Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment Reserved on: 10 February 2025
Judgment Pronounced on: 11 February 2025
+ FAO(OS) (COMM) 23/2025, CM APPLs. 7934/2025 &
7935/2025
BHADRA INTERNATIONAL INDIA
PVT LTD AND ORS. .....Appellants
Through: Mr. Ashish Mohan, Sr. Adv.
with Mr. Akshit Mago, Adv.
versus
AIRPORTS AUTHORITY OF INDIA .....Respondent
Through: Mr. Sonal Kumar Singh,
Ms. Sukanya Lal, Mr. Shivang Singh,
Ms. Shivani Chaudhary and Mr. Anmol
Adhrit, Advs.
+ FAO(OS) (COMM) 24/2025, CM APPLs. 7936/2025 &
7937/2025
BHADRA INTERNATIONAL INDIA
PVT LTD & ORS. .....Appellants
Through: Mr. Ashish Mohan, Sr. Adv.
with Mr. Akshit Mago, Adv.
versus
AIRPORTS AUTHORITY OF INDIA .....Respondent
Through: Mr. Sonal Kumar Singh,
Ms. Sukanya Lal, Mr. Shivang Singh,
Ms. Shivani Chaudhary and Mr. Anmol
Adhrit, Advs.
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 1 of 23
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
HON'BLE MR. JUSTICE AJAY DIGPAUL
JUDGMENT
% 11.02.2025
C. HARI SHANKAR, J.
The Issue, and our view
1. The contract between the appellants and respondent Airport
1
Authority of India envisages arbitration of disputes by a Sole
Arbitrator to be appointed by the respondent. In terms thereof, the
appellants wrote to the AAI, call on the respondent to appoint a Sole
Arbitrator. The respondent appointed a learned retired Judge of the
Supreme Court. Before learned Arbitrator, both the parties submitted
that they had no objection to his arbitrating on the disputes. The
Record of Proceedings, so prepared, was communicated to the parties,
and neither party objected. An arbitral award was passed. The
unsuccessful appellant challenged the award under Section 34 of the
2
Arbitration and Conciliation Act, 1996 . No dispute, regarding the
legality of appointment of the Arbitrator, was raised in the Section 34
petition. However, during arguments before a learned Single Judge of
this Court, a preliminary submission was advanced, by the appellant,
that the arbitral award was entirely vitiated as the appointment of the
arbitrator was unilateral and, therefore, vitiated in view of Section
3
12(5) of the 1996 Act. The learned Single Judge has dismissed the
1
“AAI” hereinafter
2
“the 1996 Act” hereinafter
3
[(5) 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
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 2 of 23
objection. The appellant is in appeal.
2. The question that arises is whether, in such circumstances, the
appellants can maintain a successful challenge against the impugned
judgment of the learned Single Judge.
3. Cases turn on facts. In deciding the above issue, we have to
note that:
(i) the arbitration agreement between the parties envisaged
appointment of the arbitrator by AAI,
(ii) in terms of the said Clause, Appellant 1 wrote to AAI,
requesting AAI to appoint the arbitrator ,
(iii) the appointment of the arbitrator by AAI was, thus,
effectively ad invitum ,
(iv) before the learned Arbitrator, the appellant stated, on 22
March 2016, that it had no objection to his arbitrating on the
dispute,
(v) this submission was reduced to writing by the learned
Arbitrator,
(vi) the said order was communicated to both parties, and the
appellant never questioned the correctness of what was
recorded therein ,
(vii) rather, the appellant participated, without demur, in the
arbitration, and even preferred applications, before the learned
Arbitrator, under Section 17 of the 1996 Act ,
Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the
applicability of this sub-section by an express agreement in writing.]
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 3 of 23
(viii) during the currency of the arbitral proceedings, Section
12 of the 1996 Act was amended to introduce, therein, sub-
section (5), which proscribed, unilateral appointment of the
arbitrator by one of the parties,
(ix) even thereafter, the appellant never moved any
application before the learned Arbitrator, or before this Court,
questioning his jurisdiction or competence,
4
(x) even in the Section 34 petition , which came to be filed
by the appellant challenging the arbitral award, no contention
that the appointment of the learned Arbitrator was unilateral and
that, therefore, the arbitral award was vitiated, was taken,
5
(xi) it was only by a subsequent application that the appellant
suddenly found the entire arbitral proceedings to have been
conducted in violation of the law, as the appointment of the
arbitrator was, as the appellant would seek to contend,
“unilateral”, and
(xii) even in this application, the appellant, inadvertently or
otherwise, never disclosed, to this Court, the Procedural Order
dated on 22 March 2016, which records the fact that the parties
had no objection to the learned Arbitrator arbitrating on the
dispute.
