Delhi District Court
Airports Authority Of India vs M/S Basudev Rout Sanitation on 20 March, 2025
DLSE010035892018
THE COURT OF DISTRICT JUDGE-03
SOUTH-EAST DISTRICT, SAKET COURTS, NEW DELHI
(PRESIDED OVER BY: SACHIN MITTAL)
ARBTN No. 150/2018
In the matter of :
Airport Authority of India,
Having its Registered and Corporate Office at:
Rajiv Gandhi Bhavan, Safdarjung Airport,
New Delhi. .... PETITIONER
VERSUS
M/s Basudev Rout Sanitation,
RZ-16/2, Gali No. 32, Mangal Bazar Gali,
Indira Park, Palam Colony,
New Delhi-110045. .... RESPONDENT
Date of Institution : 02.05.2018
Date on which arguments concluded : 28.01.2025
Date of Judgment : 20.03.2025
Result : Allowed
JUDGMENT
1. This is a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (herein after 'the Act') seeking therein setting aside of Arbitration Award dated 22.12.2017 (herein after 'the impugned Award'), passed by the Ld. Sole Arbitrator, Sh. B.D. Joshi, whereby an Award for a sum of Rs. 5,57,997/- alongwith a sum of Rs. 1,00,000/- towards arbitration cost, has been passed in favour of the respondent and against the petitioner. The said Award amount has ARBTN No.150/18 AIRPORT AUTHORITY OF INDIA Page 1 of 10 v.
M/s BASUDEV ROUT SANITATION Digitally signed SACHIN by SACHIN MITTAL MITTAL Date: 2025.03.20 13:04:40 +0530 been directed to be paid within 3 months from the date of the Award, failing which, the respondent shall be entitled to future interest at the rate of 10% per annum on the Award amount from the date of Award till the date of payment. The respondent herein was the claimant in the arbitration proceedings.
2. The facts in brief leading to the passing of the impugned Award are that the petitioner, a statutory corporation, had invited tenders for "Raising height of operational boundary wall and associated civil works" at Safdarjung Airport. On 15.10.2014, the respondents submitted its bid for the execution of the work. The petitioner, vide letter dated 10.11.2014, accepted the offer/bid of the respondent.
3. As per the letter of acceptance, the respondent was required to sign the contract within 15 days of receipt of the acceptance letter. However, the respondent failed to do so. As per the aforesaid letter of acceptance, the work was to be completed within 4 months and the same was to be reckoned from the 10 th day of letter of acceptance. Thus, the work was supposed to commence on 20.11.2014 and was to be completed on or before 19.03.2015.
4. However, before the agreement between the petitioner and the respondent could be executed, the Bureau of Civil Aviation Security (BCAS), vide letter dated 17.11.2014, informed the petitioner that the proposal for raising of height of boundary wall of operational area by profile sheet is rejected for security reasons. Due to this, no agreement could be executed between the petitioner and the respondent.
5. On 02.01.2015, the respondent wrote a letter to the petitioner therein requesting to handover the site for work. The petitioner, vide letter dated 07.01.2015, informed the respondent that the site could not be handed over due to administrative reasons. The ARBTN No.150/18 AIRPORT AUTHORITY OF INDIA Page 2 of 10 v. Digitally signed by M/s BASUDEV ROUT SANITATION SACHIN SACHIN MITTAL MITTAL Date:
2025.03.20 13:05:12 +0530 respondent again wrote a letter dated 05.03.2015 for handover of the site. The said letter was replied by the petitioner, vide letter dated 26.03.2015, wherein it was again stated that due to administrative reason the site could not be handed over. The petitioner, vide letter dated 06.05.2015, informed the respondent that the matter has been sent to the competent authority for necessary action as per tender clause 3A GCC 16 and clause 13 GCC 33. Then, the petitioner, vide letter dated 08.06.2015, foreclosed the tender work as per tender clause 3A GCC 16 and clause 13 GCC 33.
6. The respondent, vide letters dated 08.08.2015 and 23.10.2015, raised certain disputes and requested for appointment of an Arbitrator. The petitioner, vide letter dated 07.12.2015, informed the respondent that the matter would be referred to the Dispute Resolution Committee (DRC). However, the dispute between the parties could not be resolved before the DRC.
