Bdr Buildtech Pvt. Ltd vs Mahamaya Exports Pvt.Ltd.
- Court
- Delhi High Court
$~76
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
Date of decision: 12 MAY, 2026
IN THE MATTER OF:
+ OMP (ENF.) (COMM.) 9/2019, EX.APPL.(OS) 245/2026, I.A.
6722/2019
BDR BUILDTECH PVT. LTD .....Decree Holder
Through: Mr. Manish Vashisht, Sr. Adv. with
Mr. Prashant Mehta, Ms. Prachi
Kohli, Ms. Diksha Goswami, Mr.
Manish Rajput and Mr. Nitin Bajaj,
Advocates
versus
MAHAMAYA EXPORTS PVT.LTD. .....Judgement Debtor
Through: Mr. J. Rajesh, Mr. Yashwardhan
Aggarwal, Mr. Arsalan Ahmed, Mr.
Ali Abbas Masoodi, Advs.
CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT (ORAL)
1. The Petitioner/Decree Holder has approached this Court by filing the
present petition for enforcement of the Award dated 06.07.2018 passed by
the learned Sole Arbitrator in Arbitration Case No.3/2016 titled as BDR
Buildtech Pvt. Ltd. v. Mahamaya Exports Pvt. Ltd. & Ors.
2. The facts in brief as stated by the Petitioner/Decree Holder in the
present execution petition are as follows:-
i. It is stated that agreements were entered into between the
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Petitioner/Decree Holder/Purchaser and the Judgment
Debtor/Respondent as sellers of Floor Space Index (FSI) of
2,15,000 sq. ft. in the project of the Judgment Debtor on its land
in Sector 63A, Gurgaon, Haryana.
ii. It is stated that a sum of Rs.29 crores were paid by the Decree
Holder to the Judgment Debtor. It is the case of the Decree
Holder that since the Judgment Debtor did not take necessary
steps in terms of the Agreement dated 29.06.2015, a legal
notice dated 12.07.2016 was issued by the Petitioner.
Thereafter, arbitration proceedings were initiated by the
Petitioner appointing Mr. S. K. Tandon, former ADJ, Delhi as
the Sole Arbitrator. An Award dated 06.07.2018 was passed by
the learned Sole Arbitrator directing the Respondent to pay a
sum of Rs.29 crores to the Petitioner along with interest @ 18%
per annum from 29.06.2015 along with costs.
iii. It is stated that till 29.12.2018, when this petition was filed, a
sum of Rs.47,52,00,000/- was due and payable by the Judgment
Debtor.
iv. The Award was challenged by the Judgment Debtor by filing a
petition under Section 34 of the Arbitration & Conciliation Act
being OMP(COMM) 338/2022. However, the said challenge
was filed with a delay of more than 1450 days. The said delay
was not condoned as the challenge to the Award was filed by
the Judgment Debtor beyond the maximum period as prescribed
under Section 34(3) and this Court vide Order dated
09.04.2024, dismissed the same on the ground of delay alone.
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v. The present petition has therefore been filed for execution of
the said Award.
3. A preliminary objection has been raised by the Judgment Debtor
stating that since the appointment of the Arbitrator is unilateral in nature, the
same is hit by the Judgment of the Apex Court in Perkins Eastman
Architects DPC & Anr. V. HSCC (India) Ltd., (2020) 20 SCC 760 and the
Judgment passed by the five Judges Bench of the Apex Court in Central
Organisation for Railway Electrification (CORE) v. ECI SPIC SMO MCML
(JV) A Joint Venture Co., (2025) 4 SCC 641 , wherein it has been
categorically held that any clause allowing any of the parties to unilaterally
appoint the arbitrator is in violation of the principles of equality and gives
rise to justifiable doubts as to the independence and impartiality of the
arbitrator and such a clause hinders equal participation of the other party and
therefore the same cannot be permitted.
4. At this juncture it is necessary to refer to the procedure adopted by the
Petitioner/Decree Holder in the facts of this case.
5. Material on record indicates that a legal notice dated 12.07.2016 had
been issued by the Petitioner to the Respondent stating that the Respondent
approached the Petitioner stating that the Respondent is the absolute owner
in possession of certain lands measuring 14.025 acres forming part of the
revenue estate of Village Khadarpur, Tehsil Sohna, Haryana and that the
Director of Town & Country Planning, Haryana as forming part of Urban
Sector 63A, Gurgaon-Manesar, Urban Complex, Haryana and that the
Directorate of Town and Country Planning, Haryana, after completion of
formalities and payment of necessary license fee and other charges, had
granted the Letter of Intent dated 22.07.2014 and the License Dated
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06.08.2014 to the Respondent for developing a residential group housing on
the said lands.
6. It is stated that acting on the said representation by the Respondent,
the Petitioner had agreed to purchase the said land for developing the
project. The legal notice indicates that contrary to the representations made
by the Respondent, permission had not been obtained from the authorities.
7. Since issues were not resolved, a letter dated 31.08.2016 was sent by
the Petitioner to the Respondent appointing Mr. S. K. Tandon, former ADJ,
Delhi as the Sole Arbitrator.
