Holding

The proviso to Section 12(5) is ineffective without a post‑dispute express written waiver, so the arbitrator became de jure ineligible and his mandate terminated under Section 14(1)(a).

Summary

The Supreme Court examined whether the proviso to Section 12(5) of the Arbitration and Conciliation Act, 1996 could be invoked to validate an arbitrator who had become ineligible under the Seventh Schedule. The Court held that the proviso applies only when, after a dispute arises, the parties execute an express written waiver, which was absent in the present case. Consequently, the arbitrator, Shri K.H. Khan, became de jure unable to act and his mandate terminated under Section 14(1)(a). The Court also clarified that a managing director who is ineligible cannot appoint an arbitrator and that the TRF Ltd. judgment applies prospectively to appointments made after the amendment. The High Court’s finding of an implied waiver was rejected, and the appeals were allowed, setting aside the impugned judgment and directing appointment of a substitute arbitrator.

Issues considered

The scope and applicability of the proviso to Section 12(5) of the Arbitration and Conciliation Act, 1996
Whether an express written agreement waiving Section 12(5) existed between the parties
Eligibility of a managing director to appoint an arbitrator under the Seventh Schedule
Effect of the TRF Ltd. v. Energo Engineering Projects Ltd. judgment on subsequent appointments
Whether Section 12(4) bars a party from applying to the court under Section 14(2)
Whether a challenge under Section 13 is the appropriate remedy in cases of de jure ineligibility

Legislation cited

Arbitration and Conciliation Act, 1996 (as amended 2015)s. 11(8), s. 12(1), s. 12(3), s. 12(4), s. 12(5), s. 13(2), s. 14(1), s. 14(2), s. 16(2), s. 26, s. 4, s. 7
Indian Contract Act, 1872s. 9

Subjects

ArbitrationArbitrator eligibilitySection 12(5)Express waiverDe jure ineligibilityManaging director appointmentChallenge procedureArbitration and Conciliation Act

Judgment

[2019] 6 S.C.R. 97 97

BHARAT BROADBAND NETWORK LIMITED A
v.
UNITED TELECOMS LIMITED
(Civil Appeal No. 3972 of 2019)
APRIL 16, 2019 B
[R. F. NARIMAN AND VINEET SARAN, JJ.]
Arbitration and Conciliation, 1996: s.12(5) and its proviso –
Applicability of the proviso – Held: The proviso to s.12(5) applies
only if subsequent to arising of disputes between the parties, the
C
parties waive the applicability of sub-section (5) of s.12 by an express
agreement in writing – The expression “express agreement in
writing” refers to an agreement made in words as opposed to an
agreement which is to be inferred by conduct – The instant case
disclosed no such express agreement – The fact that a statement of
claim was filed before the arbitrator, would not mean that there was D
an express agreement in words that both parties wished continuation
of arbitrator so appointed despite his being ineligible to act as such.
Arbitration and Conciliation, 1996: s.12(5) – Interpretation
of – Eligibility to be appointed as arbitrator – In the instant case,
agreement provided for appointment of arbitrator by the Managing E
Director of appellant-company – Accordingly, in terms of the
arbitration clause, appointment of arbitrator was made – On
3.7.2017, TRF judgment of Supreme Court held that since Managing
Director of a company which was one of the parties to the arbitration
was himself ineligible to act as arbitrator, such ineligible person
F
could not appoint an arbitrator, and any such appointment would
be null and void – In view of TRF judgment, in the instant case,
validity of appointment of arbitrator challenged by the Managing
Director himself – Held: In the instant case, appointment of the
arbitrator was after the introduction of s.12(5) in the statute book
– The Managing Director of the appellant himself could not have G
acted as an arbitrator, being rendered ineligible to act as arbitrator
under Item 5 of the Seventh Schedule – The scheme of ss.12, 13
and 14 was that where an arbitrator makes a disclosure in writing
which is likely to give justifiable doubts as to his independence or
impartiality, the appointment of such arbitrator may be challenged
H
97
98 SUPREME COURT REPORTS [2019] 6 S.C.R.

A under ss.12(1) to 12(4) r/w s.13 – However, where such person
becomes “ineligible” to be appointed as an arbitrator, there is no
question of challenge to such arbitrator, before such arbitrator –
In such a case, i.e., a case which falls under s.12(5), s.14(1)(a) of
the Act gets attracted inasmuch as the arbitrator becomes, as a
matter of law (i.e., de jure), unable to perform his functions under
B
s.12(5), being ineligible to be appointed as an arbitrator – This
being so, his mandate automatically terminates, and he shall then
be substituted by another arbitrator under s.14(1) itself – If an
arbitrator continues as such, being de jure unable to perform his
functions, as he falls within any of the categories mentioned in
C s.12(5), r/w the Seventh Schedule, a party may apply to the Court,
which will then decide on whether his mandate has terminated.
Allowing the appeals, the Court
HELD: 1.1 Section 12(1), as substituted by the Arbitration
and Conciliation (Amendment) Act, 2015 makes it clear that when
D a person is approached in connection with his possible
appointment as an arbitrator, it is his duty to disclose in writing
any circumstances which are likely to give rise to justifiable
doubts as to his independence or impartiality. Once this is done,
the appointment of the arbitrator may be challenged on the ground
E that justifiable doubts have arisen under sub-section (3) of Section
12 subject to the caveat entered by sub-section (4) of Section 12.
The challenge procedure is then set out in Section 13, together
with the time limit laid down in Section 13(2). The arbitral tribunal
must first decide on the said challenge, and if it is not successful,
the tribunal shall continue the proceedings and make an award.
F It is only post award that the party challenging the appointment
of an arbitrator may make an application for setting aside such an
award in accordance with Section 34 of the Act. [Para 14]
[113-E-H; 114-A-B]
1.2 Section 12(5), on the other hand, is a new provision
G 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
H Seventh Schedule. The sub-section then declares that such
BHARAT BROADBAND NETWORK LIMITED v. UNITED 99
TELECOMS LIMITED

