Unilateral appointment of a serving employee as arbitrator without express written waiver is void *ab initio*.

The Petitioner awarded a contract worth Rs. 499.56 crores to the Respondent for the manufacture of wagons on 30.09.2020.

Disputes emerged regarding delivery periods, liquidated damages (LD), and the eventual short-closure of the contract by the Petitioner on 20.03.2023.

The Respondent triggered arbitration but specifically stated in notices dated 29.05.2023 and 11.08.2023 that it did not waive the provisions of Section 12(5) of the Arbitration and Conciliation Act, 1996.

Subsequently, the Petitioner proposed four serving employees as arbitrators; the Respondent shortlisted two, leading to the appointment of a sole arbitrator (a serving employee) on 30.01.2024.

An award was passed on 05.08.2024 in favor of the Respondent.

The Petitioner challenged the award under Section 34, ironically arguing that the very arbitrator it appointed was ineligible under Section 12(5).

The Court applied Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996, which renders employees of a party de jure ineligible to act as arbitrators.

It relied on the Supreme Court mandate in *Bhadra International (India) Pvt. Ltd. Ors. v. Airports Authority of India* (2026 INSC 6), establishing that "express agreement in writing" under the proviso to Section 12(5) requires a clear, unequivocal written manifestation and cannot be inferred from conduct or participation.

Furthermore, it followed *Mahavir Prasad Gupta and Sons v. Govt. of NCT of Delhi* (2025 SCC OnLine Del 4241), holding that a unilateral appointment is void *ab initio* and the resulting award is a nullity, challengeable even by the appointing party.

The Court reasoned that since the arbitrator was a serving employee of the Railways, he was hit by the Seventh Schedule ineligibility.

The Respondent's acts of shortlisting names from a panel and consenting to fast-track arbitration did not constitute an "express waiver" as required by the proviso to Section 12(5), especially since the Respondent had twice explicitly refused to waive Section 12(5) in prior correspondence.

The Court rejected the argument that the Petitioner’s internal administrative procedure (IRS Clause 2905) could override the statutory requirement for a post-dispute written agreement.

It emphasized that even if the Petitioner's conduct was "disingenuous" in challenging its own appointee after losing, the arbitrator’s inherent lack of jurisdiction rendered the entire proceeding a nullity that could not be cured by estoppel or acquiescence.

It concluded that an award passed by an ineligible arbitrator is a nullity and must be set aside.

The petition was allowed, and the arbitral award dated 05.08.2024 was set aside.