8. Clause 36 of the agreement dated 29.06.2015, which contains an
arbitration clause, reads as under:-
“Clause 36 : That it is further agreed between the
parties that in case of any dispute pertaining to and
arising out of the present agreeing the same shall, be
initially settled by mutual discussion and in case the
discussions fail or do not start, the disputes shall be
referred to Arbitration of a Sole Arbitrator to be
appointed by the second party. The Arbitration shall
be governed by the procedure and provisions of the
Arbitration and Conciliation Act 1996. The seat of
arbitration shall be at Delhi/ Haryana and courts of
Delhi/ Haryana shall have jurisdiction over the
disputes.”
(emphasis supplied)
9. By the said letter dated 31.08.2016, the Arbitrator has been appointed
unilaterally. The entire letter, which was sent to the Arbitrator, is being
reproduced as under:-
“Mr. S.K. Tandon,
Additional District Judge (Retd.),
244, Bank Enclave, New Laxmi Nagar,
New Delhi - 110098.
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Subject: Pre-Arbitration "Request for Consent" under
Section 12 (a) and 12(b) of the Arbitration and
Conciliation Act 1996 (As amended), to Arbitrate as a
Sole Arbitrator.
Our clients: M/s BDR Buildtech Pvt. Ltd., 31,
Jangpura, Bhogal, New Delhi - 110014, through its
Director Shri Rajesh Gupta.
Respected Sir,
1. We on behalf of our clients above named have to
make a request to you to consent to your appointment
as the sole Arbitrator to adjudicate certain disputes
which have arisen between our clients above named
and M/s Mahamaya Exports Pvt. Ltd., 208-210, Second
floor, Rectangle No. 1, Saket District Centre, New
Delhi -1l0017 also at M/s Mahamaya Exports Pvt. Ltd,
nd
ABW Tower, 2 Floor, IFFCO Chowk, District
Gurgaon (Haryana) through its Directors Shri Atul
Bansal and Smt. Sona Bansal, Farm No.22, Green
Khasra No. 413-414,Village Rajokri, Near Market,
New Delhi- 110037 as regards the agreement in favour
of our clients to purchase fully developed and licensed
FSI under their agreement dated 29.6.2015, in the
Residential Group Housing Project of Mahamaya
Exports Pvt. .Ltd. coming up on land admeasuring
14.025 Acres at Villages Medawas and Khadarpur,
Tehsil Sohna, District Gurgaon, Haryana, as forming
part of Urban Sector 63A , Gurgaon- Manesar, Urban
Complex, Haryana where under our clients have
agreed to purchase a total licensed and developed FSI
(to be built space) of 2, 15,000 sq. ft. in the said project
and have already paid substantial consideration for the
same.
2. That as certain disputes have arisen between our
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clients and M/s Mahamaya Exports Pvt. Ltd.
concerning the aforesaid agreement to sell - purchase
and the amicable settlement of the same has since not
been possible. The said disputes e now required to be
decided by the process of arbitration.
3. That as per the terms of the agreement dated
29.6.2015, Clause No.36, as reproduced below, our
clients above named (being the second party the
agreement) through their Director have the power to
appoint the Sole Arbitrator.
Clause 36 : That it is further agreed between the
parties that in case of any dispute pertaining to
and arising out of the present agreeing the same
shall, be initially settled by mutual discussion and
in case the discussions fail or do not start, the
disputes shall be referred to Arbitration of a Sole
Arbitrator to be appointed by the second party.
The Arbitration shall be governed by the
procedure and provisions of the Arbitration and
Conciliation Act 1996. The seat of arbitration
shall be at Delhi/ Haryana and courts of Delhi/
Haryana shall have jurisdiction over the disputes.
4. That our clients in the aforesaid facts and
circumstances express through us, their desire to
appoint you as the Sole Arbitrator in the above matter
in which our clients are the claimants. It is informed
that another associate company of our clients namely
M/s BDR Builders & Developers Pvt. Ltd. have also
sought your consent to act as Arbitrator as regards
their agreements to Purchase FSI of 2,90,000 sq. ft. in
the same project, from Mahamaya Exports Pvt. Ltd.
5. That as you are a Honorable Arbitrator on the
panel of the Delhi International Arbitration Centre
also and are arbitrating similar commercial disputes,
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our clients wish to seek your consent for your
appointment as an Arbitrator to decide the claims of
our clients which involve the specific performance of
the above stated agreement to sell - purchase and also
would involve a claim of damages against the seller
for breach of contract etc.
6 . That we request you to consider the present request
as urgent and intimate your con sent to appointment as
an Arbitrator in the above case. The consent may be
conveyed to us on email address
[email protected].”
Thanking you,
Sd/-
Sanjay Goswami
Advocate
For Goswami & Associates
9810164579.
CC: 1. M/s Mahamaya Exports Pvt. Ltd .,
208-210, Second floor, Rectangle No. I,
Saket District Centre, New Delhi -110017 .
Also at
M/s Mahamaya Exports Pvt. Ltd,
ABW Tower, 2nd Floor, IFFCO Chowk,
District Gurgaon (Haryana).
