BACKGROUND OF THE DISPUTE
The Delhi High Court, in Govt of NCT of Delhi v. M/s. Ram Krishan Yudhister Prakash, considered whether an arbitral award could be sustained when the sole arbitrator had been unilaterally appointed by the Public Works Department (PWD), despite the statutory disqualification under Section 12(5) read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996.
The dispute arose from a construction contract awarded by the Government of NCT of Delhi through its Public Works Department to M/s. Ram Krishan Yudhister Prakash for the construction of Aam Aadmi Mohalla Clinics (Primary Health Centres) at various locations under the North-East Circle, PWD, Delhi.
The letter of acceptance was issued on 17 December 2018 for a contract value of Rs. 2,96,84,753. The stipulated commencement date was 27 December 2018, and the work was scheduled to be completed by 26 April 2019. However, the construction work was actually completed on 16 March 2020.
APPOINTMENT OF THE SOLE ARBITRATOR AND ARBITRAL PROCEEDINGS
Disputes subsequently arose between the parties concerning several monetary claims raised by the contractor. These included escalation charges, expenses incurred for watch and ward, additional work, extra expenditure arising from working in difficult conditions, expenses during the extended contract period, loss of business and interest.
Invoking Clause 25 of the General Conditions of Contract for Central PWD Works, 2014, the Chief Engineer (E) of PWD, Government of NCT of Delhi, issued a communication dated 18 October 2023 appointing Shri Avendra Kumar Garg, a retired Principal Chief Engineer of PWD, as the sole arbitrator.
The arbitrator accepted the reference and commenced the proceedings. The contractor submitted its statement of claim, while the Government filed its statement of defence along with a counterclaim.
On 20 January 2025, the arbitrator passed an award in favour of the contractor, allowing certain claims while rejecting others.
CHALLENGE TO THE ARBITRAL AWARD UNDER SECTION 34
Aggrieved by the award, the Government of NCT of Delhi filed a petition under Section 34 of the Arbitration and Conciliation Act before the District Judge (Commercial), North-East District, Karkardooma Courts, Delhi.
Among other grounds, the Government contended that the arbitrator had failed to adjudicate upon its counterclaim. It also challenged the claims allowed by the arbitrator on the ground that they were contrary to the contractual terms and were based on presumptions without adequate supporting evidence.
Importantly, in its written arguments and written submissions before the Section 34 Court, the Government specifically raised an objection concerning the arbitrator's unilateral appointment.
It contended that the arbitrator was a retired employee of the very department that had appointed him and that his appointment was prohibited under Section 12(5) read with the Seventh Schedule of the Act. Consequently, the Government argued that the arbitral proceedings and the resulting award were legally unsustainable.
However, by an order dated 8 May 2026, the District Judge dismissed the Section 34 petition.
Regarding the challenge to the arbitrator's appointment, the District Court observed that the arbitrator had been appointed with the concurrence of the Government and that the Government had participated in the arbitral proceedings and contested the claims.
APPEAL BEFORE THE DELHI HIGH COURT
Challenging the dismissal of its Section 34 petition, the Government preferred an appeal before the Delhi High Court under Section 13(1A) of the Commercial Courts Act, 2015, read with Section 37 of the Arbitration and Conciliation Act, 1996.
The principal contention of the Government was that the arbitrator's appointment was contrary to Section 12(5) read with the Seventh Schedule of the Act.
It was argued that the arbitrator had been appointed unilaterally by the PWD from among its retired government officials and that such an appointment was legally impermissible. The Government further contended that the appointment could not be validated merely because it had participated in the arbitral proceedings or because it had itself appointed the arbitrator.
The Government also reiterated its objections concerning the arbitrator's failure to adjudicate upon the counterclaim and the alleged departure from the contractual provisions while allowing certain claims.
RESPONDENT'S CONTENTIONS
Opposing the appeal, the contractor submitted that the arbitrator had been appointed in accordance with the arbitration agreement between the parties and by the Government department itself.
It was further contended that the Government had actively participated in the arbitral proceedings, filed its statement of defence and contested the claims. The contractor also pointed out that the Government had not specifically raised the objection concerning the arbitrator's eligibility in its original Section 34 petition.
