The Hon’ble Supreme Court has held that merely if a party has participated in the arbitral proceedings does not per se constitute a waiver of its right to object to an arbitrator’s eligibility. The waiver to object should be express and in writing.
I. Factual Matrix
The dispute originated from a License Agreement executed in 2010 between the Appellants (a consortium) and the Respondent, Airports Authority of India (AAI), for ground handling services. Clause 78 of the agreement contained a dispute resolution mechanism providing for the reference of disputes to the “sole arbitration of a person, to be appointed by the Chairman of the Authority”.
Disputes arose in 2015. The Appellants invoked arbitration on November 27, 2015, notably after the Arbitration and Conciliation (Amendment) Act, 2015 came into effect on October 23, 2015. The Chairman of AAI appointed a sole arbitrator. In the first procedural order dated March 22, 2016, the arbitrator recorded: “None of the parties have any objection to my appointment.”
Subsequently, the parties filed joint applications for the extension of time under Section 29A of the Act, and the Appellants filed their Statement of Claim without raising an objection to the arbitrator’s jurisdiction.
A ‘Nil’ award was passed in July 2018 rejecting the Appellants’ claims. The Appellants challenged the award under Section 34 of the Act. Initially, the challenge was on merits, but it was later amended to challenge the unilateral appointment as void ab initio in light of Section 12(5).
The Single Judge and the Division Bench of the Delhi High Court rejected the challenge, holding that the Appellants had waived their right to object by their conduct, specifically citing the “no objection” recorded in the procedural order and their participation in the proceedings.
II. Issues before the Supreme Court
- Unilateral Appointment: Whether the appointment of a sole arbitrator by the Chairman of the Respondent (an interested party) renders the arbitrator ineligible under Section 12(5) read with the Seventh Schedule of the Act.
- Waiver by Conduct: Whether the Appellants’ participation, filing of pleadings, joint applications under Section 29A, or the recording of “no objection” in procedural orders constitutes a valid waiver under the proviso to Section 12(5).
- Stage of Challenge: Whether an objection regarding de jure ineligibility can be raised for the first time in a Section 34 petition, having not been raised before the Arbitral Tribunal.
III. Submissions of the Parties
Appellants: The Appellants contended that the appointment was void ab initio based on the principles laid down in TRF Ltd. and Perkins Eastman. They argued that the Chairman, being ineligible to act as an arbitrator, was also ineligible to appoint one. Further, they argued that waiver under Section 12(5) requires an “express agreement in writing” and cannot be inferred from conduct or silence.
Respondent: The Respondent argued that the Appellants waived the ineligibility by participating in the proceedings for two years and recording their consent in the first procedural order. They contended that the challenge was an afterthought raised only after the award was passed .
IV. Ratio Decidendi
A. Invalidity of Unilateral Appointments (Section 12(5))
The Supreme Court reaffirmed that the principle of “equal treatment of parties” under Section 18 extends to the appointment process. Relying on TRF Ltd., Perkins Eastman, and Bharat Broadband, the Court held that a person who is ineligible to act as an arbitrator (due to interest in the dispute/outcome under the Seventh Schedule) is legally disabled from appointing another person as an arbitrator.
The Court clarified that the element of invalidity flows from the “interest” the appointing authority has in the outcome. Consequently, the unilateral appointment by the Chairman of AAI was held to be void ab initio and the arbitrator lacked inherent jurisdiction.
B. Strict Interpretation of Waiver (Proviso to Section 12(5))
The Court provided a definitive interpretation of the proviso to Section 12(5), distinguishing it from “deemed waiver” under Section 4. The Court held that:
- Express Agreement Required: The proviso requires an “express agreement in writing” entered into subsequent to disputes having arisen. This cannot be inferred from conduct.
- Insufficient Acts: The Court explicitly cataloged acts that do not constitute a valid waiver: Filing a Statement of Claim. Recording “no objection” in procedural minutes/orders. Silence or failure to object during proceedings. Joint applications for extension of time under Section 29A.
- Rationale: The waiver must be a conscious abandonment of the right to object to statutory ineligibility. Procedural participation does not equate to an express written agreement to waive the disqualification under the Seventh Schedule .
C. Challenge to Jurisdiction at Section 34 Stage
The Court held that ineligibility under Section 12(5) renders the arbitrator de jure unable to perform functions. This defect goes to the root of the “inherent jurisdiction” of the tribunal, rendering the proceedings coram non judice.
- Unlike challenges involving bias (Fifth Schedule) which must be raised before the Tribunal, de jure ineligibility (Seventh Schedule) does not require a challenge before the arbitrator.
- Since the appointment is a nullity, the objection can be raised at any stage, including in collateral proceedings or for the first time in a Section 34 petition. An award passed by an ineligible arbitrator is a nullity and conflicts with the public policy of India.
V. Judgment
The Supreme Court allowed the appeals, setting aside the judgment of the High Court and the arbitral award dated July 30, 2018. The Court declared the appointment of the sole arbitrator void ab initio and the resulting award a nullity. The parties were granted liberty to initiate fresh arbitration proceedings in accordance with the law.
VI. AMLEGALS Remarks
- Retrospective Applicability: The 2015 Amendment applies if the notice invoking arbitration was received on or after Oct 23, 2015, regardless of the date of the underlying agreement.
- Mandatory Waiver Protocol: Arbitrators must, at the threshold, inform parties of any ineligibility. If parties wish to proceed despite the ineligibility, the arbitrator must insist on a specific, separate written agreement waiving the Section 12(5) objection. Mere minutes of the meeting are legally insufficient.
- Section 29A is Not Waiver: Joining an application for extension of the mandate under Section 29A does not cure the defect of an illegal appointment.
- Nullity of Award: An award rendered by a unilaterally appointed arbitrator (where the appointer is ineligible) is unenforceable and liable to be set aside as being against the fundamental policy of Indian law.
Case: Bhadra International (India) Pvt. Ltd. & Ors. v. Airports Authority of India
Citation: 2026 INSC 6
Court: Supreme Court of India
Date of Judgment: January 05, 2026
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