7. The respondent, vide letter dated 20.06.2016, requested for appointment of an Arbitrator. The petitioner, vide letter dated 15/20.09.2016, appointed Sh. B.D. Joshi as the Sole Arbitrator for adjudication of disputes between the parties.
8. The respondent filed its claim under five heads: (a) claim no.1 for Rs. 8,71,691/- towards loss of profit; (b) claim no.2 for Rs. 7,00,000/- towards additional expenses incurred; (c) claim no.3 for Rs. 15,754/- towards interest at the rate of 18% per annum on the earnest money of Rs.1,31,280/- for the period from 15.10.2014 till 08.06.2015; (d) claim no.4 towards interest at the rate of 18% per annum on claim no.1 to 3; and (e) claim no.5 towards interest at the rate of 18% per annum for the pre-reference, pendente-lite and future period on claim no.1 to 4.
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9. The petitioner, in order to contest the claim of the respondent, filed a reply. The rejoinder and sur-rejoinder were filed on behalf of the respondent and petitioner respectively.
10. The Ld. Sole Arbitrator, vide the impugned Award, disposed off the arbitration claim of the respondent. An Award for a sum of Rs. 5,57,997/- alongwith a sum of Rs. 1,00,000/- towards arbitration cost, has been passed in favour of the respondent and against the petitioner. The said Award amount has been directed to be paid within 3 months from the date of the Award, failing which, the respondent shall be entitled to future interest at the rate of 10% per annum on the Award amount from the date of Award till the date of payment.
11. The petitioner being aggrieved has filed this petition seeking setting aside of the impugned Award. Pertinently, the respondent being aggrieved with the non allowing of its claim to the full extent has also filed a petition, ARBTN No. 117/18 under Section 34 of the Act, which vide Order dated 20.03.2025 has been dismissed as withdrawn.
12. I have heard Sh. Ratik Sharma, Ld. Counsel for the petitioner and Sh. P.S. Shridhar Raj, Ld. Counsel for the respondent. I have carefully perused the judicial record as well.
13. Mr. Sharma submitted that the Ld. Sole Arbitrator was unilaterally appointed by the petitioner; that such appointment was in violation of Section 12(5) of the Act; that the Ld. Sole Arbitrator was therefore ineligible to be appointed as an Arbitrator; and that the impugned Award rendered by an ineligible Arbitrator is a nullity in the eyes of the law. In response to Court's query as to whether a person/entity appointing an Arbitrator can seek the setting aside of the Award rendered by such Arbitrator, Ld. Counsel relied upon the Judgment of the Hon'ble Supreme Court in Bharat Broadband ARBTN No.150/18 AIRPORT AUTHORITY OF INDIA Page 4 of 10 v. Digitally signed M/s BASUDEV ROUT SANITATION by SACHIN SACHIN MITTAL Date:
MITTAL 2025.03.20 13:05:19 +0530 Network Limited v. United Telecoms Limited 1 and contended that even a person/entity unilaterally appointing the Arbitrator can seek the setting aside of the Award. Mr. Sharma has also relied upon the Judgments, TRF Ltd. v. Energo Engg. Projects Ltd.2; Perkins Eastman Architects DPC v. HSCC (India) Ltd.3; Govind Singh v. Satya Group Pvt. Ltd.4; Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat.5; Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat6; Airports Authority of India v. TDI International India Pvt. Ltd.7; Hindustan Zinc Limited v. Ajmer Vidyut Vitran Nigam Limited.8; and Man Industries (India) Limited v. Indian Oil Corporation9.
14. This Court had heard Ld. Counsels for both the parties on 04.11.2024 and then, on 23.12.2024. On both these dates, Ld. Counsel for the respondent had addressed the submissions to oppose the setting aside of the impugned Award. However, after the Ld. Counsel for the petitioner filed the compilation of aforesaid Judgments, Ld. Counsel for the respondent on the next date of hearing i.e. 28.01.2025, conceded that the impugned Award is liable to be set aside in view of the settled legal position that an Award passed by a unilaterally appointed Arbitrator is a nullity in law. Not only this, Ld. Counsel for the respondent has also sought that respondent's similar petition against the impugned Award may also 1 (2019) 5 SCC 755 2 (2017) 8 SCC 377 3 (2020) 20 SCC 760 4 2023 SCC OnLine Del 37 5 2023 SCC OnLine Del 3148 6 SLP (C) Diary No(s). 47322/2023 7 2024 SCC OnLine Del 4016 8 (2019) 17 SCC 82 9 2023 SCC OnLine Del 3537 ARBTN No.150/18 AIRPORT AUTHORITY OF INDIA Page 5 of 10 Digitally signed v.
