Can a High Court Review Its Own Section 11 Appointment and Void an Arbitration Agreement by Enforcing a Unilateral Appointment Veto?

Summary

Practical Impact

What’s New / What Lawyers Should Note

• Supreme Court confirms no power of review or appeal against a Section 11(6) appointment order; once made, the court is functus officio.
• An exclusionary veto clause in an arbitration agreement is severable; the underlying intent to arbitrate survives.
• Parties’ joint applications under Section 29A to extend the mandate amount to waiver of procedural objections under Section 4.
• An express post-dispute waiver in writing under Section 12(5) remains mandatory only for statutory disqualifications listed in the Seventh Schedule.
• Courts must substitute an arbitrator under Sections 15(1)–(2) to preserve continuity rather than terminate arbitration.
• Public undertakings are “model litigants”; prolonged inaction by senior officers may attract adverse observations and affect good governance.

Summary of Legal Reasoning

1. Self-contained Code & Minimal Intervention: Sections 5 and 11 of the A&C Act limit judicial scrutiny to a prima facie check of an arbitration agreement; deeper challenges belong to the tribunal under Section 16.
2. No Review of Section 11 Orders: Once an arbitrator is appointed under Section 11(6), courts lack jurisdiction to review or recall that order (Interplay 2024; CORE II 2025).
3. Severability Doctrine: Unilateral appointment veto in Clause 25 is void as arbitrary and contravenes equality (Article 14); sever it and uphold the remainder as a valid arbitration clause (Offshore Infrastructures 2025).
4. Waiver vs. Statutory Disqualification: Section 4 binds parties who proceed without timely objection; Section 12(5) requires an express written waiver for ineligible arbitrators post-dispute. Joint Section 29A extensions demonstrate waiver under Section 4.
5. Continuity of Proceedings: Sections 14–15 and 29A empower courts to substitute arbitrators and extend mandates, preserving evidence and prior hearings. Failure to substitute rather than terminate arbitration is impermissible.

Arguments by the Parties

Appellant (Hindustan Construction Co. Ltd.)

• The Patna High Court exceeded jurisdiction by reviewing its 2021 Section 11 appointment order, which had attained finality and is not subject to review under the A&C Act.
• Clause 25 clearly manifests an intent to arbitrate; the exclusionary proviso cannot nullify the agreement.
• Joint three Section 29A extension applications show waiver of procedural objections; no Section 16 objections were ever raised.
• Unilateral appointment clauses must be cured by court substitution under Section 11(6), per TRF Ltd, Perkins Eastman, and CORE II.
• Delay and inaction by the respondent PS­U compelled judicial intervention; respondent’s statutory notification of August 2019 cannot retroactively alter the 2014 contract.

Respondent (Bihar Rajya Pul Nirman Nigam Ltd.)

• Clause 25 is a contingent contract: arbitration only if the Managing Director appoints an arbitrator; if not, disputes revert to courts.
• The negative covenant (“if for any reason… no arbitration”) must be given effect under the Contract Act (Sections 31, 33).
• Party autonomy permits courts to respect express negative stipulations; appointment under Section 11 would rewrite the contract (Vidya Drolia 2021; Venkataraman Krishnamurthy 2024).
• Amendment by Gazette Notification, August 2019, replacing Clause 25 with institutional tribunal provisions, reflects government policy shifting away from ad-hoc arbitration.
• SLP dismissal against Kashish Developers affirms Patna HC’s interpretation of identical clauses (though SC clarifies non-speaking dismissal is not binding).

Factual Background

Hindustan Construction Company Ltd. was awarded a bridge-construction contract by BRPNNL on 04.03.2014, containing Clause 25 for ad-hoc arbitration by an arbitrator appointed by the Managing Director and a proviso barring arbitration if such appointment failed. The appellant invoked Section 11 twice (August 2019 and August 2021), leading to two arbitrator appointments and an award in December 2021. Fresh claims for extended-period costs were filed, proceedings continued with three joint six-month extensions under Section 29A, and over seventy hearings were held. In October 2024, the respondents secured a Civil Review of the 2021 Section 11 appointment order. The Patna High Court suspended arbitration and, by judgment dated 09.12.2024, dismissed the Section 11 petition. The appellant appealed.

Statutory Analysis

• Section 5: Non-obstante clause limits judicial intervention to enumerated provisions (Sections 8, 11, 29A, 34, 37).
• Section 7: Defines “arbitration agreement” and allows proof by exchange of claims and defences under 7(4)(c).
• Section 11: Parties’ freedom to designate an appointment procedure; Sections 11(4)–(6) empower courts to appoint arbitrators when agreed processes fail.
• Section 12(5): Mandatory ineligibility categories unless post-dispute express waiver in writing.
• Sections 14–15: Deal with termination of mandate and substitution of arbitrators.
• Section 18: Equal treatment of parties.
• Section 29A: Time limits for awards; consensual six-month extensions; court powers to extend, substitute arbitrators, and impose costs.
• Section 4: Waiver of non-compliance by proceeding without timely objection.

Procedural Innovations

• Clarifies that joint Section 29A extension applications constitute waiver of procedural objections under Section 4, but cannot substitute for an express Section 12(5) waiver.
• Confirms courts must substitute arbitrators under Sections 15(1)–(2) to preserve prior evidence and hearings, rather than terminate arbitration.
• Reaffirms that review powers of High Courts under Article 227 cannot override the limited scheme of Section 11.

Alert Indicators

• 🚨 Breaking Precedent – Patna High Court’s internal review of its Section 11 order declared impermissible.
• ✔ Precedent Followed – Interplay (2024), CORE II (2025) on minimal intervention and competence-competence.
• 🔄 Conflicting Decisions – Distinguishes Patna HC in Kashish Developers; non-speaking SLP dismissals are not binding.