4. Mr. Ashish Mohan, learned Senior Counsel has, with
commendable skill, tried to convince us, by referring to several
judgments, including the judgments of the Supreme Court in Bharat
4
OMP (Comm) 414/2018 and OMP (Comm) 415/2018 , in which the presently impugned judgment has
been passed
5
IA 1842/2022
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 4 of 23
6
Broadband Network Limited v United Telecoms Ltd , Perkins
7
Eastman Architects DPC v HSCC (India) Ltd and TRF Limited v
8
Energo Engineering Projects Ltd , as well as the judgment of one of
us (C. Hari Shankar J) in JMC Projects (India) Ltd. v Indure Pvt
9
Ltd , that there can be no compromise on the statutory requirement of
a waiver, of Section 12(5) of the 1996 Act, having to be in writing,
and that, in fact, no such express written waiver of Section 12(5) was
forthcoming on the record.
5. We have to decide cases based on the facts before us. The law
cannot be applied academically or mechanically. We are afraid that if
we were to permit a party who
(i) first invites the opposite party to appoint the arbitrator, as
permitted by the contract, whereupon the opposite party does
so,
(ii) thereafter states, before the learned Arbitrator, that it had
no objection to his arbitrating on the disputes,
(iii) thereafter participates, without a whisper of any objection
to the jurisdiction of the learned Arbitrator, to his jurisdiction or
competence, even after Section 12(5) was introduced in the
1996 Act in the interregnum,
(iv) thereafter does not choose to raise any ground of
incompetence of the learned Arbitrator in view of his
appointment having been “unilateral” (as the appellant would
seek to contend) even in the Section 34 petition filed
6
(2019) 5 SCC 755
7
(2020) 20 SCC 760
8
(2017) 8 SCC 377
9
(2020) SCC OnLine Del 1950
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 5 of 23
challenging the arbitral award that results, and
(v) thereafter, introduces a ground of the learned Arbitrator
having been incompetent to arbitrate in a subsequent
Miscellaneous Application filed in the Section 34 proceedings,
(vi) suppressing, in the said application, the Procedural Order
passed by the learned Arbitrator recording the fact that neither
party had any objection to his proceeding with the arbitration,
to have the entire arbitral proceedings set at naught and, thereby, have
the arbitral award – which is obviously unpalatable to the appellant –
declared a nullity, the entire integrity of the arbitral process would be
irremediably eroded. We are, decidedly, not inclined to permit this to
happen.
Facts
6. The disputes between the parties emanated out of a Licence
Agreement dated 29 November 2010. Under the said Licence
Agreement, the AAI had granted licence to the appellants for
undertaking ground handling services on payment of royalty. Clause
78 of the Licence Agreement envisaged reference of disputes, arising
thereunder, to arbitration and read thus:
“78. All disputes and differences, arising out of or, in any way,
touching or concerning this Agreement, (except those the decision
whereof is otherwise hereinabove expressly provided for or to
which the Public Premises (Eviction of Unauthorised Occupants)
Act, 1971 and the rules framed hereunder which are now in force
or which if hereafter come in to force, are applicable) shall be
referred to the sole arbitration of a person, to be appointed by the
Chairman of the Authority or, in case the designation of Chairman
is changed or his office is abolished, by the person, for the time
being entrusted, whether or not, in addition to other functions, with
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 6 of 23
the functions of the Chairman, Airports Authority of India, by
whatever designation such person may be called, and, if the
Arbitrator, so appointed, is unable or unwilling to act, to the sole
arbitrations of some other person to be similarly appointed. It will
be no objection to such appointment that the Arbitrator so
appointed is a servant of the Authority, that he had to deal with the
matters to which this Agreement relates and that in the course of
his duties, as such servant of the Authority, he had expressed views
on all or any of the matters in dispute or differences. The award of
the arbitrator, so appointed, shall be final and binding on the
Parties. The Arbitrator may, with the consent of the parties,
enlarge, from time to time, the time for making and publishing the
award. The venue of the arbitration shall be at New Delhi.”
