Hanson Agro Limited vs Gail (India) Limited
- Court
- Delhi High Court
$~1 to 19 (Original Side)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 01.04.2026
Judgment pronounced on: 01.09.2026
+ O.M.P. (COMM) 356/2016 & I.A. 9148/2016
HANSON AGRO LIMITED .....Petitioner
versus
GAIL (INDIA) LIMITED .....Respondent
2
+ O.M.P. (COMM) 404/2016
M/S. ORDYN TECHNOLOGIES PVT. LTD. & ORS.
.....Petitioners
versus
TECHNOLOGY DEVELOPMENT BOARD & ORS.
.....Respondents
3
+ O.M.P. (COMM) 405/2016
SREERAJ S & ORS.
.....Petitioner
versus
TECHNOLOGY DEVELOPMENT BOARD, & ORS.
.....Respondent
4
+ O.M.P. (COMM) 127/2017
M/S VIPIN GUPTA & ASSOCIATES
.....Petitioner
versus
THE DELHI STATE INDUSTRIAL & INFRASTRUCTURE
DEVELOPMENT CORPORATION LTD
.....Respondent
5
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+ O.M.P. (COMM) 128/2017
DSIIDC
.....Petitioner
versus
M/S VIPIN GUPTA & ASSOCIATES
.....Respondent
6
+ O.M.P. (COMM) 262/2017 & I.A. 7921/2017
NAVAYUGA ENGINEERING COMPANY LIMITED
.....Petitioner
versus
NTPC LIMITED
.....Respondent
7
+ O.M.P. (COMM) 44/2018 & I.A. 1454/2018
NATIONAL THERMAL POWER CORPORATION LTD. (NTPC)
.....Petitioner
versus
NAVAYUGA ENGINEERING COMPANY LTD. (NECL)
.....Respondent
8
+ O.M.P. (COMM) 329/2017
SUGAM CONSTRUCTION PVT.LTD.
.....Petitioner
versus
UNION OF INDIA
.....Respondent
9
+ O.M.P. (COMM) 355/2017 , I.A. 13836/2019 & I.A. 5771/2022
V.A. AZEEZ PROPRIETOR OF SELMEC ENGINEERING
CONSTRUCTION
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.....Petitioner
versus
DSC LIMITED THRUOGH ITS MANAGING DIRECTOR
.....Respondent
10
+ O.M.P. (COMM) 384/2017 & I.A. 2053/2020
ADWEL ADVERTISING SERVICE & ANR.
.....Petitioner
versus
SOUTH DELHI MUNICIPAL CORPORATION
.....Respondent
11
+ O.M.P. (COMM) 168/2020 & I.A. 12126/2014
SURENDER PAL SINGH
.....Petitioner
versus
HINDUSTAN PETROLEUM CORPORATION LTD
.....Respondent
12
+ O.M.P. (COMM) 198/2020
CELEBI DELHI CARGO TERMINAL MANAGEMENT INDIA
PVT LTD
.....Petitioner
versus
AMIT DHUPAR
.....Respondent
13
+ O.M.P. (COMM) 205/2020
M/S ISHVAKOO INDIA PVT LTD
.....Petitioner
versus
AIRPORT AUTHORITY OF INDIA & ANR
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.....Respondent
14
+ O.M.P. (COMM) 236/2020
MASTER ABHISHEK MEHRA & ORS
.....Petitioner
versus
M/S DLF COMMERCIAL DEVELOPERS LTD & ORS
.....Respondent
15
+ O.M.P. (COMM) 362/2020
M/S BHARGAVA & ASSOCIATES PVT LTD
.....Petitioner
versus
RITES LTD
.....Respondent
16
+ O.M.P. (COMM) 385/2021, I.A. 17489/2021, I.A. 17490/2021 & I.A.
17491/2021, I.A. 131/2022
HINDUSTANT PREFAB LTD
.....Petitioner
versus
M/S NCC LIMITED
.....Respondent
17
+ O.M.P. (COMM) 329/2022 & I.A. 12447/2022
BHARAT UDYOG
.....Petitioner
versus
INTEC CAPITAL LIMITED & ORS.
.....Respondent
18
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+ O.M.P. (COMM) 101/2024 & I.A. 4106/2024
DISHA IMPEX PVT LTD
.....Petitioner
versus
NATIONAL AGRICULTURAL CO OP MARKETING
FEDERATION OF INDIA LIMITED
.....Respondent
19
+ OMP (ENF.) (COMM.) 200/2024 & EX.APPL.(OS) 1401/2024
NATIONAL AGRICULTURAL COOPERATIVE MARKETING
FEDERATION OF INDIA NAFED
.....Decree Holder
versus
DISHA IMPEX PVT. LTD
.....Judgement Debtor
MEMO OF APPEARANCE:
FOR PETITIONER(S):
Mr Jay Savla, Sr. Adv. with Mr. Jasdeep Singh Dhillon, Mr. Anirudh
Jamwal, Mr. Aditya Bajaj & Ms. Kenisha Savla, Advs. in Item 13.
Mr. Pallav Saxena, Mr. Nipun Sharma, Mr. Akshat, Ms. Supreeti Chauhan
& Mr. Rudra Chauhan, Advs. in Item 10.
Ms. Manisha Singh, Adv. in Item 11.
Mr. Aaditya Vijaykumar, Mr. Naman Garg, Adv. in Item 19.
Mr. Gautam Khazanchi, Mr. Rohan kothari, Ms Aditi kukreja, Ms.
Shwetha, Advs. in Item 2.
Ms. Niti Sudhakar, Mr. Aayushmaan Vatsyayana, Ms. Aditi Warrier, Mr.
Gourav, Mr. Vansh Pandey, Advs. in Item 12.
Mr. Kartik Yadav, Mr. Sidhant Kaushik & Mr. Sankalp Singh, Advs. in
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Item 18.
FOR RESPONDENT(S):
Mr. Vivek Kohli, Sr. Adv. with Mr. Anish Chawla, Ms. Suhasini Singh,
Advs. in Item 1
Dr. Amit George, Mr. S.K. Chandwani, Mr. Sameer Chandwani, Mr.
Dushyant Kishan Kaul, Ms. Rupam Jha, Mr. Adhishwar Suri, Ms. Medhavi
Bhatia, Mr. Bhrigu Pamidighantam, Mr. Vaibhav Gandhi, Mr. Kartikay
Puneesh, Mr. Shivam Parashar, Advs. in Item 16.
Ms. Geeta Malhotra and Ms. Swati, Advs. in Item 2 & 3.
Mr. Sandeep Kumar Mahapatra, CGSC, Ms. Mrinmayee Sahu, Mr.
Tribhuvan, and Ms. Anushka Sarraf, Advs. in Item 8.
Ms. Kanika Agnihotri, Ms. Vagmi Singh, Mr. Vidit Pratap Singh & Ms.
Shivani Patil, Advs. for NTPC in Item 6, 7 and 14.
Mr P S Singh, CGSC, Ms. Annu Singh, Ms. Shivangi Sharma, Mr.
Rajneesh K. Sharma, Advs. in Item 2 and 3.
Mr. Sarul Jain, Adv. for R-1 in Item 3 & 4.
Mr. Aaditya Vijaykumar, Mr. Naman Garg, Adv. in Item 18.
Mr. Sanjay Poddar, Sr. Adv. with Ms. Beenashaw N. Soni, Standing
Counsel, MCD with Mr. Govind, Mr. Apurv, Ms. Mansi Jain, Ms. Ann
Joseph and Ms. Katyani Malhotra, Advs. in Item 10 for MCD.
Mr. Sonal kumar Singh, Mr. Ratik sharma, Ms. Muskan Agarwal, Ms.
Dimple Kathuria, Mr. Gagan Kochar, Ms. Pragya Bansal, Advs. in Item 13.
Mr. Rajat Aneja, Mr. Saubhagya Chauriha, Mr. Karandeep Singh, Advs. in
Item 12.
Mr. Kartik Yadav, Mr. Sidhant Kaushik & Mr. Sankalp Singh, Advs. in
Item 19.
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CORAM:
HON’BLE MR. JUSTICE JASMEET SINGH
J U D G M E N T
For convenience, this judgment is divided into the following parts:-
TABLE OF CONTENTS
INTRODUCTION ......................................................................................... 8
SUBMISSIONS ON BEHALF OF THE PETITIONERS ............................ 9
SUBMISSIONS ON BEHALF OF THE RESPONDENTS ....................... 15
ANALYSIS AND FINDINGS .................................................................... 19
I. The Law Before The Change: The Pre-2015 Arbitration Regime .. 20
Ii. The 2015 Amendment: Object And Legislative Intent ................... 25
Iii. The Interplay Between The Pre And Post-2015 Regimes .............. 30
Iv. Section 26: The Bridge Between The Old And The New ............... 32
V. The Ratio In Bhadra International ................................................... 59
Category C: .............................................................................................. 69
CONCLUSION ........................................................................................... 75
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INTRODUCTION
1. These are a batch of nineteen petitions filed under Section 34 or 36 of
the Arbitration and Conciliation Act, 1996, ( “1996 Act” ) challenging
the respective Arbitral Awards on various grounds. Although the
factual matrix in each petition is distinct, common legal issues arise
concerning the validity of the constitution of the Arbitral Tribunal,
particularly where the Arbitrator was appointed unilaterally by one of
the contracting parties.
2. During the course of hearing, learned counsels for the parties
submitted that, for the purposes of adjudication, the petitions may
conveniently be classified into distinct categories depending upon the
stage at which the Arbitral proceedings, the Arbitral Award and the
court proceedings occurred vis-à-vis the coming into force of the
Arbitration and Conciliation (Amendment) Act, 2015 ( “2015
Amendment Act” ) on 23.10.2015. Accordingly, the petitions have
been grouped as under:
Category A: Cases where both the commencement of Arbitral
proceedings and the Arbitral Award preceded 23.10.2015,
whereas the proceedings under Section 34 were instituted after
the 2015 Amendment Act came into force.
Category B: Cases where the Arbitral proceedings commenced
prior to 23.10.2015, but the Arbitral Award and the proceedings
under Section 34 of the Act were instituted after the
commencement of the 2015 Amendment Act.
Category C: Cases where the Arbitral proceedings and the
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challenge thereto arose prior to the 2015 Amendment Act, but the
arbitration agreement expressly stipulated that any statutory
modification or re-enactment of the arbitration law would govern
the Arbitral proceedings, thereby raising the issue whether the
provisions introduced by the 2015 Amendment Act would
nevertheless become applicable by virtue of such contractual
stipulation.
3. Since the principal questions of law arising in these petitions
substantially overlap, the submissions advanced on behalf of the
parties have been dealt category wise.
4. Further, the matter M/s Adwel Advertising Service & Anr. v. South
Delhi Municipal Corporation, OMP (COMM) 384/2017, has been
excluded at the request of learned counsel for respondent/SDMC
communicated vide email dated 04.04.2026 as the present matter does
not fall under any category and shall be mentioned separately before
the Roster Bench.
SUBMISSIONS ON BEHALF OF THE PETITIONERS
5. At the outset, learned senior counsels and counsels appearing for the
petitioners submit that the issue of unilateral appointment of
Arbitrators now stands authoritatively settled by the Constitution
Bench of the Hon’ble Supreme Court in Central Organisation for
Railway Electrification v. ECI SPIC SMO MCML (JV), (2025) 4 SCC
641 ( “CORE” ). It has been contended that the Constitution Bench
held that the principle of equal treatment embodied in Section 18 of
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the 1996 Act extends to every stage of the Arbitral process, including
the constitution of the Arbitral Tribunal. Consequently, a contractual
clause conferring upon one party the exclusive power to appoint the
sole Arbitrator is fundamentally inconsistent with the requirement of
impartial adjudication and violates the rule against bias.
6. In this view, it was submitted that in CORE (supra) the Hon’ble
Supreme Court has reaffirmed the principles laid down in TRF Ltd. v.
Energo Engineering Projects Ltd., (2017) 8 SCC 377, and Perkins
Eastman Architects DPC v. HSCC (India) Ltd. , (2020) 20 SCC 760 ,
holding that unilateral appointment of an Arbitrator by a contracting
party creates justifiable doubts regarding the independence and
impartiality of the Tribunal and is therefore impermissible in law.