person shall be “ineligible” to be appointed as arbitrator. The A
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. Where, under any agreement between the parties, a
B
person falls within any of the categories set out in the Seventh
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 have
arisen between them, waive the applicability of this sub-section
by an “express agreement in writing”. The “express agreement C
in writing” has reference to a person who is interdicted by the
Seventh 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 Seventh Schedule. [Para 15][114-B-F]
D
2.1 The Law Commission Report makes it clear that there
are certain minimum levels of independence and impartiality that
should be required of the arbitral process, regardless of the
parties’ agreement. Thus, it will be seen that party autonomy is
to be respected only in certain exceptional situations which could
be situations which arise in family arbitrations or other arbitrations E
where a person subjectively commands blind faith and trust of
the parties to the dispute, despite the existence of objective
justifiable doubts regarding his independence and impartiality.
The scheme of Sections 12, 13, and 14, therefore, is that where
an arbitrator makes a disclosure in writing which is likely to give F
justifiable doubts as to his independence or impartiality, the
appointment of such arbitrator may be challenged under Sections
12(1) to 12(4) read with Section 13. However, where such person
becomes “ineligible” to be appointed as an arbitrator, there is
no question of challenge to such arbitrator, before such arbitrator.
In such a case, i.e., a case which falls under Section 12(5), Section G
14(1)(a) of the Act gets attracted inasmuch as the arbitrator
becomes, as a matter of law (i.e., de jure), unable to perform his
functions under Section 12(5), being ineligible to be appointed
as an arbitrator. This being so, his mandate automatically
H
100 SUPREME COURT REPORTS [2019] 6 S.C.R.

A terminates, and he shall then be substituted by another arbitrator
under Section 14(1) itself. It is only if a controversy occurs
concerning whether he has become de jure unable to perform his
functions as such, that a party has to apply to the Court to decide
on the termination of the mandate, unless otherwise agreed by
the parties. Thus, in all Section 12(5) cases, there is no challenge
B
procedure to be availed of. If an arbitrator continues as such,
being de jure unable to perform his functions, as he falls within
any of the categories mentioned in Section 12(5), read
with the Seventh Schedule, a party may apply to the Court, which
will then decide on whether his mandate has terminated.
C [Paras 16, 17][114-F-G; 116-A-G]
2.2 In the instant case, it is clear that the Managing Director
of the appellant could not have acted as an arbitrator himself,
being rendered ineligible to act as arbitrator under Item 5 of the
Seventh Schedule. Whether such ineligible person could himself
D appoint another arbitrator was only made clear by this Court’s
judgment in TRF Ltd. on 03.07.2017, in which it was held by this
Court that an appointment made by an ineligible person is itself
void ab initio. There is no doubt in this case that disputes arose
only after the introduction of Section 12(5) into the statute book
on 23.10.2015, and the arbitrator was appointed long after
E 23.10.2015. The judgment in TRF Ltd. nowhere stated that it
will apply only prospectively. Section 26 of the Amendment Act,
2015 makes it clear that the Amendment Act, 2015 shall apply in
relation to arbitral proceedings commenced on or after
23.10.2015. The APO itself is of the year 2014, whereas the
F appointment by the Managing Director is after the Amendment
Act, 2015, just as in the case of TRF Ltd. Considering that the
appointment in the case of TRF Ltd. of a retired Judge of this
Court was set aside as being non-est in law, the appointment of
arbitrator in the present case must follow suit. [Para 18][116-H;
117-B-G]
G
3. Applicability of the proviso to Section 12(5) on the facts
of this case.
Unlike Section 4 of the Act which deals with deemed waiver
of the right to object by conduct, the proviso to Section 12(5) will
H only apply if subsequent to disputes having arisen between the
BHARAT BROADBAND NETWORK LIMITED v. UNITED 101
TELECOMS LIMITED

parties, the parties waive the applicability of sub-section (5) of A
Section 12 by an express agreement in writing. For this reason,
the argument based on the analogy of Section 7 of the Act must
also be rejected. Section 7 deals with arbitration agreements that
must be in writing, and then explains that such agreements may
be contained in documents which provide a record of such
B
agreements. On the other hand, Section 12(5) refers to an
“express agreement in writing”. It is thus necessary that there
be an “express” agreement in writing. This agreement must be
an agreement by which both parties, with full knowledge of the
fact that Shri Khan is ineligible to be appointed as an arbitrator,
still go ahead and say that they have full faith and confidence in C
him to continue as such. The facts of the instant case disclose no
such express agreement. The appointment letter which is relied
upon by the High Court as indicating an express agreement on
the facts of the case is dated 17.01.2017. On this date, the
Managing Director of the appellant was certainly not aware that
D
Shri Khan could not be appointed by him as Section 12(5) read
with the Seventh Schedule only went to the invalidity of the
appointment of the Managing Director himself as an arbitrator.
Shri Khan’s invalid appointment only became clear after the
declaration of the law by the Supreme Court in TRF Ltd. which,
was only on 03.07.2017. After this date, far from there being an E
express agreement between the parties as to the validity of Shri
Khan’s appointment, the appellant filed an application on
07.10.2017 before the sole arbitrator, bringing the arbitrator’s
attention to the judgment in TRF Ltd. and asking him to declare
that he has become de jure incapable of acting as an arbitrator.
F
The impugned judgment is not correct when it applies Section 4,
Section 7, Section 12(4), Section 13(2), and Section 16(2) of the
Act to the facts of the instant case, and goes on to state that the
appellant cannot be allowed to raise the issue of eligibility
of an arbitrator, having itself appointed the arbitrator.
[Para 20][118-B-H; 119-A-C] G
TRF Ltd. v. Energo Engineering Projects Ltd. (2017) 8
SCC 377 : [2017] 7 SCR 409 ; Voestalpine Schienen
GmbH v. Delhi Metro Rail Corporation Ltd. (2017) 4
SCC 665 HRD Corporation v. GAIL (India) Ltd. (2018)
12 SCC 471 : [2017] 11 SCR 857 – relied on. H
102 SUPREME COURT REPORTS [2019] 6 S.C.R.