7. Disputes arose between the appellants and AAI. Appellant 1
10
addressed a notice to AAI under Section 21 of the 1996 Act on 27
November 2015 setting out its claims and seeking reference of the
disputes to arbitration. The concluding paragraph of the said
communication read thus:
“(9) As AAI has failed to resolve any of the issue since
commencement of the above referred two (02) licenses despite
various written representations and personal meetings, and is rather
unabatedly continuing with financial persecution of Novia-Bhadra
Tie Up, we are as a last resort invoking:
(i) Clause 78 of the agreement dated 29.11.2010
appointing Novia-Bhadra Tie Up as the Comprehensive
Ground Handling Service Provider at Two (02) Metro
Airports of Chennai and Kolkata, and seek appointment of
a “Sole Arbitrator” in accordance with the Arbitration
and Reconciliation Act 1996 , so that the disputes which
has arisen between the two parties are adjudicated, and
substantial financial damages suffered by us are
compensated in a lawful manner. The specific clause of
the agreement is an absolute clause and empowers
Chairman AAI to appoint the Sole Arbitrator without
any subjective conditionality .
(ii.) Clause 78 of the agreement dated 29.11.2010
10
21. Commencement of arbitral proceedings . – Unless otherwise agreed by the parties, the arbitral
proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be
referred to arbitration is received by the respondent.
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 7 of 23
appointing Novia-Bhadra Tie Up as the Comprehensive
Ground Handling Service Provider at Five (05) Southern
Region Airports of Trivandrum, Calicut, Coimbatore,
Trichy and Mangalore and seeks appointment of a "Sole
Arbitrator" in accordance with the Arbitration and
Reconciliation Act 1996 , so that the disputes which has
arisen between the two parties are adjudicated, and
damages suffered by us are compensated in a lawful
manner. The specific clause of the agreement is an
absolute clause and empowers Chairman AAI to
appoint the Sole Arbitrator without any subjective
conditionality .
We also like to bring out most humbly that it is incumbent
upon Chairman AAI to appoint the Sole Arbitrator 'Within a
reasonable time, lest we might not be left with no recourse, but to
seek a relief under Section 11, Sub Section 6, Chapter III of the
Arbitration & Reconciliation Act 1996 .
It is earnestly hoped that the order appointing the “Sole
Arbitrator” to adjudicate the disputes which has arisen
between parties to the contract is expeditiously communicated
to us .”
(Emphasis in original)
8. As requested by appellants, AAI proceeded to appoint Hon’ble
Mr. Justice S.S. Nijjar, a learned retired Judge of the Supreme Court
of India as the Arbitrator, to arbitrate on the disputes between the
parties.
9. The first hearing was scheduled by the learned Arbitrator on 22
March 2016 on which date, the following procedural order came to be
passed:
“PROCEDURAL ORDER NO.1
With
Minutes of, and the Directions made at, the hearing on 22.03.2016
at 1:00 pm [At D-247 (Basement), Defence Colony, New Delhi-
110024]
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 8 of 23
This preliminary meeting of the Tribunal was held D-247
nd
(Basement), Defence Colony, New Delhi-110024 on 22 March,
2016 at 1:00 PM. None of the parties have any objection to my
appointment as the Sole Arbitrator. I declare that I have no interest
in any of the Parties, or in the disputes referred to the Sole
Arbitrator.
After deliberations with the representatives of the Parties, the
following schedule for exchange of pleadings was agreed between
the parties:
(i) Claimant to file Statement of Claim along 2/5
with all documents in support thereof.
(ii) Respondent to file Statement of Defence 30/5
along with Counter Claims, if any, along
with all documents in support thereof.
(iii) Rejoinder / Reply to Counter Claim, 13/6
if any, along with further documents.
(iv) Affidavit of Admission and denial 30/6
of documents relied upon/filed by
the parties.
(v) Points of determination (Agreement) 28/7
st
Next meeting shall be held on 1 Aug. at 2 pm. Venue for the next
meeting shall be arranged by the Claimant.
