Supreme Court: Arbitrator Appointed Unilaterally by Interested Party Lacks Legal Authority

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 08.10.2026

Supreme Court: Arbitrator Appointed Unilaterally by Interested Party Lacks Legal Authority

The Supreme Court of India, in a significant judgment concerning the independence and impartiality of arbitral tribunals, has held that an arbitrator appointed unilaterally by an interested party cannot validly exercise arbitral jurisdiction merely because the opposing party participated in the proceedings without objection.

In Bhadra International (India) Pvt. Ltd. & Ors. v. Airports Authority of India, the Supreme Court set aside the arbitral awards dated 30 July 2018 and the impugned judgment of the Delhi High Court, holding that the appointment of the sole arbitrator was legally unsustainable.

The Division Bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan clarified that the principle of equal treatment under Section 18 of the Arbitration and Conciliation Act, 1996 extends beyond the conduct of arbitration proceedings to the very constitution of the arbitral tribunal.

The Court further emphasised that the statutory ineligibility contemplated under Section 12(5), read with the Seventh Schedule, can be waived only through a clear and unequivocal written agreement entered into after disputes have arisen.

Significantly, the Court held that an objection concerning the inherent lack of jurisdiction of an arbitrator may be raised at any stage, including during proceedings under Section 34 challenging the arbitral award.

Background and Facts of the Case

• The dispute originated from two licence agreements executed on 29 November 2010 between the Airports Authority of India (AAI) and a consortium comprising Bhadra International (India) Pvt. Ltd. and Novia International Consulting Aps.
• The consortium had been awarded contracts for providing ground-handling services at specified airports in India.
• Clause 78 of the licence agreements provided that disputes arising from the agreements would be referred to a sole arbitrator appointed by the Chairman of the Airports Authority of India.
• The contractual mechanism thus vested the power to appoint the sole arbitrator exclusively in the Chairman of one of the contracting parties.
• Disputes subsequently arose between the parties in 2015.
• On 27 November 2015, the consortium invoked the arbitration clause and requested the Airports Authority of India to appoint an arbitrator.
• The sole arbitrator thereafter commenced proceedings and, through the first procedural order dated 22 March 2016, recorded that neither party objected to his appointment.
• The parties continued participating in the arbitration. They also jointly sought extensions of time under Section 29A of the Arbitration and Conciliation Act, 1996.
• On 30 July 2018, the sole arbitrator passed awards rejecting the claims and counterclaims of the respective parties, effectively rendering nil awards.
• Aggrieved by the outcome, the consortium challenged the awards under Section 34 before the Delhi High Court.
• The appellants subsequently raised an objection concerning the unilateral appointment of the sole arbitrator.
• The Single Judge rejected the objection, and the Division Bench also declined to interfere.
• The matter ultimately reached the Supreme Court.

Issues Before the Supreme Court

The Supreme Court examined three principal questions:

1. Whether the sole arbitrator appointed by the Chairman of the Airports Authority of India was rendered ineligible under Section 12(5) of the Arbitration and Conciliation Act, 1996.
2. Whether the parties had waived the statutory objection to the arbitrator’s appointment through their conduct, consent, participation or other procedural acts.
3. Whether the appellants could challenge the arbitrator’s appointment for the first time in proceedings under Section 34 after the arbitral awards had been passed.

These questions required the Court to examine the relationship between party autonomy, statutory disqualification, procedural equality and the jurisdiction of an arbitral tribunal.

Arguments Advanced by the Appellants

• The appellants contended that the Chairman of the Airports Authority of India was legally ineligible to appoint the sole arbitrator because the Chairman represented an interested contracting party.
• Relying upon the Supreme Court’s decisions in TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377, Bharat Broadband Network Ltd. v. United Telecoms Ltd., (2019) 5 SCC 755, and Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760, the appellants argued that an interested or statutorily ineligible person could not unilaterally nominate an arbitrator.
• It was submitted that the resulting appointment was invalid from inception and that the awards passed pursuant to such an appointment were legally unenforceable.
• The appellants further argued that participation in arbitration proceedings, filing statements of claim, seeking extensions of time or failing to object at the initial hearing could not constitute an express written waiver under Section 12(5).
• They maintained that statutory ineligibility could be waived only through a specific written agreement satisfying the proviso to Section 12(5).

