Delhi high court reaffirms that unilateral appointment of arbitrators violates section 12(5) of the arbitration and conciliation act

Delhi High Court Upholds Legal Standards, Declares Unilateral Arbitrator Appointments Non-compliant with Arbitration Act Section 12(5).

The Delhi High Court, in Govt. of NCT of Delhi v. RKMT Buildcon Pvt. Ltd., O.M.P. (COMM) 445/2024, decided on 1 July 2026, once again underscored the importance of impartiality in arbitral proceedings by setting aside an arbitral award on the ground that the sole arbitrator had been appointed through a unilateral appointment mechanism. The judgment, delivered by Justice Harish Vaidyanathan Shankar, reinforces the principle that the legitimacy of arbitration depends not only upon a fair adjudication but also upon the fairness of the process through which the arbitral tribunal is constituted.

The dispute arose out of a construction contract executed between the Government of NCT of Delhi through the Public Works Department and RKMT Buildcon Pvt. Ltd. for the construction of additional classrooms and allied works in various government schools. Although the contractual work was completed, disputes subsequently emerged regarding payments under the final bill, deviation and extra items, escalation, prolongation costs, GST and other contractual claims. In accordance with Clause 25 of the General Conditions of Contract, the Chief Engineer of the PWD appointed a sole arbitrator, who later passed an award dated 22 May 2024 allowing several claims of the contractor while rejecting certain counterclaims of the Government. The Government challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, confining its challenge solely to the legality of the arbitrator's appointment rather than the merits of the award itself.

Before the High Court, the petitioner argued that the appointment of the sole arbitrator by the Chief Engineer amounted to a unilateral appointment made by an interested party, thereby violating the mandatory provisions of Section 12(5) of the Arbitration and Conciliation Act, 1996. It was submitted that once the constitution of the arbitral tribunal itself was contrary to law, the resulting award became unsustainable irrespective of its merits. The respondent, however, contended that both parties had participated in the arbitral proceedings without raising any objection and had therefore waived their right to challenge the appointment under the proviso to Section 12(5).

The Court rejected the respondent's contention by closely examining the legislative framework introduced through the Arbitration and Conciliation (Amendment) Act, 2015. It observed that Section 12(5), read with the Seventh Schedule, was enacted to strengthen the independence and impartiality of arbitrators by rendering certain categories of persons ineligible for appointment and by prohibiting appointment mechanisms that allow an interested party to unilaterally constitute the arbitral tribunal. According to the Court, the object of the provision is to ensure that arbitral justice is not only done but is also seen to be done.

A significant aspect of the judgment is the Court's interpretation of the proviso to Section 12(5), which permits parties to waive the statutory disqualification only through an express agreement in writing after disputes have arisen. Relying extensively upon the Supreme Court's decisions in Bhadra International (India) Pvt. Ltd. v. Airports Authority of India and Bharat Broadband Network Ltd. v. United Telecoms Ltd., the Court clarified that waiver cannot be inferred from silence, participation in proceedings, filing of pleadings or any other conduct of the parties. The expression "express agreement in writing" requires a conscious, informed and unequivocal relinquishment of the statutory protection, which cannot be substituted by implied consent or procedural participation.

The Court further examined Clause 25(ii) of the General Conditions of Contract, the appointment letter issued by the Chief Engineer, the arbitral award and the arbitrator's own communication accepting the reference. These documents clearly established that the arbitrator had been appointed solely by the Chief Engineer in exercise of powers conferred under the contract. The Court found that the appointment was neither made through a mutually agreed process nor by an independent institution or judicial authority. Since no express written agreement waiving the applicability of Section 12(5) was produced before the Court, the statutory requirement remained unfulfilled.

While deciding the matter, the Court also relied upon the Constitution Bench judgment in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), which reaffirmed that equality of parties extends to the appointment stage of arbitration and that unilateral appointment clauses undermine the independence and impartiality of the arbitral process. The Constitution Bench had further recognised that any waiver of objections relating to unilateral appointments must satisfy the strict requirement of an express written agreement after disputes have arisen.

Applying these settled principles, the Delhi High Court concluded that the appointment of the sole arbitrator by the Chief Engineer was invalid from its inception. Since the tribunal itself lacked statutory competence under Section 12(5), the defect went to the very root of jurisdiction and could not be cured by the parties' participation in the proceedings. Consequently, the arbitral award was set aside. The Court reiterated that neutrality in the appointment of arbitrators is a substantive safeguard forming an integral part of the arbitral framework and cannot be diluted through implied consent or procedural acquiescence.

The decision serves as another important reaffirmation of the evolving jurisprudence on arbitrator neutrality in India. It strengthens the legislative objective of ensuring fairness, equality and independence in arbitral proceedings and makes it clear that unilateral appointment mechanisms controlled by one of the disputing parties cannot survive judicial scrutiny unless there is a valid and express written waiver executed after the disputes have arisen.