Legal provisions involved: Arbitration and Conciliation Act, 1996 – Sections 12(5), 14, 18 and 34; Seventh Schedule to the Arbitration and Conciliation Act, 1996.

Judgement by: Supreme Court of India

Judge/Bench: Justice J.B. Pardiwala and Justice K.V. Viswanathan

Facts

Bhadra International and other companies had licence agreements with the Airports Authority of India (AAI) for ground handling services. As per the contract, the Chairman of AAI had the power to appoint a sole arbitrator. When disputes arose, the Chairman appointed an arbitrator. Both sides participated in the arbitration for over two years and even jointly asked for extensions of time. The arbitrator finally passed a “nil” award. The companies later challenged the award, saying that the arbitrator was appointed illegally.

Key legal provisions

Arbitration and Conciliation Act, 1996 – Sections 12(5), 14, 18 and 34

Seventh Schedule to the Arbitration and Conciliation Act, 1996.

Issues raised

Whether the arbitrator was legally appointed, whether participation in proceedings amounts to waiver, and whether such an objection can be raised at the stage of challenging the award.

Arguments of the case

AAI argued that since the parties took part in the proceedings without objection, they had accepted the appointment. The companies argued that the law requires a clear written waiver and that conduct alone is not enough.

Judgement

The Supreme Court held that the Chairman of AAI could not have appointed the arbitrator at all. Such an appointment is void from the beginning. The Court made it clear that ineligibility can be waived only through an express written agreement after disputes arise. Participation in arbitration does not cure the defect. The arbitral award was set aside.

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