2. Shri Atul Bansal, Farm No.22,
Green Khasra No. 413-414,Villaage Rajokri,
Near Market, New Delhi- 110037
3. Smt. Sona Bansal, Farm No.22,
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Green Khasra No. 413-414,Villaage Rajokri,
Near Market, New Delhi - 110037”
(emphasis supplied)
10. The learned Arbitrator gave his consent vide Communication dated
06.09.2016.
11. Material on record indicates that on 15.09.2016, the Respondents had
shown its disagreement for the request of the appointment of the Arbitrator
as the same has not been mutual. The appointment was, therefore, unilateral
in nature.
12. Be that as it may, the proceedings were conducted before the
Arbitrator and the Award has been passed. A challenge to the same has been
dismissed on the ground of delay. The objection regarding the appointment
of Arbitrator was not considered at that stage and has been raised at the
execution stage.
13. Learned Counsel for the Petitioner places reliance on the Judgment
passed by a Coordinate Bench of this Court in Anglo-American
Metallurgical Coal Pvt. Ltd. v. MMTC Ltd., MANU/DE/3182/2025 .
14. Per contra , learned Counsel for the Respondent places reliance on the
Judgment passed by the Division Bench of this Court in Kotak Mahindra
Bank Ltd. v. Narendra Kumar Prajapat, 2023 SCC OnLine Del 3148 and
M/s Mahavir Prasad Gupta & Sons v. Govt. of NCT of Delhi , 2025 SCC
OnLine Del 4241 .
15. Heard learned Counsel for the parties and perused the material on
record.
16. A perusal of the arbitration clause indicates that the clause gives the
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right to the Decree Holder to unilaterally appoint the Sole Arbitrator. Such a
clause has been held to be bad by the five Judges Bench of the Apex Court
in Central Organisation for Railway Electrification v. ECI SPIC SMO
MCML (JV) A Joint Venture Co., (2025) 4 SCC 641 , wherein the Apex
Court has observed as under:-
“ 70 . The concept of equality under Article 14
enshrines the principle of equality of treatment. The
basic principle underlying Article 14 is that the law
must operate equally on all persons under like
circumstances. [M. Nagaraj v. Union of India, (2006)
8 SCC 212, para 106 : (2007) 1 SCC (L&S) 1013] The
implication of equal treatment in the context of judicial
adjudication is that “all litigants similarly situated are
entitled to avail themselves of the same procedural
rights for relief, and for defence with like protection
and without discrimination” [Shree Meenakshi Mills
Ltd. v. A.V. Visvanatha Sastri, (1954) 2 SCC 497, para
6 : (1954) 26 ITR 713] . In Union of India v. Madras
Bar Assn. [Union of India v. Madras Bar Assn., (2010)
11 SCC 1, para 102 : (2010) 156 Comp Cas 392] , a
Constitution Bench held that the right to equality
before the law and equal protection of laws guaranteed
by Article 14 of the Constitution includes a right to
have a person's rights adjudicated by a forum which
exercises judicial power impartially and independently.
Thus, the constitutional norm of procedural equality is
a necessary concomitant to a fair and impartial
adjudicatory process.
xxx
129 . Equal treatment of parties at the stage of
appointment of an arbitrator ensures impartiality
during the arbitral proceedings. A clause that allows
one party to unilaterally appoint a sole arbitrator is
exclusive and hinders equal participation of the other
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party in the appointment process of arbitrators.
Further, arbitration is a quasi-judicial and
adjudicative process where both parties ought to be
treated equally and given an equal opportunity to
persuade the decision-maker of the merits of the case.
An arbitral process where one party or its proxy has
the power to unilaterally decide who will adjudicate
on a dispute is fundamentally contrary to the
adjudicatory function of Arbitral Tribunals. [ Gary
Born, International Commercial Arbitration, (2nd
Edn., Kluwer 2014) p. 1952.]”
(emphasis supplied)
17. A perusal of the above Paragraphs shows that the Apex Court has held
that an arbitration clause that allows one party to unilaterally appoint the
arbitrator casts a doubt on the independence and impartiality of the arbitrator
and the appointment of such arbitrator is bad rendering the award void and
once the award becomes void , it becomes unenforceable in law. The fact that
the Respondent participated in the arbitration does not amount to express
consent.
18. At this juncture it is necessary to reproduce Section 12(5) of the
Arbitration & Conciliation Act, 1996, which reads as under:-
“ 12(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 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.”
19. A perusal of Section 12(5) refers to the words “ express agreement in
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writing ” which clearly indicates that the requirement is to have a written
agreement in words that parties have waived their rights to the applicability
of this sub-section. It is now settled by the Apex Court that the said waiver
cannot be inferred from the conduct of the parties.
20. The five Judges Bench of the Apex Court in CORE (supra) expressed
on this aspect in detail and has held as under:-
“ 121 . An objection to the bias of an adjudicator can be
waived. [Supreme Court Advocates-on-Record Assn. v.
