Airports Authority Of India vs Ahluwalia Contracts India Limited on 20 July, 2026

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    Delhi High Court

    Airports Authority Of India vs Ahluwalia Contracts India Limited on 20 July, 2026

                      $~77
                      *      IN THE HIGH COURT OF DELHI AT NEW DELHI
    
                      %                                          Date of decision: 20.07.2026
                      +      O.M.P. (COMM) 512/2023, I.A. 25189/2023 & I.A.37025/2024
    
                             AIRPORTS AUTHORITY OF INDIA         .....Petitioner
                                          Through: Mr. Vaibhav Kalra, Ms. Neha
                                                   Bhatnagar and Mr. Deepankar
                                                   Singh, Advs.
    
                                                 Versus
    
                             AHLUWALIA CONTRACTS INDIA LIMITED....Respondent
                                         Through: Mr. Anil Airi, Sr. Adv with Mr.
                                                  Dhruv Rohatgi, Ms. Chandrika
                                                  Sachdev and Mr. Dhruv Kumar,
                                                  Advs.
    
                             CORAM:
                             HON'BLE MR. JUSTICE AVNEESH JHINGAN
                      AVNEESH JHINGAN, J. (ORAL)
    

    1. This petition under Section 34 of the Arbitration and
    Conciliation Act, 1996 (for short „the Act‟) is filed against the arbitral
    award dated 10.08.2023.

    2. The brief facts are that the petitioner/Airports Authority of India
    (for short „AAI‟) awarded the work of construction of the New
    Integrated Passenger Terminal Building at Birsa Munda Airport,
    Ranchi to the respondent vide Letter of Award dated 21.01.2009.
    Subsequently, an agreement dated 02.02.2009 was entered into
    between the parties to the lis. The time for completion of the work was

    SPONSORED

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    twelve months.

    2.1 Clause 57 of the General Conditions of Contract (for short
    „GCC‟) provides for resolution of disputes by arbitration. As per
    clause 57(c) disputes are to be referred to the sole arbitration of a
    person appointed by the authority mentioned in Schedule E and no
    objection shall lie if the appointed arbitrator is an employee of AAI.
    The relevant portion of clause 57 is reproduced below:

    Dispute Resolution Mechanism (Arbitration)
    “Clause 57(b) when the dispute could not be resolved
    through the Dispute Resolution Board, the Arbitration
    clause may be invoked within 30days of receiving the
    decision of the Dispute Resolution Board.

    57(c) Except where otherwise provided for in the contract
    all questions and disputes relating to the meaning of the
    specifications, designs, drawings and instructions herein
    before mentioned and as to the quality of workmanship or
    materials used on the work or as to any other question,
    claim, right, matter or thing whatsoever in any way arising
    out of or relating to the contract, designs, drawings,
    specifications, estimates, instructions, orders or these
    conditions or otherwise concerning the works, or the
    execution or failure to execute the same weather arising
    during the progress of the work or after the completion or
    abandonment thereof shall be referred to the sole arbitrator
    as may be appointed by authority mentioned at serial
    number 32 in schedule E. There will be no objection if the
    arbitrator so appointed is an employee of AAI and that he
    had to deal with the matters to which the contract relates and
    that in the course of his duties as such he had expressed
    views on all or any of the matters is dispute or difference.
    The arbitrator to whom the matter is originally referred
    being transferred or vacating his office or being unable to
    act for any reason, the appointing authority for arbitrator, as
    aforesaid at the time of such transfer, vacation of office or

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    inability to act, shall appoint another person to act as
    arbitrator in accordance with the terms of the contract. Such
    person shall be entitled to proceed with the reference from
    the stage at which it was left by his predecessor. It is also a
    term of this contract that no person other than a person
    appointed by the authority mentioned in schedule E, should
    act as arbitrator and if for any reason, that is not possible,
    the matter is not to be referred to arbitration at all.”

    2.2 Disputes arose between the parties with regard to delay in
    execution of the work, levy of liquidated damages and release of
    pending amounts. The respondent invoked arbitration by issuing a
    notice under Section 21 of the Act on 16.04.2019. The petitioner
    appointed the sole arbitrator vide order dated 13.05.2019. The arbitral
    proceedings culminated in the impugned award whereby claims no. 1,
    4 & 5 were allowed in favour of the respondent. Hence, the present
    petition.

