Choosing an arbitrator from the other party’s shortlist does not waive a challenge to a one-sided appointment, Delhi High Court rules

Newton Engineering and Chemicals Ltd. contracted with Indian Oil Corporation Ltd. (IOCL) to supply heat exchangers.

After disputes arose and IOCL terminated the contract, IOCL sent Newton a panel of three proposed sole arbitrators, asking it to select one.

Newton selected Shri A.K. Srivastava from that panel and requested IOCL’s approval; its letter described itself as communicating the selection and did not refer to waiver of any statutory right.

The arbitrator proceeded to hear the parties and made an award in IOCL’s favour.

Newton’s Section 34 challenge was dismissed by the District Judge, after which Newton appealed under Section 37 of the Arbitration and Conciliation Act, 1996.

1. Whether IOCL’s appointment mechanism—under which it prepared the panel and Newton could only select an arbitrator from that panel—complied with the requirements governing equal participation in constituting the tribunal.

2. Whether Newton’s selection of an arbitrator from IOCL’s panel, its letter of 27 January 2020, or its subsequent participation in the arbitration constituted an express written waiver of Section 12(5) after the disputes had arisen.

Section 12(5) of the Arbitration and Conciliation Act, 1996 makes a person falling within a Seventh Schedule category ineligible for appointment, notwithstanding a prior agreement; its proviso permits waiver only by an express written agreement made after disputes have arisen.

The Court held that such waiver must be clear and unequivocal and cannot be inferred merely from conduct, acquiescence, or participation.

Section 18’s equal-treatment requirement applies to the appointment process, and a party’s exclusive control over a panel from which the other party must choose does not provide equal participation.

The Court relied on Bhadra International (India) Pvt. Ltd. v. Airports Authority of India, 2026 INSC 6; Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), (2025) 4 SCC 641; Mahavir Prasad Gupta and Sons v. Govt. of NCT of Delhi, 2025 SCC OnLine Del 4241; and M/s Ahluwalia Contracts (India) Ltd. v. Airport Authority of India, 2026:DHC:8252-DB, concerning equal treatment, unilateral appointment mechanisms, and the limits of waiver by participation.

Section 34 permits scrutiny of tribunal composition subject to mandatory statutory requirements; Section 37 provided the route of appeal.

IOCL alone determined the three names on the panel, while Newton had no right to nominate a candidate, contribute names, or require IOCL to choose from a panel prepared by Newton.

Its limited choice among IOCL’s nominees therefore did not amount to equal participation in constituting the tribunal.

Newton’s letter merely communicated its choice under the contractual clause and requested IOCL’s approval; it neither recorded an agreement between the parties nor expressly waived Section 12(5).

Nor could Newton’s participation in the arbitration cure the defect, because statutory waiver requires an express written agreement after the dispute has arisen.

The District Judge’s focus on the merits and reappreciation of evidence did not resolve the anterior issue of the tribunal’s constitution.

It allowed the appeal, set aside the District Judge’s judgment and the arbitral award, and left the parties at liberty to commence fresh arbitration in accordance with law; the merits remained open.