According to the contractor, the Government was challenging the appointment only after the award had been passed against it, despite having participated in the proceedings and contested the matter on its merits.
LEGAL ISSUE: WHETHER PARTICIPATION AMOUNTS TO WAIVER UNDER SECTION 12(5)?
The principal question before the Division Bench was whether a party could be treated as having waived the applicability of Section 12(5) merely because it had participated in arbitration proceedings or because the appointment had been made in accordance with an earlier contractual arrangement.
The Court examined the statutory requirements governing the appointment of arbitrators and the circumstances in which parties may waive the disqualification prescribed under Section 12(5).
Section 12(5) of the Arbitration and Conciliation Act provides that, notwithstanding any prior agreement to the contrary, a person whose relationship with the parties, their counsel or the subject matter of the dispute falls within any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator.
The proviso to Section 12(5), however, permits the parties to waive the applicability of this provision after disputes have arisen between them, provided such waiver is made through an express agreement in writing.
Therefore, the statutory provision imposes three essential conditions for a valid waiver:
1. The waiver must take place after disputes have arisen between the parties.
2. It must be based on an agreement between the parties.
3. The agreement must be express and in writing.
The Court emphasised that the statutory requirement cannot be satisfied merely through implied consent, acquiescence or conduct of the parties.
RELIANCE ON THE SUPREME COURT'S DECISION IN BHADRA INTERNATIONAL
The Delhi High Court relied upon the principles laid down by the Supreme Court in Bhadra International (India) Pvt. Ltd. v. Airports Authority of India.
The Supreme Court had clarified that the right to object to the appointment of an ineligible arbitrator cannot be treated as waived merely because a party has participated in the proceedings or otherwise acted in a manner suggesting acceptance of the arbitrator.
The Court also referred to the requirement that waiver must reflect a conscious and unequivocal intention to relinquish the statutory right.
It explained that where the legislature has specifically prescribed the manner in which a statutory right can be waived, courts cannot substitute that prescribed requirement with an inference drawn from the conduct of the parties.
RELIANCE ON BHARAT BROADBAND NETWORK LTD. v. UNITED TELECOMS LTD.
The Division Bench also relied upon the Supreme Court's decision in Bharat Broadband Network Ltd. v. United Telecoms Ltd., (2019) 5 SCC 755.
In that case, the Supreme Court examined whether an appointment letter issued by a party possessing the contractual power to appoint an arbitrator could itself constitute an express written waiver under Section 12(5).
The Supreme Court rejected this proposition.
It distinguished between Section 4 of the Arbitration and Conciliation Act, which recognises waiver of certain objections through conduct, and the proviso to Section 12(5), which specifically requires an express agreement in writing after disputes have arisen.
The Supreme Court clarified that an express agreement in writing means an agreement expressed through words and not one inferred from the conduct of the parties.
The Delhi High Court applied this principle and held that the mere fact that a party had itself appointed the arbitrator could not be treated as an express written agreement waiving the statutory disqualification.
UNILATERAL APPOINTMENT CANNOT ITSELF CONSTITUTE WAIVER
The Court also referred to its earlier Division Bench decision in M/s Ahluwalia Contracts (India) Limited v. Airports Authority of India, pronounced on 25 September 2026.
In that decision, the Court had reiterated that following a contractual mechanism for appointing an arbitrator cannot, by itself, amount to waiver of Section 12(5).
The Court further relied upon its decision in Mahavir Prasad Gupta and Sons v. Government of NCT of Delhi, reported as 2025 SCC OnLine Del 4241.
The said decision recognised that the unilateral exercise of contractual power to appoint an arbitrator cannot be equated with an express agreement between the parties to waive the statutory disqualification.
The Division Bench observed that the appointment of an arbitrator and the statutory waiver contemplated under the proviso to Section 12(5) operate in distinct fields and cannot be treated as interchangeable.
PARTICIPATION, STATEMENT OF DEFENCE AND COUNTERCLAIM DO NOT AMOUNT TO WAIVER
Applying the above principles to the facts of the case, the Delhi High Court noted that the sole arbitrator was a retired Principal Chief Engineer of PWD and had been appointed by the PWD itself.