    3. Learned counsel for the petitioner submits that the appointment
    of the sole arbitrator is in violation of amended Section 12(5) read
    with Seventh Schedule of the Act and the impugned award is liable to
    be set aside. Reliance is placed upon the decision of the Supreme
    Court in Bhadra International (India) Pvt. Ltd. & Ors. v. Airports
    Authority of India
    , 2026 INSC 6 and the decisions of this Court in
    Railways Board, Ministry of Railways vs. Titagarh Rail Systems
    Limited, 2026:DHC:1720 and Engineering Projects (India) Ltd. v.
    Allied Construction
    , 2026:DHC:2540 to contend that unilateral
    appointment of an arbitrator is void ab-initio and objection to such
    appointment can be raised even in proceedings under Section 34 of the

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    Act.

    4. Per contra, the petitioner having appointed the arbitrator,
    participated in the arbitral proceedings, awaited for the outcome and
    having failed therein cannot challenge the appointment. It is submitted
    that the appointment was not unilateral but joint as the petitioner
    appointed arbitrator on request of the respondent. Further that no
    objection with regard to the appointment of the arbitrator was raised
    before the arbitral tribunal and the same cannot be permitted to be
    raised in the present proceedings under Section 34 of the Act.

    5. Before proceeding further, it would be apposite to quote the
    following decisions:

    5.1 The Supreme Court in Bhadra International (supra) dealt with
    the following three issues:

    “29….i. Whether the sole arbitrator could be said to have
    become “ineligible to be appointed as an arbitrator” by
    virtue of sub-section (5) of Section 12 of the Act, 1996?
    ii. Whether the parties could be said to have waived the
    applicability of sub-section (5) of Section 12 of the Act,
    1996, by way of their conduct, either expressed or implied?
    iii. Whether the appellants could have raised an objection
    to the appointment of the sole arbitrator for the first time in
    an application under Section 34 of the Act, 1996?”

    Held:

    “123…i. The principle of equal treatment of parties provided
    in Section 18 of the Act, 1996, applies not only to the arbitral
    proceedings but also to the procedure for appointment of
    arbitrators. Equal treatment of the parties entails that the

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    parties must have an equal say in the constitution of the
    arbitral tribunal.

    ii. Sub-section (5) of Section 12 provides that any person
    whose relationship with the parties or counsel, or the dispute,
    whether direct or indirect, falls within any of the categories
    specified in the Seventh Schedule would be ineligible to be
    appointed as an arbitrator. Since, the ineligibility stems from
    the operation of law, not only is a person having an interest in
    the dispute or its outcome ineligible to act as an arbitrator,
    but appointment by such a person would be ex facie invalid.
    iii. The words “an express agreement in writing” in
    the proviso to Section 12(5) means that the right to object to
    the appointment of an ineligible arbitrator cannot be taken
    away by mere implication. The agreement referred to in
    the proviso must be a clear, unequivocal written agreement.
    iv. When an arbitrator is found to be ineligible by virtue of
    Section 12(5) read with the Seventh Schedule, his mandate is
    automatically terminated. In such circumstance, an aggrieved
    party may approach the court under Section 14 read with
    Section 15 for appointment of a substitute arbitrator.
    Whereas, when an award has been passed by such an
    arbitrator, an aggrieved party may approach the court under
    Section 34 for setting aside the award.

    v. In arbitration, the parties vest jurisdiction in the tribunal
    by exercising their consent in furtherance of a valid
    arbitration agreement. An arbitrator who lacks jurisdiction
    cannot make an award on the merits. Hence, an objection to
    the inherent lack of jurisdiction can be taken at any stage of
    the proceedings.”

    5.2 The Division Bench of this court in Mahavir Prasad Gupta
    and Sons v. Govt. of NCT of Delhi
    , 2025 SCC OnLine Del 4241
    dealt with the following issues:

    “74…a) When a party itself has unilaterally appointed
    the arbitrator, whether that party can object to the unilateral
    appointment of the arbitrator at any stage during or after the

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    arbitration proceedings?

    b) If a party has unilaterally appointed an arbitrator, can
    that party be deemed to have given express waiver in writing
    under Section 12(5) of the Act while making the appointment
    itself?”

