Unilateral appointment of arbitrator cannot be waived by mere participation in proceedings, award rendered a nullity: Delhi high court

Delhi High Court Rules Unilateral Arbitrator Appointments Require Consent: Participation Alone Insufficient for Validity, Resulting in Nullity.

Case Title: Union of India v. Goodrich Foodtech Ltd.

Citation: (2026) ibclaw.in 4655 HC

Coram: Justice Subramonium Prasad

The Delhi High Court has set aside an arbitral award on the ground that the Sole Arbitrator was unilaterally appointed by the Union of India in violation of Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996, holding that mere participation in the arbitral proceedings does not amount to a valid waiver of the objection to such appointment.

The dispute arose out of five contracts for supply of malted milk food with cocoa to the Army, awarded to the respondent pursuant to a tender floated by the Union of India. After the petitioner alleged deviation from specifications, it issued a show cause notice, terminated four of the contracts, and forfeited the bank guarantees furnished by the respondent. The respondent invoked arbitration under the Arbitration Clause contained in the tender documents, which provided that the arbitrator would be appointed by the Competent Financial Authority. The Sole Arbitrator, so appointed, ruled in favour of the respondent on several claims, quashed the termination and debarment letters, and directed refund of the bank guarantees with interest. The Union of India filed a petition under Section 34 challenging the award, primarily on grounds relating to the merits of the findings.

During the hearing, the Court noted that the Sole Arbitrator had been unilaterally appointed by the petitioner pursuant to the Arbitration Clause. The respondent argued that its own invocation letter, which had called upon the Competent Financial Authority to appoint an arbitrator, along with its participation in the proceedings without objection, amounted to a waiver of Section 12(5), relying on Bhadra International (India) Pvt. Ltd. v. Airports Authority of India, 2026 SCC OnLine SC 7, which held that there is no fixed format for a waiver under the proviso to Section 12(5).

The Court referred extensively to Bhadra International, which held that waiver under the proviso to Section 12(5) must be through an express agreement in writing, entered into after the dispute has arisen, and cannot be inferred from conduct, since Section 12(5) is an exception to the deemed waiver contemplated under Section 4 of the Act. Reliance was also placed on Bharat Broadband Network Ltd. v. United Telecoms Ltd., which held that filing of pleadings before an arbitrator does not amount to an express agreement that the parties wish an ineligible arbitrator to continue. The Court further relied on the Division Bench ruling of the Delhi High Court in Mahavir Prasad Gupta & Sons v. State (NCT of Delhi), 2025 SCC OnLine Del 4241, which held that a party which has itself unilaterally appointed an arbitrator is not thereby deemed to have waived the objection to such appointment, and retains the right to challenge it at any stage, including under Section 34, even though it made the appointment itself.

The Court held that since the Arbitration Clause provided for appointment of the arbitrator by the Competent Financial Authority, an official of the Union of India which was itself a party to the dispute, and there was no express agreement in writing after the dispute arose waiving the ineligibility, the appointment of the Arbitrator was in violation of Section 12(5) read with the Seventh Schedule of the Act. It further held that the absence of a specific ground on this point in the petition did not preclude the point being raised, since it flowed from the binding law declared by the Supreme Court under Article 141 of the Constitution. The appointment was held void ab initio, rendering the Impugned Award a nullity. The petition under Section 34 was accordingly allowed, and the Impugned Award dated April 27, 2022, as modified on May 6, 2022, was set aside.