A All India Power Engineer Federation v. Sasan Power
Ltd. (2017) 1 SCC 487 : [2016] 9 SCR 901 ; Vasu P.
Shetty v. Hotel Vandana Palace (2014) 5 SCC 660 :
[2014] 9 SCR 38 ; BSNL v. Motorola India (P) Ltd.
(2009) 2 SCC 337 : [2008] 13 SCR 445 – held
inapplicable.
B
Case Law Reference
[2017] 7 SCR 409 relied on Para 5
(2017) 4 SCC 665 relied on Para 11

C [2017] 11 SCR 857 relied on Para 12
[2016] 9 SCR 901 held inapplicable Para 21
[2014] 9 SCR 38 held inapplicable Para 21
[2008] 13 SCR 445 held inapplicable Para 21
D CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3972
of 2019.
From the Judgment and Order dated 22.11.2017 of the High
Court of Delhi, New Delhi in Application OMP (T) (Comm) 84 of 2017.
With
E
Civil Appeal No. 3973 of 2019.
Vikramjeet Banerjee, ASG, Chandan Kumar, Aniruddha P. Mayee,
Advs. for the Appellant.
S. B. Upadhyay, Sr. Adv., Pawan Upadhyay, S. S. Sastri, Sarvjit
F Pratap Singh, Ms. Anisha Upadhyay, Nishant Kr., UNUC Legal LLP,
C. M. Patel, Advs. for the Respondent.
The Judgment of the Court was delivered by
R. F. NARIMAN, J. 1. Leave granted.
G 2. The present appeals raise an interesting question as to the
interpretation of Section 12(5) of the Arbitration and Conciliation Act,
1996 [“Act”].
3. The appellant, Bharat Broadband Network Ltd. [“BBNL”],
had floated a tender dated 05.08.2013 inviting bids for a turnkey project
H
BHARAT BROADBAND NETWORK LIMITED v. UNITED 103
TELECOMS LIMITED [R. F. NARIMAN, J.]

for supply, installation, commissioning, and maintenance of GPON A
equipment and solar power equipment. The respondent was the successful
L1 bidder. The appellant issued an Advance Purchase Order [“APO”]
dated 30.09.2014. Clause III.20.1 of the General (Commercial) Conditions
of Contract [“GCC”] provides for arbitration. The said clause reads as
under:
B
“III.20 ARBITRATION
III.20.1 In the event of any question, dispute or difference arising
under the agreement or in connection therewith (except as to the
matters, the decision to which is specifically provided under this
agreement), the same shall be referred to the sole arbitration of C
the CMD, BBNL or in case his designation is changed or his
office is abolished, then in such cases to the sole arbitration of the
officer for the time being entrusted (whether in addition to his
own duties or otherwise) with the functions of the CMD, BBNL
or by whatever designation such an officer may be called
(hereinafter referred to as the said officer), and if the CMD or D
the said officer is unable or willing to act as such, then to the sole
arbitration of some other person appointed by the CMD or the
said officer. The agreement to appoint an arbitrator will be in
accordance with the Arbitration and Conciliation Act 1996. There
will be no object to any such appointment on the ground that the E
arbitrator is a Government Servant or that he has to deal with the
matter to which the agreement relates or that in the course of his
duties as a Government Servant/PSU Employee he has expressed
his views on all or any of the matters in dispute. The award of the
arbitrator shall be final and binding on both the parties to the
agreement. In the event of such an arbitrator to whom the matter F
is originally referred, being transferred or vacating his office or
being unable to act for any reason whatsoever, the CMD, BBNL
or the said officer shall appoint another person to act as an arbitrator
in accordance with terms of the agreement and the person so
appointed shall be entitled to proceed from the stage at which it G
was left out by his predecessors.”
4. Since disputes and differences arose between the parties, the
respondent, by its letter dated 03.01.2017, invoked the aforesaid arbitration
clause and called upon the appellant’s Chairman and Managing Director
H
104 SUPREME COURT REPORTS [2019] 6 S.C.R.

A to appoint an independent and impartial arbitrator for adjudication of
disputes which arose out of the aforesaid APO dated 30.09.2014. By a
letter dated 17.01.2017, the Chairman and Managing Director of the
appellant, in terms of the arbitration clause contained in the GCC,
nominated one Shri K.H. Khan as sole arbitrator to adjudicate and
determine disputes that had arisen between the parties. He also made it
B
clear that the parties would be at liberty to file claims and counter-claims
before the aforesaid sole arbitrator.
5. On 03.07.2017, this Court, by its judgment in TRF Ltd. v.
Energo Engineering Projects Ltd., (2017) 8 SCC 377 [“TRF Ltd.”],
held that since a Managing Director of a company which was one of the
C parties to the arbitration, was himself ineligible to act as arbitrator, such
ineligible person could not appoint an arbitrator, and any such appointment
would have to be held to be null and void.
6. Given the aforesaid judgment, the appellant itself having
appointed the aforesaid sole arbitrator, referred to the aforesaid judgment,
D and stated that being a declaration of law, appointments of arbitrators
made prior to the judgment are not saved. Thus, the prayer before the
sole arbitrator was that since he is de jure unable to perform his function
as arbitrator, he should withdraw from the proceedings to allow the parties
to approach the High Court for appointment of a substitute arbitrator in
E his place. By an order dated 21.10.2017, Shri Khan rejected the appellant’s
application after hearing both sides, without giving any reasons therefor.
This led to a petition being filed by the appellant before the High Court
of Delhi dated 28.10.2017 under Sections 14 and 15 of the Act to state
that the arbitrator has become de jure incapable of acting as such and
that a substitute arbitrator be appointed in his place. By the impugned
F judgment dated 22.11.2017, this petition was rejected, stating that the
very person who appointed the arbitrator is estopped from raising a plea
that such arbitrator cannot be appointed after participating in the
proceedings. In any event, under the proviso to Section 12(5) of the Act,
inasmuch as the appellant itself has appointed Shri Khan, and the
G respondent has filed a statement of claim without any reservation, also
in writing, the same would amount to an express agreement in writing,
which would, therefore, amount to a waiver of the applicability of Section
12(5) of the Act.

H
BHARAT BROADBAND NETWORK LIMITED v. UNITED 105
TELECOMS LIMITED [R. F. NARIMAN, J.]

