Headnote — Unilateral appointment, ineligibility, waiver and stage of challenge
Paras 32–39, 46–50, 67–70, 74–89, 99–113, 123
The principle of equal treatment of parties under Section 18 of the Arbitration and Conciliation Act, 1996 applies to the procedure for appointment of arbitrators. A unilateral appointment of a sole arbitrator by one party, where the appointing authority itself is ineligible under Section 12(5) read with the Seventh Schedule, is void ab initio and renders the arbitrator de jure ineligible to act. Such ineligibility can be cured only by an express agreement in writing, entered into after disputes have arisen, as contemplated by the proviso to Section 12(5). Mere participation in arbitral proceedings, filing of statement of claim, recording of “no objection” in a procedural order, seeking extension of time under Section 29A, or continued conduct in arbitration does not amount to an express waiver in writing. An objection to such inherent lack of jurisdiction may be raised at any stage, including for the first time in proceedings under Section 34, as an award passed by an ineligible arbitrator is a nullity and opposed to the public policy of India.
ANALYSIS (What the Supreme Court Actually Held)
1. Equal treatment and party autonomy (Paras 32–39)
The Court held that party autonomy under Section 11(2) is not absolute. It must operate within the framework of the Act, particularly Section 18. Equal treatment necessarily means equal participation in constitution of the arbitral tribunal. Any clause or practice that allows one party exclusive control over appointment undermines neutrality.
2. Scope of Section 12(5) and Seventh Schedule (Paras 46–50)
Section 12(5) operates notwithstanding any prior agreement. If any Seventh Schedule relationship exists, the arbitrator becomes statutorily ineligible, and disclosure or consent cannot save the appointment unless the proviso is strictly satisfied.
3. Unilateral appointment by ineligible authority (Paras 67–70)
The Chairman of AAI was held to be squarely hit by multiple items of the Seventh Schedule. Once the appointing authority itself is ineligible, it cannot appoint or nominate an arbitrator. A notice invoking arbitration under Section 21 does not amount to consent to such appointment.
4. De jure ineligibility and termination of mandate (Paras 61–64)
Ineligibility under Section 12(5) results in de jure inability under Section 14(1)(a). The mandate of the arbitrator stands automatically terminated by operation of law. This goes to the root of jurisdiction, not merely procedural irregularity.
5. Waiver — meaning of “express agreement in writing” (Paras 74–89)
The Court gave a strict construction to the proviso:
-
Waiver must be conscious, informed, post-dispute, and
-
Expressly recorded in writing.
Conduct-based waiver, implied consent, procedural acquiescence, or silence is legally insufficient. Section 4 (deemed waiver) has no application to Section 12(5).
6. Participation, pleadings, Section 29A — no waiver (Paras 92–96)
Filing statement of claim, agreeing to procedural orders, or jointly seeking extension of mandate cannot cure statutory ineligibility. Such acts may indicate cooperation but not waiver under the proviso.
7. Stage of challenge — Section 34 permissible (Paras 99–113)
Because ineligibility affects inherent jurisdiction, the objection:
-
need not be raised before the tribunal,
-
may be raised directly under Section 14, or
-
even for the first time under Section 34, after the award.
An award by an ineligible arbitrator is non-est, unenforceable, and contrary to public policy of India.
RATIO DECIDENDI
An arbitrator appointed unilaterally by an authority that is itself ineligible under Section 12(5) read with the Seventh Schedule is de jure incapable of acting; such ineligibility can be waived only by an express, post-dispute agreement in writing, and not by conduct, participation, or procedural acquiescence. An arbitral award rendered by such an ineligible arbitrator is a nullity and may be challenged at any stage, including for the first time under Section 34 of the Arbitration and Conciliation Act, 1996.