Union of India, (2016) 5 SCC 808, para 30 : (2016) 3
SCC (Civ) 492 : (2016) 3 SCC (Cri) 173 : (2016) 2
SCC (L&S) 253] A waiver is an intentional
relinquishment of a right by a party or an agreement
not to assert a right. [State of Punjab v. Davinder Pal
Singh Bhullar, (2011) 14 SCC 770, para 41 : (2012) 4
SCC (Civ) 1034 : (2012) 4 SCC (Cri) 496 : (2014) 1
SCC (L&S) 208] The Arbitration Act allows parties to
waive the application of Section 12(5) by an express
agreement after the disputes have arisen. However, the
waiver is subject to two factors. First, the parties can
only waive the applicability of Section 12(5) after the
dispute has arisen. This allows parties to determine
whether they will be required or necessitated to draw
upon the services of specific individuals as arbitrators
to decide upon specific issues. To this effect,
Explanation 3 to the Seventh Schedule recognises that
certain kinds of arbitration such as maritime or
commodities arbitration may require the parties to
draw upon a small, specialised pool. [ “Explanation
3.—For the removal of doubts, it is clarified that it may
be the practice in certain specific kinds of arbitration,
such as maritime or commodities arbitration, to draw
arbitrators from a small, specialised pool. If in such
fields it is the custom and practice for parties
frequently, to appoint the same arbitrator in different
cases, this is a relevant fact to be taken into account
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while applying the rules set out above.”] The second
requirement of the proviso to Section 12(5) is that
parties must consciously abandon their existing legal
right through an express agreement. Thus, the
Arbitration Act reinforces the autonomy of parties by
allowing them to override the limitations of
independence and impartiality by an express
agreement in that regard.
Xxx
123. In Bharat Broadband Network Ltd. [Bharat
Broadband Network Ltd. v. United Telecoms Ltd.,
(2019) 5 SCC 755 : (2019) 3 SCC (Civ) 1] , this Court
held that the proviso to Section 12(5) requires an
express agreement in writing, that is, an agreement
made in words as opposed to an agreement that can be
inferred by conduct. [Bharat Broadband Network
Ltd. v. United Telecoms Ltd., (2019) 5 SCC 755, para
20 : (2019) 3 SCC (Civ) 1] It was explained that such
an agreement must be made by both parties with full
knowledge of the fact that although a particular person
is ineligible to be appointed as an arbitrator, the
parties still have full faith and confidence in them to
continue as an arbitrator. [Bharat Broadband
Network, (2019) 5 SCC 755, p. 771, para 20. This
Court observed:“20. … 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 principle of express waiver contained
under the proviso to Section 12(5) also applies to
situations where the parties seek to waive the
allegation of bias against an arbitrator appointed
unilaterally by one of the parties. After the disputes
have arisen, the parties can determine whether there is
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a necessity to waive the nemo judex rule. This balances
the autonomy of parties and the principles of an
independent and impartial Arbitral Tribunal.”
21. Recently, the Apex Court in Bhadra International (India) Pvt. Ltd. &
Ors. v. Airport Authority of India, 2026 SCC OnLine SC 7, has held as
under:-
“ b. Challenge to the ineligibility of the
arbitrator after arbitral award has been passed
109. When an award has been passed, the proceedings
before the arbitral tribunal conclude, leaving no
possibility of substituting the arbitrator at this stage. In
other words, once an award is passed, the mandate of
the arbitral tribunal also arrives at a conclusion. In
such circumstances, a party aggrieved by the
arbitrator's ineligibility may challenge the award by
filing an application under Section 34 of the 1996 Act,
as an award passed by an ineligible arbitrator is
nullity, non-est, or void ab initio, and against the
public policy of India.
110. Even where an interim award has been passed, it
is liable to be set aside, as it is not capable of being
enforced. The fate of an interim award and that of an
arbitral award, in this regard, is identical. In either
circumstance, the parties would be required to initiate
fresh arbitration proceedings as per law. In Alpro
Industries v. Ambience (P) Ltd., 2025 SCC OnLine Del
8373, the petitioner assailed an interim award under
Section 34 on the primary ground of unilateral
appointment. The Court observed thus:—
“41. In light of the findings in Mahavir Prasad (supra)
and my findings that the unilateral appointment of the
Sole Arbitrator in the present case is invalid and there
has been no express waiver in writing in terms of the
proviso to clause 12(5) of the Act, the Impugned
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Interim Award is liable to be set aside. Consequently,
the issue raised by the respondents as to whether the
Impugned Interim Award constitutes an „interim
award‟ or not would not be relevant. The Court cannot
permit continuation of arbitral proceedings before an
Arbitral Tribunal which would be a nullity and cannot
result into an enforceable award. Hence, I do not deem
it necessary to go into the merits of the challenge to the
Impugned Interim Award.”