7. According to the petitioners, the only aspect to which the Constitution
Bench accorded prospective operation was its ruling concerning the
appointment procedure for three-member Arbitral Tribunals. No such
prospective limitation has been placed upon the law governing
unilateral appointment of sole Arbitrators.
8. Learned counsels further submitted that the controversy in the present
batch is not whether unilateral appointment is impermissible after the
2015 Amendment, as that issue is no longer res integra . The main
question is whether the principles governing unilateral appointment
would equally apply to arbitrations which commenced before
23.10.2015 but culminated in Awards/Court proceedings after the
2015 Amendment Act came into force.
Categories A and B
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9. In respect of Categories A and B, learned counsels submit that the
issue is squarely covered by the decision of the Hon’ble Supreme
Court in BCCI v. Kochi Cricket Pvt. Ltd. , (2018) 6 SCC 287 (“BCCI”)
wherein the Court interpreted Section 26 of the 2015 Amendment Act
and held that a distinction must be maintained between Arbitral
proceedings and Court proceedings arising therefrom.
10. It was contended by learned counsels for the petitioners that while
Arbitral proceedings commenced before 23.10.2015 continue to be
governed by the unamended provisions unless otherwise agreed, court
proceedings instituted after the 2015 Amendment Act came into force
are governed by the amended provisions of the Act. Consequently,
every petition under Section 34 instituted after 23.10.2015 is liable to
be examined from the lens of the amended statutory framework
irrespective of the date on which arbitration commenced.
11. Learned counsels also submit that once the amended provisions
become applicable to proceedings under Section 34, the Court is
required to examine the validity of the constitution of the Arbitral
Tribunal in the light of Sections 12, 18 and 34 of the 2015
Amendment Act. It was argued that a unilaterally appointed Arbitrator
suffers from statutory ineligibility, thereby rendering the composition
of the Tribunal contrary to Section 34(2)(a)(v). It was further
contended that such an Award also conflicts with the most basic
notions of justice and morality within the meaning of Explanation
1(iii) to Section 34(2)(b)(ii), having been rendered by a Tribunal
constituted in violation of the principles of natural justice.
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12. In order to buttress their submissions, reliance was placed upon Ellora
Paper Mills Ltd. v. State of Madhya Pradesh , (2022) 3 SCC 1 to
contend that even Arbitral Tribunals constituted before the
Amendment Act were held liable to be reconstituted upon the coming
into force of the amended provisions. Hence, indicating that the
requirement of independence and impartiality is not merely
procedural in nature but affects the jurisdiction of the Tribunal.
13. Learned counsels further relied upon several decisions of this Court,
including Supreme Infrastructure India Ltd. v. Freyssinet Memard
India Pvt. Ltd., 2025 SCC Online Del 3305, Bharat Forge v. Tarsem
Jain, 2025 SCC Online Del 4090 and other judgments following
Dharma Prathishthanam v. Madhoc Construction, (2005) 9 SCC 686
and Bhadra International (India) (P) Ltd. v. Airports Authority of
India, 2026 SCC OnLine SC 7 (“Bhadra International” ) to submit
that even in arbitrations commenced prior to the 2015 Amendment
Act, Awards rendered by unilaterally appointed Arbitrators have
consistently been treated as nullities.
Category C
14. Insofar as Category C is concerned, it was submitted that the
arbitration agreements themselves contain an express stipulation
providing that the Arbitration Act, 1940 or any statutory modification
or re-enactment thereof shall govern the arbitration proceedings.
15. Learned counsels submit that although some of the agreements
originally referred to the Arbitration Act, 1940, the parties consciously
proceeded under the 1996 Act and accepted the applicability of the
statutory re-enactment. It was therefore argued that once the parties
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accepted and acted upon the statutory modification clause, the
subsequent amendments introduced by the 2015 Amendment Act
equally became applicable to the Arbitral proceedings.
16. Reliance was placed upon the decision of this Court in Jagdish Chand
Gupta v. Union of India, 2025 SCC OnLine Del 7278 to submit that
where parties have expressly accepted and acted upon a statutory
modification clause, the amended provisions become applicable
notwithstanding the original date of commencement of arbitration.
17. It was contended that the present cases are distinguishable from
decisions such as Union of India v. Parmar Construction Co. , (2019)
15 SCC 682, S.P. Singla Constructions (P) Ltd. v. State of H.P.,
(2019) 2 SCC 488 , and Ratnam Sudesh Iyer v. Jackie Shroff, 2021
SCC OnLine SC 1032 , as those decisions dealt with general references
to statutory modification and not situations where the parties had
consciously accepted and acted upon the statutory modification by
conducting the arbitration under the re-enacted legislation.
18. The last limb of the petitioners’ submission is that permitting Awards
rendered by unilaterally appointed Arbitrators to survive merely
because the arbitration commenced prior to 23.10.2015 would defeat
the very object underlying the 2015 Amendment, which sought to
eliminate bias and reinforce the neutrality of Arbitral Tribunals. It is
therefore prayed that all Awards falling within the aforesaid categories
be set aside as being contrary to the mandatory provisions of the Act,
the law declared in CORE (Supra).
19. Learned counsels also state that the reliance placed by the respondents
on the decision of this Court in Avneet Soni v. Kavita Agrawal, 2026
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SCC OnLine Del 3236 is misplaced and the said judgment is clearly
distinguishable.
20. It is stated that the dispute in Avneet Soni (supra) arose between
private parties and the challenge to the appointment of the Arbitrator,
the Arbitral Award as well as the proceedings before the Court had all
substantially arisen in the context of the unamended regime. It was
further submitted that the Court therein did not undertake an
examination of the effect of the Constitution Bench judgment in
CORE (supra) particularly with respect to Section 18 of the 1996 Act
and Article 14 of the Constitution on the validity of unilateral
appointments.
21. According to the petitioners, Avneet Soni (supra) cannot, therefore, be
treated as laying down the law applicable to the present batch of
petitions, especially those arising from public-private contracts.
22. Learned counsels further submitted that CORE (supra) operates
prospectively only insofar as it concerns the law relating to the
appointment of Arbitrators in three-member Arbitral Tribunals . It was
argued that no such prospective limitation has been imposed in respect
of unilateral appointment of a sole Arbitrator.
23. It was next submitted that the amended provisions of Section 12(5) are
attracted to this category and the only statutory exception to the
ineligibility contemplated therein is contained in the proviso to
Section 12(5), which permits waiver only by an express agreement in
writing entered into after disputes have arisen.
24. It has also been argued that the objection to the unilateral appointment
of the Arbitrator goes to the very jurisdiction and competence of the
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Arbitral Tribunal and is not a mere procedural irregularity. It was
contended that the issue pertains to the inherent eligibility of the
Arbitrator to act and, consequently, can validly be raised in
proceedings under Section 34 of the Act even if it was not accepted
during the Arbitral proceedings.
25. It was lastly submitted that accepting the respondents’ contention that
unilateral appointments made prior to 23.10.2015 would remain
immune from judicial scrutiny would defeat the very object
underlying the 2015 Amendment Act as well as the law subsequently
declared by the Constitution Bench in CORE (supra) . According to
the petitioners, such an interpretation would render Arbitral
proceedings conducted by Tribunals lacking the minimum standards
of independence and impartiality, contrary to the mandate of Sections
12 and 18 of the Act, and the principles of natural justice.
SUBMISSIONS ON BEHALF OF THE RESPONDENTS
26. Learned senior counsels and counsels appearing for the respondents
submit that the present petitions falling under Category A are
governed by the legal position prevailing prior to the 2015
Amendment Act. It was submitted that the Arbitral proceedings in the
present matters had commenced upon issuance of the notice under
Section 21 prior to 23.10.2015 and the sole Arbitrators had also been
appointed before the 2015 Amendment Act came into force. Merely
because Award/ Court proceedings under Section 34 were instituted
after the 2015 Amendment Act, the law applicable to the constitution
of the Arbitral Tribunal would not undergo any change.
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27. Further, it is submitted that Section 26 of the 2015 Amendment Act
expressly provides that the amendments introduced by the
Amendment Act shall not apply to Arbitral proceedings commenced
prior to 23.10.2015 unless the parties have otherwise agreed.
According to the respondents, the appointment of the Arbitrator forms
an integral part of the Arbitral proceedings and, therefore, the legality
of such appointment must necessarily be examined with reference to
the unamended provisions of the Act.
28. Reliance was placed upon the judgment of the Hon’ble Supreme Court
in BCCI (supra) to contend that the distinction drawn therein between
Arbitral proceedings and court proceedings cannot be interpreted so as
to retrospectively invalidate the constitution of an Arbitral Tribunal
which was validly constituted under the unamended Act. It was
submitted that BCCI (supra) does not alter the legal regime governing
the commencement or constitution of Arbitral proceedings which had
already commenced prior to 23.10.2015.
29. Learned counsels further submitted that the prospective nature of the
2015 Amendment Act stands consistently recognised by the Supreme
Court in Hindustan Construction Co. Ltd. v. Union of India , ( 2020) 17
SCC 324 , Union of India v. Pradeep Vinod Construction Co., (2020) 2
SCC 464 and S.P. Singla Constructions (P) Ltd. v. State of H.P.,
(2019) 2 SCC 488. It was argued that these decisions affirm that the
amended provisions cannot be retrospectively imported into Arbitral
proceedings which had already commenced prior to the 2015
Amendment Act. Reliance was also placed on Datar Switchgears Ltd.
v. Tata Finance Ltd., (2000) 8 SCC 151 to state that agreed procedure
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of appointment should be given primacy as per the principle of party
autonomy.
30. It was also contended that under the 1996 Act, primacy was accorded
to the appointment procedure contractually agreed upon between the
parties and unilateral or departmental appointments were not, by
themselves, invalid. According to the respondents, the principles
subsequently laid down in TRF Ltd. (supra) and Perkins Eastman
Architects DPC (supra) cannot be retrospectively applied to
arbitrations which commenced prior to the 2015 Amendment Act.
31. Reliance was placed on Avneet Soni (supra) , wherein, after
considering the decisions of the Supreme Court as well as various
judgments of this Court, it was held that the legality of a unilateral
appointment is required to be examined with reference to the law
prevailing on the date of commencement of the Arbitral proceedings.
It was submitted that the said judgment reaffirms that the prohibition
against unilateral appointments introduced through the post-
amendment jurisprudence cannot be extended retrospectively to pre-
amendment arbitrations.
32. It was further submitted that the decisions relied upon by the
petitioners, including Mahavir Prasad Gupta & Sons v. State (NCT of
Delhi), 2025 SCC OnLine Del 4241 , Bhadra International (India) (P)
Ltd. v. Airports Authority of India, 2026 SCC OnLine SC 7, and Vineet
Dujodwala v. Phoenix ARC Pvt. Ltd. , 2024 SCC OnLine Del 5940 are
distinguishable on facts.
33. According to the respondents, those cases either arose from Arbitral
proceedings commenced after the Amendment Act or did not consider
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the effect of Section 26 of the 2015 Amendment Act and the binding
precedents of the Hon’ble Supreme Court governing pre-amendment
arbitrations. It was further submitted that Jagdish Chand Gupta v.
Union of India, 2025 SCC OnLine Del 7278 itself recognises that the
Amendment Act would apply to pre-amendment arbitrations only
where the arbitration agreement specifically provides that statutory
amendments or modifications shall govern the arbitration proceedings,
which stipulation is absent in the present cases.
34. Learned counsels also submitted that in several of the petitions the
respondent had proposed a panel of independent retired judicial
officers in accordance with the arbitration agreement and the
petitioners either failed to exercise the option available to them or
participated in the appointment process without objection. It was
argued that the Arbitrators appointed were independent retired judicial
officers having no relationship whatsoever with the respondents.
35. It was further contended that the petitioners participated in the Arbitral
proceedings without demur, filed their statements of defence and, in
several cases, also preferred counter-claims before the learned
Arbitrator. No objection to the appointment of the Arbitrator was
raised either before the Arbitral Tribunal or in the petitions under
Section 34 of the Act. According to the respondents, the challenge to
the unilateral appointment has been raised for the first time during the
course of arguments or by way of written submissions and, therefore,
the petitioners, having voluntarily submitted to the jurisdiction of the
Arbitral Tribunal, are precluded from questioning its constitution at
this belated stage.
