BHADRA INTERNATIONAL (INDIA) PVT. LTD. v. AIRPORTS AUTHORITY OF INDIA
Upholding Impartiality: Supreme Court Clarifies "Express Agreement" Requirement for Waiving Arbitrator Ineligibility under Section 12(5) and Seventh Schedule of the Arbitration Act.
Court: Supreme Court of India
Citation: 2026 INSC 6
Decision Date: 05-01-2026
List of Laws
The Arbitration and Conciliation Act, 1996; The Arbitration and Conciliation (Amendment) Act, 2015; Section 12(5) of the Arbitration and Conciliation Act, 1996; Section 18 of the Arbitration and Conciliation Act, 1996; Section 34 of the Arbitration and Conciliation Act, 1996; Section 37 of the Arbitration and Conciliation Act, 1996; Section 14 of the Arbitration and Conciliation Act, 1996; Section 15 of the Arbitration and Conciliation Act, 1996; Section 21 of the Arbitration and Conciliation Act, 1996; Section 29A of the Arbitration and Conciliation Act, 1996; The Indian Contract Act, 1872; Constitution of India, 1950
- Facts: Bhadra International (India) Pvt. Ltd. and Novia International Consulting Aps formed a consortium to provide ground handling services at various airports in India. The Airports Authority of India (AAI) floated tenders, and the consortium was selected. A License Agreement was executed, containing an arbitration clause (Clause 78) providing for a sole arbitrator appointed by the Chairman of AAI. Disputes arose, and the appellants invoked the arbitration clause. A sole arbitrator was appointed, and in the first procedural order, it was recorded that neither party objected to the appointment. The Arbitration and Conciliation (Amendment) Act, 2015, which introduced Section 12(5) and the Seventh Schedule regarding arbitrator ineligibility, came into effect. The sole arbitrator passed a 'Nil' award.
- Procedural Posture: The appellants challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, before a Single Judge of the High Court, arguing unilateral appointment. The Single Judge rejected the challenge, and the Division Bench of the High Court dismissed the appellants' appeals under Section 37. The appellants then appealed to the Supreme Court.
- Issue: (1) Whether the sole arbitrator was ineligible under Section 12(5) of the Arbitration and Conciliation Act, 1996, due to unilateral appointment. (2) Whether the appellants waived their right to object to the arbitrator's appointment under Section 12(5) by their conduct. (3) Whether the appellants could raise an objection to the appointment of the sole arbitrator for the first time in an application under Section 34 of the Act, 1996.
- Holding: (1) Yes, the sole arbitrator was ineligible due to unilateral appointment by the Chairman of AAI, who was himself ineligible under the Seventh Schedule. (2) No, the appellants did not waive their right to object as the waiver under Section 12(5) requires an "express agreement in writing," which was absent. (3) Yes, the appellants could raise the objection for the first time in a Section 34 application.
- Reasoning: The Court emphasized the principle of equal treatment of parties in arbitration, as enshrined in Section 18 of the Act. It held that unilateral appointment of an arbitrator by a party ineligible under the Seventh Schedule violates this principle. The Court interpreted the proviso to Section 12(5) strictly, stating that waiver of ineligibility requires an "express agreement in writing" entered into after disputes have arisen. Conduct such as participation in proceedings, filing a statement of claim, or seeking extensions of time does not constitute such an express waiver. The Court clarified that an objection to the de jure ineligibility of an arbitrator can be raised at any stage, including in a Section 34 application, as it goes to the root of the arbitrator's jurisdiction. The Court overruled the High Court's judgment and set aside the arbitral awards.
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