Unilateral appointment of an ineligible arbitrator invalidates the entire award, even beyond the claims challenged, Delhi HC rules

At the Respondent’s request, the Appellant’s Executive Director (Engineering) unilaterally appointed the sole arbitrator on 14 November 2019.

The arbitrator issued an award on 10 January 2022.

The Respondent challenged specified parts of the award under Section 34 of the Arbitration and Conciliation Act, 1996 (“A&C Act”), including on the ground that the appointment was impermissible.

The Single Judge held the appointment invalid but set aside the award only to the extent of the relief sought in the Respondent’s petition.

The Appellant’s application under Sections 151 and 152 of the Code of Civil Procedure, 1908, seeking correction of the operative order, was dismissed on 21 August 2026.

The Appellant appealed and sought condonation of a 692-day delay, which the Court allowed.

Whether the 692-day delay in filing the appeal should be condoned

Whether, after finding that the sole arbitrator’s unilateral appointment was impermissible under Section 12(5) of the A&C Act, the Single Judge could confine the setting aside of the award to the claims specifically challenged in the Section 34 petition

Section 12(5) read with the Seventh Schedule to the A&C Act renders an arbitrator de jure ineligible where the statutory disqualification applies; the proviso permits waiver only by an express agreement in writing after disputes have arisen.

Where the tribunal’s constitution is invalid on that basis, the defect goes to the root of the tribunal’s competence and the award cannot be sustained in part merely because the Section 34 challenge sought relief concerning specified claims.

Section 34 provides the procedure for challenging an award; Bhadra International (India) Pvt. Ltd. v. Airports Authority of India, 2026 SCC OnLine SC 7, para. 109, recognises that an award made by an ineligible arbitrator may be challenged under Section 34, but does not alter the substantive consequence of a finding that the appointment was impermissible.

Sections 151 and 152 CPC were invoked in the unsuccessful application to correct or modify the Single Judge’s operative order.

The Respondent accepted that the appointment contravened Section 12(5) read with the Seventh Schedule, and the finding of ineligibility was not challenged.

The Court held that this invalidity affected the constitution of the tribunal and therefore the validity of the award as a whole, not merely the claims identified in the Respondent’s Section 34 petition.

The Respondent could not rely on the tribunal’s invalid constitution to set aside selected claims while seeking to preserve the remainder of the same award; nor could payments already made validate the award.

The Court also distinguished Bhadra International: paragraph 109 addressed the procedure for challenging an arbitrator’s ineligibility after an award, not the consequences of a finding that the appointment itself was impermissible.

For delay, the Court considered the Appellant’s explanation that it undertook internal examination and obtained approvals and legal advice before pursuing the correction application and appeal sufficient.

It modified the judgment of 29 October 2024, set aside the entire arbitral award dated 10 January 2022, and set aside the order dismissing the Appellant’s Section 152 application.

The Respondent may, if so advised, pursue recovery of amounts already paid in accordance with law; the Court expressed no view on entitlement to recovery.