(Emphasis supplied)
111. An award passed by an arbitrator who is found to
be ineligible cannot be enforced. In CORE II (supra), a
Constitution Bench of this Court held that the concept
of “public policy of India” and “fundamental policy of
Indian law” means complying with statues and judicial
precedents, and principles of natural justice. It was
categorically held that “the most basic notions of
morality and justice” mentioned in the Explanation
1 to Section 34(b) includes bias. The observations of
this Court in paragraphs 163 and 164 respectively
reproduced hereinbelow squarely apply to the facts of
the present case. The relevant extract has been
reproduced thus:—
“158. Section 34(2)(b) specifically provides that an
arbitral award may be set aside if the court finds that
the arbitral award conflicts with the public policy of
India. The provision further clarifies “public policy of
India” to only mean that : (i) the making of the award
was induced or affected by fraud or corruption or was
in violation of Section 75 or Section 81; (ii) it is in
contravention with the fundamental policy of Indian
law; or (iii) it is in conflict with the most basic notions
of morality or justice.
159. This Court has construed the expression “public
policy of India” appearing under Section 34 to mean
the “fundamental policy of Indian law”. [Ssangyong
Engg. & Construction Co. Ltd. v. NHAI, (2019) 15
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SCC 131, para 34 : (2020) 2 SCC (Civ)
213; NHAI v. P. Nagaraju, (2022) 15 SCC 1 : (2024) 2
SCC (Civ) 414, para 39] The concept of “fundamental
policy of Indian law” has been held to cover
compliance with statutes and judicial precedents,
adopting a judicial approach, and compliance with the
principles of natural justice. [MMTC Ltd. v. Vedanta
Ltd., (2019) 4 SCC 163, para 11 : (2019) 2 SCC (Civ)
293] In OPG Power Generation (India) (P)
Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd.
[OPG Power Generation (India) (P) Ltd. v. Enexio
Power Cooling Solutions (India) (P) Ltd., (2025) 2
SCC 417 : (2025) 1 SCC (Civ) 54], this Court
explained the concept of “fundamental policy of Indian
law” thus : (SCC pp. 467-68, paras 55-56)
“55. … The expression “in contravention with the
fundamental policy of Indian law” by use of the word
“fundamental” before the phrase “policy of Indian
law” makes the expression narrower in its application
than the phrase “in contravention with the policy of
Indian law”, which means mere contravention of law is
not enough to make an award vulnerable. To bring the
contravention within the fold of fundamental policy of
Indian law, the award must contravene all or any of
such fundamental principles that provide a basis for
administration of justice and enforcement of law in this
country.
56. Without intending to exhaustively enumerate
instances of such contravention, by way of illustration,
it could be said that
(a) violation of the principles of natural justice;
(b) disregarding orders of superior courts in India or
the binding effect of the judgment of a superior court;
and
(c) violating law of India linked to public good or
public interest, are considered contravention of the
fundamental policy of Indian law.”
160. In Avitel Post Studioz Ltd. v. HSBC PI Holdings
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(Mauritius) Ltd. [Avitel Post Studioz Ltd. v. HSBC PI
Holdings (Mauritius) Ltd., (2024) 7 SCC 197, para 34
: (2024) 3 SCC (Civ) 780] , this Court held that the
most basic notions of morality and justice under the
concept of “public policy” will include bias.
161. […] As a corollary, Section 34 places a
responsibility on the Arbitral Tribunals to ensure that
the arbitral proceedings are consistent with the
fundamental policy of Indian law. [Vidya
Drolia v. Durga Trading Corpn., (2021) 2 SCC 1, pp.
69-70, para 70:“70. Arbitrators, like the courts, are
equally bound to resolve and decide disputes in
accordance with the public policy of the law.
Possibility of failure to abide by public policy
consideration in a legislation, which otherwise does
not expressly or by necessary implication exclude
arbitration, cannot form the basis to overwrite and
nullify the arbitration agreement. This would be
contrary to and defeat the legislative intent reflected in
the public policy objective behind the Arbitration Act.
Arbitration has considerable advantages as it gives
freedom to the parties to choose an arbitrator of their
choice, and it is informal, flexible and quick.
Simplicity, informality and expedition are hallmarks of
arbitration. Arbitrators are required to be impartial
and independent, adhere to natural justice, and follow
a fair and just procedure. Arbitrators are normally
experts in the subject and perform their tasks by
referring to facts, evidence, and relevant case law.”]
xxx
163. The possibility of bias is real in situations where
an arbitration clause allows a government company to
unilaterally appoint a sole arbitrator or control the
majority of the arbitrators. Since the Government has
control over the Arbitral Tribunal, it can chart the
course of the arbitration proceedings to the prejudice
of the other party. Resultantly, unilateral appointment
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clauses fail to provide an effective substitute for
judicial proceedings in India. Further, a unilateral
appointment clause is inherently exclusionary and
violates the principle of equal treatment of parties and
procedural equality.
164. Unilateral appointment clauses in a public-
private contract fail to provide the minimum level of
integrity required in authorities performing quasi-
judicial functions such as Arbitral Tribunals.
Therefore, a unilateral appointment clause is against
the principle of arbitration, that is, impartial resolution
of disputes between parties. It also violates the nemo
judex rule which constitutes the public policy of India
in the context of arbitration. Therefore, unilateral
appointment clauses in public-private contracts are
violative of Article 14 of the Constitution for being
arbitrary in addition to being violative of the equality
principle under the Arbitration Act.”