Arguments Advanced by the Airports Authority of India

• The Airports Authority of India defended the appointment on the ground that the appellants themselves had invoked Clause 78 and requested the appointment of an arbitrator.
• AAI submitted that the first procedural order expressly recorded the parties’ consent to the appointment.
• It further argued that the appellants had participated in the proceedings, filed claims and jointly sought extensions of time without raising objections concerning the arbitrator’s independence, impartiality or jurisdiction.
• According to AAI, these circumstances demonstrated acceptance of the appointment and amounted to an express agreement in writing.
• The respondent also contended that the objection was raised belatedly through an amendment to the Section 34 proceedings.

Supreme Court’s Findings and Legal Principles

1. Equal Treatment Applies to the Appointment of Arbitrators

• The Supreme Court examined Section 18 of the Arbitration and Conciliation Act, 1996, which requires equal treatment of parties and a full opportunity to present their cases.
• The Court clarified that this principle applies not merely to the conduct of arbitration but also to the procedure through which the arbitral tribunal is constituted.
• Both parties must have an equal opportunity to participate in the appointment process.
• The Court observed that party autonomy under Section 11(2), which permits parties to agree upon an appointment procedure, is not unlimited.
• Contractual freedom must operate within the mandatory framework of the Arbitration and Conciliation Act.
• Accordingly, an arbitration clause cannot override statutory requirements intended to secure independence, impartiality and procedural equality.

2. Unilateral Appointment by an Interested Party Is Legally Invalid

• The Supreme Court reiterated the principles laid down in TRF Ltd., Perkins Eastman and Bharat Broadband.
• An individual who is legally ineligible to act as an arbitrator cannot exercise the power to appoint another person as arbitrator where the statutory disqualification and unilateral appointment principles apply.
• The Court emphasised that the problem is not necessarily the personal integrity or competence of the individual appointed.
• Rather, the defect lies in the appointment mechanism itself, where an interested party exercises exclusive control over the constitution of the tribunal.
• The judgment reinforces the distinction between the impartiality of an individual arbitrator and the fairness of the process through which that arbitrator is selected.

3. Section 12(5) Overrides Contrary Contractual Arrangements

• The Court examined Section 12(5), introduced through the Arbitration and Conciliation (Amendment) Act, 2015.
• The provision renders a person ineligible to act as an arbitrator where the person’s relationship with the parties, counsel or subject matter falls within the categories specified in the Seventh Schedule.
• The Court clarified that the statutory restriction overrides prior contractual agreements to the contrary.
• It also distinguished the Fifth Schedule, which identifies circumstances capable of raising justifiable doubts about independence or impartiality, from the Seventh Schedule, which prescribes grounds of statutory ineligibility.
• The Court held that the 2015 amendment applied to the present arbitration because the arbitration was invoked on 27 November 2015, after the amendment came into force on 23 October 2015.

4. Mere Participation Does Not Constitute Express Written Waiver

• One of the most important aspects of the judgment concerns the interpretation of the proviso to Section 12(5).
• The Supreme Court held that a waiver of statutory ineligibility must arise from an express agreement in writing entered into after disputes have arisen.
• The Court rejected the proposition that such waiver could automatically be inferred from conduct.
• In particular, the Court examined the significance of participation in proceedings, the filing of statements of claim, requests for extension of time under Section 29A and the absence of an objection recorded in the first procedural order.
• These circumstances did not satisfy the statutory requirement of a clear and unequivocal written agreement waiving the applicable ineligibility.
• The Court thus distinguished ordinary procedural participation from the conscious relinquishment of a statutory right.

5. Ineligibility Results in Termination of the Arbitrator’s Mandate

• The Supreme Court explained the consequences of statutory ineligibility under Section 12(5).
• Where an arbitrator is rendered ineligible under the provision, the arbitrator becomes legally incapable of continuing the mandate.
• Such ineligibility results in automatic termination of the mandate.
• An aggrieved party may approach the competent court under Sections 14 and 15 for the appointment of a substitute arbitrator.
• Where an arbitral award has already been passed by an ineligible arbitrator, the aggrieved party may seek to have the award set aside under Section 34.
• The Court therefore distinguished between remedies available during the arbitration and those available after the award.

6. Objection to Inherent Lack of Jurisdiction Can Be Raised at Any Stage

• The Supreme Court further held that an objection concerning an arbitrator’s inherent lack of jurisdiction may be raised at any stage of proceedings.
• The Court explained that an arbitral tribunal derives its authority from a valid arbitration agreement and a legally valid appointment.
• Where the tribunal has been constituted in a manner that deprives it of lawful jurisdiction, the resulting award cannot acquire validity merely because the parties participated in the proceedings.
• Referring to established principles concerning jurisdictional defects, the Court held that a fundamental absence of jurisdiction cannot ordinarily be cured through acquiescence or implied consent.
• Accordingly, the appellants were entitled to challenge the arbitrator’s appointment in their Section 34 proceedings.
• The judgment is particularly significant because it rejects the argument that failure to object during arbitration necessarily prevents a subsequent challenge based on statutory ineligibility.