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36. It is also argued that permitting a party to participate fully in the
Arbitral proceedings and thereafter assail the constitution of the
Tribunal after suffering an adverse Award would amount to permitting
the party to approbate and reprobate simultaneously. Such conduct,
according to the respondents, disentitles the petitioners from invoking
either the principles of natural justice or Article 14 of the Constitution.
37. On the aforesaid grounds, learned counsels submitted that the
unilateral appointments made in accordance with the contractual
procedure prevailing under the 1996 Act were valid and legal. It was
therefore prayed that the challenge to the constitution of the Arbitral
Tribunal be rejected and the petitions be treated on a case to case
basis.
ANALYSIS AND FINDINGS
38. I have heard the learned senior counsels and counsels for the parties
and perused the material on record.
39. For ease of exposition, I shall first examine the scheme of the 1996
Act, followed by the changes introduced by the 2015 amendment. I
shall then deal with the interplay between the two regimes as the
arbitrations started in the 1996 Act were continued/ concluded after
the 2015 amendment or a Section 34 petition was filed post 2015
amendment, with emphasis on the scope and interpretation of Section
26 of the 2015 Amendment Act. I shall thereafter consider the relevant
judicial pronouncements leading up to Bhadra International (supra) ,
examine the ratio and implications of Bhadra International (supra) ,
and finally determine whether, in light of the said decisions, the
amended provisions can be applied to the present set of petitions.
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i. The Law Before the Change: The Pre-2015 Arbitration Regime
40. Prior to the 2015 Amendment, the statutory scheme of the 1996 Act
recognised and gave primacy to the procedure agreed upon by the
parties for constitution of the Arbitral Tribunal or appointment of an
Arbitrator. Section 11(2) expressly stated that the parties are free to
agree upon a procedure for appointment of the Arbitrator or
Arbitrators. The legislative scheme was thus founded upon the
principle of party autonomy, under which the parties, having
consciously agreed upon a particular mechanism for appointment,
were ordinarily bound by the same.
41. The position was explained by the Hon’ble Supreme Court in Indian
Oil Corpn. Ltd. v. Raja Transport (P) Ltd., (2009) 8 SCC 520 , where,
the following issues were before the Court.
“12. ….
(i) Whether the learned Chief Justice was justified in
assuming that when an employee of one of the parties to the
dispute is appointed as an Arbitrator, he will not act
independently or impartially?
(ii) In what circumstances, the Chief Justice or his designate
can ignore the appointment procedure or the named
Arbitrator in the arbitration agreement, to appoint an
Arbitrator of his choice?
(iii) Whether the respondent herein had taken necessary
steps for the appointment of an Arbitrator in terms of the
agreement, and the appellant had failed to act in terms of
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the agreed procedure, by not referring the dispute to its
Director (Marketing) for arbitration?‖
42. After examining Sections 11, 12 and 18 of the 1996 Act, the Court
held as follows:
― 15. It is now well settled by a series of decisions of this
Court that arbitration agreements in government contracts
providing that an employee of the Department (usually a
high official unconnected with the work or the contract) will
be the Arbitrator, are neither void nor unenforceable. We
may refer to a few decisions on this aspect.‖
43. The reason for the above observation was that Section 11(2) permitted
parties to agree upon the procedure for appointment of the Arbitrator
and that the power of the Court under Section 11 was not intended to
nullify a specific term of the arbitration agreement naming the
Arbitrator.
44. Arbitration, the Court held, is a binding voluntary alternative dispute
resolution process by a private forum chosen by the parties; where a
party, with open eyes and full knowledge of the clause, enters into a
contract with a Government/statutory corporation/PSU providing that
one of its own officers shall be the Arbitrator, it cannot later accept the
benefit of the arbitration mechanism while repudiating the named-
Arbitrator term, unless that part is impossible of performance or void
for repugnancy to the Act and severable from the rest.
45. The Court then traced a long and consistent line of authorities,
Executive Engineer v. Gangaram Chhapolia, 1984 (3) SCC 627,
Eckersley v. Mersey Docks and Harbour Board, 1894 (2) QB 667,
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Secy. to Govt., Transport Deptt. v. Munuswamy Mudaliar, 1988
(Supp) SCC 651, International Airports Authority of India v. K.D.
Bali, 1988 (2) SCC 360, S. Rajan v. State of Kerala, 1992 (3) SCC
608, and Ace Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corpn.
Ltd., 2007 (5) SCC 304, all holding that arbitration agreements
naming a senior officer of the Government/statutory corporation/PSU
as Arbitrator are neither void nor unenforceable, and that mere
apprehension of bias without tangible/specific evidence is not a
ground for removal.
46. It further rejected the respondent’s argument that the 1996 Act’s
heightened emphasis on independence and impartiality (Sections
11(8), 12(1), 12(3) and 18) rendered such clauses per se invalid,
holding that these provisions operate as safeguards within the
employee-Arbitrator framework (disclosure obligations, challenge
procedure, duty of equal treatment) rather than as a statutory bar on
naming an employee as Arbitrator, and that nothing in Sections 11, 12
or 18 suggests such a clause is invalid merely because the named
Arbitrator is an employee of a party.
47. On this basis the Court arrived at its finding that, the fact that the
named Arbitrator is an employee of one of the parties is not ipso facto
a ground to presume bias, partiality, or lack of independence.
48. The Court held that apprehension of bias arises only where there is
something concrete, such as the Arbitrator being the
controlling/dealing authority under the contract or a direct subordinate
of the decision-maker. Where the nominated officer had no
involvement in the contract or decision in question, his independence
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could not be doubted merely because he was an employee of the State
or its instrumentality.
49. Thus, the Court rejected the blanket presumption of bias and upheld
the contractual appointment mechanism in the absence of specific
circumstances indicating bias. However, it cautioned Governments
and PSUs to reconsider the desirability of appointing their own
employees as Arbitrators, distinguishing legal validity from the policy
desirability of such clauses.
50. Similarly, in Denel (Proprietary) Ltd. v. Bharat Electronics Ltd. &
Anr. , (2010) 6 SCC 394 , it was stated that the Courts cannot
ordinarily interfere with the appointment of an Arbitrator in
accordance with the procedure agreed upon by the parties, unless
grounds such as legal misconduct, fraud or disqualification are
pleaded and established. The authority of an Arbitrator appointed with
the consent of the parties cannot be revoked at the unilateral pleasure
of one party; there must be just and sufficient cause for such
revocation.
51. Likewise, in Union of India v. Singh Builders Syndicate , (2009) 4
SCC 523 , the Hon’ble Supreme Court held that the Arbitral Tribunal
ought to be constituted in accordance with the procedure prescribed in
the arbitration agreement. It recognised that arbitration clauses in
contracts entered into by the Government, statutory authorities and
government companies commonly provided for appointment of
serving officers as Arbitrators, and held that such clauses were
required to be given effect to, subject to the requirements of
independence and impartiality. At the same time, the Court recognised
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that exceptional circumstances may warrant departure from the agreed
mechanism.
52. The Court, however, expressed a policy concern regarding the
continued practice of appointing serving officers as Arbitrators,
observing that such provisions frequently give rise to resistance from
the opposite party once disputes arise. It suggested that the
Government, statutory authorities and government companies should
consider phasing out such clauses and encouraging greater
professionalism in arbitration.
53. The underlying principle was therefore that an arbitration clause
constituted a package of contractual rights and obligations. A party
which had agreed to arbitration could not ordinarily accept the
arbitration clause while simultaneously repudiating the agreed
mechanism for appointment of the Arbitrator. As the Hon’ble
Supreme Court observed, parties who had entered into the contract
with full knowledge of its terms could not subsequently seek to
wriggle out of the agreed appointment procedure merely on the
ground that they would prefer a different Arbitrator.
54. Thus, under the pre-2015 regime, unilateral or party-nominated
appointments were not, by that fact alone, rendered invalid. Although
the Courts did caution against this practice, it was believed that since
both the parties had agreed to a certain procedure in a voluntary
adjudication process, primacy needs to be accorded to that procedure
of appointment. It is against this legal position that the significance of
the 2015 Amendment and, subsequently, the decisions examining the
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interface between the pre- and post-amendment regimes needs to be
considered.
ii. The 2015 Amendment: Object and Legislative Intent
55. If the pre-2015 position was founded upon the primacy of party
autonomy, the genesis of the 2015 Amendment lies in the legislative
recognition that such autonomy could not be permitted to operate at
the expense of the fundamental requirements of independence and
impartiality of the Arbitral Tribunal. It is, therefore, necessary to
th
examine the recommendations of the 246 Report of the Law
Commission of India, which formed the principal basis for the 2015
Amendment Act.
56. The Law Commission undertook an extensive examination of the
Arbitral framework then prevailing and, in particular, considered the
concerns arising from the practice of one of the contracting parties
having the power to appoint the Arbitrator. The Commission was of
the view that the existing position had tilted the balance unduly in
favour of party autonomy, notwithstanding that independence and
impartiality constitute the very foundation of adjudication through
arbitration.
57. The Commission considered that party autonomy, though central to
arbitration, could not be stretched to a point where it undermined the
requirement of an independent and impartial adjudicator. Paragraphs
56 and 57 of the Report, record this concern in the following terms:
―56. The limits of this provision has been tested in the
Indian Supreme Court in the context of contracts with
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State entities naming particular persons/designations
(associated with that entity) as a potential Arbitrator. It
appears to be settled by a series of decisions of the
Supreme Court (see Executive Engineer, Irrigation
Division v. Gangaram Chhapolia [Executive Engineer,
Irrigation Division v. Gangaram Chhapolia, (1984) 3
SCC 627] , Transport Deptt. v. Munuswamy Mudaliar
[Transport Deptt. v. Munuswamy Mudaliar, 1988 Supp
SCC 651] , International Airports Authority v. K.D.
Bali [International Airports Authority v. K.D. Bali,
(1988) 2 SCC 360] , S. Rajan v. State of Kerala [S.
Rajan v. State of Kerala, (1992) 3 SCC 608] , Indian
Drugs & Pharmaceuticals Ltd. v. Indo Swiss Synthetics
Gem Mfg. Co. Ltd. [Indian Drugs & Pharmaceuticals
Ltd. v. Indo Swiss Synthetics Gem Mfg. Co. Ltd., (1996)
1 SCC 54] , Union of India v. M.P. Gupta [Union of
India v. M.P. Gupta, (2004) 10 SCC 504] and ACE
Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corpn.
Ltd. [ACE Pipeline Contracts (P) Ltd. v. Bharat
Petroleum Corpn. Ltd., (2007) 5 SCC 304] that
arbitration agreements in government contracts which
provide for arbitration by a serving employee of the
department, are valid and enforceable. While the
Supreme Court, in Indian Oil Corpn. Ltd. v. Raja
Transport (P) Ltd. [Indian Oil Corpn. Ltd. v. Raja
Transport (P) Ltd., (2009) 8 SCC 520 : (2009) 3 SCC
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(Civ) 460] , carved out a minor exception in situations
when the Arbitrator ‗was the controlling or dealing
authority in regard to the subject contract or if he is a
direct subordinate (as contrasted from an officer of an
inferior rank in some other department) to the officer
whose decision is the subject-matter of the dispute‘
(SCC p. 533, para 34) and this exception was used by
the Supreme Court in Denel (Proprietary) Ltd. v.
Ministry of Defence [Denel (Proprietary) Ltd. v.
Ministry of Defence, (2012) 2 SCC 759 : (2012) 2 SCC
(Civ) 37 : AIR 2012 SC 817] and Bipromasz Bipron
Trading Sa v. Bharat Electronics Ltd. [Bipromasz
Bipron Trading Sa v. Bharat Electronics Ltd., (2012) 6
SCC 384 : (2012) 3 SCC (Civ) 702] , to appoint an
independent Arbitrator under Section 11, this is not
enough.