The Government had participated in the arbitration proceedings, filed its statement of defence and also submitted a counterclaim against the contractor.
However, the Court found that there was nothing on record to establish that, after disputes had arisen, the parties had entered into any express agreement in writing consciously waiving the applicability of Section 12(5).
Consequently, the Court held that participation in the arbitral proceedings, filing of a statement of defence or counterclaim, and failure to raise an objection before the arbitrator could not be treated as substitutes for the statutory waiver prescribed under the Act.
The Court made it clear that even where a party has itself appointed the arbitrator, such appointment does not automatically prevent that party from subsequently questioning the arbitrator's legal eligibility.
OBJECTION CAN BE CONSIDERED EVEN IF NOT RAISED IN THE ORIGINAL SECTION 34 PETITION
Another important aspect considered by the Court was the timing of the Government's objection.
The contractor had argued that the Government had not raised the objection concerning the arbitrator's appointment in its original Section 34 petition and had participated in the proceedings without challenging the appointment.
The High Court, however, noted that the Government had specifically raised the objection in its written arguments and written submissions before the Section 34 Court, along with the relevant judicial authorities.
The District Court had failed to properly examine this objection and had rejected it merely on the ground that the Government had participated in the arbitration proceedings.
The High Court held that the objection had, in fact, been brought to the attention of the Section 34 Court before the petition was decided.
The Bench further referred to the Supreme Court's decision in Bhadra International (India) Pvt. Ltd. v. Airports Authority of India, recognising that an objection concerning the inherent jurisdiction of an arbitral tribunal may be raised at any stage of the challenge to the award.
Accordingly, the mere failure to raise the objection at an earlier stage of the arbitral proceedings could not validate an otherwise legally impermissible appointment.
RELEVANT EXTRACT FROM THE JUDGMENT
In paragraph 17 of the judgment, the Delhi High Court observed:
“However, there is nothing on record to show that subsequent to the disputes having arisen, the parties entered into any express agreement in writing whereby they consciously waived off the applicability of Section 12(5) of the A&C Act. Thus, participation in the arbitration proceedings or filing of statement of defence or counter claim or failure to raise an objection before learned Arbitrator in this regard cannot be treated as a substitute for such statutory waiver.”
The above observation directly establishes that participation in arbitration proceedings, filing a defence or counterclaim, and failure to object before the arbitrator cannot replace the express written agreement required under Section 12(5).
The Court further observed in paragraph 18:
“However, as discussed above, merely because the Appellant had participated in the arbitral proceedings or had failed to raise such an objection at any earlier stage of the proceedings cannot make such an appointment to be valid.”
This observation is particularly significant because it clarifies that participation and delay in raising an objection do not, by themselves, cure an appointment that is contrary to the statutory requirements.
FINAL DECISION
After examining the statutory provisions and the relevant judicial precedents, the Division Bench comprising Justice Anil Kshetarpal and Justice Bharat Parashar held that the unilateral appointment of the retired PWD Principal Chief Engineer as the sole arbitrator could not be sustained in the absence of an express written agreement waiving the applicability of Section 12(5) after the disputes had arisen.
The Court concluded that the subsequent arbitral proceedings and the award passed by such an arbitrator could not be legally sustained.
Accordingly, the Delhi High Court allowed the appeal and set aside both the District Court's order dated 8 May 2026 dismissing the Section 34 petition and the arbitral award dated 20 January 2025.
Since the award was set aside on the ground of the invalid appointment of the arbitrator, the Court held that there was no requirement to examine the other grounds raised by the Government challenging the award.
There was no order as to costs.
CASE DETAILS
Case Name: Govt of NCT of Delhi v. M/s. Ram Krishan Yudhister Prakash
Court: High Court of Delhi
Case Number: FAO (COMM) 198/2026
Neutral Citation: 2026:DHC:9641-DB
Date of Judgment: 31 October 2026
Coram: Justice Anil Kshetarpal and Justice Bharat Parashar
Relevant Provisions: Sections 12(5), 34 and 37 of the Arbitration and Conciliation Act, 1996; Section 13(1A) of the Commercial Courts Act, 2015; Seventh Schedule to the Arbitration and Conciliation Act, 1996.
