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
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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 orSignature Not Verified
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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 theSignature Not Verified
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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 theSignature Not Verified
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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 suchSignature Not Verified
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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. ThisSignature Not Verified
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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 theSignature Not Verified
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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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