7. Shri Vikramjit Banerjee, learned Additional Solicitor General A
appearing on behalf of the appellant, has relied upon Sections 12 to 14 of
the Act, as also the judgment in TRF Ltd. (supra), and has argued that
the appointment of Shri Khan goes to eligibility to be appointed as an
arbitrator, as a result of which the appointment made is void ab initio.
Further, the judgment in TRF Ltd. (supra) is declaratory of the law and
B
would apply to the facts of this case. Further, since there is no express
agreement in writing between the parties subsequent to disputes having
arisen between them that Shri Khan’s appointment is agreed upon, the
proviso will not be applicable in the present case.
8. Shri Sharad Yadav, learned Senior Advocate appearing on behalf
of the respondent, has supported the reasoning of the impugned judgment C
and has added that Section 12(4) makes it clear that a party may challenge
the appointment of an arbitrator appointed by it only for reasons of which
it became aware after the appointment has been made. In the facts of
the present case, since Section 12(5) and the Seventh Schedule were on
the statute book since 23.10.2015, the appellant was fully aware that the D
Managing Director of the appellant would be hit by Item 5 of the Seventh
Schedule, and consequently, any appointment made by him would be
null and void. This being so, Section 12(4) acts as a bar to the petition
filed under Sections 14 and 15 by the appellant. Further, Section 13(2)
makes it clear that a party who intends to challenge the appointment of
the arbitrator, shall, within 15 days after becoming aware of circumstances E
referred to in Section 12(3), send a written statement of reasons for the
challenge to the arbitrator. Admittedly, this has not been done within the
time frame stipulated by the said Section, as a result of which, the
aforesaid petition filed by the appellant should be dismissed. Coming to
the proviso to Section 12(5), Shri Yadav argued that “express agreement F
in writing” in the proviso to Section 12(5) is clearly met in the facts of
the present case. This need not be in the form of a formal agreement
between the parties, but can be culled out, as was rightly held by the
High Court, from the appointment letter issued by appellant as well as
the statement of claim filed by the respondent before the arbitrator leading,
therefore, to a waiver of the applicability of Section 12(5). G

9. Pursuant to the 246th Law Commission Report, important
changes were made in the Act. Insofar as the facts of this case are
concerned, sub-section (8) of Section 11 was substituted for the earlier

H
106 SUPREME COURT REPORTS [2019] 6 S.C.R.

A Section 11(8)1, sub-section (1) of Section 12 was substituted for the
earlier Section 12(1)2 and a new Section 12(5)3 was added after Section
12(4). The opening lines of Section 14(1)4 were also substituted.
10. Post-amendment, the aforesaid Sections are set out, as also
Section 4 of the Act, as follows:
B “4. Waiver of right to object.—A party who knows that—
(a) any provision of this Part from which the parties may
derogate, or
(b) any requirement under the arbitration agreement,
C has not been complied with and yet proceeds with the arbitration
without stating his objection to such non-compliance without undue
delay or, if a time-limit is provided for stating that objection, within
that period of time, shall be deemed to have waived his right to so
object.”
D “11. Appointment of arbitrators.—
xxx xxx xxx
(8) The Supreme Court or, as the case may be, the High Court or
the person or institution designated by such Court, before appointing
E
1
Subs. by Act 3 of 2016, S. 6(iv) (w.r.e.f. 23.10.2015). Prior to substitution, Section
11(8) read as:
“11. Appointment of arbitrators.—
(8) The Chief Justice or the person or institution designated by him, in appointing
an arbitrator, shall have due regard to—
(a) any qualifications required of the arbitrator by the agreement of the
F parties; and
(b) other considerations as are likely to secure the appointment of an
independent and impartial arbitrator.”
2
Subs. by Act 3 of 2016, S. 8(i) (w.r.e.f. 23.10.2015). Prior to substitution, Section
12(1) read as:
“12. Grounds for challenge.—(1) When a person is approached in connection
with his possible appointment as an arbitrator, he shall disclose in writing any
G circumstances likely to give rise to justifiable doubts as to his independence or
impartiality.”
3
Ins. by Act 3 of 2016, S. 8(ii) (w.r.e.f. 23.10.2015).
4
Subs. by Act 3 of 2016, S. 9 (w.r.e.f. 23.10.2015). Prior to substitution, Section 14(1)
read as:
“14. Failure or impossibility to act.—(1) The mandate of an arbitrator shall
H terminate if—”
BHARAT BROADBAND NETWORK LIMITED v. UNITED 107
TELECOMS LIMITED [R. F. NARIMAN, J.]

an arbitrator, shall seek a disclosure in writing from the prospective A
arbitrator in terms of sub-section (1) of Section 12, and have due
regard to—
(a) any qualifications required for the arbitrator by the
agreement of the parties; and
(b) the contents of the disclosure and other considerations as B
are likely to secure the appointment of an independent and
impartial arbitrator.
xxx xxx xxx “
“12. Grounds for challenge.—(1) When a person is approached C
in connection with his possible appointment as an arbitrator, he
shall disclose in writing any circumstances,—
(a) such as the existence either direct or indirect, of any past
or present relationship with or interest in any of the parties or
in relation to the subject-matter in dispute, whether financial, D
business, professional or other kind, which is likely to give rise
to justifiable doubts as to his independence or impartiality; and
(b) which are likely to affect his ability to devote sufficient
time to the arbitration and in particular his ability to complete
the entire arbitration within a period of twelve months.
E
Explanation 1.—The grounds stated in the Fifth Schedule shall
guide in determining whether circumstances exist which give rise
to justifiable doubts as to the independence or impartiality of an
arbitrator.
Explanation 2.—The disclosure shall be made by such person in F
the form specified in the Sixth Schedule.
(2) An arbitrator, from the time of his appointment and throughout
the arbitral proceedings, shall, without delay, disclose to the parties
in writing any circumstances referred to in sub-section (1) unless
they have already been informed of them by him. G
(3) An arbitrator may be challenged only if—
(a) circumstances exist that give rise to justifiable doubts as to
his independence or impartiality, or
(b) he does not possess the qualifications agreed to by the
H
parties.
108 SUPREME COURT REPORTS [2019] 6 S.C.R.

A (4) A party may challenge an arbitrator appointed by him, or in
whose appointment he has participated, only for reasons of which
he becomes aware after the appointment has been made.
(5) Notwithstanding any prior agreement to the contrary, any
person whose relationship, with the parties or counsel or the
B 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
C express agreement in writing.”
“13. Challenge procedure.—(1) Subject to sub-section (4), the
parties are free to agree on a procedure for challenging an
arbitrator.
(2) Failing any agreement referred to in sub-section (1), a party
D who intends to challenge an arbitrator shall, within fifteen days
after becoming aware of the constitution of the arbitral tribunal or
after becoming aware of any circumstances referred to in sub-
section (3) of Section 12, send a written statement of the reasons
for the challenge to the arbitral tribunal.
E (3) Unless the arbitrator challenged under sub-section (2)
withdraws from his office or the other party agrees to the challenge,
the arbitral tribunal shall decide on the challenge.
(4) If a challenge under any procedure agreed upon by the parties
or under the procedure under sub-section (2) is not successful,
F the arbitral tribunal shall continue the arbitral proceedings and
make an arbitral award.
(5) Where an arbitral award is made under sub-section (4), the
party challenging the arbitrator may make an application for setting
aside such an arbitral award in accordance with Section 34.
G (6) Where an arbitral award is set aside on an application made
under sub-section (5), the Court may decide as to whether the
arbitrator who is challenged is entitled to any fees.”
“14. Failure or impossibility to act.—(1) The mandate of an
arbitrator shall terminate and he shall be substituted by another
H arbitrator, if—
BHARAT BROADBAND NETWORK LIMITED v. UNITED 109
TELECOMS LIMITED [R. F. NARIMAN, J.]