(Emphasis supplied)
112. What emerges from the foregoing is that the
appellants were well within their right to challenge the
ineligibility of the sole arbitrator in an application
under Section 34 of the Act, 1996.
c. Challenge to the ineligibility of the arbitrator at
any stage of the proceedings
113. A challenge to an arbitrator's ineligibility could
be raised at any stage because an award passed in
such circumstance is non-est, i.e., it carries no
enforceability or recognition in law. We say so because
an arbitrator does not possess the jurisdiction to pass
an award. In arbitration, the parties vest the
jurisdiction in the tribunal by virtue of a valid
arbitration agreement and an appointment made in
accordance with the provisions of the Act, 1996. This
jurisdiction is grounded in the consent of the parties as
explained in the foregoing paragraphs of this
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judgment.
114. In this context, jurisdiction means the authority of
an arbitral tribunal to render a decision affecting the
merits of the case. An arbitrator who lacks jurisdiction
cannot make an award on the merits. With a view to
dispel any doubt and lend clarity, we deem it
appropriate to observe that the jurisdiction of the
arbitral tribunal is distinct from the admissibility of the
dispute, i.e., the arbitrability of the claims.
115. A question pertaining to the jurisdiction of the
arbitral tribunal arises when the tribunal is
fundamentally incompetent to render any decision at
all. In other words, a question of jurisdiction pertains
to the ability of the tribunal to hear a case, whereas
questions of admissibility presuppose that the tribunal
has jurisdiction. An award passed by an arbitrator who
does not have jurisdiction strikes at the very authority
of the arbitrator.
116. This Court, in catena of decisions, has held that
the validity of a decree can be challenged even in
execution proceedings if the court passing such decree
lacked subject-matter jurisdiction over the dispute. As
a decree passed by a court without jurisdiction goes to
the root of the matter. Any decision passed by a court
lacking jurisdiction would be coram non judice, since a
court cannot give itself jurisdiction. No act of the
parties can cure an inherent lack of jurisdiction.
117. In Hira Lal Patni v. Kali Nath, 1961 SCC OnLine
SC 42, this Court held that competence of a court to
decide a case goes to the root of the matter, and
incompetency results in inherent lack of jurisdiction.
As a result, a decision rendered by a court that lacks
jurisdiction is a nullity. The relevant observations read
thus:—
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“4. […] The validity of a decree can be challenged in
execution proceedings only on the ground that the
court which passed the decree was lacking in inherent
jurisdiction in the sense that it could not have seisin of
the case because the subject-matter was wholly foreign
to its jurisdiction or that the defendant was dead at the
time the suit had been instituted or decree passed, or
some such other ground which could have the effect of
rendering the court entirely lacking in jurisdiction in
respect of the subject-matter of the suit or over the
parties to it. But in the instant case there was no such
inherent lack of jurisdiction. The decision of the Privy
Council in the case of Ledgard v. Bull [13 Indian
Appeals 134] is an authority for the proposition that
consent or waiver can cure defect of jurisdiction but
cannot cure inherent lack of jurisdiction. In that case,
the suit had been instituted in the Court of the
Subordinate Judge, who was incompetent to try it. By
consent of the parties, the case was transferred to the
Court of the District Judge for convenience of trial. It
was laid down by the Privy Council that as the court in
which the suit had been originally instituted was
entirely lacking in jurisdiction, in the sense that it was
incompetent to try it, whatever happened subsequently
was null and void because consent of parties could not
operate to confer jurisdiction on a court which was
incompetent to try the suit. […] It is well settled that
the objection as to local jurisdiction of a court does not
stand on the same footing as an objection to the
competence of a court to try a case. Competence of a
court to try a case goes to the very root of the
jurisdiction, and where it is lacking, it is a case of
inherent lack of jurisdiction. On the other hand, an
objection as to the local jurisdiction of a court can be
waived and this principle has been given a statutory
recognition by enactments like Section 21 of the Code
of Civil Procedure.[…]”
(Emphasis supplied)
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118. We may look into the decision of this Court
in Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran Nigam
Ltd., (2019) 17 SCC 82. The submission canvassed
before this Court was that an objection to jurisdiction
could not have been raised in a proceeding under
Section 37 of the Act, 1996, once the parties had
consented to arbitration. In the said decision it was
held that an objection to the inherent lack of
jurisdiction can be taken at any stage and also in
collateral proceedings. Furthermore, that a decree
passed without jurisdiction is a nullity. The relevant
observations read thus:—
“17. We are of the view that it is settled law that if
there is an inherent lack of jurisdiction, the plea can be
taken up at any stage and also in collateral
proceedings. This was held by this Court in Kiran
Singh v. Chaman Paswan [Kiran Singh v. Chaman
Paswan, (1955) 1 SCR 117 : AIR 1954 SC 340] as
follows : (SCR p. 121 : AIR p. 342, para 6)
“6. … It is a fundamental principle well-established
that a decree passed by a court without jurisdiction is
a nullity, and that its invalidity could be set up
whenever and wherever it is sought to be enforced or
relied upon, even at the stage of execution and even in
collateral proceedings. A defect of jurisdiction,
whether it is pecuniary or territorial, or whether it is in
respect of the subject-matter of the action, strikes at the
very authority of the Court to pass any decree, and
such a defect cannot be cured even by consent of
parties. If the question now under consideration fell to
be determined only on the application of general
principles governing the matter, there can be no doubt
that the District Court of Monghyr was coram non
judice, and that its judgment and decree would be
nullities.”
