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M.P Khaitan vs. Engineering Projects (India) Limited & Anr.

Arbitration Petition · 2026:DHC:7514Decided 1 Sept 2026New Delhi Bench
ARB.P. 340/2026CNR: DLHC010066052026
Justice Avneesh Jhingan

Background

The petitioner-contractor had built university buildings in Tripura under a contract with Engineering Projects (India) Limited (EPI), which itself was executing the project on behalf of Tripura University. After completion, a dispute arose over unpaid escalation charges, and the petitioner sought appointment of an arbitrator under Section 11(6) of the Arbitration Act, while the University argued it was not a party to the contract and should not be involved.

Decision Breakdown

The Court held that the contract's arbitration clause, which vested exclusive arbitrator-appointment power in EPI's own Chairman, was void as it violated Section 12(5) of the Arbitration Act (a party cannot appoint its own arbitrator), but the underlying agreement to arbitrate survived and the Court could appoint an independent arbitrator. On the University's status, the Court found, based on the University's own committee minutes acknowledging liability and a payment-dependency clause in the contract, that the University was prima facie a "veritable party" to the dispute, though it left the final determination of that question to the arbitrator. A retired judge was appointed as sole arbitrator under the Delhi International Arbitration Centre.

Lesson Learnt

A contract clause letting one party unilaterally appoint the arbitrator is legally unenforceable, but this does not kill the arbitration itself: courts will sever the invalid part and still appoint an independent arbitrator to resolve the dispute.

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