The Delhi High Court has upheld the setting aside of an arbitral award worth ₹1.76 crore granted in favor of M/s Mahavir Prasad Gupta and Sons, ruling that the Sole Arbitrator was appointed unilaterally by the Government of NCT of Delhi, rendering the appointment invalid under Section 12(5) of the Arbitration and Conciliation Act, 1996.
A Division Bench comprising Justices Vibhu Bakhru and Tejas Karia held that unilateral appointment of a Sole Arbitrator by one party, without an express written waiver post-dispute, is impermissible and violates the principles of impartiality, public policy, and equal treatment under the Arbitration Act. The Court clarified that active participation in the arbitral proceedings without objecting does not amount to a valid waiver under the proviso to Section 12(5), which requires an express agreement in writing.
The dispute arose out of a contract for roadwork on Maharaja Surajmal Marg, where the appellant was awarded a work order for over ₹5.16 crore. After completion, payment was withheld over alleged deficiencies. A third-party audit later found the work acceptable, and the Sole Arbitrator awarded ₹1.76 crore plus interest. However, the award was challenged and ultimately set aside by the Commercial Court on grounds of ineligibility of the arbitrator.
The Court reiterated binding precedents like TRF Limited v. Energo Engineering Projects Limited, (2017) 8 SCC 377, Perkins Eastman Architects DPC v. HSCC (India) Ltd 2019 SCC OnLine SC 1517, and Bharat Broadband Network Ltd. v. United Telecoms Ltd. (2019) 5 SCC 755, holding that a party interested in the dispute outcome cannot appoint an arbitrator, and any such award is void from inception. The Court also clarified that objections to such appointments can be raised at any stage, even during enforcement proceedings, and that courts may suo motu set aside awards violating public policy.
Advocates who appeared in this case
For the Appellant : Mr M.K. Ghosh and Ms Tina Garg, Advocates.
For the Respondent : Mr Tushar Sannu, and Ms Ankita Bhadouriya, Advocates.
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