M/s BASUDEV ROUT SANITATION SACHIN by SACHIN MITTAL MITTAL Date: 2025.03.20 13:04:51 +0530 be dismissed as withdrawn. This Court, vide a separate Order of even date, has dismissed the said petition as withdrawn.
15. The Law Commission, in its 246 th report, recommended:
(i) introducing Section 12(5) to the Act; and (ii) introducing Schedule V and Schedule VII to the Act therein incorporating the guidelines of the International Bar Association (IBA) regarding the standards of independence and impartiality of arbitrator.
16. The aforesaid recommendations of Law Commission were accepted by the Parliament and the Act was amended by 2015 amendments. The 2015 amendments to the Act introduced Section 12(5) and Schedule V and Schedule VII to the Act. The Schedule V enumerates grounds which give rise to justifiable doubts as to the independence or impartiality of Arbitrator. The Schedule VII enumerates categories of relationships of a proposed Arbitrator with the parties, or counsel, or the subject matter of the dispute, which renders the proposed appointment of such person as an Arbitrator to be illegal. Section 12(5) clarifies that any individual whose relationship with the party, the subject matter of dispute, and counsel is found to be falling under Schedule VII to the Act, he or she will not be considered eligible for the appointment as an Arbitrator. Unlike the Schedule V, attracting any of the grounds enumerated under Schedule VII will lead to instant disqualification of the Arbitrator from being appointed.
17. In the wake of aforesaid amendments by 2015 amendment, the Hon'ble Supreme Court, in a series of landmark judgments, TRF Ltd. v. Energo Engg. Projects Ltd. (supra); Bharat Broadband Network Ltd. v. United Telecoms Ltd. (supra); Perkins Eastman Architects DPC v. HSCC (India) Ltd. (supra) and Haryana Space Application Centre (HARSAC) and Anr. v. Pan India ARBTN No.150/18 AIRPORT AUTHORITY OF INDIA Page 6 of 10 v.
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Consultants10, held the unilateral appointment of Arbitrator by one of the parties to dispute to be illegal.
18. The Hon'ble Delhi High Court in Proddatur Cable TV Digi Services v. Siti Cable Network Limited 11, following the precedents laid down by the Hon'ble Supreme Court in its aforesaid judgments, also ruled the unilateral appointment of Arbitrator to be bad in law.
19. Pertinent to note here is that all the aforesaid judgments have been passed on the basis of reasoning that in view of the insertion of Section 12(5) and Schedule V and Schedule VII by way of 2015 amendments, a unilaterally appointed Arbitrator is de-jure ineligible to be appointed as Arbitrator.
20. The Hon'ble Supreme Court in Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd. v. Ajay Sales & Suppliers12 and Ellora Paper Mills Ltd. v. State of M.P.13, was dealing with pre-2015 amendment arbitral dispute and arbitral clause. The Hon'ble Supreme Court even in such cases ruled against the unilateral appointment of arbitrator as in these cases, the arbitral proceedings had not yet culminated into award.
21. Recently, the Hon'ble Delhi High Court in Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat (supra) and the Hon'ble Calcutta High Court in Cholamandalam Investment and Finance Co. Ltd. v. Amrapali Enterprises14, were dealing with the issue of the enforcement of Arbitral Award rendered by unilaterally appointed sole Arbitrator. The Hon'ble High Courts after placing 10 (2021) 3 SCC 103 11 2020 SCC OnLine Del 350 12 2021 SCC Online SC 730 13 (2022) 3 SCC 1 14 2023 SCC OnLine Cal 605 ARBTN No.150/18 AIRPORT AUTHORITY OF INDIA Page 7 of 10 v.
M/s BASUDEV ROUT SANITATION Digitally signed SACHIN by SACHIN MITTAL MITTAL 13:05:27 Date: 2025.03.20 +0530 reliance upon catena of judgments held that unilateral appointment of an arbitrator is void ab initio and that such an award is also non est in law. The Hon'ble High Courts have reasoned that a person's ineligibility to act as an Arbitrator strikes at the root of the matter. Accordingly, the award rendered by such a unilaterally appointed Arbitrator would be non est and non enforceable in law. It was also held that an executing Court could entertain an objection that the award is a nullity and suffers with illegality going to the root of the matter. The Hon'ble Supreme Court in Kotak Mahindra Bank Ltd v. Narendra Kumar Prajapat (supra) dismissed the petition file by Kotak Mahindera Bank challenging the Hon'ble Delhi High Court's decision in Kotak Mahindera Bank (Supra) to uphold the Commercial Court's judgment that refused the execution of an award passed by a unilaterally appointed Arbitrator.