57. The balance between procedural fairness and
binding nature of these contracts, appears to have been
tilted in favour of the latter by the Supreme Court, and
the Commission believes the present position of law is
far from satisfactory. Since the principles of
impartiality and independence cannot be discarded at
any stage of the proceedings, specifically at the stage of
constitution of the Arbitral Tribunal, it would be
incongruous to say that party autonomy can be
exercised in complete disregard of these principles –
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even if the same has been agreed prior to the disputes
having arisen between the parties. There are certain
minimum levels of independence and impartiality that
should be required of the Arbitral process regardless of
the parties‘ apparent agreement. A sensible law cannot,
for instance, permit appointment of an Arbitrator who
is himself a party to the dispute, or who is employed by
(or similarly dependent on) one party, even if this is
what the parties agreed. The Commission hastens to
add that Mr. PK Malhotra, the ex officio member of the
Law Commission suggested having an exception for the
State, and allow State parties to appoint employee
Arbitrators. The Commission is of the opinion that, on
this issue, there cannot be any distinction between State
and non-State parties. The concept of party autonomy
cannot be stretched to a point where it negates the very
basis of having impartial and independent adjudicators
for resolution of disputes. In fact, when the party
appointing an adjudicator is the State, the duty to
appoint an impartial and independent adjudicator is
that much more onerous – and the right to natural
justice cannot be said to have been waived only on the
basis of a ―prior‖ agreement between the parties at the
time of the contract and before arising of the disputes.
58. Large-scale amendments have been suggested to
address this fundamental issue of neutrality of
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Arbitrators, which the Commission believes is critical
to the functioning of the arbitration process in India. In
particular, amendments have been proposed to Sections
11, 12 and 14 of the Act.‖
(emphasis added)
58. The explanatory note appended by the Law Commission to the
proposed amendment to Section 12 of the 1996 Act is equally
important and is reproduced below:
―[ NOTE : This amendment is intended to further goals
of independence and impartiality in arbitrations, and
only gives legislative colour to the phrase
―independence or impartiality‖ as it is used in the Act.
The contents of the Fourth Schedule incorporate the
Red and Orange lists of the International Bar
Association Guidelines on Conflicts of Interest in
International Arbitration. While Mr. Malhotra was of
the view that the said provisions should not apply to the
public sector, excluding the public sector will render
the provision susceptible to a challenge under article
19 of the Constitution of India.]
59. A perusal of the above shows that the concern of the legislature was
not confined to the identity of the Arbitrator but extended to the
circumstances which could give rise to justifiable doubts as to his
independence or impartiality. The explanatory note accompanying the
proposed amendment to Section 12 is instructive in this regard. It
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stated that the amendment was intended to further the goals of
independence and impartiality and to give legislative content to these
concepts by incorporating objective standards based upon the Red and
Orange Lists of the IBA Guidelines on Conflicts of Interest in
International Arbitration.
60. The 2015 Amendment must, therefore, be understood against this
background. It cannot be said that it merely clarified the 1996 Act. As
seen from the above observations, the Commission identified a
problem plaguing the system and it recalibrated the relationship
between two competing principles, party autonomy on the one hand,
and the independence and impartiality of the Arbitral Tribunal, on the
other. What was earlier regarded principally as a matter of contractual
choice was, to the extent specifically addressed by the amended
provisions, subjected to mandatory statutory standards designed to
ensure the neutrality of the Arbitral process.
iii. The Interplay Between the Pre and Post-2015 Regimes
61. The principal question arising in the present case is whether the
provisions introduced by the 2015 Amendment Act can be invoked in
respect of an arbitration which had commenced prior to 23.10.2015,
merely because the Arbitral Award was made and/or the proceedings
under Section 34 of the 1996 Act were instituted after the 2015
Amendment Act came into force.
62. Detailed submissions were advanced on behalf of both sides. The
principal contention of the petitioners is that the principles of
neutrality, impartiality and equal treatment of parties were already
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embedded in the unamended Act and, consequently, a unilateral
appointment of an Arbitrator was impermissible even prior to the 2015
Amendment. In support of this proposition, reliance has been placed
upon BCCI (supra) , particularly to contend that Section 26 of the 2015
Amendment Act draws a distinction between the applicability of the
amendments to Arbitral proceedings and their applicability to court
proceedings. According to the petitioners, since proceedings under
Section 34 constitute court proceedings, the amended provisions ought
to govern the present batch of petitions.
63. In furtherance of the aforesaid submission, reliance has been placed
upon the decisions in Ellora Paper Mills Ltd. (supra) , Supreme
Infrastructure India Ltd. (supra) , Bharat Broadband Network Ltd.
(supra), Dharma Pratishthanam (supra), Vineet Dujodwala (supra) ,
Dharamvir Singh (supra) and Bhadra International (supra) , amongst
others.
64. Per contra , the respondents contend that the 2015 Amendment Act
brought about substantive changes in the statutory framework
governing arbitration and cannot, therefore, be applied retrospectively
in the absence of an express legislative mandate. It is their submission
that the amendments were not merely clarificatory in nature. Reliance
has further been placed upon BCCI (supra) to contend that the
judgment dealt with the retrospective applicability of Section 36 and
did not hold that the amended provisions governing Section 34 would
retrospectively apply to arbitrations commenced prior to 23.10.2015.
65. According to the respondents, at the relevant time, agreements
providing for unilateral appointment of Arbitrators were recognised by
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law and the primacy of the parties’ agreed appointment procedure had
also been affirmed by the Hon’ble Supreme Court. In support of this
proposition, reliance has been placed upon S.P. Singla Constructions
(supra) , Pradeep Vinod Construction (supra), Parmar Construction
Co. (supra), Aravali Power Co. (P) Ltd. v. Era Infra Engineering Ltd. ,
(2017) 15 SCC 32 , Avneet Soni (supra) and Rajasthan Small
Industries Corp. Ltd. (supra) .
66. The petitioners opening submission proceeds on the premise that, in
view of the interpretation accorded to Section 26 by the Hon’ble
Supreme Court in BCCI (supra) , the mere fact that the proceedings
under Section 34 were instituted after 23.10.2015 would attract the
amended provisions. On this basis, it is contended that this Court can,
at the present stage, examine the validity of the Arbitral Tribunal and
consequently declare the Award to be null and void on the ground that
the Arbitrator was unilaterally appointed.
iv. Section 26: The Bridge Between the Old and the New
67. It would be apposite to reproduce Section 26 of the 2015 Amendment
Act, which reads as under:
―Nothing contained in this Act shall apply to the Arbitral
proceedings commenced, in accordance with the provisions
of Section 21 of the principal Act, before the commencement
of this Act unless the parties otherwise agree but this Act
shall apply in relation to Arbitral proceedings commenced
on or after the date of commencement of this Act.‖
(emphasis added)
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68. Before examining the interpretation of Section 26 of the 2015
Amendment Act, it is necessary to briefly examine its legislative
history as well.
69. The Arbitration and Conciliation (Amendment) Act, 2019 ( “2019
Amendment Act” ) sought to fundamentally alter the regime governing
the applicability of the 2015 amendments. By Section 15 of the 2019
Amendment Act, Section 26 of the 2015 Amendment Act was
retrospectively omitted, while Section 13 inserted Section 87 into the
1996 Act.
70. Section 87 reads as under:
―87. Unless the parties otherwise agree, the amendments
made to this Act by the Arbitration and Conciliation
(Amendment) Act, 2015 shall—
(a) not apply to––
(i) Arbitral proceedings commenced before the
commencement of the Arbitration and Conciliation
(Amendment) Act, 2015;
(ii) court proceedings arising out of or in relation to such
Arbitral proceedings irrespective of whether such court
proceedings are commenced prior to or after the
commencement of the Arbitration and Conciliation
(Amendment) Act, 2015;
(b) apply only to Arbitral proceedings commenced on or
after the commencement of the Arbitration and Conciliation
(Amendment) Act, 2015 and to court proceedings arising out
of or in relation to such Arbitral proceedings.‖
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71. Section 87 provided that the amendments introduced by the 2015
Amendment Act would apply only to Arbitral proceedings
commenced on or after 23.10.2015, and to Court proceedings arising
out of or in relation to such Arbitral proceedings. The effect of this
provision was to revive the pre-amendment position, including the
automatic stay on enforcement of Arbitral Awards.
72. However, in Hindustan Construction Co. Ltd. v. Union of India ,
(2020) 17 SCC 324 , a three-Judge Bench of the Hon’ble Supreme
Court struck down both the insertion of Section 87 and the
retrospective deletion of Section 26 as manifestly arbitrary and
violative of Article 14 of the Constitution. The Court held that these
amendments defeated the very object of the 2015 Amendment Act and
the recommendations of the 246th Law Commission by
retrospectively reviving the automatic-stay regime, thereby depriving
successful Award-holders of the fruits of their Awards. The Court
observed:
―63. ….The deletion of Section 26 of the 2015 Amendment
Act, together with the insertion of Section 87 into the
Arbitration Act, 1996 by the 2019 Amendment Act, is struck
down as being manifestly arbitrary under Article 14 of the
Constitution of India.‖
73. The Court further clarified that the validity of 23.10.2015 as the cut-
off date was never under challenge. What was held to be
constitutionally impermissible was the legislative attempt to obliterate
the distinction between Arbitral proceedings and Court proceedings.
Accordingly, the Court concluded:
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―66. The result is that Kochi Cricket judgment will therefore
continue to apply so as to make applicable the salutary
amendments made by the 2015 Amendment Act to all court
proceedings initiated after 23-10-2015.‖
74. Consequently, after Hindustan Construction Company (supra) ,
Section 26 of the 2015 Amendment Act continues to govern the
applicability of the 2015 amendments, while Section 87 stands effaced
from the statute. The interpretation of Section 26 as laid down in
BCCI (supra) therefore remains the governing position in law and is
examined hereinafter.
75. The relevant paras of BCCI (supra) read as under:
“33. What can be seen from the above is that Section 26 has,
while retaining the bifurcation of proceedings into
arbitration and court proceedings, departed somewhat from
Section 85-A as proposed by the Law Commission.
34. That a provision such as Section 26 has to be construed
literally first, and then purposively and pragmatically, so as
to keep the object of the provision also in mind, has been
laid down in Thyssen [Thyssen Stahlunion GmbH v. SAIL,
(1999) 9 SCC 334] in para 26 as follows: (SCC pp. 370-71)
―26. Present-day courts tend to adopt a purposive approach
while interpreting the statute which repeals the old law and
for that purpose to take into account the objects and reasons
which led to the enacting of the new Act. We have seen
above that this approach was adopted by this Court
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in MMTC Ltd. case [MMTC Ltd. v. Sterlite Industries
(India) Ltd., (1996) 6 SCC 716] . Provisions of both the
Acts, old and new, are very different and it has been so
observed in Sundaram Finance Ltd. case [Sundaram
Finance Ltd. v. NEPC India Ltd., (1999) 2 SCC 479] . In
that case, this Court also said that provisions of the new Act
have to be interpreted and construed independently and that
in fact reference to the old Act may actually lead to
misconstruction of the provisions of the new Act. The Court
said that it will be more relevant, while construing the
NCITRAL
provisions of the new Act, to refer to the U Model
Law rather than the old Act. In State of Kuwait v. Frederick
Snow & Partners [State of Kuwait v. Frederick Snow &
Partners, 1984 AC 426 : (1984) 2 WLR 340 : (1984) 1 All
ER 733 (HL)] the Award was given before Kuwait became a
party to the New York Convention recognised by an Order-
in-Council in England. The House of Lords held that though
a foreign Award could be enforced in England under the
(UK) Arbitration Act, 1975 as when the proceedings for
enforcement of the Award were initiated in England Kuwait
had become a party to the Convention. It negatived the
contention that on the date the Award was given Kuwait was
not a party to the New York Convention.‖
35. Similarly, in Milkfood Ltd. [Milkfood Ltd. v. GMC Ice
Cream (P) Ltd., (2004) 7 SCC 288] , this Court, while
construing Section 85 of the 1996 Act, had this to say: (SCC
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p. 315, para 70)
―70. Section 85 of the 1996 Act repeals the 1940 Act. Sub-
section (2) of Section 85 provides for a non obstante clause.
Clause (a) of the said sub-section provides for saving clause
stating that the provisions of the said enactments shall apply
in relation to Arbitral proceedings which commenced before
the said Act came into force. Thus, those Arbitral
proceedings which were commenced before coming into
force of the 1996 Act are saved and the provisions of the
1996 Act would apply in relation to Arbitral proceedings
which commenced on or after the said Act came into force.
