An analysis of M/s Mahavir Prasad Gupta and Sons v. Government of NCT of Delhi, FAO (COMM) 170/2023, decided on 31 May 2025
By Aditi Karn, Associate
Introduction
The Delhi High Court’s Division Bench decision in M/s Mahavir Prasad Gupta and Sons v. Government of NCT of Delhi marks a significant reaffirmation of the principle that arbitration must be fundamentally fair, impartial, and free from unilateral control by one party. The case revisits the recurring controversy surrounding the unilateral appointment of arbitrators, and whether participation in such proceedings can amount to waiver of objections to ineligibility under Section 12(5) of the Arbitration and Conciliation Act, 1996 (“Act”).
The judgment is notable not only for its detailed engagement with the legislative framework and Supreme Court precedents but also for its practical clarity: an arbitrator appointed unilaterally, without an express written waiver after disputes arise, lacks jurisdiction; any award rendered by such a tribunal is a nullity, unenforceable in law.
Factual Background
The appellant, M/s Mahavir Prasad Gupta and Sons (“Contractor”), had executed certain road development works for the Government of NCT of Delhi (“GNCTD”). Upon completion, disputes arose over the quality of work and the thickness of certain layers laid on the roads. The contractor submitted its final bills, but payments were withheld. As is typical in government contracts, the underlying agreement contained an arbitration clause allowing the Engineer-in-Chief or his nominee to act as, or appoint, a sole arbitrator.
When disputes crystallized, GNCTD appointed a sole arbitrator unilaterally in terms of that clause. The arbitrator conducted the proceedings and, ultimately, rendered an award in favour of the contractor.
GNCTD, however, challenged the award before the Commercial Court under Section 34 of the Act, asserting that the appointment was invalid under Section 12(5) read with the Seventh Schedule, since the appointing authority (an officer of the GNCTD itself) was ineligible to act as arbitrator or to nominate one. The Commercial Court accepted this challenge and set aside the award.
The contractor appealed to the High Court, contending that GNCTD had participated in the arbitration, had even moved an application for extension of the arbitrator’s mandate under Section 29A of the Act, and was therefore stopped from questioning the arbitrator’s jurisdiction. The appeal thus raised questions central to modern arbitration jurisprudence:
- Can a party’s conduct amount to a waiver of the statutory ineligibility under Section 12(5) of the Act?
- Is an award rendered by a unilaterally appointed arbitrator void or merely voidable?
Issues Before the Court
The Division Bench (comprising Justice Vibhu Bakhru and Justice Tejas Karia) distilled the dispute into two primary issues:
- Whether the proviso to Section 12(5) of the Act permits waiver by conduct, or whether the waiver must be an express written agreement after the disputes have arisen; and
- Whether an award rendered by an ineligible arbitrator appointed unilaterally without such waiver is a nullity that can be challenged even at the Section 34 of Act or execution stage.
Legal Framework
Section 12(5) of the Act, introduced by the 2015 amendment, declares that any person whose relationship with the parties, counsel, or subject matter falls within the Seventh Schedule shall be ineligible to act as arbitrator. The proviso allows an exception:
“Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing”.
The legislative intent is unambiguous neutrality of arbitrators is paramount, and waiver must be both post-dispute and expressly recorded in writing.
The Court’s Reasoning
(1) Express waiver is mandatory; conduct is insufficient
The Court began by emphasizing that the proviso to Section 12(5) of the Act is a special provision that cannot be diluted by notions of deemed waiver under Section 4 of the Act. Section 4 of the Act deals with waiver by conduct where a party proceeds without objecting despite knowledge of irregularity. However, the proviso to Section 12(5) of the Act demands an express written waiver an exception carved out by Parliament to maintain integrity of the arbitral process.
Accordingly, the Bench rejected the contractor’s argument that GNCTD’s participation in the proceedings and its Section 29A of the Act application amounted to waiver. Participation, the Court observed, “may waive procedural irregularities but cannot breathe life into a process vitiated by statutory ineligibility”.
(2) Unilateral appointment destroys the foundation of impartiality
Relying on the Supreme Court’s seminal decisions in TRF Ltd. v. Energo Engineering Projects Ltd. (2017)8 SCC 377 and Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2019) 9 SCC 389, the Bench reiterated that once a person is himself ineligible under the Seventh Schedule, he cannot nominate another as arbitrator. A clause allowing one party, typically the employer in a government contract to appoint the arbitrator is inherently inconsistent with Section 12(5) of the Act unless both sides, after the dispute, expressly agree otherwise.
