1. Introduction
For decades, Indian arbitrations carried a quiet paradox. Disputes meant to be decided by neutral adjudicators often began with one party holding the unilateral power to appoint the sole arbitrator. It was particularly common in contracts involving public sector entities where arbitration clauses sat uneasily with a foundational principle of justice i.e., nemo judex in causa sua (no one should be a judge in their own cause). The Arbitration and Conciliation (Amendment) Act of October 2015 introduced section 12(5) to the Arbitration and Conciliation Act, 1996 (“Act”) to address arbitrator’s neutrality. This section bars appointment of those persons as arbitrators who have a relationship with any of the parties or counsel or dispute and such persons come within the ambit of the list contained in the Seventh Schedule. The section provides for a leeway and to waive this restriction, parties must agree in writing. Yet a critical question lingered: what constitutes a valid waiver of this ineligibility? On January 5, 2026, in Bhadra International (India) Pvt. Ltd. & Ors. v. Airports Authority of India[1] the Supreme Court (“SC”) resolved this.
This newsletter examines the judgment and its wider implications.
2. Facts and Contentions
2.1 Facts: Two license agreements were executed on November 29, 2010 (“Agreements”) between Airports Authority of India (“AAI“) and Bhadra International (India) Pvt. Ltd. and Novia International Consulting Aps operating as a joint consortium (“Appellants”). Under the Agreements, the Appellants were permitted to provide ground handling services at specified airports. Disputes were to be resolved by a sole arbitrator “to be appointed by the Chairman of the Authority.” The provision also stated the parties would not object if the arbitrator was an AAI employee or had previously expressed views on matters in dispute. Disputes arose in 2015 and the Appellants invoked the arbitration clause a month after the 2015 Amendment had come into force. The chairman of AAI appointed the sole arbitrator. At the first hearing the arbitrator recorded the parties’ no objection to his appointment. Thereafter, both parties continued with the proceedings and neither raised any objection to the tribunal’s constitution.
On July 30, 2018, the sole arbitrator passed a “Nil” award rejecting both claims and counterclaims (“Awards”). The Appellants filed a petition under section 34 of the Act for setting aside the Awards. Three years later, sometime in 2022 the Appellants introduced the ground that unilateral appointment rendered the Awards void. This belated challenge was the fulcrum of all subsequent proceedings. The single judge dismissed section 34 petition, and the Appellants appealed against this which too was dismissed. Thereafter, the Appellants moved the SC.
2.2 Parties’ Contentions: At the apex court, the Appellants contended the chairman of AAI was himself ineligible under the Seventh Schedule and an appointment made by an ineligible person was void ab initio. The proviso to section 12(5) required waiver only by an express agreement in writing after disputes arose, which the parties did not fulfil. The Appellants also contended that ineligibility objection could be raised at any stage since it goes to the arbitrator’s inherent lack of jurisdiction.
AAI defended the appointment and said it was not unilateral since the Appellants had themselves called upon AAI’s chairman to appoint the arbitrator. The first arbitral hearing recorded “no objection” which constituted an express agreement in writing as required under section 12(5) proviso. The Appellants submitted to the arbitrator’s jurisdiction by (a) their sustained participation, (b) filing a statement of claim, and (c) jointly applying to extend the arbitrator’s mandate. Thus, the objection to the appointment at the stage of a section 34 petition was an afterthought.
3. The Issues
The SC had to determine and rule on the following three issues.
3.1 Was the sole arbitrator appointed by AAI’s chairman ineligible as under section 12(5)?: The SC held that the Delhi High Court erred in holding that the arbitrator’s appointment was not unilateral since AAI proceeded to appoint based on the Appellants’ request contained in the notice invoking arbitration.
In addressing this issue, the SC began with analysis of section 18, which mandates equal treatment of parties and the right to a fair hearing.
By applying this principle, the SC held equal treatment means both parties must have an equal say in appointment of the arbitrator(s). The principle of equal treatment overrides party autonomy and would lessen the likelihood of future challenges regarding impartiality of the arbitrator.
Addressing unilateral appointments, the SC stated the non-appointing party may reasonably apprehend a unilaterally appointed arbitrator may not be fully impartial. Section 12(5) does not bar unilateral appointments, per se. But when the appointed arbitrator falls within the ambit of the Seventh Schedule and there is no written waiver by the parties, the appointment is rendered ineligible. In such case, by operation of law, the arbitrator is incapable of discharging its functions.
Accordingly, the SC concluded AAI’s chairman was rendered ineligible and the appointment of the sole arbitrator invalid.
3.2 Whether the parties waived the arbitrator’s ineligibility by express or implied conduct? The Delhi High Court held that the sole arbitrator had duly obtained the consent of the parties during the first hearing. Additionally, the parties continued to participate in the proceedings without any protest. The SC overruled High Court’s view. It analyzed the essentials of section 12(5) proviso which entails ability of the parties to waive their right to object after dispute arises which must be in writing.
Waiver is a conscious decision to relinquish a legal right with full understanding of its consequences. The SC held this right cannot be taken away by mere implication. The phrase “express agreement in writing” stipulates heightened statutory requirement which is stricter than deemed waiver by conduct. Given the rigours of the Seventh Schedule, it is clear that conduct, silence and acquiescence cannot constitute a valid waiver under section 12(5).
Thus, the SC held that notice invoking arbitration, procedural order by the arbitrator, filing a statement of claim, continued participation in the proceedings or even joint application for extending the arbitrator’s mandate do not fulfil the “express written agreement” requirement.
3.3 Timing of raising ineligibility:The third issue addressed the most contentious question. In answering it, the SC provided a structured remedial framework across three stages.
- During the proceedings, either party may directly approach the court seeking termination of the arbitrator’s mandate. The court determines whether the arbitrator is ineligible by operation of law. If yes, it proceeds to appoint a substitute so that there is no need to commence proceedings afresh. The SC noted only an arbitrator’s mandate terminates and not the proceedings altogether.
- After the award is passed, an aggrieved party may approach the court in a section 34 petition since an award passed by an ineligible arbitrator is a nullity and cannot be enforced.
- At any stage of the proceedings, ineligibility objection can be raised as it concerns the tribunal’s inherent lack of jurisdiction. The SC arrived at this conclusion by drawing parallels with civil law, where jurisdictional objection may be raised at any stage, including execution.
Thus, the SC set aside the judgment of the Delhi High Court and, consequently, the Awards. The parties were at liberty to initiate fresh arbitration proceedings.
4. Conclusion
This judgment is extremely important particularly in cases of contracting with government agencies and in public partnership contracts. Private parties must review existing arbitration clauses and negotiate them to ensure appointment can be done based on mutual agreement. If this is not possible, then timely action should be taken regarding the appointment. If parties do not expressly waive by a written agreement, challenges can arise even in the future, and the mere fact of participation will not serve as a valid defence. Normally, it should be the appointing party who ought to secure a written waiver since there is no deemed consent, even in the notice invoking arbitration. It is possible to minimize challenges to an award, arbitrator(s) asking for a written waiver at the very first hearing which will ensure there is no belated ineligibility challenge.
As the SC notes, “the test to determine bias is not actual proof of bias but reasonable apprehension of bias. The moment this apprehension takes birth in the mind of a party, the trust in the arbitral proceedings dies.” Impartiality is not a procedural formality, but the bedrock on which the entire edifice of arbitral legitimacy rests.
Author
Kamana Pradhan
[1] 2026 SCC OnLine SC 7