Practice Directions under Section 18 of Arbitration &
Conciliation Act, 1996:
After discussion, the Learned Counsel and representatives of the
parties have agreed on the practice and procedure to be followed
and in accordance therewith the following practice directions are
issued by the Tribunal:
1. The pleadings will be accompanied by documents in
support of the case pleaded by the party.
2. (i) The documents shall be placed in Volume/s
separate from the volume of the pleadings.
(ii) The documents filed by the Claimant shall
be assigned numbers as --> CD-1, CD-2 and so on.
The documents filed by the Respondent shall be
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 9 of 23
assigned numbers as --> RD-1, RD-2 and so on.
Page number of each volume shall begin from
number 1. The volumes of pleading need not be
assigned a separate volume number.
(iii) The size of volumes shall be kept confined
to about 150-200 pages. If needed, one volume may
be split into two or more, consecutively paginated.
(iv) The volumes shall be complied by using A/4
size paper.
3. On or before 23/6 each party may file a memo of
denial listing and describing such of the documents as it
does not admit, or proposes to dispute, setting out the
reasons thereof in brief. In the absence of such memo
having been filed, the document shall be available for being
read in evidence dispensing with the need of formal proof
thereof. However, the question of evidentiary value of the
attached to the document shall remain open for
consideration at the final hearing.
4. Rejoinder, shall be divided in two parts: Part-A
would set out in brief such plea of the other side, as is
sought to be dealt with by Rejoinder, stating the reference
to paragraph number of the pleading of the other side; Part-
B shall set out the plea urged by way of rejoinder.
5. Filing by either party of any pleading, document,
application and communication etc. shall be deemed to
have been effectively done and completed only on having
been delivered to the Tribunal and copy having been
previously or simultaneously delivered to the opposite
party.
6. Brief applications/communications to the Tribunal
may be made by e-mail followed by hard copy sent per
courier or speed post. All substantive pleadings,
applications and documents shall necessarily be filed as
hard copies.
7. (i) The pleadings and documents shall be filed
neatly printed on one side of paper, duly indexed
and paginated and bound in volumes.
(ii) The size of paper to be used for compiling
the volumes of pleadings and documents also for
applications and papers in support thereof, shall be
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 10 of 23
A-4 size paper. Use of legal size papers shall be
avoided.
8. Communication by the Tribunal to the parties may
be made by e-mail on the e-addresses given as under:-
M/S BHADRA INTERNATIONAL (INDIA) PVT.
LTD.
Mr. Ashish Mohan ashishmohanadv@gmail.com
AIRPORTS AUTHORITY OF INDIA
9. The venue for hearing shall be arranged by the
parties as per their mutual understanding but it shall
primarily be the obligation of the Claimant to arrange for
the venue as also to inform the opposite party and Tribunal
well in advance of time. The party arranging for the venue
shall also take care of Secretarial Assistance as and when
needed, in particular, on the dates of recording of evidence
or hearing of any application for interim relief. All the
expenses shall be shared equally by the parties.
10. The Tribunal shall assemble on 01.08.2016 at 4:30
pm at a venue to be arranged by the parties for issuing
directions on further proceedings in the Arbitration. If the
parties wish to adduce oral evidence, Learned Counsel
should be ready with instructions as to number and names
of witnesses proposed to be examined so as to enable the
requisite dates being appointed for recording cross
examination.
11. Fee and Expenses of the member of the
Tribunal:
1. The fees of the Sole Arbitrator after discussions and
agreement of the parties has been fixed as follows:
i. Parties directed to deposit Rs.1 L./- (Rupees
… and … only) for the meeting held on
22.03.2016. Deposit to be made by
15.04.2016.
ii. Parties directed to deposit Rs .../- (Rupees
only) advance fee of the Sole Arbitrator, at
least two weeks before the next meeting.
iii. The Tribunal shall be paid, in addition to the
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 11 of 23
fee, an amount calculated @ 10% of fee
payable to him for administrative expenses.
2. Reading fee will be fixed after the completion of the
Pleadings.
3. All the fee and expenses shall be shared in equal
proportion by the parties.