Even for the said limited purpose, it is necessary to find out
as to what is meant by commencement of Arbitral
proceedings for the purpose of the 1996 Act wherefor also
necessity of reference to Section 21 would arise. The Court
is to interpret the repeal and savings clauses in such a
manner so as to give a pragmatic and purposive meaning
thereto. It is one thing to say that commencement of
arbitration proceedings is dependent upon the facts of each
case as that would be subject to the agreement between the
parties. It is also another thing to say that the expression
―commencement of arbitration proceedings‖ must be
understood having regard to the context in which the same is
used; but it would be a totally different thing to say that the
arbitration proceedings commence only for the purpose of
limitation upon issuance of a notice and for no other
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purpose. The statute does not say so. Even the case laws do
not suggest the same. On the contrary, the decisions of this
Court operating in the field beginning from Shetty‘s
Constructions [Shetty‘s Constructions Co. (P)
Ltd. v. Konkan Railway Construction, (1998) 5 SCC 599]
are ad idem to the effect that Section 21 must be taken
recourse to for the purpose of interpretation of Section
85(2)(a) of the Act. There is no reason, even if two views are
possible, to make a departure from the decisions of this
Court as referred to hereinbefore.‖
36. All the learned counsel have agreed, and this Court has
found, on a reading of Section 26, that the provision is
indeed in two parts. The first part refers to the Amendment
Act not applying to certain proceedings, whereas the second
part affirmatively applies the Amendment Act to certain
proceedings. The question is what exactly is contained in
both parts. The two parts are separated by the word ―but‖,
which also shows that the two parts are separate and
distinct. However, Shri Viswanathan has argued that the
expression ―but‖ means only that there is an emphatic
repetition of the first part of Section 26 in the second part of
the said section. For this, he relied upon Concise Oxford
Dictionary on Current English, which states:
―introducing emphatic repetition; definitely (wanted to see
nobody, but nobody).‖
Quite obviously, the context of the word ―but‖ in Section 26
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cannot bear the aforesaid meaning, but serves only to
separate the two distinct parts of Section 26.
…
38. That the expression ―the Arbitral proceedings‖ refers to
proceedings before an Arbitral Tribunal is clear from the
heading of Chapter V of the 1996 Act, which reads as
follows:
―Conduct of Arbitral proceedings‖
The entire chapter consists of Sections 18 to 27 dealing with
the conduct of Arbitral proceedings before an Arbitral
Tribunal. What is also important to notice is that these
proceedings alone are referred to, the expression ―to‖ as
contrasted with the expression ―in relation to‖ making this
clear. Also, the reference to Section 21 of the 1996 Act,
which appears in Chapter V, and which speaks of the
Arbitral proceedings commencing on the date on which a
request for a dispute to be referred to arbitration is received
by the respondent, would also make it clear that it is these
proceedings, and no others, that form the subject-matter of
the first part of Section 26. Also, since the conduct of
Arbitral proceedings is largely procedural in nature, parties
may ―otherwise agree‖ and apply the Amendment Act to
Arbitral proceedings that have commenced before the
Amendment Act came into force.….
In stark contrast to the first part of Section 26 is the second
part, where the Amendment Act is made applicable ―in
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relation to‖ Arbitral proceedings which commenced on or
after the date of commencement of the Amendment Act. What
is conspicuous by its absence in the second part is any
reference to Section 21 of the 1996 Act. Whereas the first
part refers only to Arbitral proceedings before an Arbitral
Tribunal, the second part refers to court proceedings ―in
relation to‖ Arbitral proceedings, and it is the
commencement of these court proceedings that is referred to
in the second part of Section 26, as the words ―in relation to
the Arbitral proceedings‖ in the second part are not
controlled by the application of Section 21 of the 1996 Act.
39. Section 26, therefore, bifurcates proceedings, as has
been stated above, with a great degree of clarity, into two
sets of proceedings – (i) Arbitral proceedings themselves,
and (ii) court proceedings in relation thereto. The reason
why the first part of Section 26 is couched in negative form
is only to state that the Amendment Act will apply even to
Arbitral proceedings commenced before the amendment if
parties otherwise agree. If the first part of Section 26 were
couched in positive language (like the second part), it would
have been necessary to add a proviso stating that the
Amendment Act would apply even to Arbitral proceedings
commenced before the amendment if the parties agree. In
either case, the intention of the legislature remains the same,
the negative form conveying exactly what could have been
stated positively, with the necessary proviso. Obviously,
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―Arbitral proceedings‖ having been subsumed in the first
part cannot re-appear in the second part, and the expression
―in relation to Arbitral proceedings‖ would, therefore,
apply only to court proceedings which relate to the Arbitral
proceedings.‖
(emphasis added)
76. The scheme of Section 26 is thus clear: that the 2015 Amendment Act
is prospective in nature, and will apply to those Arbitral proceedings
that have commenced, as understood by Section 21 of the 1996 Act,
on or after the 2015 Amendment Act, and to court proceedings which
have commenced on or after the 2015 Amendment Act came into
force.
77. The petitioners’ submission, at first blush, appears attractive. Section
26 expressly refers to “Arbitral proceedings” and BCCI (supra)
recognised a distinction between the applicability of the 2015
Amendment Act to Arbitral proceedings and its applicability to
proceedings before a Court. On that basis, it may be argued that, since
a petition under Section 34 is a proceeding before a Court and was
instituted after 23.10.2015, the amended Act must necessarily govern
the Court’s consideration of the Award.
78. However, such an interpretation, in my view, would overlook the
precise nature of the distinction drawn in BCCI (supra) . The Hon’ble
Supreme Court held that the 2015 Amendment Act is prospective in
operation. This cannot be understood to mean that the amended Act
applies prospectively to the Section 34 proceeding but retrospectively
to the Arbitral proceedings which form the very foundation of that
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proceeding. What cannot be done directly - namely, applying a
substantive amendment to an arbitration which had already
commenced before 23.10.2015 - cannot be achieved indirectly merely
by treating the subsequent Section 34 proceeding as an entirely new
and independent proceeding, divorced from the arbitration whose
Award is under challenge.
79. A proceeding under Section 34 does not arise in a vacuum. It is a
proceeding instituted to challenge to an Award rendered in an Arbitral
proceeding. The Award, the constitution of the Tribunal, the
appointment of the Arbitrator and the conduct of the arbitration are all
elements of the same Arbitral process. Consequently, while the Court
may apply the procedural law applicable to the Section 34 proceeding
as on the date of its institution that does not necessarily mean that
every substantive alteration made to the law governing the Arbitral
Tribunal can be retrospectively imported into an arbitration which had
already commenced.
80. This distinction is necessary in the present batch of petitions because
the challenge concerns the eligibility and constitution of the Arbitral
Tribunal. Section 12(5), introduced by the 2015 Amendment Act, did
not merely regulate the manner in which a pending proceeding was to
be conducted. It created a new statutory disqualification and declared
certain persons to be “ineligible” to be appointed as Arbitrators,
notwithstanding any prior agreement to the contrary. The question,
therefore, is whether a Tribunal validly constituted under the law
applicable on the date of its appointment can subsequently become
retrospectively invalid solely because Parliament altered the
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substantive law governing eligibility after the arbitration had
commenced.
81. At this juncture it becomes relevant to refer to the authorities cited.
Starting with the case of Rajasthan Small Industries Corporation
Ltd. (supra) the Court considered the applicability of Section 12(5) to
an arbitration which had commenced in 2009. The Court held as
under:
―23. After the amendment to the Arbitration and
Conciliation Act, 2015, Section 12(5) prohibits the employee
of one of the parties from being an Arbitrator. In the present
case, the agreement between the parties was entered into on
28.01.2000 and the arbitration proceedings commenced way
back in 2009 and thus, the respondent cannot invoke Section
12(5) of the Arbitration and Conciliation (Amendment) Act,
2015. As per Section 26 of the Act, the provisions of the
amended Act 2015 shall not apply to the Arbitral
proceedings commenced in accordance with the provisions
of Section 21 of the principal Act, before the commencement
of this Act unless the parties otherwise agree.‖
82. The Court thereafter expressly referred to BCCI (supra) and observed
as under:
―24. In Board of Control for Cricket in India v. Kochi
Cricket Private Limited and others, (2018) 6 SCC 287, this
Court held that the provisions of Amendment Act, 2015 (with
effect from 23.10.2015) cannot have retrospective operation
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in the Arbitral proceedings already commenced unless the
parties otherwise agree. In the present case, there is nothing
to suggest that the parties have agreed that the provisions of
the new Act shall apply in relation to the Arbitral
proceedings.‖
(emphasis added)
83. In the aforesaid case, the arbitration clause provided for “arbitration
by the Managing Director himself or his/her nominee for the sole
arbitration”. At the request of the respondent, the petitioner appointed
an Arbitrator on 21.02.2005. However, as the arbitration proceedings
did not progress satisfactorily, the said Arbitrator was removed on
26.03.2009 and, in his place, the Chairman-cum-Managing Director of
the Corporation was appointed as the sole Arbitrator with the consent
of both parties.
84. As the proceedings continued to remain pending, the respondent-
contractor, on 13.05.2015, preferred an application under Sections
11(6) and 15 of the 1996 Act before the High Court, seeking
appointment of an independent sole Arbitrator for adjudication of the
disputes. The High Court allowed the said application and appointed a
former District Judge as the sole Arbitrator. In the meantime, the
previously appointed sole Arbitrator proceeded with the arbitration
and ultimately passed an ex parte Award on 21.01.2016.
85. Notably, the application under Sections 11(6) and 15 of the 1996 Act
had been instituted prior to the coming into force of the 2015
Amendment Act. It was, therefore, held that the 2015 Amendment Act
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had no application to the proceedings and that the matter was to be
governed by the statutory regime prevailing prior to the
commencement of the 2015 Amendment Act.
86. The next case is Parmar Construction Co. , (supra) where the Hon’ble
Supreme Court held as under:
―27. We are also of the view that the 2015 Amendment Act
which came into force i.e. on 23-10-2015, shall not apply to
the Arbitral proceedings which have commenced in
accordance with the provisions of Section 21 of the principal
Act, 1996 before the coming into force of the 2015
Amendment Act, unless the parties otherwise agree.
28…the applications/requests made by the respondent
contractors deserve to be examined in accordance with the
principal Act, 1996 without taking resort to the 2015
Amendment Act which came into force from 23-10-2015.‖
87. The factual context was that a notice seeking appointment of an
Arbitrator was issued on 23.12.2013. Upon the appellants’ failure to
appoint an Arbitrator, an application under Section 11(6) of the Act
was filed before the High Court of Rajasthan. One of the issues that
arose for consideration in those proceedings was whether the
constitution of the Arbitral Tribunal was precluded by the execution of
a “no claim/discharge certificate”.
88. In this context, while considering whether the scope of examination
was circumscribed by the amended Section 11(6A), the above
observations were made. Thus, the issue of the eligibility of the
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Arbitrator/Arbitral Tribunal on the touchstone of Section 12(5), read
with the VIIth Schedule thereof, did not fall for consideration in the
aforesaid case. Rather, it was expressly clarified that where there was
an issue as regards impartiality of the Arbitral Tribunal, it was open to
the Court to appoint an independent Arbitrator to adjudicate the
disputes between the parties.
89. In S.P. Singla Constructions (P) Ltd. (supra) , the Hon’ble Supreme
Court observed as under:
―16. Considering the facts and circumstances of the present
case, we are not inclined to go into the merits of this
contention of the appellant nor examine the correctness or
otherwise of the above view taken by the Delhi High Court
in Ratna Infrastructure Projects case [Ratna Infrastructure
Projects (P) Ltd. v. Meja Urja Nigam (P) Ltd., 2017 SCC
OnLine Del 7808] ; suffice it to note that as per Section 26
of the Arbitration and Conciliation (Amendment) Act, 2015,
the provisions of the amended 2015 Act shall not apply to
the arbitral proceedings commenced in accordance with the
provisions of Section 21 of the principal Act before the
commencement of the Amendment Act unless the parties
otherwise agree. In the facts and circumstances of the
present case, the proviso in Clause (65) of the general
conditions of the contract cannot be taken to be the
agreement between the parties so as to apply the provisions
of the amended Act. As per Section 26 of the Act, the
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provisions of the Amendment Act, 2015 shall apply in
relation to arbitral proceedings commenced on or after the
date of commencement of the Amendment Act, 2015 (w.e.f.
