Section 36 seeking enforcement of
the award during the year 2021. Order dated 08.12.2021 came to be
passed in the execution proceedings, directing the respondent to deposit
the awarded amount along with interest within two weeks of the order.
These directions were complied with by the respondent.
9. Thereafter, Order dated 08.04.2022 permitted the appellant to
withdraw the amount so deposited by the respondent upon furnishing an
unconditional bank guarantee of an equivalent amount.
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10. It was only later on 26.09.2023 that the respondent filed an
application seeking leave to amend its petition under Section 34 to
include additional grounds to assail the arbitral award qua Section 12 (5)
of the Act.
11. The learned single judge in the order impugned noted that Section
12(5) of the Act read with its Seventh Schedule conceives the legal
position that an employee of a party in dispute is ineligible to be
appointed as an arbitrator, and furthermore such party cannot nominate
or appoint any other person as an arbitrator in the absence of an express
agreement in writing to waive the applicability of Section 12(5) of the
Act . In the absence of explicit waiver through an agreement in writing,
such appointment would then be void ab initio , and any alleged
acquiescence by a party through participation in proceedings or
otherwise, could not be interpreted as satisfying the threshold of the
proviso to Section 12(5) of the Act.
12. Aggrieved by the setting aside of the award, the appellant is now
before us in appeal under Section 37 of the Act.
13. Mr. Rajat Joneja, learned counsel appearing on behalf of the
appellant, submits that the facts at hand are distinct from those that lay
before the Hon’ble Supreme Court in its decision in Bhadra
4

International (India) Pvt ltd v Airports Authority of India . He
emphasises that the decision in Bhadra specifically deals with an
instance where the award was challenged on the ground of unilateral

4
2026 SCC OnLine SC 7
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appointment of the arbitrator sans an explicit waiver under Section 12 (5)
of the Act, where such challenge was instituted by a party that did not
make such unilateral appointment.
14. He urges that for the respondent/appointing party to contend that
an express waiver as contemplated under the proviso to Section 12(5)
was not made is inappropriate and indicative of mala fides , and that the
decision in Bhadra deals not with bias itself but the reasonable
apprehension of bias. In this light, he argues, that no reasonable
apprehension of bias may be claimed by a party that itself appoints an
arbitrator unilaterally. For this, he places reliance on paragraphs 57 to 59
of the decision.
15. Concluding his arguments, he submits that for this Court to permit
an interpretation of the decision in Bhadra in favour of that which is
proposed by the respondent would run contrary to Indian public policy.
Highlighting the conduct of the respondents, he points out that the
respondent, who appointed the learned sole arbitrator unilaterally only to
suffer an award entirely in favour of the appellant, then instituted a
petition under Section 34 of the Act to set aside the award, and belatedly
amended such petition five years hence to include a challenge under
Section 12(5) of the Act, cannot be allowed to escape the consequences
of the award.
16. Adding to the fetor of mala fide alleged, he points out that it was
only after the appellant had filed an application under Section 11 of the
Act seeking appointment of an arbitrator that the respondent chose to
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issue letter dated 10.01.2017 through which unilateral appointment of the
learned sole arbitrator was effected.
17. Mr. Joneja also draws our attention to paragraph 80 of the decision
in Bhadra to state that the consent of the appointing party is implicit, and
relies on the preceding text in paragraphs 76-79 to highlight the test to
determine whether a waiver exists in the meaning of the proviso to
Section 12(5), and that the respondent has, in its act of unilateral
appointment, categorically waived its right to object to the appointment
of the learned Sole Arbitrator.
18. Mr. Sonal Kumar Singh, learned counsel appearing on behalf of
the respondent, refutes the case of the appellant on three fronts. First, he
argues that a waiver in accordance with the proviso to section 12 (5) of
the act ought to constitute the character of an express agreement in
writing . Secondly, he submits that a party appointing an arbitrator may
also challenge such appointment of being in violation of Section 12 (5)
of the Act. Thirdly, he argues that it is trite that challenges to jurisdiction
may be raised at any stage.
19. He places reliance upon the decision in Bhadra to the extent of his
first and third arguments, while relying on a decision of a coordinate
5
bench of this Court in Mahavir Prasad Gupta & Sons v GNCTD , and
paragraphs 5, 17, and 18 from the decision of the Hon’ble Supreme
6
Court in Bharat Broadband Network Ltd v united Telecoms Ltd to
buttress his second argument.

5
2025 SCC OnLine Del 4241
6
(2019) 5 SCC 755
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20. Heard and perused.
21. Learned counsel for the appellant argues that the facts in the
decision in Bhadra did not consider the challenge to an award by the
appointing party on the ground of Section 12(5) of the Act. However, it
cannot be disputed that the decision of a coordinate bench in Mahavir
Prasad Gupta squarely covers the same.

22. At the outset, a diligent reading of both, the decision in Mahavir
Prasad Gupta , as well as that in Bhadra , precipitates an unequivocal
conclusion; that the unilateral appointment of an arbitrator is void ab
initio , saved only by satisfaction of the proviso to Section 12(5) though
an explicit waiver by parties in writing.
23. While it may be correct to infer, from paragraph 80 of the decision
in Bhadra , that the consent of the appointing party is implicit, learned
counsel for the appellant fails to persuade this Court that the proviso to
Section 12(5) of the Act stands satisfied de hors an express waiver in
writing. Without such satisfaction, all argumentation to the extent of
implicit consent to unilateral appointment is rendered immaterial.
24. We deem it appropriate to refer to paragraphs 82 and 83 of the
decision in Mahavir Prasad Gupta, which address an appointing party’s
challenge to an award on the ground of unilateral appointment :
“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.

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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.”

25. Resting on this very principle, that the award passed by a
unilaterally appointed sole arbitrator, who is de jure ineligible to be
appointed by virtue of the Seventh Schedule to the Act, is void ab initio ,
we are unimpressed by the submissions put forth by Mr. Joneja to the
extent of the applicability of the test of reasonable apprehension of bias
upon the appointing party.
26. The judgment of the learned single judge which has been
impugned before us through the present appeal has effectively isolated
crux of the dispute as whether the award dated 06.07.2018 ought to be set
aside on account of it being passed in violation of Section 12(5) of the
Act, and has correctly applied the decisions in Bhadra and Mahavir
Prasad Gupta to arrive at the conclusion that the absence of an express
waiver in writing between the parties fails to satisfy the proviso to
Section 12(5) of the Act, de hors which the award cannot be sustained.
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Signing Date:07.05.2026
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27. The present appeal stands dismissed for the aforesaid reasons,
along with pending applications, if any.
28. Judgment be uploaded on the website forthwith.


AJAY DIGPAUL
(JUDGE)


NITIN WASUDEO SAMBRE
(JUDGE)




MAY 7, 2026/gs/av
Signature Not Verified
Signed By:SHILPI
Signing Date:07.05.2026
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