4. The remittance of the aforesaid amount shall be
accompanied by a covering letter clearly stating the amount
sought to be remitted, the amount of TDS deducted along
with rate thereof, particulars of the head (fee deposited as
an interim measure). This is very necessary for accounting
purposes.
5. Account details of the Tribunal are as under:-
i. Account Holder: Justice Surinder Singh
Nijjar
ii. Bank Account No: 0092000101781573
iii. Bank Name & Branch: Punjab National Bank,
Khan Market, New Delhi
iv. IFSC Code: PUNB0014900
v. MICR Code: 110024055
vi. Contact Details of Bank: 011-24619181,
43587101
vii. PAN No.: AAHPN6038L
6. The parties shall stick to the schedule once
appointed. Any prayer for cancellation of date of hearing if
not made at least 4 weeks in advance of time may not be
entertained. Fee for any date of hearing shall not be
adjusted or waived if the date has to be cancelled at less
than 4 weeks notice.
(Justice S.S. Nijjar)
Sole Arbitrator”
10. From then on, the learned Arbitrator proceeded with the
arbitration. No objection was raised by the appellants at any stage, to
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 12 of 23
the assumption of jurisdiction by the learned Arbitrator. Rather, the
appellants also filed an application before the learned Arbitrator under
Section 17 of the 1996 Act. There was, therefore, acquiescence by the
appellant to the jurisdiction of the learned Arbitrator throughout the
arbitral proceedings.
11. The learned Arbitrator, proceeded, ultimately to render his final
Arbitral Award on 30 July 2018 in which all the claims of the
appellants were rejected.
12. Challenging the aforesaid arbitral award, the appellants
approached this Court under Section 34 of the 1996 Act by way of
OMP (Comm) 414/2018. It is worthwhile to note that in the said
OMP, no ground was urged with respect to the jurisdiction of the
learned Arbitrator to arbitrate on the dispute or that his appointment
was, in any manner, violative of any provisions of the 1996 Act . At the
time of argument before the learned Single Judge, the appellants
raised a preliminary ground that the appointment of the learned
Arbitrator was unilateral by AAI and was, therefore, violative of
Section 12(5) of the 1996 Act. This, according to the appellant,
vitiated the arbitral proceedings in their entirety and ab initio . No
other aspect of the matter was, therefore, required to be considered.
13. At the appellant’s insistence, the learned Single Judge has, by
judgment dated 24 December 2024, addressed this preliminary
submission of the appellant. The Learned Single Judge has held that,
as the appointment of the learned Arbitrator was ad invitum and the
appellants at no stage objected to the assumption of jurisdiction by the
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 13 of 23
learned Arbitrator, it was not open to the appellants to challenge the
arbitral award on the ground that the appointment of the learned
Arbitrator was unilateral and, therefore, bad.
14. Having thus rejected the preliminary submissions advanced by
the appellants, learned Single Judge has relegated the remaining
grounds of challenge to the arbitral award for hearing on a subsequent
occasion.
15. Aggrieved by the aforesaid judgment dated 24 December 2024,
passed by the learned Single Judge, the appellants are before us.
16. We have heard Mr. Ashish Mohan, learned Senior Counsel for
the appellants, and Mr. Sonal Kumar Singh, learned counsel for the
AAI at length.
Submissions of the Appellant
17. Mr. Mohan submits that the appointment of the learned
Arbitrator was completely violative of Section 12(5) of the 1996 Act,
read with the judgments of the Supreme Court in Bharat Broadband
Network Limited, Perkins Eastman Architects and TRF Limited .
Waiver of the application of Section 12(5) of the 1996 Act under the
proviso thereto, he submits, can only be by an agreement in writing.
He submits that there was no agreement in writing by the appellant at
any point of time, waiving the application of Section 12(5) of the 1996
Act.
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
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18. Mr. Mohan draws inspiration from the decision of one of us (C.
Hari Shankar J) in JMC Projects (India) Ltd. as well as the judgment
of the Supreme Court in Bharat Broadband . He submits that the facts
in Bharat Broadband are starkly similar to those at the case in hand.