(a) he becomes de jure or de facto unable to perform his A
functions or for other reasons fails to act without undue delay;
and
(b) he withdraws from his office or the parties agree to the
termination of his mandate.
(2) If a controversy remains concerning any of the grounds referred B
to in clause (a) of sub-section (1), a party may, unless otherwise
agreed by the parties, apply to the Court to decide on the termination
of the mandate.
(3) If, under this section or sub-section (3) of Section 13, an
arbitrator withdraws from his office or a party agrees to the C
termination of the mandate of an arbitrator, it shall not imply
acceptance of the validity of any ground referred to in this Section
or sub-section (3) of Section 12.”
11. Section 12(5) has been earlier dealt with in three Supreme
Court judgments. In Voestalpine Schienen GmbH v. Delhi Metro D
Rail Corporation Ltd., (2017) 4 SCC 665, this Court went into the
recommendations of the aforesaid Law Commission Report, and referred
in great detail to the law before the amendment made in Section 12 and
then held:
“23. It also cannot be denied that the Seventh Schedule is based E
on IBA guidelines which are clearly regarded as a representation
of international based practices and are based on statutes, case
law and juristic opinion from a cross-section on jurisdiction. It is
so mentioned in the guidelines itself.”
xxx xxx xxx F
“25. Section 12 has been amended with the objective to induce
neutrality of arbitrators viz. their independence and impartiality.
The amended provision is enacted to identify the “circumstances”
which give rise to “justifiable doubts” about the independence or
impartiality of the arbitrator. If any of those circumstances as G
mentioned therein exists, it will give rise to justifiable apprehension
of bias. The Fifth Schedule to the Act enumerates the grounds
which may give rise to justifiable doubts of this nature. Likewise,
the Seventh Schedule mentions those circumstances which would
attract the provisions of sub-section (5) of Section 12 and nullify
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110 SUPREME COURT REPORTS [2019] 6 S.C.R.

A any prior agreement to the contrary. In the context of this case, it
is relevant to mention that only if an arbitrator is an employee, a
consultant, an advisor or has any past or present business
relationship with a party, he is rendered ineligible to act as an
arbitrator. Likewise, that person is treated as incompetent to
perform the role of arbitrator, who is a manager, director or part
B
of the management or has a single controlling influence in an
affiliate of one of the parties if the affiliate is directly involved in
the matters in dispute in the arbitration. Likewise, persons who
regularly advised the appointing party or affiliate of the appointing
party are incapacitated. A comprehensive list is enumerated in
C Schedule 5 and Schedule 7 and admittedly the persons empanelled
by the respondent are not covered by any of the items in the said
list.”
12. In HRD Corporation v. GAIL (India) Ltd., (2018) 12 SCC
471, this Court, after setting out the amendments made in Section 12 and
D the Fifth, Sixth, and Seventh Schedules to the Act, held as follows:
“12. After the 2016 Amendment Act, a dichotomy is made by the
Act between persons who become “ineligible” to be appointed as
arbitrators, and persons about whom justifiable doubts exist as to
their independence or impartiality. Since ineligibility goes to the
E root of the appointment, Section 12(5) read with the Seventh
Schedule makes it clear that if the arbitrator falls in any one of the
categories specified in the Seventh Schedule, he becomes
“ineligible” to act as arbitrator. Once he becomes ineligible, it is
clear that, under Section 14(1)(a), he then becomes de jure unable
to perform his functions inasmuch as, in law, he is regarded as
F “ineligible”. In order to determine whether an arbitrator is de jure
unable to perform his functions, it is not necessary to go to the
Arbitral Tribunal under Section 13. Since such a person would
lack inherent jurisdiction to proceed any further, an application
may be filed under Section 14(2) to the Court to decide on the
G termination of his/her mandate on this ground. As opposed to this,
in a challenge where grounds stated in the Fifth Schedule are
disclosed, which give rise to justifiable doubts as to the arbitrator’s
independence or impartiality, such doubts as to independence or
impartiality have to be determined as a matter of fact in the facts
of the particular challenge by the Arbitral Tribunal under Section
H
BHARAT BROADBAND NETWORK LIMITED v. UNITED 111
TELECOMS LIMITED [R. F. NARIMAN, J.]

13. If a challenge is not successful, and the Arbitral Tribunal decides A
that there are no justifiable doubts as to the independence or
impartiality of the arbitrator/arbitrators, the Tribunal must then
continue the arbitral proceedings under Section 13(4) and make
an award. It is only after such award is made, that the party
challenging the arbitrator’s appointment on grounds contained in
B
the Fifth Schedule may make an application for setting aside the
arbitral award in accordance with Section 34 on the aforesaid
grounds. It is clear, therefore, that any challenge contained in the
Fifth Schedule against the appointment of Justice Doabia and
Justice Lahoti cannot be gone into at this stage, but will be gone
into only after the Arbitral Tribunal has given an award. Therefore, C
we express no opinion on items contained in the Fifth Schedule
under which the appellant may challenge the appointment of either
arbitrator. They will be free to do so only after an award is rendered
by the Tribunal.”
xxx xxx xxx D
“14. The enumeration of grounds given in the Fifth and Seventh
Schedules have been taken from the IBA Guidelines, particularly
from the Red and Orange Lists thereof. The aforesaid guidelines
consist of three lists. The Red List, consisting of non-waivable
and waivable guidelines, covers situations which are “more E
serious” and “serious”, the “more serious” objections being non-
waivable. The Orange List, on the other hand, is a list of situations
that may give rise to doubts as to the arbitrator’s impartiality or
independence, as a consequence of which the arbitrator has a
duty to disclose such situations. The Green List is a list of situations
where no actual conflict of interest exists from an objective point F
of view, as a result of which the arbitrator has no duty of disclosure.
These Guidelines were first introduced in the year 2004 and have
thereafter been amended, after seeing the experience of arbitration
worldwide. In Part 1 thereof, general standards regarding
impartiality, independence and disclosure are set out.” G
xxx xxx xxx
“17. It will be noticed that Items 1 to 19 of the Fifth Schedule are
identical with the aforesaid items in the Seventh Schedule. The
only reason that these items also appear in the Fifth Schedule is
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112 SUPREME COURT REPORTS [2019] 6 S.C.R.

