Unilateral appointment of a sole arbitrator without express written waiver is void ab initio and a nullity.

Bharat Heavy Electricals Limited (BHEL) was awarded a contract by the National Electricity Corporation, Sudan, and subsequently sub-contracted the work to the Respondent via an agreement dated 03.08.2007

Clause 33 of the General Conditions of Contract (GCC) empowered BHEL’s General Manager to unilaterally appoint a sole arbitrator, even if such person was an employee of BHEL

Following disputes regarding execution delays and liquidated damages, the Respondent requested arbitration in September 2016. BHEL unilaterally appointed a sole arbitrator on 28.10.2016, and the proceedings resulted in an award dated 01.05.2018

BHEL (the appointing party) and the Respondent both filed petitions under Section 34 of the Arbitration and Conciliation Act, 1996, with BHEL now challenging the award on the ground of the arbitrator's inherent lack of jurisdiction due to the unilateral nature of the appointment

1. Whether the unilateral appointment of the sole arbitrator by BHEL is in violation of amended Section 12(5) of the Arbitration and Conciliation Act, 1996

2. Whether a party that unilaterally appointed the arbitrator can subsequently object to said appointment for the first time in proceedings under Section 34 of the Act

3. Whether participation in arbitral proceedings without objection constitutes a "deemed waiver" of the ineligibility under the proviso to Section 12(5)

The Court applied Section 12(5) of the Arbitration and Conciliation Act, 1996, read with the Seventh Schedule, which renders any person with a prohibited relationship to the parties or the dispute ineligible to be an arbitrator

The Court relied on the Supreme Court’s ruling in Bhadra International (India) Pvt. Ltd. v. Airports Authority of India (2026 INSC 6), which established that unilateral appointments are void ab initio and that waiver of Section 12(5) requires an "express agreement in writing" executed after the dispute has arisen

The Court further applied the Division Bench principle from Mahavir Prasad Gupta and Sons v. Govt. of NCT of Delhi (2025 SCC OnLine Del 4241), holding that the "Rule against Unilateral Appointment" is a matter of public policy and an award by an ineligible arbitrator is a nullity

The Court reasoned that Section 12(5) creates a non-negotiable standard of impartiality where an employee or a nominee of one party cannot act as a sole arbitrator unless both parties explicitly waive this in writing after the dispute arises

In this case, BHEL exercised a unilateral power under Clause 33 of the GCC to appoint the arbitrator without obtaining the Respondent's express written consent as mandated by the proviso to Section 12(5)

The Court rejected the Respondent's argument that BHEL waived its right to object by participating in the proceedings, noting that Section 12(5) is an exception to the "deemed waiver" rule under Section 4

Following Bhadra International, the Court held that since the ineligibility goes to the root of the jurisdiction, the appointment was non-est and the resulting award carried no legal recognition, allowing the objection to be raised even at the Section 34 stage by the very party that made the appointment

The Arbitral Tribunal lacked inherent jurisdiction, rendering the award dated 01.05.2018 a nullity. Consequently, the Court allowed O.M.P. (COMM) 374/2018, set aside the impugned award, and disposed of the connected petition O.M.P. (COMM) 387/2018 accordingly