23-10-2015). In the present case, arbitration proceedings
commenced way back in 2013, much prior to coming into
force of the amended Act and therefore, provisions of the
amended Act cannot be invoked.‖
90. Since the termination of the arbitration proceedings was found
to be improper, it was directed that “ In the interest of justice, in
our considered view, an opportunity is to be afforded to the
appellant to go before the departmental Arbitrator (as agreed
by the parties in Clause (65) of the general conditions of
contract) and the proceedings of the Arbitrator dated 06-08-
2014 terminating the proceedings is to be set aside. …..‖
91. The same approach is evident from M/s Shree Vishnu Constructions
v. Engineer-in-Chief, Military Engineering Service , 2023 SCC
Online SC 600. There, the notice invoking arbitration under Section
21 had been served on 20.12.2013, whereas the petition under Section
11(6) was instituted only on 27.04.2016, after the 2015 Amendment
Act had come into force. Nevertheless, the Court held that the
unamended Act applied. The decision is instructive because the
subsequent court proceeding was itself instituted after the statutory
cut-off date, yet that circumstance did not alter the law applicable to
the underlying arbitration.
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92. The principle emerging from these authorities is thus that the date of
commencement of arbitration under Section 21 determines the
applicability of the substantive Arbitral regime. The subsequent
institution of proceedings before a Court does not, by itself, alter that
position. This distinction is particularly material where the challenge
concerns the very constitution or eligibility of the Arbitral Tribunal.
93. The position is further reinforced by Bharat Broadband Network Ltd.
v. United Telecoms Ltd. , (2019) 5 SCC 755 , where the Hon’ble
Supreme Court described Section 12(5) in the following terms:
―15. Section 12(5), on the other hand, a new provision
which relates to the de jure inability of an Arbitrator to act
as such. Under this provision, any prior agreement to the
contrary is wiped out by the non-obstante clause in Section
12(5) the moment any person whose relationship with the
parties or the counsel or the subject-matter of the dispute
falls under the Seventh Schedule. The sub-section then
declares that such person shall be ‗ineligible‘ to be
appointed as Arbitrator...‖
94. The characterisation of Section 12(5) as a “new provision” creating a
statutory state of “ineligibility” is important. The provision does not
merely prescribe a procedure for the conduct of an arbitration; it alters
the legal status of persons who could previously be appointed as
Arbitrators and, in doing so, overrides prior contractual arrangements.
It therefore operates upon the substantive legal position governing the
constitution of the Tribunal. Such a provision cannot ordinarily be
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presumed to operate retrospectively, particularly where Parliament has
expressly enacted Section 26 to preserve the applicability of the
unamended Act to arbitrations already commenced.
95. In Ssangyong Engineering & Construction Co. Ltd. v. NHAI , (2019)
15 SCC 131 , the Court observed as under:
―Applicability of the Arbitration and Conciliation
(Amendment) Act, 2015
16. Since the Section 34 petition in the present case is
dated 30-7-2016, an important question as to the
applicability of the parameters of review of Arbitral Awards
would arise in this case. More particularly, radical changes
have been made by the Arbitration and Conciliation
(Amendment) Act, 2015 (the 2015 Amendment Act) with
effect from 23-10-2015 — in particular, in the ―public policy
of India‖ ground for challenge of Arbitral Awards. The
question which arises is whether the amendments made in
Section 34 are applicable to applications filed under Section
34 to set aside Arbitral Awards made after 23-10-2015.
18. There is no doubt that the amendments made in
Explanations 1 and 2 to Section 34(2)(b)(ii) have been made
for the avoidance of any doubt, which language, however, is
not found in Section 34(2-A). Apart from the anomalous
position which would arise if the section were to be applied
piecemeal, namely, that Explanations 1 and 2 were to have
retrospective effect, being only to remove doubts, whereas
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sub-section (2-A) would have to apply prospectively as a
new ground, with inbuilt exceptions, having been introduced
for the first time, it is clear that even on principle, it is the
substance of the amendment that is to be looked at rather
than the form. Therefore, even in cases where, for avoidance
of doubt, something is clarified by way of an amendment,
such clarification cannot be retrospective if the earlier law
has been changed substantively. Thus, in S EDCO Forex
EDCO
International Drill. Inc. v. CIT [S Forex International
EDCO
Drill. Inc. v. CIT, (2005) 12 SCC 717] (S ), this Court
held: (SCC p. 724, para 17)
―17. As was affirmed by this Court in Goslino
Mario [CIT v. Goslino Mario, (2000) 10 SCC 165] a
cardinal principle of the tax law is that the law to be
applied is that which is in force in the relevant
assessment year unless otherwise provided expressly
or by necessary implication. (See also Reliance Jute
and Industries Ltd. v. CIT [Reliance Jute and
Industries Ltd. v. CIT, (1980) 1 SCC 139 : 1980
SCC (Tax) 67] .) An explanation to a statutory
provision may fulfil the purpose of clearing up an
ambiguity in the main provision or an explanation
can add to and widen the scope of the main section
(See Sonia Bhatia v. State of U.P. [Sonia
Bhatia v. State of U.P., (1981) 2 SCC 585 : AIR
1981 SC 1274] , SCC at p. 598, AIR at p. 1282, para
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24). If it is in its nature clarificatory then the
explanation must be read into the main provision
with effect from the time that the main provision
came into force [See Shyam Sunder v. Ram Kumar ,
SCC para 44; Brij Mohan Das Laxman
Das v. CIT [Brij Mohan Das Laxman Das v. CIT,
(1997) 1 SCC 352] , SCC at p. 354; CIT v. Podar
Cement (P) Ltd. [CIT v. Podar Cement (P) Ltd.,
(1997) 5 SCC 482] , SCC at p. 506]. But if it
changes the law it is not presumed to be
retrospective, irrespective of the fact that the
phrases used are ―it is declared‖ or ―for the
removal of doubts‖.‖
…
19. There is no doubt that in the present case,
fundamental changes have been made in the law. The
expansion of ―public policy of India‖ in ONGC v. Saw Pipes
Ltd. and ONGC v. Western Geco International Ltd.
[―Western Geco‖] has been done away with, and a new
ground of ―patent illegality‖, with inbuilt exceptions, has
been introduced. Given this, we declare that Section 34, as
amended, will apply only to Section 34 applications that
have been made to the Court on or after 23-10-2015,
irrespective of the fact that the arbitration proceedings may
have commenced prior to that date.
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(emphasis added)
96. Ssangyong (supra) concerned the amended scope of the public policy
ground and the introduction of patent illegality. The Court was
concerned with the grounds on which a Court could review an Arbitral
Award. It clearly stated that the nature of the amendment has to be
looked at and held that the 2015 amendment was prospective in
nature.
97. Similarly in KRR Infra Projects (P) Ltd. v. Union of India , 2018
SCC OnLine Del 12418 , the Court was concerned with a situation
where the notice under Section 21 had been issued and an Arbitrator
was also appointed, prior to commencement of the Amendment Act;
however, upon resignation of the said Arbitrator, an employee of the
respondent therein was appointed as the substitute Arbitrator on
27.05.2016.
98. The Court relied on the case of Aravali Power Co. (P) Ltd. (supra)
and held as under:
―5 . I have considered the submissions made by the counsels
for the parties. Admittedly, though first Arbitrator was
appointed on 24.10.2014, the arbitration proceedings did
not culminate into an Award due to resignation of the first
Arbitrator. The present Arbitrator was appointed on
27.05.2016, that is, after coming into force of the Amending
Act.
…
8. In view of the above, merely because the Arbitration
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Agreement had been invoked prior to the coming into force
of the Amending Act and the arbitration proceedings had
commenced before the earlier Arbitrator prior to coming
into force of Amending Act, the respondent could not have
proceeded to appoint an ineligible Arbitrator under Section
12(5) read with the Seventh Schedule of the Act after coming
into force of the Amending Act. At the time of such
appointment, the eligibility of the Arbitrator had to be
considered in accordance with the laws applicable to such
appointment, including Section 12(5) and the Seventh
Schedule of the Act. The Arbitrator being a serving
employee of the respondent, was ineligible to be appointed
in terms of Entry 1 of the Seventh Schedule to the Act and
therefore, all proceedings that were conducted by him were
not in accordance with the law.‖
99. A perusal of the above shows that the Court assessed the eligibility of
the substitute Arbitrator with reference to the law applicable at the
time of appointment. Since the appointment of the substitute
Arbitrator took place on 27.05.2016, after the 2015 Amendment Act
had come into force, and Section 12(5) was therefore applicable, the
Court in view of the same set aside the Award.
100. The position under the unamended Act is also reflected in Aravali
Power Co. (P) Ltd. (supra) , where the Supreme Court observed:
―22.1.1. The fact that the named Arbitrator is an employee
of one of the parties is not ipso facto a ground to raise a
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presumption of bias or partiality or lack of independence on
his part. There can however be a justifiable apprehension
about the independence or impartiality of an employee
Arbitrator, if such person was the controlling or dealing
authority in regard to the subject contract or if he is a direct
subordinate to the officer whose decision is the subject-
matter of the dispute.‖
101. The above judgment has clearly explained the difference between the
legal position under the unamended Act and that introduced by
Section 12(5) read with the Seventh Schedule. Under the former
regime, the mere fact that an Arbitrator was an employee of one of the
parties did not, by itself, render the appointment invalid. The Court
examined whether circumstances existed giving rise to a justifiable
apprehension of bias or lack of independence. Section 12(5), by
contrast, introduced an automatic statutory disqualification in the
circumstances specified in the Seventh Schedule.
102. It would therefore be impermissible to apply Section 12(5) to a pre-
23.10.2015 arbitration merely because the Section 34 proceeding was
instituted thereafter. Such an approach would effectively substitute the
legal standard introduced by Parliament in 2015 for the standard
which governed the parties’ arbitration proceedings when it was
commenced and the Tribunal was constituted. That would amount to
giving retrospective operation to a substantive amendment
notwithstanding the express language of Section 26 of the 2015
amendment.
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103. The position has been stated in particularly clear terms in Avneet Soni
(supra) , where the Court held:
―55. Consequently, the legality or otherwise of the unilateral
appointment of a sole Arbitrator in the present case must
necessarily be examined in the context of the law as it stood
on the date of commencement of the Arbitral proceedings,
having due regard to Section 21 of the A&C Act and the
express mandate of Section 26 of the 2015 Amendment Act.
56. The consistent position that has emerged is that Arbitral
proceedings commenced prior to 23.10.2015 are not
affected by the substantive amendments introduced by the
2015 Amendment Act, including those relating to unilateral
appointment of Arbitrators.‖
104. The reasoning in Avneet Soni (supra) directly addresses the
controversy involved in the present case. The legality of a unilateral
appointment is to be examined with reference to the law applicable on
the date of commencement of the Arbitral proceedings, having regard
to Section 21 and the express mandate of Section 26. Thus, where the
arbitration commenced prior to 23.10.2015, the subsequent
amendment cannot retrospectively convert an appointment which was
legally permissible when made into one which was statutorily
prohibited.
105. The same reasoning has also found application in proceedings under
Section 34. In West Bengal Housing Board v. M/s Abhisek
Construction , AP 189 of 2019 , where the arbitration had commenced
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in 2012, the Court declined to set aside the Award on the ground of
unilateral appointment, holding that there was no statutory prohibition
against such appointment at the time when the appointment was made.
106. Recently, a Division bench of this Court in DV Anand v. Hindustan
Petroleum Corporation Ltd., FAO (OS) COMM 139/2018, was faced
with the same question of unilateral appointment and while relying on
Rajasthan Small Industries Corporation Ltd. (supra) the Court held
that the amended regime cannot be applied retrospectively to
arbitrations commenced prior to the cut-off date .
107. The cumulative effect of the aforesaid authorities is that the distinction
between “Arbitral proceedings” and “court proceedings” recognised in
BCCI (supra) cannot be stretched to the extent contended by the
petitioners. BCCI (supra) does not hold that the institution of a
Section 34 petition after 23.10.2015 retrospectively subjects the
underlying arbitration to every substantive amendment introduced by
the 2015 Amendment Act. Such an interpretation would effectively
render the first limb of Section 26 otiose in cases where an Award is
challenged after the cut-off date.