In that case too, the appointment of the learned Arbitrator was ad
invitum . As in this case, the appointment took place prior to insertion
in Section 11 of the 1996 Act, of sub-Section (5) by Section 8(ii) of
the Arbitration and Conciliation (Amendment) Act, 2016, with effect
from 23 October 2015. At the time when the appellants called upon
the AAI to appoint the Arbitrator in terms of Clause 78 of the Licence
Agreement, therefore, the appellants could not have foreseen the
subsequent amendment of Section 12 by insertion of sub-Section (5)
therein, which would render the appointment of the learned Arbitrator
invalid.
19. In these circumstances, Mr. Mohan has also sought to contend
that mere recording i n the first Procedural Order dated 22 March
2016, of the fact that the parties had no objection to the learned Sole
Arbitrator arbitrating on the dispute, could not constitute an express
waiver, in writing, of Section 12(5) of the 1996 Act. He has also relied
in this context on para 20 of the judgment of this Court in Bharat
Broadband Network and on para 6 of the judgment of a Division
Bench of this Court in Kotak Mahindra Bank Ltd. v Narendra
11
Kumar Prajapat , which read thus:
Extracts of Bharat Broadband Network Ltd.
“20. This then brings us to the applicability of the proviso to
11
(2023) SCC OnLine Del 3148
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
18:12:23
FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 15 of 23
Section 12(5) on the facts of this case. Unlike Section 4 of the Act
which deals with deemed waiver of the right to object by
conduct, the proviso to Section 12(5) will only apply if subsequent
to disputes having arisen between the parties, the parties waive the
applicability of sub-section (5) of Section 12 by an express
agreement in writing. For this reason, the argument based on the
analogy of Section 7 of the Act must also be rejected. Section 7
deals with arbitration agreements that must be in writing, and then
explains that such agreements may be contained in documents
which provide a record of such agreements. On the other hand,
Section 12(5) refers to an “express agreement in writing”. The
expression “express agreement in writing” refers to an agreement
made in words as opposed to an agreement which is to be inferred
by conduct. Here, Section 9 of the Indian Contract Act,
1872 becomes important. It states:
“9. Promises, express and implied. — Insofar as the
proposal or acceptance of any promise is made in words,
the promise is said to be express. Insofar as such proposal
or acceptance is made otherwise than in words, the promise
is said to be implied.”
It is thus necessary that there be an “express” agreement in writing.
This agreement must be an agreement by which both parties, with
full knowledge of the fact that Shri Khan is ineligible to be
appointed as an arbitrator, still go ahead and say that they have full
faith and confidence in him to continue as such. The facts of the
present case disclose no such express agreement. The appointment
letter which is relied upon by the High Court as indicating an
express agreement on the facts of the case is dated 17-01-2017. On
this date, the Managing Director of the appellant was certainly not
aware that Shri Khan could not be appointed by him as Section
12(5) read with the Seventh Schedule only went to the invalidity of
the appointment of the Managing Director himself as an arbitrator.
Shri Khan's invalid appointment only became clear after the
declaration of the law by the Supreme Court in TRF Ltd. (supra)
which, as we have seen hereinabove, was only on 3-07-2017. After
this date, far from there being an express agreement between the
parties as to the validity of Shri Khan's appointment, the appellant
filed an application on 7-10-2017 before the sole arbitrator,
bringing the arbitrator's attention to the judgment in TRF
Ltd. (supra) and asking him to declare that he has become de
jure incapable of acting as an arbitrator. Equally, the fact that a
Signature Not Verified
Digitally Signed By:AJIT
KUMAR
Signing Date:11.02.2025
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FAO(OS) (COMM) 23/2025 & FAO(OS) (COMM) 24/2025 Page 16 of 23
statement of claim may have been filed before the arbitrator, would
not mean that there is an express agreement in words which would
make it clear that both parties wish Shri Khan to continue as
arbitrator despite being ineligible to act as such. This being the
case, the impugned judgment is not correct when it applies Section
4, Section 7, Section 12(4), Section 13(2), and Section 16(2) of the
Act to the facts of the present case, and goes on to state that the
appellant cannot be allowed to raise the issue of eligibility of an
arbitrator, having itself appointed the arbitrator. The judgment
under appeal is also incorrect in stating that there is an express
waiver in writing from the fact that an appointment letter has been
issued by the appellant, and a statement of claim has been filed by
the respondent before the arbitrator. The moment the appellant
came to know that Shri Khan's appointment itself would be invalid,
it filed an application before the sole arbitrator for termination of
his mandate.”
