Order 2

Order Details: COPY OF ORDER
Pdf Text: Misc DJ No. 517/2025
Government of NCT of Delhi Vs. M/s Maa Bhagwati Associates
09.07.2025
Present: Sh. Zafar Abbas, Ld. Counsel for petitioner alongwith Sh. Amod
Kumar, Executive Engineer.
Further submissions on the aspect of unilateral appointment of the
Arbitral Tribunal heard. Yesterday, this Court was apprised by Ld. Counsel for
GNCTD that the respondent/award holder had issued a waiver letter in terms of
proviso 2 under Section 12 (5) of Arbitration & Conciliation Act, 1996 as
amended on 23.10.2015 and time was sought for producing the same on record.
For ready reference Section 12 (5) of A&C Act, 1996 is reproduced hereunder:
Section 12 of A&C Act, 1996: Ground for challenge
“5. Notwithstanding any prior agreement to the contrary, any person whose
relationship, with the parties or counsel or the subject-matter of the dispute,
falls under any of the categories specified in the Seventh Schedule shall be
ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them,
waive the applicability of this sub-section by an express agreement in writing.”
Today, attention is drawn to a letter issued by the Tribunal on
20.03.2023. It seems that GNCTD is terribly mistaken in understanding the
purpose and purport of this proviso which has been duly upheld by Hon’ble
Supreme Court in Bharat Broadband Network Vs. United Telecoms Ltd., 2019
Latest Caselaw 395 SC. While dealing with an issue of Section 12 (5) read with
Schedule 7 qua unilateral appointment of arbitrator by official of the disputing
company, the Bench led by Justice R. F. Nariman dealt with an issue wherein
during the pendency of arbitral proceedings before a Sole Arbitrator who was
unilaterally appointed by CMD of Bharat Broadband Network, an application was
moved before the Arbitrator by the Bharat Broadband Network company that in
the light of TRF Limited the Tribunal would be de jure unable to perform the
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function as Arbitrator and that he should withdraw from the arbitration so that an
application under Section 11 of the Act can be filed before the High Court. The
plea was rejected by the Arbitrator. When Bharat Broadband Network approached
Delhi High Court, the High Court rejected the plea of the Bharat Broadband
Network on the ground that since the Sole Arbitrator was appointed by Bharat
Broadband Network itself, it is estopped from making a plea for removal of the
arbitrator. While discussing Voestalpine Schienen Hon’ble Supreme Court ruled
that,
“Section 12 (5), on the other hand, is a new provision which relates to the de jure
inability of an arbitrator to act as such. Under this provision, any prior agreement to the
contrary is wiped out by the non-obstante clause in Section 12(5) the moment any person
whose relationship with the parties or the counsel or the subject matter of the dispute falls
under the 7th Schedule. The sub-Section then declares that such person shall be
“ineligible” to be appointed as arbitrator. The only way in which this ineligibility can be
removed is by the proviso, which again is a special provision which states that parties
may, subsequent to disputes having arisen between them, waive the applicability of
Section 12(5) by an express agreement in writing. What is clear, therefore, is that where,
under any agreement between the parties, a person falls within any of the categories set
out in the 7th Schedule, he is, as a matter of law, ineligible to be appointed as an
arbitrator. The only way in which this ineligibility can be removed, again, in law, is that
parties may after disputes having arisen between them, waive the applicability of this sub-
section by an “express agreement in writing”. The express agreement in writing” has
reference to a person who is interdicted by the 7th Schedule, but who is stated by parties
(after the disputes have arisen between them) to be a person in whom they have faith
notwithstanding the fact that such person is interdicted by the 7th Schedule.”
The statute as well as the judgment of Hon’ble Supreme Court has
categorically laid that this waiver has to be made in writing by the disputing
parties and there can be no deemed waiver by way of conduct or even by way of
participation in arbitral proceedings.
This Court in case titled Kotak Mahindra Bank Ltd. Vs. Narender
Kumar Prajapat And Ors., in Execution No. 98/2022, vide detailed order, has
already ruled that an award passed by a unilaterally appointed arbitrator is a nullity
because the Arbitral Tribunal is constituted in such a manner is powerless ab
initio. It has also been ruled by this Court that no award passed by such
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unilaterally appointed arbitrator is executable under Section 36 of A&C Act,
1996. The order of this Court has been upheld by Division Bench of Hon’ble High
Court of Delhi in case titled Kotak Mahindra Bank Ltd. Vs. Narender Kumar
Prajapat and Ors., 2023 Latest Caselaw 709 Del, and the order of Division
Bench has further been upheld by Hon’ble Supreme Court in case titled as “Kotak
Mahindra Bank Ltd. Vs. Narendra Kumar Prajapat”, 2023 Latest Caselaw
935 SC where the SLP preferred by Kotak Mahindra Bank stands dismissed on
12.12.2023.