The Delhi High Court observed that despite several judicial pronouncements, unilateral appointments continue to surface in government contracts, producing avoidable litigation and delay. The Court thus sought to reiterate the rule emphatically: “Unless there is an express written waiver, unilateral appointment is impermissible in law”.
(3) Award by an ineligible arbitrator is a nullity
On the second issue, the Court held that an award rendered by an ineligible arbitrator is void ab initio, a nullity in the eyes of law because jurisdiction itself is lacking, the defect cannot be cured by participation, consent, or estoppel.
The Bench reasoned that Section 34(2)(b) of the Act permits setting aside an award that conflicts with the “public policy of India”. The Bench emphasized that any such unilateral appointment goes against the fundamental idea of justice, undermines the equal treatment of parties and it is violative of the procedural fairness which are embedded in Article 14 and Section 18 of the Act, read together. The Court further observed that, any proceeding that is conducted before such arbitrator who has been appointed unilaterally, is a nullity and liable to be set aside under the provisions of Section 34 of the Act. An award rendered by a tribunal lacking impartiality and independence violates the fundamental policy of ensuring neutral adjudication, and hence falls squarely within that ground.
Significantly, the Court clarified that such invalidity may be raised not only at the stage of challenge under Section 34 of the Act but even at the enforcement stage under Section 36 of the Act. A court is not bound to enforce a nullity.
(4) Even the appointing party can challenge
Interestingly, the Court also observed that the party that made the unilateral appointment (here, the GNCTD) is not precluded from challenging the award on that ground. Jurisdictional defects cannot be waived by the act of appointment itself. The doctrine of “approbate and reprobate” (that which I approve, I cannot disapprove) has no application where the very constitution of the tribunal is contrary to statute.
Decision and Outcome
The Division Bench dismissed the contractor’s appeal, affirming the Commercial Court’s decision. It held that:
- The unilateral appointment of the sole arbitrator by the GNCTD was invalid under Section 12(5) of the Act read with the Seventh Schedule;
- There was no express written waiver by the contractor after the disputes arose;
- The arbitral award, being rendered by an ineligible arbitrator, was void and unenforceable; and
- Participation in the proceedings or seeking extension of mandate could not be construed as waiver of the statutory bar.
Consequently, the award stood set aside, and the appeal was dismissed.
Broader Implications
The Mahavir Prasad Gupta decision fortifies a consistent line of jurisprudence that prioritizes impartiality and procedural fairness over procedural efficiency. Its implications extend across both public and private contracting:
- Government departments must reform their standard arbitration clauses. The old formula of empowering the Chief Engineer or departmental head to appoint a sole arbitrator has become untenable unless parties later execute a written post-dispute waiver.
- Private parties relying on pre-dispute arbitration clauses that vest unilateral appointment powers should also take heed; such clauses risk invalidation and wasted proceedings.
- Arbitral institutions and practitioners gain clarity that deemed waiver cannot rescue defective appointments; formal written waiver alone satisfies the statutory requirement.
- The judgment also underscores the judiciary’s continuing effort to ensure that India’s arbitration landscape aligns with international standards of independence and neutrality, bolstering investor confidence and credibility.
Conclusion
The Delhi High Court’s ruling in M/s Mahavir Prasad Gupta and Sons v. Government of NCT of Delhi reaffirms the fundamental principle that no person should be a judge in his own cause, even indirectly. By holding that unilateral appointments are invalid unless accompanied by an express written waiver under Section 12(5) of the Act, the Court closes the door on attempts to circumvent neutrality through conduct-based waiver arguments.
Equally important is the Court’s declaration that an award rendered by such an ineligible arbitrator is a jurisdictional nullity, one that cannot be cured by participation or acquiescence. This pronouncement provides much-needed clarity for arbitral practice in India and sends a clear message to contracting parties, especially public authorities: arbitration cannot be a private extension of departmental control.
The case thus stands as a reaffirmation of the integrity of arbitral justice in India, ensuring that the promise of arbitration, speedy yet fair resolution, remains anchored in the principles of independence, equality, and the rule of law.