7. Arbitrators Must Ensure Compliance at the Initial Stage

• The Supreme Court also issued important observations concerning the responsibilities of arbitrators.
• The Court stated that an arbitrator should ensure, at the commencement of proceedings, that the parties are willing to proceed before the tribunal and that the requirements of Section 12(5) have been satisfied.
• Where statutory ineligibility is implicated, the arbitrator should insist upon a written waiver agreement satisfying the statutory provision.
• The Court further observed that where a party fails to appear despite receiving notice in such circumstances, the arbitrator should not proceed further and should withdraw.
• These observations emphasise the importance of establishing the legal validity of the tribunal’s constitution before substantive proceedings continue.

Important Judgments Considered by the Supreme Court

The judgment discusses several leading authorities governing arbitrator independence, unilateral appointment and jurisdiction.

Judicial precedent	Legal principle
TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377	A statutorily ineligible arbitrator cannot nominate another arbitrator.
Bharat Broadband Network Ltd. v. United Telecoms Ltd., (2019) 5 SCC 755	Section 12(5) ineligibility requires express written waiver after disputes arise.
Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760	An interested party cannot exercise exclusive power to appoint a sole arbitrator.
Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), (2025) 4 SCC 641	Equality, neutrality and fairness in arbitral tribunal constitution.
Dharma Prathishthanam v. Madhok Construction (P) Ltd., (2005) 9 SCC 686	Unilateral appointment and reference without lawful authority are invalid.
Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran Nigam Ltd., (2019) 17 SCC 82	Inherent jurisdictional objections may be raised at any stage.

The Supreme Court relied upon these principles to examine whether the arbitral tribunal had been validly constituted and whether the resulting awards could survive judicial scrutiny.

Final Decision of the Supreme Court

The Supreme Court allowed Civil Appeal Nos. 37–38 of 2026.

The Court concluded that the Delhi High Court had erred in sustaining the arbitral appointment and rejecting the challenge raised by the appellants.

Consequently, the Supreme Court:

1. Set aside the impugned judgment of the Delhi High Court.
2. Set aside the arbitral awards dated 30 July 2018.
3. Clarified that the parties remained free to initiate fresh arbitration proceedings in accordance with law.

The decision therefore invalidated the earlier awards without adjudicating the underlying commercial claims and counterclaims on their merits.

Legal and Commercial Implications

• The judgment has important implications for commercial contracts, infrastructure agreements, public-sector undertakings and arbitration clauses that vest exclusive appointment powers in one contracting party.
• Review of arbitration clauses: Businesses should examine whether existing agreements permit one party or its officials to exercise unilateral control over the appointment of a sole arbitrator.
• Statutory waiver requirements: Parties should not assume that participation in proceedings or failure to object amounts to a legally sufficient waiver of Section 12(5).
• Validity of arbitral awards: Awards passed by tribunals constituted through legally invalid appointment procedures may face challenges under Section 34.
• Public-sector and infrastructure contracts: Government authorities and public-sector entities should ensure that appointment mechanisms comply with statutory neutrality and equality requirements.
• Arbitration strategy: Parties considering challenges to arbitral jurisdiction should distinguish between ordinary procedural objections and fundamental statutory ineligibility.
• The decision reinforces the need for careful drafting of arbitration clauses and strict compliance with statutory safeguards at the stage of tribunal constitution.

Conclusion

The Supreme Court’s judgment in Bhadra International (India) Pvt. Ltd. & Ors. v. Airports Authority of India is an important authority on unilateral appointment of arbitrators, statutory ineligibility and the legal requirements for waiver under Section 12(5) of the Arbitration and Conciliation Act, 1996.

The Court reaffirmed that independence and impartiality must be secured not only during arbitral proceedings but also through a fair and legally compliant appointment process.

By holding that mere participation does not amount to express written waiver and that fundamental jurisdictional objections may be raised even at the stage of challenging an award, the judgment strengthens procedural safeguards in Indian arbitration law. The ruling underscores that the validity of an arbitral award depends not only on the adjudication of the dispute but also on the lawful constitution of the tribunal that renders it.

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Source: Supreme Court

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