Unilateral appointment of arbitrators and the requirement of express waiver under Indian arbitration law

Exploring the complexities of unilateral arbitrator appointments and the necessity for express waivers in Indian arbitration law.

The decision of the High Court of Delhi in PTC Techno Pvt. Ltd. v. Samsung India Electronics Pvt. Ltd. is another significant development in Indian arbitration jurisprudence concerning the validity of unilateral appointment of arbitrators. The judgment reinforces the principles of neutrality, impartiality, and equal participation in the constitution of arbitral tribunals under the Arbitration and Conciliation Act, 1996. By setting aside an arbitral award on the ground that the arbitrator had been appointed by an official of one of the parties, the Court reiterated that statutory safeguards under Section 12(5) cannot be bypassed through implication or conduct.

The dispute arose from a Mould Agreement and related Purchase and Sale Agreements executed between PTC Techno Pvt. Ltd. and Samsung India Electronics Pvt. Ltd. Under these agreements, Samsung was to supply moulds for manufacturing purposes. Subsequently, disputes emerged regarding the return of moulds after termination of the contractual relationship. The arbitration clause contained in the Mould Agreement provided that disputes would be resolved through arbitration by a sole arbitrator appointed by the Vice President of Samsung. Acting upon this clause, Samsung’s Vice President appointed a sole arbitrator in April 2017.

The petitioner challenged the arbitral award under Section 34 of the Arbitration and Conciliation Act on the ground that the appointment itself was invalid under Section 12(5) read with the Seventh Schedule of the Act. The petitioner argued that once the 2015 amendments came into force, any employee or official of a party to the dispute became ineligible not only to act as an arbitrator but also to appoint an arbitrator. Therefore, the appointment made by Samsung’s Vice President was contrary to the statutory mandate and rendered the entire arbitral proceedings void.

On the other hand, Samsung contended that the petitioner had participated in the arbitration proceedings without objecting to the appointment of the arbitrator. It was argued that the petitioner had effectively waived its objections by conduct and could not raise the issue for the first time at the stage of challenge under Section 34. Samsung further relied upon an earlier order of the Court passed in proceedings under Section 9, where the parties had agreed to pursue interim relief before the arbitral tribunal under Section 17. According to Samsung, this amounted to written consent and waiver of objections under Section 12(5).

The Delhi High Court rejected these submissions and placed substantial reliance on the recent judgment of the Supreme Court of India in Bhadra International (India) Pvt. Ltd. v. Airports Authority of India. The Supreme Court in Bhadra International had clarified that the principle of equal treatment under Section 18 extends not only to arbitral proceedings but also to the process of appointment of arbitrators. Equal treatment necessarily requires that both parties have an equal role in constituting the arbitral tribunal. The Supreme Court further held that any appointment made by a person who is himself ineligible under the Seventh Schedule is ex facie invalid.

A crucial aspect emphasized by the Court was the interpretation of the proviso to Section 12(5), which permits parties to waive the applicability of the provision only through an “express agreement in writing” after disputes have arisen. The Court observed that the legislature intentionally used strict language to prevent waiver from being inferred through silence, participation, acquiescence, or implied conduct. Participation in arbitration proceedings, filing claims, or failing to object at an earlier stage cannot amount to a valid waiver. Waiver under Section 12(5) requires a conscious and unequivocal written agreement between both parties.

The Court also referred to the Division Bench judgment in Mahavir Prasad Gupta and Sons v. Govt. of NCT of Delhi, which categorically held that unilateral appointment clauses are invalid and that awards passed by such arbitrators are nullities. The Division Bench had further clarified that objections relating to lack of inherent jurisdiction can be raised at any stage, including during enforcement proceedings or in a challenge under Section 34.

Applying these principles, the Delhi High Court concluded that the appointment of the arbitrator by Samsung’s Vice President directly violated Section 12(5) and the Seventh Schedule. The Court observed that there was no express written agreement between the parties waiving the statutory protection provided under the Act. The earlier order passed under Section 9 merely allowed the parties to seek interim relief before the arbitrator and could not be interpreted as consent to waive objections regarding the arbitrator’s eligibility.

The judgment is important because it reinforces party equality and procedural fairness in arbitration. Arbitration is founded on consent, and the legitimacy of the arbitral process depends upon the independence and impartiality of the tribunal. Allowing one party to unilaterally appoint an arbitrator undermines confidence in the process and creates an imbalance contrary to the objectives of modern arbitration law. By treating such appointments as void ab initio, Indian courts continue to strengthen the credibility and neutrality of arbitration proceedings.

The ruling also demonstrates the judiciary’s consistent approach towards post amendment arbitration law in India. Courts have increasingly recognized that the provisions introduced through the 2015 amendments are mandatory in nature and aimed at ensuring transparency and fairness. The insistence on an express written waiver ensures that parties are fully aware of the rights they are relinquishing and prevents stronger parties from relying on procedural technicalities or implied consent.

In conclusion, the judgment in PTC Techno Pvt. Ltd. v. Samsung India Electronics Pvt. Ltd. represents a significant reaffirmation of the principles governing impartiality in arbitration. The decision clarifies that unilateral appointments by interested parties are legally unsustainable and that statutory protections under Section 12(5) cannot be diluted through conduct or participation. By setting aside the arbitral award, the Delhi High Court strengthened the integrity of the arbitral process and reinforced the importance of equal treatment and genuine consent in the constitution of arbitral tribunals.