    The court concluded:

    “84….a) Mandatory Requirement: Any arbitration
    agreement providing unilateral appointment of the sole or
    presiding arbitrator is invalid. A unilateral appointment by
    any party in the arbitrations seated in India is strictly
    prohibited and considered as null and void since its very
    inception. Resultantly, any proceedings conducted before
    such unilaterally appointed Arbitral Tribunal are also nullity
    and cannot result into an enforceable award being against
    Public Policy of India and can be set aside under Section 34
    of the Act and/or refused to be enforced under Section 36 of
    the Act.

    b) Deemed Waiver: The proviso to Section 12(5) of the
    Act requires an express agreement in writing. The conduct of
    the parties, no matter how acquiescent or conducive, is
    inconsequential and cannot constitute a valid waiver under
    the proviso to Section 12(5) of the Act. The ineligibility of a
    unilaterally appointed arbitrator can be waived only by an
    express agreement in writing between the parties after the
    dispute has arisen between them. Section 12(5) of the Act is
    an exception to Section 4 of the Act as there is no deemed
    waiver under Section 4 of the Act for unilateral appointment
    by conduct of participation in the proceedings. The proviso to
    Section 12(5) of the Act requires an „express agreement in
    writing‟ and deemed waiver under Section 4 of the Act will
    not be applicable to the proviso to Section 12(5) of the Act.

    c) Award by an Ineligible Arbitrator is a Nullity: An
    award passed by a unilaterally appointed arbitrator is a nullity
    as the ineligibility goes to the root of the jurisdiction. Hence,
    the award can be set aside under Section 34(2)(b) of the Act
    by the Court on its own if it „finds that‟ an award is passed by
    unilaterally appointed arbitrator without even raising such

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    objection by either party.

    d) Stage of Challenge: An objection to the lack of
    inherent jurisdiction of an arbitrator can be taken at any stage
    during or after the arbitration proceedings including by a
    party who has appointed the sole or presiding arbitrator
    unilaterally as the act of appointment is not an express waiver
    of the ineligibility under proviso to Section 12(5) of the Act.

    Such objection can be taken even at stage of challenge to the
    award under Section 34 of the Act or during the enforcement
    proceedings under Section 36 of the Act.”

    6. After amendment of Section 12(5) of the Act an employee of a
    party in dispute can neither be appointed arbitrator nor can nominate
    or appoint any other person as an arbitrator. The unilateral
    appointment in absence of an express agreement in writing between
    the parties to waive applicability of Section 12(5) of the Act is void
    ab-initio. The filing of the statement of claim or participation in the
    arbitral proceedings cannot be construed as waiver under the proviso
    to Section 12(5) of the Act. The unilateral appointment of the
    arbitrator can be objected to for the first time under Section 34 of the
    Act. In the case in hand, the arbitrator was appointed by the petitioner
    in terms of clause 57(c) of the GCC.

    7. The contention that the appointment of the arbitrator was never
    objected to and that this issue was not pleaded in the petition under
    Section 34 of the Act is of no avail. The Supreme Court in Bhadra
    International
    (supra) held that the issue goes to the root of
    jurisdiction and can be raised for the first time under Section 34 of the
    Act. Moreover, the issue of jurisdiction can be raised at any stage,
    including the stage of execution. It is also held that there should be

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    express written consent by the parties for waiver of the applicability of
    Section 12(5) of the Act. The relevant paragraphs are reproduced
    below:

    “97. One could argue that a miscreant party may participate
    in the arbitral proceedings up to the passing of the award,
    despite having full knowledge of the arbitrator’s
    ineligibility. While after an adverse award is rendered, such
    a party may then seek to challenge it with a view to having
    it set aside. Such an apprehension is reasonable, however, to
    obviate the possibility of such misuse, the party making
    unilateral appointment must endeavour to enter into an
    express written agreement as stipulated in the proviso to
    Section 12(5), so as to safeguard the proceedings from being
    rendered futile.

    *** *** ***

    109. When an award has been passed, the proceedings
    before the arbitral tribunal conclude, leaving no possibility
    of substituting the arbitrator at this stage. In other words,
    once an award is passed, the mandate of the arbitral tribunal
    also arrives at a conclusion. In such circumstances, a party
    aggrieved by the arbitrator’s ineligibility may challenge the
    award by filing an application under Section 34 of the 1996
    Act, as an award passed by an ineligible arbitrator is nullity,
    non-est, or void ab initio, and against the public policy of
    India.

    *** *** ***

    113. A challenge to an arbitrator’s ineligibility could be
    raised at any stage because an award passed in such
    circumstance is non-est, i.e., it carries no enforceability or
    recognition in law. We say so because an arbitrator does not
    possess the jurisdiction to pass an award. In arbitration, the
    parties vest the jurisdiction in the tribunal by virtue of a
    valid arbitration agreement and an appointment made in
    accordance with the provisions of the Act, 1996. This

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    jurisdiction is grounded in the consent of the parties as
    explained in the foregoing paragraphs of this judgment.”