The above order of this Court has been cited and relied by Division
Bench of Hon’ble High Court of Delhi in a latest judgment titled as M/s Mahavir
Prasad Gupta And Sons Vs. Govt. of NCT of Delhi, decided on 31.05.2025.
In case titled Richpal Singh Vs. Guru Teg Bahadur Hospital &
Anr., decided by this Court on 10.01.2023 as Presiding Officer in other
Commercial Court, it was observed as under:
“66. The above detailed discussion fairly brings to the fore one fact that
‘Unilateral Appointment of Arbitrators’ by the GNCTD is nothing but a
blatant violation and disregard of Law laid by Full Bench of Hon’ble
Supreme Court and is akin to Contempt of Court. Such a conduct by Govt.
of NCT of Delhi which is custodian of Law through such Unilateral
Appointments is nothing but a classic example of abuse of Constitutional
duty to usurp citizens’ Rights to seek justice under this ADR.
67. It is appalling to observe that the GNCTD appeared to be determined to
scorn and ignore with impunity the binding Law of the Land and still
gather courage to approach the Courts of Law with their unclean hands to
abuse the due process of law in reaping benefits of such ill-gotten Arbitral
Award.
77. It is expected of GNCTD that they shall function within the sphere of
procedure duly established by Law and shall never cross the Lakshman
Rekha set by governing statutes, bye-laws and binding authoritative
Judgments of Hon’ble Supreme Court. Instead of aligning their Arbitration
Agreements/Clauses and Arbitral Practices in consonance with Section
12(5) read with Schedule 7 of Arbitration and Conciliation Act, 1996 post
its amendment in 2015, they continued to harp over their age-old law
practices of having in-house Unilaterally Appointed Arbitrators. The
GNCTD sought to have aligned their arbitral practices with the changing
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times as suggested by Justice B. N. Srikrishna Report on Arbitration dated
30.07.2017 and the 2015 and 2019 Amendments carried out in the
Arbitration and Conciliation Act, 1996.
78. As guided by the afore-discussed binding judgments of Hon’ble
Supreme Court and Hon’ble Delhi High Court, the Arbitral Award dated
09.07.2018, passed by Unilaterally Appointed Sole Arbitrator namely Sh.
G.S. Patnaik is declared ‘Non-Executable’. In so far as plaintiff/objector
has incurred huge expenditure as detailed supra in the last around 9 years,
respondent GNCTD is burdened with Cost of Rs.3 lacs which shall be paid
by GNCTD to the petitioner within 4 weeks.”
In FAO (COMM) 150/2023 titled as GTB Hospital Through Its
Medical Superintendent Vs. M/s Richpal Singh & Anr. the order of this Court
qua Section 34 of A&C Act, 1996 petition has been upheld by Hon’ble High
Court of Delhi in following words:
“5. In view of averments made in the appeal and the observations made by
learned Trial Court in order dated 10.01.2023, we find no ground in the
present appeal. Accordingly, the present appeal is dismissed.”
Now coming to the facts of this case, it is evident that Govt. of NCT
of Delhi has neither learnt anything nor has amended its affairs and is still toeing
the illegal line of unilateral appointment of choicest of their arbitrators.
The only difference here is that the unilaterally appointed arbitrators
decided against his own appointing agency i.e. Chief Engineer, PWD and
interestingly Govt. of NCT of Delhi is aggrieved for its failure to reap benefits of
its own wrong and the contractor was benefited by the same.
In so far as, it is now a settled legal proposition that awards passed by
unilaterally appointed arbitrator are nullity and non-executable, the execution
proceedings pending before the Court of Sh. Lokesh Kumar Sharma, DJ
(Commercial Court-05), South, Saket in Execution (Comm.) No. 19/20252 are
hereby stayed.
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Issue notice of this petition to the respondent on PF, RC, authorized
courier/speed post as well as through email and Whatsapp messenger.
Put up for further proceedings on 26.07.2025.
As prayed, copy of order be given dasti.
Next date of hearing is given as per convenience of petitioner.
(SURINDER S. RATHI)
District Judge
Commercial-11
Central District, THC,
Delhi/09.07.2025(P)
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