A for purposes of disclosure by the arbitrator, as unless the proposed
arbitrator discloses in writing his involvement in terms of Items 1
to 34 of the Fifth Schedule, such disclosure would be lacking, in
which case the parties would be put at a disadvantage as such
information is often within the personal knowledge of the arbitrator
only. It is for this reason that it appears that Items 1 to 19 also
B
appear in the Fifth Schedule.”
13. In TRF Ltd. (supra), this Court referred to Section 12(5) of
the Act in the context of appointment of an arbitrator by a Managing
Director of a corporation, who became ineligible to act as arbitrator
under the Seventh Schedule. This Court held:
C
“50. First, we shall deal with Clause (d). There is no quarrel that
by virtue of Section 12(5) of the Act, if any person who falls
under any of the categories specified in the Seventh Schedule
shall be ineligible to be appointed as the arbitrator. There is no
doubt and cannot be, for the language employed in the Seventh
D Schedule, the Managing Director of the Corporation has become
ineligible by operation of law. It is the stand of the learned Senior
Counsel for the appellant that once the Managing Director
becomes ineligible, he also becomes ineligible to nominate.
Refuting the said stand, it is canvassed by the learned Senior
E Counsel for the respondent that the ineligibility cannot extend to a
nominee if he is not from the Corporation and more so when
there is apposite and requisite disclosure. We think it appropriate
to make it clear that in the case at hand we are neither concerned
with the disclosure nor objectivity nor impartiality nor any such
other circumstance. We are singularly concerned with the issue,
F whether the Managing Director, after becoming ineligible by
operation of law, is he still eligible to nominate an arbitrator. At the
cost of repetition, we may state that when there are two parties,
one may nominate an arbitrator and the other may appoint another.
That is altogether a different situation. If there is a clause requiring
G the parties to nominate their respective arbitrator, their authority
to nominate cannot be questioned. What really in that circumstance
can be called in question is the procedural compliance and the
eligibility of their arbitrator depending upon the norms provided
under the Act and the Schedules appended thereto. But, here is a
case where the Managing Director is the “named sole arbitrator”
H
BHARAT BROADBAND NETWORK LIMITED v. UNITED 113
TELECOMS LIMITED [R. F. NARIMAN, J.]

and he has also been conferred with the power to nominate one A
who can be the arbitrator in his place. Thus, there is subtle
distinction……”
xxx xxx xxx
“54. In such a context, the fulcrum of the controversy would be,
can an ineligible arbitrator, like the Managing Director, nominate B
an arbitrator, who may be otherwise eligible and a respectable
person. As stated earlier, we are neither concerned with the
objectivity nor the individual respectability. We are only concerned
with the authority or the power of the Managing Director. By our
analysis, we are obligated to arrive at the conclusion that once the C
arbitrator has become ineligible by operation of law, he cannot
nominate another as an arbitrator. The arbitrator becomes ineligible
as per prescription contained in Section 12(5) of the Act. It is
inconceivable in law that person who is statutorily ineligible can
nominate a person. Needless to say, once the infrastructure
collapses, the superstructure is bound to collapse. One cannot D
have a building without the plinth. Or to put it differently, once the
identity of the Managing Director as the sole arbitrator is lost, the
power to nominate someone else as an arbitrator is obliterated.
Therefore, the view expressed by the High Court is not sustainable
and we say so.” E
14. From a conspectus of the above decisions, it is clear that
Section 12(1), as substituted by the Arbitration and Conciliation
(Amendment) Act, 2015 [“Amendment Act, 2015”], makes it clear
that when a person is approached in connection with his possible
appointment as an arbitrator, it is his duty to disclose in writing any F
circumstances which are likely to give rise to justifiable doubts as to his
independence or impartiality. The disclosure is to be made in the form
specified in the Sixth Schedule, and the grounds stated in the Fifth
Schedule are to serve as a guide in determining whether circumstances
exist which give rise to justifiable doubts as to the independence or
impartiality of an arbitrator. Once this is done, the appointment of the G
arbitrator may be challenged on the ground that justifiable doubts have
arisen under sub-section (3) of Section 12 subject to the caveat entered
by sub-section (4) of Section 12. The challenge procedure is then set out
in Section 13, together with the time limit laid down in Section 13(2).
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114 SUPREME COURT REPORTS [2019] 6 S.C.R.

A What is important to note is that the arbitral tribunal must first decide on
the said challenge, and if it is not successful, the tribunal shall continue
the proceedings and make an award. It is only post award that the party
challenging the appointment of an arbitrator may make an application
for setting aside such an award in accordance with Section 34 of the
Act.
B
15. 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
C dispute falls under the Seventh 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
D 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 Seventh 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 have arisen between them, waive the
E applicability of this sub-section by an “express agreement in writing”.
Obviously, the “express agreement in writing” has reference to a person
who is interdicted by the Seventh 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
F by the Seventh Schedule.
16. The Law Commission Report, which has been extensively
referred to in some of our judgments, makes it clear that there are certain
minimum levels of independence and impartiality that should be required
of the arbitral process, regardless of the parties’ agreement. This being
G the case, the Law Commission then found:
“59. The Commission has proposed the requirement of having
specific disclosures by the arbitrator, at the stage of his possible
appointment, regarding existence of any relationship or interest of
any kind which is likely to give rise to justifiable doubts. The
H Commission has proposed the incorporation of the Fourth Schedule,
BHARAT BROADBAND NETWORK LIMITED v. UNITED 115
TELECOMS LIMITED [R. F. NARIMAN, J.]