    8. In view of the law laid down by the Supreme Court in Bhadra
    International
    (supra) and the decisions of this Court in Titagarh Rail
    Systems Limited (supra) & Allied Construction (supra) affirmed by
    the Division Bench of this court, the appointment of the arbitrator is in
    violation of the amended provisions of Section 12(5) of the Act.

    9. The issue now to be determined is as to whether after the
    dispute arose was there an express waiver in writing between the
    parties that the provisions of Section 12(5) of the Act shall not apply.

    10. The Supreme Court in Bhadra International (supra) held that
    waiver involves a conscious decision to abandon the existing legal
    right and can be made only by a person fully aware of such right. A
    legal right cannot be taken away by implications. The waiver has to be
    an unequivocal expression and it cannot be lost sight of that by such
    waiver the restriction imposed by Section 12(5) of the Act is sought to
    be overcome.

    11. There is no prescribed format under the proviso to Section 12(5)
    of the Act for an express agreement in writing but it shall not mean
    that the waiver can be inferred by implication or through conduct. It
    would be relevant to quote the following paragraph from Bhadra
    International
    (supra):

    “84. Undoubtedly, the statute does not prescribe a format for
    the agreement. However, the absence of a prescribed format
    cannot be construed to mean that the waiver may be inferred
    impliedly or through conduct. We say so because the

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    legislature has consciously prefaced the term “agreement”

    with the word “express” and followed it with the phrase “in
    writing”. This semantics denote the intention of the
    legislature that the waiver under the proviso to Section 12(5)
    must be made only through an express and written
    manifestation of intention.”

    12. The matter needs to be considered from another angle. The
    express consent in writing under proviso to Section 12(5) of the Act
    has to be of both the parties. The factum of the petitioner having
    appointed the arbitrator cannot be construed as compliance with the
    proviso to Section 12(5) of the Act. The waiver has to be express and
    cannot be construed or inferred through conduct. The Division Bench
    of this court in Mahavir Prasad Gupta (supra) held that an
    appointment of an ineligible person as an arbitrator is void ab-initio
    and can be challenged by the party making such appointment. The
    relevant paragraphs of the judgment are:

    “81. Accordingly, the party that unilaterally appointed the
    arbitrator cannot be deemed to have agreed in writing to
    waive the ineligibility of the arbitrator by act of appointment.
    When appointment itself is ineligible under the provisions of
    Section 12(5) of the Act read with Seventh Schedule of the
    Act
    , it does not take away the right of the party to challenge
    such an appointment merely because that party had made the
    appointment in absence of express agreement in writing
    between the parties to waive the applicability of Section
    12(5)
    of the Act.

    82. Hence, a party which unilaterally appointed the arbitrator
    has right to object to such appointment irrespective of fact
    that that party itself made the appointment of the arbitrator.
    Mere fact of making appointment in writing will not make
    the ineligible appointment a valid appointment unless there is
    express agreement in writing waiving such ineligibility.

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    83. Although it appears disingenuous, a party appointing an
    the sole or presiding arbitrator unilaterally can challenge the
    award on the ground that the award has been rendered in
    contravention of Section 12(5) of the Act read with Seventh
    Schedule of the Act
    notwithstanding that the said party itself
    made such an appointment. When the Arbitral Tribunal
    inherently lacked jurisdiction to act, the arbitration
    proceedings are void ab initio, rendering the award
    unenforceable irrespective of which party made such
    unilateral appointment. The arbitral proceedings and an
    award made by an unilaterally appointed sole or presiding
    arbitrator, who is de jure ineligible to be appointed as an
    arbitrator by virtue of the Seventh Schedule of the Act
    are void ab initio. The waiver under the proviso to Section
    12(5)
    of the Act must be express and subsequent to the
    disputes having been arisen between the parties. Hence, the
    party which appointed the sole or presiding arbitrator
    unilaterally can also challenge the award under Section 34 of
    the Act on the ground of such ineligibility.”

    13. In the absence of an express agreement in writing under proviso
    to Section 12(5) of the Act by the parties, the appointment of the
    arbitrator by the petitioner is in violation of Section 12(5) read with
    Seventh Schedule of the Act. The appointment of the arbitrator is void
    ab-initio and renders the impugned award a nullity.

    14. The petition is allowed and the impugned award is set aside.
    Pending application is also disposed of.

    AVNEESH JHINGAN, J
    JULY 20, 2026/’tl’

    Reportable:- Yes

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