108. Accordingly, the mere fact that the Arbitral Award was rendered after
23.10.2015, or that the petition under Section 34 was instituted
thereafter, cannot by itself attract Section 12(5) or the Seventh
Schedule to an arbitration which had already commenced before that
date. To hold otherwise would amount to giving retrospective
operation to a substantive amendment through the medium of a
subsequent court proceeding, contrary to the express scheme of
Section 26.
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109. The petitioners’ contention that the principles of neutrality,
impartiality and equal treatment were already inherent in the
unamended Act does not lead to a different conclusion. The existence
of those general principles does not mean that the specific statutory
disqualification subsequently enacted in Section 12(5) existed in the
same form under the unamended Act.
110. As Aravali Power Co. (P) Ltd. (supra) demonstrates, the pre-
amendment law adopted a more fact-sensitive approach to the
independence of an employee Arbitrator. The 2015 Amendment Act
altered that position by creating specified categories of statutory
ineligibility. The question, therefore, is not whether neutrality was a
principle of arbitration before 2015; plainly, it was. The question is
whether Parliament intended a new consequence of ineligibility to
operate upon arbitrations which had already commenced. Section 26
answers that question in the negative, unless the parties otherwise
agree.
111. The argument based upon BCCI (supra) , therefore, cannot be
accepted in the broad form in which it is advanced. The fact that a
Section 34 proceeding is a court proceeding does not sever it from the
Arbitral proceedings whose Award is under challenge, nor does it
retrospectively alter the law governing the constitution of the Arbitral
Tribunal.
112. The authorities relied upon by the petitioner also need to be examined.
In D. Swamy v. Karnataka State Pollution Control Board, (2023) 20
SCC 469, it has been held as under:
―36. It is, however, well settled that words and phrases
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and/or sentences in a judgment cannot be read in the
manner of a statute, and that too out of context….‖
113. The first judgment that the petitioners have relied upon is the case of
Ellora paper mills Ltd. (supra) which in my view was in very
peculiar facts of the case and cannot be applied to the present batch of
petitions. In Ellora paper mills Ltd. (supra) the Tribunal was
reconstituted after lapse of approximately 18 years and in the
meantime the amendment was notified.
114. In Dharamvir (supra) the question before the Court was that whether
the amended provisions would apply, considering that the arbitration
commenced prior to the coming into force of the 2015 Amendment
Act. However, on a closer look at the facts it is clear that the parties
had agreed to be bound by the Amended Act and had even appointed
an independent Arbitrator in terms of the 2015 amendment.
115. Similarly in Vineet Dujodwala (supra) even though the Section 34
was filed before the cut-off date, the Arbitrator had appeared in 215
cases against the same respondent which was not disclosed in terms of
Section 12(1) of the 1996 Act.
116. Even the case of Bharat Forge (supra) does not aid the petitioners
case as the issue before the Court was that whether an Arbitrator
appointed by one party alone with the other side’s silence treated as
“deemed consent” is validly constituted. The Court held that unilateral
appointment is void ab initio , deemed-consent clauses does not
substitute for actual, express consent, and participation in the
arbitration “under protest” does not cure the defect or amount to
acquiescence.
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117. In Supreme Infrastructure India Limited (supra) , the factual position
was materially different as the petitioner was not served with the
notice and nor was informed about the appointment of the Arbitrator
which ultimately resulted in an ex-parte Award.
118. Similarly the other judgments relied upon by the petitioners also do
not aid the petitioners’ case as the factual position was materially
different. The Arbitrators in those cases were appointed after the 2015
amendment was notified. Since the date of commencement of Arbitral
proceedings was after the cut-off date, the rigors of the amended Act
would apply.
v. The Ratio in Bhadra International
119. The petitioners have also placed reliance on certain paras (Paras 37-
39) of Bhadra International (supra) to state that it lays down the
position that the changes made by the 2015 amendment were always
present in the Act and what was implicit was only made explicit by
way of the Amendment and therefore an Arbitrator appointed
unilaterally prior to the 2015 Amendment Act is bad in law and can be
set aside at this stage.
120. Recently, the High Court of Bombay in M/s. S. E. Investments Ltd.
(now known as Paisalo Digital Limited) v. Star Bazaar Private
Limited, 2026 SCC OnLine Bom 8602 has dealt with the
interpretation in the case of Bhadra International (supra) and held as
under:
―24. The decision in the case of Bhadra International
(India) Pvt. Ltd. (supra) was concerned with the invocation
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of arbitration post 2015 amendment. The issue before the
Hon‘ble Supreme Court was not of pre- 2015 amendment.
The decision has to be read holistically and not by reading
few observations dehors the context. The Court did refer to
Section 18 dealing with equal treatment of parties and did
emphasised upon ensuring impartiality and preserving
fairness of the Arbitral process but that would not mean that
prior to 2015 this decision can be made applicable. When in
paragraph 37 of Bhadra International (India) Pvt. Ltd.
(supra), the Hon‘ble Supreme Court says what was implicit
prior to 2015 has been made explicit by the Amendment Act
of 2015, it does not flow therefrom that the unilateral
appointments made prior to 2015 are void. This reading
would be contrary to the decision of the 5 Judge
Constitution Bench decision in the case of CORE (supra)
and also would amount to saying something which the
Hon‘ble Supreme Court has not said.
25. Section 12(5) of the Act, 1996 expressly provides for
ineligibility of a person who is appointed as an Arbitrator if
he falls under any of the categories specified in the Seventh
Schedule of the Act. Post 23 October 2015, there is an
express provision making a person ineligible to be appointed
as an Arbitrator and, therefore, any proceedings pursuant to
such an appointment are bad in law. Prior to 23 October
2015, there was no such express provision making a person
ineligible. The basic tenets of the Arbitral proceedings
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enshrined in Sections 7, 11, 12 and 18 of the Act, 1996
which existed even prior to 23 October 2015 may indicate
that categories specified in Seventh Schedule of the Act were
implicit or enshrined in these provisions but merely because
they were implicit providing for impartiality, unbiased,
equal treatment etc., that would not lead to appointment of
an Arbitrator being illegal and consequently, the
proceedings arising therefrom being illegal. If a party had
any apprehension that any provision of the Act or basic
tenets of Arbitral proceedings were not followed or were
being violated then such a party always had a remedy to
challenge the same in accordance with law and if such a
challenge is upheld, then certainly the proceedings would be
bad in law but if such a challenge is unsuccessful then the
party is estopped from making such a grievance during
execution proceedings. Accepting submissions of the
judgment debtor would amount to attributing
disqualification to Arbitrator appointed prior to 23 October
2015 and such an attribution cannot be interpreted
retrospectively.
…
If the intention of the legislature was to disqualify a person
on the basis of Fifth Schedule or Seventh Schedule read with
Section 12(5) on an implicit basis, then nothing stopped
them from making the law retrospectively applicable from
the date when 1996 Act came into force or from providing
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that an Arbitrator would be ineligible even if appointed
prior to 23 October 2015. The fact that Section 12(5) has
been inserted by Act 3 of 2016 with retrospective effect from
23 October 2015 and not prior thereto clearly demonstrates
that the legislature did not intend to disqualify a person from
being an Arbitrator whose appointment was made even prior
to 23 October 2015 on the basis of the Schedule which never
existed though impliedly existed in various provisions of the
Act viz., Sections 10, 11, 12, 18 etc. There can be no doubt
that what has been made explicit by virtue of Fifth Schedule
and Seventh Schedule were implicit prior to 23 October
2015, but by virtue of these implicit provisions, the
appointments are not treated statutorily as illegal unless a
party aggrieved successfully challenges the same in
accordance with the provisions of the Act based on
provisions existing prior to 23 October 2015.
…….It is settled that disqualification cannot be ascribed
impliedly and retrospectively which would be the case if
submission made by the judgment debtor is to be accepted.
Prior to 2015 Amendment, there was no express provision
disqualifying a person to be an Arbitrator on such implied
criteria
35.…..The issue before the Court as per paragraph 29 was
with regard to the appointment of an Arbitrator being
ineligible by virtue of Section 12(5) of the Act and whether
by conduct, there can be a waiver of such appointment and
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whether such a point can be raised for the first time in an
application under Section 34 of the Act. On these facts, the
Hon‘ble Supreme Court relied upon Section 18 and its own
decision in the case of Dharma Prathishthanam (supra)
while observing that what was implicit earlier has now been
made explicit by way of statutory amendment. It stops there.
The Hon‘ble Supreme Court nowhere in the said decision
has observed that appointments made prior to 23 October
2015, even if hit by implicit disqualifications would render
the appointment bad in law. Reading such a conclusion, as
sought by the judgment debtor cannot, in my view, be
correct reading of judgment of the Hon‘ble Supreme Court.
The observations made in paragraphs 32 to 37 were for
deciding whether the appointments made contrary to the
provisions of Section 12(5) were illegal. It is settled position
that a judgment of the Hon‘ble Supreme Court cannot be
read as a statute dehors the context and the issue.‖
121. The aforesaid observations to my mind, correctly make it clear that the
decision in Bhadra International (supra) cannot be read in isolation
or construed as laying down a general proposition that every
appointment which, under the post-2015 statutory regime, would
attract disqualification under the Fifth or Seventh Schedule was
rendered void ab initio even where such appointment had been made
prior to 23.10.2015.
122. The Bombay High Court has clearly held that the observations of the
Hon’ble Supreme Court in Bhadra International (supra) were
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rendered in the context of an appointment governed by Section 12(5),
as introduced by the 2015 Amendment, and were principally
concerned with the question whether an ineligible Arbitrator could
continue in office and whether such ineligibility could be waived by
conduct. The reference to the line that certain principles were
“implicit” in the unamended Act has to be understood in that context.
123. In particular, the said expression cannot be understood to mean that
the legislature had already enacted a statutory disqualification
identical to Section 12(5), despite the absence of any such provision in
the unamended Act. There is a material distinction between the
existence of general principles of impartiality, independence and equal
treatment under the 1996 Act and the creation of ineligibility under
Section 12(5), read with the Seventh Schedule. The former could
furnish a ground for challenge under the pre-amendment statutory
framework; the latter operates as an express statutory bar to
appointment.
124. The validity of appointments prior to cut off date has to be examined
with reference to the law applicable on the date on which the
appointment was made. The subsequent introduction of Section 12(5)
and the Seventh Schedule cannot, merely by characterising the
underlying principles as having existed implicitly, retrospectively
convert an appointment which was not statutorily prohibited when
made into one which is now void in law. Such an interpretation would
effectively give retrospective operation to a statutory disqualification
which Parliament expressly made applicable from 23.10.2015.
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125. The judgment in Bhadra International (supra) must also be read
harmoniously with the Constitution Bench decision in CORE (supra) .
The observations in Bhadra International (supra) concerning the pre-
existing requirement of impartiality and fairness cannot be elevated
into a standalone rule that any appointment which would subsequently
fall within the Seventh Schedule was void from its inception. The
judgment itself did not determine the legal consequences of an
appointment made before the insertion of Section 12(5), nor did it
hold that every such appointment stood retrospectively invalidated by
the 2015 Amendment.
126. Thus, Bhadra International (supra) supports the proposition that the
principles of independence, impartiality and fairness are fundamental
to arbitration and were not unknown to the pre-amendment statutory
scheme. However, it does not follow that the statutory consequence
subsequently attached to breach of those principles by Section 12(5)
can automatically be imported into an arbitration governed by the
unamended Act. Prior to 23.10.2015, an objection to the independence
or impartiality of an Arbitrator had to be pursued within the remedial
framework then available under the 1996 Act. The 2015 Amendment
altered that position by introducing an express statutory prohibition in
specified circumstances.
127. The contrary interpretation would lead to an anomalous consequence.
An appointment validly made under the statutory regime existing on
the date of appointment could subsequently be rendered void solely
because Parliament, several years later, introduced an express
disqualification. Such an approach would not merely apply the 2015
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Amendment to pending proceedings; it would retrospectively alter the
legal character of an act completed before the amendment came into
force. In the absence of clear legislative language evincing such an
intention, such retrospective operation cannot be attributed to the 2015
Amendment Act.