which has drawn from the Red and Orange lists of the IBA A
Guidelines on Conflicts of Interest in International Arbitration, and
which would be treated as a “guide” to determine whether
circumstances exist which give rise to such justifiable doubts. On
the other hand, in terms of the proposed section 12 (5) of the Act
and the Fifth Schedule which incorporates the categories from
B
the Red list of the IBA Guidelines (as above), the person proposed
to be appointed as an arbitrator shall be ineligible to be so
appointed, notwithstanding any prior agreement to the contrary.
In the event such an ineligible person is purported to be appointed
as an arbitrator, he shall be de jure deemed to be unable to perform
his functions, in terms of the proposed explanation to section 14. C
Therefore, while the disclosure is required with respect to a
broader list of categories (as set out in the Fourth Schedule, and
as based on the Red and Orange lists of the IBA Guidelines), the
ineligibility to be appointed as an arbitrator (and the consequent
de jure inability to so act) follows from a smaller and more serious
D
sub-set of situations (as set out in the Fifth Schedule, and as based
on the Red list of the IBA Guidelines).
60. The Commission, however, feels that real and genuine party
autonomy must be respected, and, in certain situations, parties
should be allowed to waive even the categories of ineligibility as
set in the proposed Fifth Schedule. This could be in situations of E
family arbitrations or other arbitrations where a person commands
the blind faith and trust of the parties to the dispute, despite the
existence of objective “justifiable doubts” regarding his
independence and impartiality. To deal with such situations, the
Commission has proposed the proviso to section 12 (5), where F
parties may, subsequent to disputes having arisen between
them, waive the applicability of the proposed section 12 (5) by an
express agreement in writing. In all other cases, the general rule
in the proposed section 12 (5) must be followed. In the event the
High Court is approached in connection with appointment of an
arbitrator, the Commission has proposed seeking the disclosure in G
terms of section 12 (1), and in which context the High Court or
the designate is to have “due regard” to the contents of such
disclosure in appointing the arbitrator.”
(emphasis in original)
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116 SUPREME COURT REPORTS [2019] 6 S.C.R.

A Thus, it will be seen that party autonomy is to be respected only in
certain exceptional situations which could be situations which arise in
family arbitrations or other arbitrations where a person subjectively
commands blind faith and trust of the parties to the dispute, despite the
existence of objective justifiable doubts regarding his independence and
impartiality.
B
17. The scheme of Sections 12, 13, and 14, therefore, is that where
an arbitrator makes a disclosure in writing which is likely to give justifiable
doubts as to his independence or impartiality, the appointment of such
arbitrator may be challenged under Sections 12(1) to 12(4) read with
Section 13. However, where such person becomes “ineligible” to be
C appointed as an arbitrator, there is no question of challenge to such
arbitrator, before such arbitrator. In such a case, i.e., a case which falls
under Section 12(5), Section 14(1)(a) of the Act gets attracted inasmuch
as the arbitrator becomes, as a matter of law (i.e., de jure), unable to
perform his functions under Section 12(5), being ineligible to be appointed
D as an arbitrator. This being so, his mandate automatically terminates,
and he shall then be substituted by another arbitrator under Section 14(1)
itself. It is only if a controversy occurs concerning whether he has become
de jure unable to perform his functions as such, that a party has to apply
to the Court to decide on the termination of the mandate, unless otherwise
agreed by the parties. Thus, in all Section 12(5) cases, there is no challenge
E procedure to be availed of. If an arbitrator continues as such, being de
jure unable to perform his functions, as he falls within any of the
categories mentioned in Section 12(5), read with the Seventh Schedule,
a party may apply to the Court, which will then decide on whether his
mandate has terminated. Questions which may typically arise under
F Section 14 may be as to whether such person falls within any of the
categories mentioned in the Seventh Schedule, or whether there is a
waiver as provided in the proviso to Section 12(5) of the Act. As a
matter of law, it is important to note that the proviso to Section 12(5)
must be contrasted with Section 4 of the Act. Section 4 deals with cases
of deemed waiver by conduct; whereas the proviso to Section 12(5)
G deals with waiver by express agreement in writing between the parties
only if made subsequent to disputes having arisen between them.
18. On the facts of the present case, it is clear that the Managing
Director of the appellant could not have acted as an arbitrator himself,
being rendered ineligible to act as arbitrator under Item 5 of the Seventh
H Schedule, which reads as under:
BHARAT BROADBAND NETWORK LIMITED v. UNITED 117
TELECOMS LIMITED [R. F. NARIMAN, J.]

“Arbitrator’s relationship with the parties or counsel A
xxx xxx xxx
5. The arbitrator is a manager, director or part of the management,
or has a similar controlling influence, in an affiliate of one of the
parties if the affiliate is directly involved in the matters in dispute
in the arbitration” B

Whether such ineligible person could himself appoint another
arbitrator was only made clear by this Court’s judgment in TRF Ltd.
(supra) on 03.07.2017, this Court holding that an appointment made by
an ineligible person is itself void ab initio. Thus, it was only on 03.07.2017,
that it became clear beyond doubt that the appointment of Shri Khan C
would be void ab initio. Since such appointment goes to “eligibility”,
i.e., to the root of the matter, it is obvious that Shri Khan’s appointment
would be void. There is no doubt in this case that disputes arose only
after the introduction of Section 12(5) into the statute book, and Shri
Khan was appointed long after 23.10.2015. The judgment in TRF Ltd. D
(supra) nowhere states that it will apply only prospectively, i.e., the
appointments that have been made of persons such as Shri Khan would
be valid if made before the date of the judgment. Section 26 of the
Amendment Act, 2015 makes it clear that the Amendment Act, 2015
shall apply in relation to arbitral proceedings commenced on or after
23.10.2015. Indeed, the judgment itself set aside the order appointing E
the arbitrator, which was an order dated 27.01.2016, by which the
Managing Director of the respondent nominated a former Judge of this
Court as sole arbitrator in terms of clause 33(d) of the Purchase Order
dated 10.05.2014. It will be noticed that the facts in the present case are
somewhat similar. The APO itself is of the year 2014, whereas the F
appointment by the Managing Director is after the Amendment Act,
2015, just as in the case of TRF Ltd. (supra). Considering that the
appointment in the case of TRF Ltd. (supra) of a retired Judge of this
Court was set aside as being non-est in law, the appointment of Shri
Khan in the present case must follow suit.
G
19. However, the learned Senior Advocate appearing on behalf
of the respondent has argued that Section 12(4) would bar the appellant’s
application before the Court. Section 12(4) will only apply when a
challenge is made to an arbitrator, inter alia, by the same party who has
appointed such arbitrator. This then refers to the challenge procedure
set out in Section 13 of the Act. Section 12(4) has no applicability to an H
118 SUPREME COURT REPORTS [2019] 6 S.C.R.

