Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-000037-000038 – 2026 |
| Diary Number | 25327/2025 |
| Judge Name | HON’BLE MR. JUSTICE J.B. PARDIWALA |
| Bench | HON’BLE MR. JUSTICE J.B. PARDIWALA; HON’BLE MR. JUSTICE K.V. VISWANATHAN |
| Precedent Value | Binding |
| Overrules / Affirms |
|
| Type of Law | Arbitration law; statutory interpretation of Sections 12, 14, 18, 21, 29A; Fifth & Seventh Schedules |
| Questions of Law |
|
| Ratio Decidendi |
The Court held that any person falling within the Seventh Schedule is de jure ineligible to act as arbitrator, and any appointment by such a disqualified authority is void ab initio. Section 12(5)’s non-obstante clause overrides prior agreements but permits waiver only by an express agreement in writing after disputes arise. Participation, procedural orders recording “no objection,” extensions under Section 29A or filing pleadings cannot substitute for that waiver. De jure ineligibility terminates the arbitrator’s mandate under Section 14(1)(a), and awards by an ineligible arbitrator are void as against the public policy of India under Section 34(2)(b). An objection to ineligibility may be raised at any stage, including first in Section 34 proceedings. |
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon by Court |
|
| Facts as Summarised by the Court |
A consortium was awarded ground-handling licenses with a sole-arbitrator clause vesting appointment power in the Chairman. The 2015 Amendment inserted Section 12(5) and the Seventh Schedule. Disputes arose, arbitration was invoked, and the Chairman unilaterally appointed a sole arbitrator. No objection was raised in the first procedural order; the arbitrator dismissed all claims; Section 34 challenges were amended to attack the appointment; the High Court dismissed them. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts |
| Persuasive For | Other High Courts; arbitral tribunals |
| Overrules | Delhi High Court’s FAO(OS)(COMM) Nos. 23 & 24 of 2025 |
| Follows |
|
What’s New / What Lawyers Should Note
- Section 12(5) ineligibility arising from the Seventh Schedule automatically terminates an arbitrator’s mandate—no prospective cure by later consent.
- Waiver of Section 12(5) requires an express written agreement after the dispute has arisen; conduct or procedural orders recording “no objection” are insufficient.
- Unilateral appointment clauses by disqualified authorities are void ab initio; awards thus rendered are non-est and unenforceable.
- Parties may challenge de jure ineligibility at any stage, including for the first time in Section 34 proceedings as a public-policy ground.
- Arbitral tribunals must, at the outset, secure a post-dispute written waiver if a proposed arbitrator falls under the Seventh Schedule or withdraw immediately if any party declines.
Summary of Legal Reasoning
- Equal Treatment and Party Autonomy: Section 18 guarantees equal participation in tribunal constitution; unilateral appointments undermine impartiality.
- Scope of Section 12(5): The 2015 Amendment’s non-obstante overrides prior agreements and disqualifies persons in the Seventh Schedule.
- De Jure Ineligibility: Appointment by a disqualified authority is void, and the arbitrator becomes de jure unable to perform functions under Section 14(1)(a).
- Waiver Requirement: Proviso mandates express written agreement post-dispute; no room for implied or conduct-based waiver (Section 4 differs).
- Substitution vs. Annulment: An aggrieved party may approach under Section 14 to substitute an ineligible arbitrator; if an award has been made, Section 34 applies to set it aside as contrary to public policy.
- Public Policy and Bias: Awards by ineligible arbitrators violate “most basic notions of morality or justice” and fundamental policy of Indian law under Section 34(2)(b).
Arguments by the Parties
Appellants (Claimants)
- Sole arbitrator appointed unilaterally by a disqualified Chairman; appointment and resulting proceedings void ab initio.
- Ineligibility under Section 12(5) carries de jure inability; mandate terminated by operation of law; awards nullity.
- No express written waiver in compliance with the proviso; conduct and procedural orders insufficient.
- Objection to appointment may be raised first in Section 34.
Respondent (Authority)
- First procedural order recording “no objection” constitutes an express written waiver under the proviso.
- Participation (statement of claim, extension applications) demonstrates consent to the arbitrator’s jurisdiction.
- Section 12(5) waiver not formalized but implied by conduct and procedural approvals.
Factual Background
A consortium secured two ground-handling contracts under License Agreements containing a sole-arbitrator clause empowering the Chairman to appoint. The 2015 Amendment to Section 12 introduced ineligibility criteria and the Seventh Schedule. Upon invoking arbitration in late 2015, the Chairman unilaterally appointed a sole arbitrator. A procedural order (March 2016) recorded “no objection.” The arbitrator issued a nil award in July 2018. The consortium filed Section 34 applications and amendments to challenge the appointment; the Delhi High Court dismissed their appeal. The Supreme Court granted leave and addressed Section 12(5) ineligibility and waiver.
Statutory Analysis
- Section 12(5) & the Seventh Schedule disqualify persons with specified relationships from appointment; non-obstante clause overrides prior agreements.
- Proviso to Section 12(5) allows waiver only by express written agreement post-dispute.
- Section 14(1)(a) terminates mandate of an arbitrator de jure unable to perform functions.
- Section 18 ensures equal treatment in appointments and proceedings.
- Section 21 fixes the arbitration commencement date on receipt of notice.
- Section 29A extensions do not cure ineligibility.
- Section 34(2)(b) awards conflicting with public policy (bias) are subject to annulment.
- Contract Act 1872, Section 9 on express vs implied promises underpins “express agreement.”
Dissenting / Concurring Opinion Summary
No separate concurring or dissenting opinions were recorded.
Procedural Innovations
- Arbitrators should, at the first hearing, secure a written post-dispute waiver if any ineligibility under Section 12(5) is possible; otherwise, withdraw.
- Record detailed minutes of consent or non-consent to appointment to prevent later disputes.
Alert Indicators
- 🚨 Breaking Precedent – Delhi High Court’s approach to implied waiver and unilateral appointments overturned
- ✔ Precedent Followed – TRF Ltd. v. Energo, Perkins Eastman, Bharat Broadband
- ⚖️ Split Verdict – No split; unanimous judgment