22. The aforesaid 2015 amendments in the Act commenced with effect from 23.10.2015. In the present case, the Ld. Sole Arbitrator was appointed by the petitioner, vide letter dated 15/20.09.2016 i.e. after the commencement of 2015 Amendments. The appointment of Ld. Sole Arbitrator is therefore clearly in the teeth of Section 12(5) of the Act.
23. Regarding the unilateral appointment of Arbitrator and its permissibility under the law, the Hon'ble Supreme Court in Bharat Broadband Network Ltd. (supra) has observed as under:
"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 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 ARBTN No.150/18 AIRPORT AUTHORITY OF INDIA Page 8 of 10 Digitally signed v. by SACHIN M/s BASUDEV ROUT SANITATION SACHIN MITTAL Date:
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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 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 subsection 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 by the Seventh Schedule."
24. The Hon'ble Delhi High Court in its recent decision in Telecommunication Consultants India Ltd. v. Shivaa Trading 15 while relying upon Bharat Broadband Network Ltd. (supra) has observed as under:-
"23. Upon a conspectus of the averments contained in the petition and in the reply; and having heard learned counsel for the parties, this court is of the view that the present case is squarely covered by the decision of the Supreme Court in Bharat Broadband Network Ltd. v. United Telecoms Ltd. (supra). Just as in Bharat Broadband, in the present case as well, the party that had appointed the Arbitrator had itself subsequently challenged the award on the ground that the Arbitrator was ineligible to act as such, in light of section 12(5) of the A&C Act.
24. The enunciation of the law by the Supreme Court on the point is clear and unequivocal, inasmuch as the challenge under section 12(5) is attracted in a case where the arbitrator becomes de jure ineligible to perform his function by reason of falling in one or more of the categories specified in the Seventh Schedule to the A&C Act. In such circumstances, the Supreme Court has held, that since an arbitrator so appointed inherently lacks 15 2024 SCC OnLine DEL 2937 ARBTN No.150/18 AIRPORT AUTHORITY OF INDIA Page 9 of 10 v.Digitally signed
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jurisdiction to act as an arbitrator, the very appointment of the arbitrator and the arbitral proceedings conducted are rendered void ab-initio. The Supreme Court has also held that any waiver in terms of the proviso to section 12(5) of the A&C Act must be 'express' and 'in writing' and must have been granted 'subsequent' to disputes having arisen between the parties. These have been held to be necessary prerequisites for the waiver to section 12(5) being valid.
27. There also cannot be any cavil with the proposition of law that a defect of jurisdiction, which renders a decision void, can be challenged at any stage, since such defect strikes at the very foundation of the power of the court or tribunal to decide a dispute.
29. As a sequitur to be above, the court is persuaded to allow the present petition, solely on the ground that the learned Arbitrator appointed in the matter was de jure ineligible to act as such; and consequently, all proceedings in arbitration, including Arbitral Award dated 17.12.2021 rendered by him, are void ab-initio and of no legal effect."
25. In view of the above discussion, I am of the considered view that the appointment of Ld. Sole Arbitrator in the present case is hit by Section 12(5) of the Act read with 7 th Schedule therein. The impugned Award is therefore a nullity in the eyes of law.
26. As a result, this petition is allowed and the impugned Award dated 22.12.2017, passed by the Ld. Sole Arbitrator, Sh. B.D. Joshi, is set aside. The petition is, accordingly, disposed off.
27. The file be consigned to Record Room.
Announced & dictated in the open court on 20.03.2025 (Sachin Mittal) DJ-03/South-East District, Saket Courts, New Delhi/20.03.2025 Certified that this Judgment contains 10 pages and each page bears my signatures.
(Sachin Mittal) District Judge-03/South-East District Saket Courts, New Delhi/20.03.2025 ARBTN No.150/18 AIRPORT AUTHORITY OF INDIA Page 10 of 10 v.
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