A application made to the Court under Section 14(2) to determine whether
the mandate of an arbitrator has terminated as he has, in law, become
unable to perform his functions because he is ineligible to be appointed
as such under Section 12(5) of the Act.
20. This then brings us to the applicability of the proviso to Section
B 12(5) on the facts of this case. Unlike Section 4 of the Act which deals
with deemed waiver of the right to object by conduct, the proviso to
Section 12(5) will only apply if subsequent to disputes having arisen
between the parties, the parties waive the applicability of sub-section
(5) of Section 12 by an express agreement in writing. For this reason,
the argument based on the analogy of Section 7 of the Act must also be
C rejected. Section 7 deals with arbitration agreements that must be in
writing, and then explains that such agreements may be contained in
documents which provide a record of such agreements. On the other
hand, Section 12(5) refers to an “express agreement in writing”. The
expression “express agreement in writing” refers to an agreement made
D in words as opposed to an agreement which is to be inferred by conduct.
Here, Section 9 of the Indian Contract Act, 1872 becomes important. It
states:
“9. Promises, express and implied.—In so far as a proposal
or acceptance of any promise is made in words, the promise is
E said to be express. In so far as such proposal or acceptance is
made otherwise than in words, the promise is said to be implied.”
It is thus necessary that there be an “express” agreement in
writing. This agreement must be an agreement by which both parties,
with full knowledge of the fact that Shri Khan is ineligible to be appointed
F as an arbitrator, still go ahead and say that they have full faith and
confidence in him to continue as such. The facts of the present case
disclose no such express agreement. The appointment letter which is
relied upon by the High Court as indicating an express agreement on the
facts of the case is dated 17.01.2017. On this date, the Managing Director
of the appellant was certainly not aware that Shri Khan could not be
G appointed by him as Section 12(5) read with the Seventh Schedule only
went to the invalidity of the appointment of the Managing Director himself
as an arbitrator. Shri Khan’s invalid appointment only became clear after
the declaration of the law by the Supreme Court in TRF Ltd. (supra)
which, as we have seen hereinabove, was only on 03.07.2017. After this
H date, far from there being an express agreement between the parties as
BHARAT BROADBAND NETWORK LIMITED v. UNITED 119
TELECOMS LIMITED [R. F. NARIMAN, J.]

to the validity of Shri Khan’s appointment, the appellant filed an application A
on 07.10.2017 before the sole arbitrator, bringing the arbitrator’s attention
to the judgment in TRF Ltd. (supra) and asking him to declare that he
has become de jure incapable of acting as an arbitrator. Equally, the
fact that a statement of claim may have been filed before the arbitrator,
would not mean that there is an express agreement in words which
B
would make it clear that both parties wish Shri Khan to continue as
arbitrator despite being ineligible to act as such. This being the case, the
impugned judgment is not correct when it applies Section 4, Section 7,
Section 12(4), Section 13(2), and Section 16(2) of the Act to the facts of
the present case, and goes on to state that the appellant cannot be allowed
to raise the issue of eligibility of an arbitrator, having itself appointed the C
arbitrator. The judgment under appeal is also incorrect in stating that
there is an express waiver in writing from the fact that an appointment
letter has been issued by the appellant, and a statement of claim has
been filed by the respondent before the arbitrator. The moment the
appellant came to know that Shri Khan’s appointment itself would be
D
invalid, it filed an application before the sole arbitrator for termination of
his mandate.
21. The learned Additional Solicitor General appearing on behalf
of the appellant has relied upon All India Power Engineer Federation
v. Sasan Power Ltd., (2017) 1 SCC 487, and referred to paragraph 21
thereof, which reads as follows: E

“21. Regard being had to the aforesaid decisions, it is clear that
when waiver is spoken of in the realm of contract, Section 63 of
the Contract Act, 1872 governs. But it is important to note that
waiver is an intentional relinquishment of a known right, and that,
therefore, unless there is a clear intention to relinquish a right that F
is fully known to a party, a party cannot be said to waive it. But
the matter does not end here. It is also clear that if any element of
public interest is involved and a waiver takes place by one of the
parties to an agreement, such waiver will not be given effect to if
it is contrary to such public interest. This is clear from a reading G
of the following authorities.”
This judgment cannot possibly apply as the present case is governed
by the express language of the proviso to Section 12(5) of the Act.
Similarly, the judgments relied upon by the learned Senior Advocate
appearing on behalf of the respondent, namely, Vasu P. Shetty v. Hotel H
120 SUPREME COURT REPORTS [2019] 6 S.C.R.

A Vandana Palace, (2014) 5 SCC 660, and BSNL v. Motorola India
(P) Ltd., (2009) 2 SCC 337 [“BSNL”], for the same reason, cannot be
said to have any application to the express language of the proviso to
Section 12(5). It may be noted that BSNL (supra) deals with Section 4
of the Act which, as has been stated hereinabove, has no application,
and must be contrasted with the language of the proviso to Section 12(5).
B
22. We thus allow the appeals and set aside the impugned judgment.
The mandate of Shri Khan having terminated, as he has become de jure
unable to perform his function as an arbitrator, the High Court may appoint
a substitute arbitrator with the consent of both the parties.
C 23. Vide order dated 25.01.2018, we had issued notice in the Special
Leave Petition as well as notice on the interim relief prayed for by the
appellant. Since there was no order of stay, the arbitral proceedings
continued even after the date of the impugned judgment, i.e., 22.11.2017,
and culminated in two awards dated 11.07.2018 and 12.07.2018. We
have been informed that the aforesaid awards have been challenged by
D the appellant by applications under Section 34 of the Act, in which certain
interim orders have been passed by the Single Judge of the High Court
of Delhi. These awards, being subject to the result of this petition, are
set aside. Consequently, the appellant’s Section 34 proceedings have
been rendered infructuous. It will be open to the appellant to approach
E the High Court of Delhi to reclaim the deposit amounts that have been
made in pursuance of the interim orders passed in the Section 34 petition
filed in the High Court of Delhi.

Devika Gujral Appeals allowed.

F

G

H