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M/S Ahluwalia Contracts (India) Limited (ACIL) vs. Airports Authority of India (AAI)

First Appeal from Order (Original Side, Commercial) · 2026:DHC:8252-DBDecided 25 Sept 2026New Delhi Bench
FAO(OS) (COMM) 246/2026CNR: DLHC010430852026
Justice Anil Kshetarpal · Justice Vimal Kumar Yadav

Background

ACIL had won a favourable arbitral award against AAI over a construction contract dispute dating back to 2009, but a Single Judge set the award aside, not on the substance of the dispute, but because AAI had unilaterally appointed the Sole Arbitrator, which is barred under Section 12(5) of the Arbitration Act unless the parties expressly waive it in writing. Notably, AAI itself had appointed the arbitrator, participated in the four-year arbitration without objection, and only raised the appointment issue after losing.

Decision Breakdown

The Division Bench held that Supreme Court precedent (Bhadra International and Bharat Broadband) makes clear that mere participation in arbitration proceedings, even by the very party that made the appointment, can never substitute for the "express agreement in writing" required to waive the bar on unilateral arbitrator appointments. It rejected ACIL's argument that this rule should only protect a party that did not make the appointment, noting Supreme Court precedent has already rejected that exact distinction. Since no such written waiver existed and the appointment was found to violate the statutory ineligibility rule, the appeal was dismissed and the setting-aside of the award upheld.

Lesson Learnt

Even the party that unilaterally appointed an arbitrator can later challenge that very appointment if it turns out to be legally defective: merely participating in the arbitration without objecting does not, by itself, cure the defect; only an explicit written agreement to waive it can.

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