18. Therefore, it is a little difficult to countenance Shri
Vaidyanathan's argument that having consented, the
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respondent cannot now turn around and challenge the
very appointment of the arbitrator as being invalid and
without jurisdiction.”
(Emphasis supplied)
119. In Bhim Bahadur v. Vikram Singh, 2015 SCC
OnLine Utt 1563, when the issue before the High Court
was whether the subject land therein was agricultural
or abadi in nature. The Court held that the matter had
to be referred to a revenue court under the Uttar
Pradesh Zamindari Abolition & Land Reforms Act.
The relevant observations read thus:—
“11. In this regard, the law is well established to the
effect that competency of the jurisdiction or the lack of
the same in a particular Court cannot be determined
by either of the parties through their pleadings, viz.,
the Court having jurisdiction under the law to decide a
particular issue cannot be kept away from deciding the
same on the basis of averments made by the parties
and, in the same manner, the jurisdiction cannot be
conferred on a particular Court on the basis of
pleadings and admission thereof to decide a particular
issue wherefor the law does not confer jurisdiction to
the Court.”
(Emphasis supplied)
120. All that we are trying to convey is that, in civil
law, the law itself confers subject-matter jurisdiction
on specific courts. For instance, a suit seeking a
declaration on the validity of marriage before the Civil
Court is not maintainable, as such disputes fall within
the exclusive jurisdiction of the Family Court.
Similarly, in arbitration, the consent of parties confers
subject-matter jurisdiction, i.e., the authority to decide
the dispute. When an arbitral tribunal is unilaterally
constituted, such consent is absent, thereby divesting
the tribunal of subject-matter jurisdiction. The Act,
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1996, does not recognize the conferral of jurisdiction
on an arbitral tribunal without the consent of the
parties. By entering into an express agreement in
writing as per the proviso to Section 12(5), the parties
not only waive the ineligibility of the proposed
arbitrator but also consent to his appointment.
121. Before we part, we deem it fit to observe that an
arbitrator is better equipped with the position of law
on appointments, more particularly, unilateral
appointments. Therefore, it becomes incumbent upon
the arbitrator that upon entering reference and at the
very first hearing, to ensure from the parties that they
are willing to participate in the proceedings and to
insist upon a written agreement waiving the
requirement of Section 12(5) of the Act, 1996.
122. Further, in such circumstances referred to above,
if any party does not appear despite receipt of notice,
the arbitrator shall not proceed further and shall
immediately withdraw from the arbitral proceedings.
The arbitrator must, along with the waiver agreement,
record the minutes even when the parties are
cooperating. This would certainly save time and avoid
multiplicity of proceedings.
VIII. CONCLUSION
123. A conspectus of the aforesaid detailed discussion
on the position of law as regards Section 12 of the Act,
1996, is as follows:—
i. The principle of equal treatment of parties provided
in Section 18 of the Act, 1996, applies not only to the
arbitral proceedings but also to the procedure for
appointment of arbitrators. Equal treatment of the
parties entails that the parties must have an equal say
in the constitution of the arbitral tribunal.
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ii. Sub-section (5) of Section 12 provides that any
person whose relationship with the parties or counsel,
or the dispute, whether direct or indirect, falls within
any of the categories specified in the Seventh Schedule
would be ineligible to be appointed as an arbitrator.
Since, the ineligibility stems from the operation of law,
not only is a person having an interest in the dispute or
its outcome ineligible to act as an arbitrator, but
appointment by such a person would be ex
facie invalid.
iii. The words “an express agreement in writing” in
the proviso to Section 12(5) means that the right to
object to the appointment of an ineligible arbitrator
cannot be taken away by mere implication. The
agreement referred to in the proviso must be a clear,
unequivocal written agreement.
iv. When an arbitrator is found to be ineligible by
virtue of Section 12(5) read with the Seventh Schedule,
his mandate is automatically terminated. In such
circumstance, an aggrieved party may approach the
court under Section 14 read with Section 15 for
appointment of a substitute arbitrator. Whereas, when
an award has been passed by such an arbitrator, an
aggrieved party may approach the court under Section
34 for setting aside the award.
v. In arbitration, the parties vest jurisdiction in the
tribunal by exercising their consent in furtherance of a
valid arbitration agreement. An arbitrator who lacks
jurisdiction cannot make an award on the merits.
Hence, an objection to the inherent lack of jurisdiction
can be taken at any stage of the proceedings.”
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22. The only question that is now left to be answered is whether this
objection can be raised at the stage of execution and in this case after the
challenge to the award has been rejected vide Order dated 09.04.2024 passed
by a Coordinate Bench of this Court in O.M.P. (COMM) 338/2022.
23. It is pertinent to mention that the Order dated 09.04.2024 was not an
Order on merits but only on the aspect of delay in filing the petition under
Section 34 of the Arbitration & Conciliation Act and the Court did not go
into the question as to whether the appointment of Arbitrator was valid or
not.
