Contractor Won Claims Over Ranchi Airport Project Before Arbitrator Appointed Solely by Airports Authority; Delhi High Court Quashes Award
Facts
The Airports Authority of India awarded Ahluwalia Contracts India Limited the work of constructing a New Integrated Passenger Terminal Building at Birsa Munda Airport, Ranchi.
The Letter of Award was issued on 21 January 2009, followed by a formal agreement dated 2 February 2009. The stipulated period for completing the construction was twelve months.
Clause 57 of the General Conditions of Contract provided for the resolution of disputes through arbitration.
Under Clause 57(c):
- Disputes were to be referred to a sole arbitrator appointed by an authority identified in Schedule E.
- The contractor could not object merely because the appointed arbitrator was an employee of the Airports Authority of India.
- If the original arbitrator became unavailable, the designated authority could appoint another arbitrator.
- No person other than one appointed by the designated authority could act as arbitrator.
- If such an appointment was not possible, the dispute was not to be referred to arbitration.
Disputes subsequently arose regarding:
- Delay in completing the project;
- Imposition of liquidated damages; and
- Release of amounts allegedly payable to the contractor.
On 16 April 2019, Ahluwalia Contracts invoked arbitration by issuing a notice under Section 21 of the Arbitration and Conciliation Act, 1996.
On 13 May 2019, the Airports Authority of India appointed the sole arbitrator under Clause 57(c).
Both parties participated in the arbitral proceedings. By an award dated 10 August 2023, the arbitrator allowed Claim Numbers 1, 4 and 5 in favour of Ahluwalia Contracts.
The Airports Authority of India challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, contending that its own unilateral appointment of the arbitrator violated Section 12(5), read with the Seventh Schedule.
Issues
- Whether the Airports Authority of India’s exclusive appointment of the sole arbitrator violated Section 12(5), read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996.
- Whether an employee of an interested party could either act as an arbitrator or unilaterally nominate another person as arbitrator.
- Whether the appointment became a joint appointment merely because the contractor had requested the Airports Authority to appoint an arbitrator.
- Whether participation in the arbitration without objection amounted to waiver of the arbitrator’s ineligibility.
- Whether the party that had itself appointed the arbitrator could subsequently challenge the appointment.
- Whether the objection could be raised for the first time during proceedings under Section 34.
- Whether the absence of an express written waiver rendered the appointment and resulting award void from their inception.
Petitioner’s Arguments
The Airports Authority of India argued that:
- The sole arbitrator had been appointed unilaterally under Clause 57(c).
- The appointment violated the amended Section 12(5), read with the Seventh Schedule.
- A party interested in the dispute could neither act as arbitrator nor possess the exclusive power to appoint an arbitrator.
- The defect went to the root of the arbitral tribunal’s jurisdiction.
- An objection concerning inherent lack of jurisdiction could be raised at any stage.
- Its participation in the arbitration did not amount to waiver.
- Waiver under the proviso to Section 12(5) required a clear and express written agreement entered into by both parties after the dispute arose.
- No such written waiver existed.
- Since the appointment was void from the beginning, the proceedings and award were also legally non-existent.
The Airports Authority relied principally upon the Supreme Court’s judgment in Bhadra International (India) Private Limited v. Airports Authority of India.
Respondent’s Arguments
Ahluwalia Contracts opposed the petition and argued that:
- The Airports Authority had itself appointed the sole arbitrator.
- It participated in the arbitral proceedings without raising any objection.
- It waited for the outcome and challenged the appointment only after the award went against it.
- A party should not be permitted to take advantage of its own appointment after receiving an adverse award.
- The appointment was not unilateral because the contractor had requested the Airports Authority to appoint an arbitrator.
- No objection regarding the arbitrator’s appointment was raised before the arbitral tribunal.
- The objection should therefore not be permitted for the first time under Section 34.
- The challenge regarding the arbitrator’s appointment had allegedly not been specifically pleaded in the original petition.
Analysis of the Law
Section 12(5) and the Seventh Schedule
Section 12(5) makes a person ineligible to act as an arbitrator where that person’s relationship with a party, its counsel or the dispute falls within any category specified in the Seventh Schedule.
The Court explained that after the amendment:
- An employee or other ineligible person cannot act as arbitrator.
- An interested or ineligible person cannot exercise exclusive authority to nominate or appoint another person as arbitrator.
- A unilateral appointment made by one interested party is void from its inception.
Equal Treatment Under Section 18
The principle of equal treatment under Section 18 applies not only during arbitral proceedings but also while constituting the tribunal.
Both parties must have an equal say in selecting the arbitrator. An arbitration clause granting one party exclusive authority over the appointment process violates this requirement.
Express Written Waiver
The proviso to Section 12(5) permits parties to waive the statutory ineligibility only through an express agreement in writing after the dispute has arisen.