(emphasis supplied)
Extracts of Kotak Mahindra Bank Ltd.
“6. The learned counsel appearing for the appellant does not
seriously dispute that the arbitrator unilaterally appointed by the
claimant was ineligible to be appointed as an arbitrator by virtue of
Section 12(5) of the Act. He has largely focused his contentions on
assailing the decision of the learned Commercial Court to award
costs. It was also contended that the respondent was aware of the
appointment of the arbitrator and had not raised any objection to
such appointment; therefore the respondent is now precluded from
challenging the impugned award.”
20. Mr. Mohan finally submits that “waiver” within the meaning of
the proviso of Section 12(5) of the 1996 Act necessarily implies
intentional relinquishment of a known right. At the time when Section
21 notice had been addressed by the appellants to AAI, sub-section (5)
was yet to be introduced in Section 12 of the 1996 Act. As such,
knowledge of the fact that the appointment of the learned Sole
Arbitrator in terms of the notice issued by them to AAI would be
invalid as unilateral, was unknown to the appellants at that time. This
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factor, he submits, also weighed with the Supreme Court while
rendering Bharat Broadband and with this Court while passing
judgment in JMC Projects .
Analysis
21. We have considered Mr. Mohan’s submissions with the
seriousness they deserve.
22. The arbitral atmosphere is changing day by day. The prevailing
philosophy of the day, so far as arbitration is concerned, is to foster
arbitration and maximize resolution of disputes by the arbitral process.
Courts are now advisedly cautious while dealing with technical
objections to arbitral awards, and it is only when the objection is ex
facie fatal, that an arbitral ward ordinarily should be jettisoned. Still
less should the Court be inclined to interfere when, in as a case such as
this, a party acquiesced to the arbitration proceedings without raising a
finger with respect to the authority, jurisdiction or competence of the
learned Arbitrator and after suffering an adverse award, belatedly
seeks to raise a challenge to the jurisdiction of the Arbitrator to
arbitrate.
23. In the present case, it is also worthwhile to note that the Section
34 petition, as originally filed by the appellants, never included any
challenge to the jurisdiction of the learned Arbitrator, to arbitrate on
the disputes between the parties. It was only thereafter that, belatedly,
IA 1842/2022 was filed to amend OMP (Comm) 415/2018 and
introduce a challenge to the jurisdiction of the learned Arbitrator,
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terming his appointment as unilateral.
24. It is obvious, therefore, that the challenge to the jurisdiction of
the learned Arbitrator on the grounds that his appointment was
unilateral is a belated afterthought of the appellants, even after the
Section 34 petition was filed.
25. There can be no doubt about the fact that if as the law applies,
the Arbitrator was incompetent to arbitrate, he cannot be regarded as
competent merely on account of acquiescence by the appellants. At
the same time, while examining whether in fact the arbitral award is
liable to be set aside wholesale on the ground that the appointment of
the learned Arbitrator was itself illegal, the Court has to keep in mind
all the facts in the backdrop of the prevailing philosophy of fostering
arbitration as a preferred mode of dispute resolution.
26. Viewed in this light, we find ourselves unable to agree with Mr.
Mohan that the arbitral award was a nullity as the appointment of the
Arbitrator was itself illegal being unilateral. In fact, it cannot be said
that the appointment of the learned Arbitrator was unilateral at all, as
AAI proceeded to appoint the learned Arbitrator only on the appellant
requesting AAI to do so, in writing. There was, therefore, written
consent, on the part of the appellant, to the appointment of the learned
arbitrator by AAI.
27. The learned Arbitrator expressly obtained the consent of the
parties to his continuing to arbitrate in the matter. This consent was
reduced to writing, as recorded in the Procedural Order dated 22
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March 2016. Mr Ashish Mohan fairly acknowledges that this
Procedural Order was in fact communicated to his client by the
learned Arbitrator. The appellants never chose to contend that their
consent, to the learned Arbitrator continuing to arbitrate in the
matter, had been wrongly recorded, or that they – or AAI – had not
given any such consent.