128. To read Bhadra International (supra) otherwise would be to read
isolated observations dehors their context and to attribute to the
Supreme Court a conclusion which it did not expressly reach.
129. The correct approach, therefore, is to examine the applicability of the
2015 Amendment with reference to the statutory regime governing the
arbitration and, in particular, the date on which the relevant
appointment was made. Where the appointment of the Arbitral
Tribunal was made prior to 23.10.2015, the subsequent insertion of
Section 12(5) cannot, by itself, render that appointment invalid. If the
appointment was liable to challenge under the unamended Act on the
ground of lack of independence, impartiality or other statutory
infirmity, the remedy had to be pursued in accordance with the law
then prevailing. What cannot be done is to retrospectively substitute
the post-amendment statutory consequence for the legal position
which existed on the date of appointment.
130. Accordingly, Bhadra International (supra) does not lay down that
every Arbitral Tribunal constituted prior to 23.10.2015, but whose
constitution would have been impermissible under Section 12(5) read
with the Seventh Schedule, stood rendered illegal by the 2015
Amendment.
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131. In this view of the matter, in terms of Category A and B it is clear that
Section 34 filed raising the ground of unilateral appointment, filed
after the cutoff date will be analysed on the pre amendment regime
and not the post amended regime.
132. Much reliance is placed on CORE (supra) making its decision
prospective in respect of appointments to three-member Arbitral
Tribunals, and it is contended that, by necessary implication, the 2015
Amendment would apply to a sole Arbitrator appointed prior to the
cut-off date. I am unable to accept this submission.
133. The Constitution Bench in CORE (supra) considered the entire law
relating to independence, impartiality, bias, party autonomy and
unilateral appointment, including the statutory framework both prior
to and after the 2015 Amendment. However, it did not overrule the
decisions permitting unilateral appointment under the pre-2015 regime
and expressly made its ruling prospective. Consequently, those
decisions cannot be treated as having been impliedly overruled in
respect of arbitrations invoked prior to 23.10.2015.
134. The same contention has been dealt by the High Court of Bombay in
M/s. S. E. Investments Ltd (supra) and the relevant observation reads
as under:
―23…..CORE (supra) was concerned with post 2015
amendment and the Constitution Bench has considered all
the aspects of the ingredients of arbitration proceedings viz.,
party autonomy, independence, impartiality, equality, public
private arbitration, quasi judicial function, nemo judex rule,
natural justice, bias, unilateral appointment, Indian
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Contract Act, etc. This decision also analysed all the
provisions of the Act existing prior to 2015 amendment and
post 2015 amendment viz., Sections 11, 12, 18 etc. However.
after analysing the whole law on the subject including
automatic disqualification, likelihood of bias etc., the
Hon‘ble Supreme Court approved the decision in the case of
TRF Ltd vs. Energo Engineering Projects Ltd.29 and
Perkins Eastman DPC vs. HSCC (India) Ltd.30 which were
decisions dealing with post 2015 amendment but disagreed
with the decision in the case of Voestalpine Schienen GmbH
(supra) which too was post 2015 amendment dealing with
appointment of three member Arbitral Tribunal from panel
and in paragraph 169, the Hon‘ble Supreme Court made its
decision in the case of CORE (supra) applicable
prospectively to appointment of Arbitrator from panel after
the date of the judgment and that too only to three member
Tribunal. In my view, the submissions made by the learned
senior counsel Mr. Kamat on neutrality, independence, bias,
equality, etc. have all been considered by this decision and
also the decision rendered prior to 2015 on unilateral
appointment were also considered but the Constitution
Bench of the Hon‘ble Supreme Court did not overrule the
decisions rendered prior to 2015, rather it expressly
disagreed with decision rendered qua panel appointment
post 2015 amendment. This clearly indicates that the
Constitutional Bench did not disapprove or impliedly
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overrule the decisions rendered on unilateral appointment
prior to 2015 though all the aspects of the qualification of
an Arbitrator were examined in great detail. Therefore, to
say that earlier decisions of the Hon‘ble Supreme Court
dealing with unilateral appointment are no longer good law
even in case of invocation prior to 23 October 2015 and
Awards passed pursuant thereto are void, cannot be
accepted.‖
CATEGORY C:
Cases where the Arbitral proceedings and the challenge thereto
arose prior to the Amendment Act, but the arbitration
agreement expressly stipulated that any statutory modification
or re-enactment of the arbitration law would govern the Arbitral
proceedings, thereby raising the issue whether the provisions
introduced by the Amendment Act would nevertheless become
applicable by virtue of such contractual stipulation.
135. The law with regard to this category is fairly settled in view of various
Supreme Court and High Court judgments.
136. In Ratnam Sudesh Iyer (supra) the Section 34 proceedings were
commenced prior to the cutoff date. The Court held as under:
“25. The contention of the appellant, faced with the
aforesaid judicial pronouncements, solely rests on the
wording of Clause 9 of the deed of settlement, which
provides that
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―the arbitration proceedings shall be governed by
the Arbitration and Conciliation Act, 1996 of
India or any amendment thereto.‖
(emphasis supplied)
The submission thus was that this phraseology of
Clause 9 included the possibility of any future
amendments to the said Act being made applicable to
the arbitration in question.
…
27. In the context of the Arbitration Act, 1940
(hereinafter referred to as ―the Old Act‖) and the said
Act, there are some observations in Thyssen Stahlunion
GmbH v. SAIL , which are relevant for the purposes of
this discussion. While opining that the provisions of the
Old Act would apply in relation to Arbitral proceedings
which had commenced before the coming into force of
the said Act, this Court referred to the ―repeal and
savings‖ provision in Section 85(2)(a) of the said Act.
It was observed that the phrase ―in relation to Arbitral
proceedings‖ cannot be given a narrow meaning so as
to mean only pendency of arbitration proceedings
before the Arbitrator, but would also cover proceedings
before the court…
28. However, the general observations aforesaid
cannot come to the aid of the appellant in view of a
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number of judicial pronouncements by this Court which
deal with a similar issue.
29. In S.P. Singla Constructions (P) Ltd. v. State of
H.P. , the arbitration clause provided that the
arbitration would be subject to the provisions of the
Arbitration Act, 1940 or any statutory modification or
re-enactment thereof. A plea was raised that the
amended provisions would apply in accordance with
Section 26 of the 2015 Amendment Act. This contention
was repelled by the Court which opined that such
general conditions of the contract cannot be taken to be
an agreement between the parties to apply the
provisions of the 2015 Amendment Act. As a result, the
provisions of the 2015 Amendment Act would apply
only in relation to Arbitral proceedings commenced on
or after the date of commencement of the 2015
Amendment....
31. While S.P. Singla and Parmar Construction Co.
opined on the topic of Arbitral proceedings, we may
note here that the matter concerns Section 34
proceedings for setting aside the Award. In this case,
the Section 34 proceedings had already commenced
when the 2015 Amendment Act came into effect. The
court proceedings were already subject to the pre-2015
legal position. In a conspectus of the aforesaid, a
generally worded clause such as Clause 9 of the deed
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of settlement cannot be said to constitute an agreement
to change the course of law that the Section 34
proceedings were subject to.
…
34. We may note that the line of reasoning
in Ssangyong Engg. & Construction Co.
Ltd. [Ssangyong Engg. & Construction Co.
Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ)
213] itself shows that to prevent any uncertainty in law,
while seeking to fine tune the law to restrict the scope
of interference in Awards the legislature took a
conscious decision to make applicable the amendments
only from the date it came into force. Thus, the general
phraseology of a clause which seeks to include any
amendment to the Act would not be able to be availed
of to expand the scope of scrutiny as it would appear to
run contrary to the legislative intent of Section 26 of
the Amendment Act.‖
(emphasis added)
137. Similarly in the case of Jagdish Chand Gupta (supra) the Court in
view of peculiar facts and circumstances held as under:
―35. Learned Counsel of the petitioner places reliance
on APR Constructions Ltd. (supra) wherein the Hon'ble
Karnataka High Court dealt with a similar arbitration
clause. It was held that where the arbitration clause uses
the expression ―statutory modification,‖ the amendments
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brought to the 1996 Act, including the 2015 Amendment,
would automatically apply to the arbitral proceedings
unless expressly waived in writing under the proviso to
section 12(5). It was emphasized that in the absence of a
written waiver, the amended provisions must govern, and
the appointment of ineligible Arbitrators cannot be
sustained…..
37. A perusal of the aforesaid two judgments make it clear
that the words ―statutory modification‖ are of wide import
and signify a forward-looking intention of the parties to
adopt any amendments or modifications to the governing
law. In the present case, Clause 64(7) of the GCC evidences
the parties' mutual understanding that subsequent
legislative amendments including those introduced by the
2015 Amendment Act would apply to their arbitration. This
inference is further strengthened by the conduct of the
respondent, who itself invoked the amended provisions of
the 1996 Act while filing an application under section 33 of
the 1996 Act seeking correction of the Award.
38. On perusal and more particularly of paragraph 1, it
becomes evident that the respondent itself referred to and
invoked the ―Arbitration and Conciliation Act, 1996 as
amended by the Amendment Act, 2015.‖ This conduct
unequivocally demonstrates the parties' understanding that
the Amended Act governed the proceedings, thereby
satisfying the requirements of section 26 of the Amendment
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Act, 2015.
…
41. The conduct of both parties in invoking the amended
provisions first by the petitioner and later by the respondent
constitutes strong evidence of an implied agreement to
apply the Amendment Act, 2015. The parties had, in effect,
opted into the amended regime. Consequently, the arbitral
proceedings must be seen in light of the 2015 Amendment
and not the pre-amendment position.
138. In Ratnam Sudesh Iyer (supra) , the arbitration clause provided that
the proceedings would be governed by the 1996 Act “or any
amendment thereto”. It was held that such general and forward-
looking language, by itself, did not constitute an agreement to apply
the 2015 Amendment Act to proceedings which had already
commenced. The Court particularly noted that, where Section 34
proceedings were already pending when the 2015 Amendment Act
came into force, a general reference to future amendments could not
be construed as altering the legal regime applicable to those
proceedings.
139. Jagdish Chand Gupta (supra) on which the petitioners have placed
reliance, however, involved a materially different clause referring to
“statutory modification”. The Court found that the language of the
clause, read in its context, demonstrated an intention to adopt
subsequent legislative modifications. This conclusion was further
strengthened by the subsequent conduct of the parties, who themselves
invoked the amended provisions of the 1996 Act. The Court
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accordingly found an implied agreement under Section 26 to apply the
amended regime.
140. Hence it can be said that where the clause contains only a general
reference to future amendments, Ratnam Sudesh Iyer (supra) would
govern. Where the clause contains specific language indicating an
intention to adopt statutory modifications, the Court must examine the
clause in its entirety followed by the subsequent conduct of the
parties. If such language and conduct establish a clear mutual
intention to adopt the amended regime, then the amended regime
would be applicable.
141. In view of the above it is clear that applicability of the amendments
would rest on how the clause is worded, first the specific intention of
the parties to be bound by the amendments, second, the conduct of the
parties.
CONCLUSION
142. In view of the foregoing discussion, the questions referred are
answered as follows:
i. An objection relating to the unilateral appointment or de jure
ineligibility of an Arbitrator is maintainable in proceedings under
Section 34 in accordance with the principles laid down in
Bhadra International (supra).
ii. The 2015 amendment was substantive in nature and cannot be
referred as merely clarificatory. Therefore it will only be
applicable prospectively.
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iii. In case the arbitration clause provided for applicability of an
amended act or any amendment then the application would
depend on the language of the clause and conduct of the parties.
143. Learned counsel for the parties agree that all the petitions may be
listed before the Roster Bench for further proceedings, as this Court
was required only to answer the questions of law as framed.
Accordingly, this Court has confined its consideration to the three
issues so framed and has not examined the factual aspects of the
individual petitions.
144. List the batch along with M/s Adwel Advertising Service & Anr. v.
South Delhi Municipal Corporation , OMP (COMM) 384/2017 ,
separately on 14.09.2026, before the roster bench.
JASMEET SINGH, J
st
1 September, 2026/DE
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