24. Reliance placed by the learned Senior Counsel for the Petitioner on
the Judgment passed by a Coordinate Bench of this Court in MMTC (supra),
is faced with insignificance after the Judgment passed by a Division Bench
of this Court in Kotak Mahindra Bank (supra) and M/s Mahavir Prasad
Gupta (supra).
25. In the case of Kotak Mahindra Bank (supra), the Division Bench of
this Court while dealing with an appeal in an execution proceedings in a
case where the appointment of an Arbitrator was unilateral, has observed as
under:-
“ 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.
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7. We find little merit in the aforesaid contentions. The
proviso to Section 12(5) of the A&C Act is
unambiguous. A party can waive its right to object to
the ineligibility of an arbitrator under Section 12(5) of
the A&C Act but the same is subject to two conditions.
First, that the waiver is required to be by and done by
an express agreement in writing; and second, that such
agreement is entered into after the disputes have
arisen. Unless both the aforesaid conditions are
satisfied, there can be no waiver of the ineligibility of
an arbitrator.
8. In Bharat Broadband Network Limited v. United
Telecoms Limited, (2019) 5 SCC 755, the Supreme
Court had authoritatively held that waiver of a right to
object to ineligibility of an arbitrator under Section
12(5) of the A&C Act cannot be inferred by conduct of
a party. Such waiver can only be by an express
agreement in writing. The Court had also clarified that
“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”.
9. In view of the above, the failure, if any, on the part
of the respondent to object to the unilateral
appointment of the sole arbitrator, cannot be construed
as waiver of his right under Section 12(5) of the A&C
Act.
10. The award rendered by an arbitrator who is
ineligible to be appointed as such cannot be enforced.
11. In HRD Corporation v. GAIL (India) Ltd., (2018)
12 SCC 471, the Supreme Court held as under:
“Since ineligibility goes to the root of the
appointment, Section 12(5) read with the Seventh
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Schedule makes it clear that if the arbitrator falls in
any one of the categories specified in the Seventh
Schedule, he becomes “ineligible” to act as
arbitrator. Once he becomes ineligible, it is clear
that, under Section 14(1)(a), he then becomes de
jure unable to perform his functions inasmuch as, in
law, he is regarded as “ineligible”. In order to
determine whether an arbitrator is de jure unable to
perform his functions, it is not necessary to go to the
Arbitral Tribunal under Section 13. Since such a
person would lack inherent jurisdiction to proceed
any further, an application may be filed under
Section 14(2) to the Court to decide on the
termination of his/her mandate on this ground.”
[emphasis added]
12. In Govind Singh v. Satya Group Pvt. Ltd. :
2023/DHC/000081 this court held as under:
“In view of the above, the remaining question to be
addressed is whether an arbitral award rendered by a
person who is ineligible to act as an arbitrator is valid
or binding on the parties. Clearly, the answer must be
in the negative. The arbitral award rendered by a
person who is ineligible to act as an arbitrator cannot
be considered as an arbitral award. The ineligibility
of the arbitrator goes to the root of his jurisdiction.
Plainly an arbitral award rendered by the arbitral
tribunal which lacks the inherent jurisdiction cannot
be considered as valid. In the aforesaid view, the
impugned award is liable to be set aside as being
wholly without jurisdiction.”
xxx
14. This Court finds no infirmity with the aforesaid
view. A person who is ineligible to act an Arbitrator,
lacks the inherent jurisdiction to render an Arbitral
Award under the A&C Act. It is trite law that a
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decision, by any authority, which lacks inherent
jurisdiction to make such a decision, cannot be
considered as valid. Thus, clearly, such an impugned
award cannot be enforced.”
(emphasis supplied)
26. Another Coordinate Bench of this Court in M/s Mahavir Prasad Gupta
(supra), has considered specifically objections regarding appointment of the
Arbitrator taken for the first time during the setting aside or enforcement
proceedings. The Division Bench after considering judgments that allowed
the ground of unilateral appointment to be raised for the first time after the
award having being considered and also after the Judgments which have
held to the contrary, has held that the objections regarding unilateral
appointment can be taken at any stage including at the time of enforcement
of the award under Section 36 of the Arbitration & Conciliation Act as such
the award by the Arbitrator who has been appointed unilaterally is void and
unenforceable.
27. The Judgment passed by the Division Bench of this Court in M/s
Mahavir Prasad Gupta (supra) has been followed by another Division Bench
of this Court in Indian Oil Corporation Limited v. Man Industries (India)
Limited, FAO(OS) (COMM) 172/2023.
28. In view of the fact that three Division Benches of this Court have now
held that unilateral appointment of an arbitrator goes to the very root of
jurisdiction making the award a nullity, and therefore, unenforceable, is
binding on this Court.
29. Resultantly, the enforcement petition is dismissed along with pending
application(s), if any.
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30. Needless to state that it is open for the parties to take such steps as
available to them under law for taking fresh steps for appointment of an
Arbitrator to adjudicate the disputes.
SUBRAMONIUM PRASAD, J
MAY 12, 2026
hsk
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