28. Thereafter, the appellants continued to participate in the
proceedings without demur. Mr Ashish Mohan has repeatedly
emphasized that, at the time when the above events took place,
Section 12(5) had yet to be introduced in the statute. This argument
begs the issue as the fact that the appellants conceded to appointment
of the arbitrator by AAI and, in fact, invited AAI to do so, and went
on, during the arbitration, to unequivocally consent to arbitration by
the learned Arbitrator, are facts, which cannot change depending on
whether sub-section (5) had, or had not, been introduced in Section 12
of the 1996 Act.
29. Besides, even after sub-section (5) was introduced in Section 12
on 23 October 2015, the arbitral proceedings continued for over 2
years, till the arbitral award came to be rendered on 30 July 2018. At
no stage did the appellants seek to invoke Section 12(5), or protest
against the jurisdiction of the learned Arbitrator. No application to
that effect was moved, either before the learned Arbitrator or before
this Court.
30. Rather, the appellant participated, without even the whisper of
a demur, in the arbitral proceedings throughout, and even filed
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applications under Section 17 of the 1996 Act before the learned
Arbitrator
31. Even in the Section 34 petition which was filed by the
respondent before this Court, challenging the arbitral award, no
objection, to the jurisdiction of the learned Arbitrator, on the ground
that his appointment was unilateral, was raised. Clearly, therefore,
even at that stage, the appellants had no inherent objection to the
competence of the learned Arbitrator to have arbitrated on the
disputes.
32. It was only thereafter, that by fortuitous hindsight, that the
appellants decided to challenge the very jurisdiction of the learned
Arbitrator to arbitrate on the dispute.
33. Consensus ad idem is the very raison d’être of any arbitral
appointment. Till the filing of the IA 1842/2022, to amend OMP
(COMM) 415/2018, the appellants never raised a whisper regarding
the competence of the learned Arbitrator to arbitrate. This case is,
therefore, unique in that respect, and cannot be equated with cases in
which, at one stage or the other, an objection to the appointment of the
Arbitrator was voiced.
34. The decisions cited by Mr Ashish Mohan are cases in which, at
one stage or another, an objection to the jurisdiction of the learned
Arbitrator was raised. We must be aware that the proscription under
Section 12(5) of the 1996 Act is not absolute. It is subject to the
proviso thereto, which envisages conscious waiver of Section 12(5).
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In the facts of this case, which need not be repeated, but particularly in
view of the fact that
(i) the appellants had themselves invited AAI to appoint the
arbitrator,
(ii) before the learned Arbitrator, too, the appellants
consented to the learned Arbitrator proceeding with the matter,
(iii) even after Section 12(5) was introduced in the statute
book, the appellants never chose to move any application before
the learned Arbitrator under Section 16 of the 1996 Act, or
before this Court under Section 14(1) thereof, challenging the
jurisdiction of the learned Arbitrator but, rather, participated in
the proceedings without demur,
we are not inclined to interfere with the decision of the learned Single
Judge. If, in such circumstances, the appellants is to be permitted to
wish away the arbitral award which, for obvious reasons, is not
palatable to the appellants, it would do complete disservice to the
entire arbitral institution. Such a decision, we are seriously afraid,
would erode, to a substantial degree, the faith of the public in the very
institution of arbitration.
35. We are unwilling to be party to such a decision.
36. We, therefore, are in agreement with the learned Single Judge
that the preliminary submission raised by the appellants to the
impugned arbitral award, as being nullity as the appointment of the
learned Arbitrator was ab initio illegal, is completely devoid of merit.
In fact, we are of the considered opinion that the objection constitutes
not merely an ingenious, but an ingenuous, method adopted by the
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appellants, to wish away an adverse arbitral award, at a grossly belated
stage.
37. We were inclined to award costs in these matters, but refrain
from doing so as we are dismissing the appeals in limine , without
issuing notice.
38. Resultantly, the impugned order of the learned Single Judge,
insofar as it rejects the preliminary submission of the appellants,
questioning the validity of the arbitral award dated 30 July 2018 on
the ground that the appointment of the learned Arbitrator was illegal,
is sustained.
39. The present appeals are accordingly dismissed in limine , with
no order as to costs.
C. HARI SHANKAR, J.
AJAY DIGPAUL, J.
FEBRUARY 11, 2025/ yg/aky
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