Such a waiver must:
- Be entered into by both parties;
- Be clear and unequivocal;
- Demonstrate conscious abandonment of the statutory protection; and
- Be made after the dispute has arisen.
No prescribed format is necessary. However, waiver cannot be inferred from silence, conduct, participation or an implied understanding.
Jurisdictional Nature of the Defect
The Court held that an ineligible arbitrator lacks inherent jurisdiction.
Consequently:
- The appointment is void from the beginning.
- The arbitral proceedings are legally invalid.
- The award is a nullity and contrary to Indian public policy.
- The objection can be raised at any stage, including proceedings under Section 34 or during enforcement under Section 36.
Precedent Analysis
Bhadra International (India) Private Limited and Others v. Airports Authority of India, 2026 Indian Supreme Court Cases 6
The Supreme Court held that:
- Parties must have an equal say in constituting the arbitral tribunal.
- A person interested in the dispute cannot unilaterally appoint an arbitrator.
- Statutory ineligibility cannot be waived by implication or conduct.
- Waiver requires an express written agreement.
- Participation in arbitration does not cure the defect.
- An objection to the arbitrator’s inherent lack of jurisdiction may be raised for the first time under Section 34.
- An award made by an ineligible arbitrator is void and unenforceable.
The Delhi High Court treated this judgment as directly governing the dispute.
Mahavir Prasad Gupta and Sons v. Government of National Capital Territory of Delhi, 2025 Supreme Court Cases OnLine Delhi 4241
The Division Bench of the Delhi High Court held that:
- An arbitration agreement allowing unilateral appointment of a sole or presiding arbitrator is invalid.
- Conduct or participation cannot constitute waiver under Section 12(5).
- Even the party that appointed the arbitrator may subsequently challenge the appointment.
- The act of appointment itself does not constitute an express written waiver.
- An award passed by a unilaterally appointed arbitrator is a nullity.
The Court relied upon this precedent to reject the argument that the Airports Authority was barred from questioning its own appointment.
Railways Board, Ministry of Railways v. Titagarh Rail Systems Limited, 2026 Delhi High Court 1720
This decision recognised that unilateral appointment contrary to Section 12(5) is void and may be challenged during proceedings under Section 34.
It supported the Airports Authority’s contention that the defect concerned jurisdiction and was not cured by participation.
Engineering Projects (India) Limited v. Allied Construction, 2026 Delhi High Court 2540
The Delhi High Court similarly held that an award rendered following an invalid unilateral appointment could not survive a challenge under Section 34.
The Court applied the same principle to the Airports Authority’s appointment under Clause 57(c).
Court’s Reasoning
Clause 57(c) gave the Airports Authority of India exclusive control over the appointment of the sole arbitrator. The contractor had no equal say in selecting the tribunal.
The Court held that merely requesting the Airports Authority to appoint an arbitrator did not transform the appointment into a joint or consensual appointment.
The appointment remained unilateral because the Airports Authority alone selected the arbitrator under its contractual authority.
The fact that the Airports Authority itself made the appointment did not prevent it from subsequently challenging the award. Although such conduct might appear disingenuous, jurisdiction could not be created through estoppel, participation or the conduct of one party.
The act of appointing the arbitrator was also not an express written waiver because:
- Waiver required an agreement between both parties;
- It had to be entered into after the dispute arose; and
- It had to expressly waive the protection under Section 12(5).
The contractor’s filing of claims and participation in the arbitral proceedings similarly did not constitute waiver.
Since there was no bilateral express agreement in writing, the appointment violated Section 12(5), read with the Seventh Schedule.
The arbitrator therefore lacked jurisdiction from the beginning, rendering the proceedings and the resulting award legally void.
Conclusion
The Delhi High Court held that:
- The sole arbitrator was unilaterally appointed by the Airports Authority of India.
- The appointment violated Section 12(5), read with the Seventh Schedule.
- The contractor’s request for arbitration did not amount to consent to the Airports Authority’s exclusive choice.
- Participation in the proceedings did not waive the statutory objection.
- Waiver required a clear agreement in writing between both parties after the dispute arose.
- Even the party that made the unilateral appointment could challenge it.
- The jurisdictional objection could be raised for the first time under Section 34.
- The appointment was void from its inception and the arbitral award was a nullity.
The Court allowed the petition, set aside the arbitral award dated 10 August 2023 and disposed of the pending applications.
Case Details
Case: Airports Authority of India v. Ahluwalia Contracts India Limited
Neutral Citation: 2026:DHC:5785
Court: High Court of Delhi at New Delhi
Case Number: Original Miscellaneous Petition (Commercial) Number 512 of 2023, with Interim Application Numbers 25189 of 2023 and 37025 of 2024
Judge: Justice Avneesh Jhingan
Date: 20 July 2026
Result: Petition allowed; unilateral appointment held void from inception and arbitral award dated 10 August 2023 set aside
