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Introduction
1. This article analyses the Hon'ble Supreme Court's ("the Court") decision in Bhadra International (India) Pvt. Ltd. v. Airports Authority of India, 1 clarifying the conditions under which a party may waive an arbitrator's ineligibility under Section 12(5) of the Arbitration and Conciliation Act, 1996 ("the Act"). The Court has held that a waiver under Section 12(5) is valid only when effected through an express agreement in writing, executed after disputes have arisen between the parties. Crucially, a party's participation in arbitral proceedings including the filing of a Statement of Claim or preferring applications under Sections 29A and 17 does not, by itself, satisfy the written waiver mandate under Section 12(5). The Court's holding has affirmed the Court's jurisprudence previously laid down in Bharat Broadband Network Ltd. v. United Telecoms Ltd.2 and TRF Ltd. v. Energo Engineering Projects Ltd. 3
2. In the instant case, the Court was required to adjudicate on the following issues:
a) Whether unconditional and continued participation in the arbitral proceedings by a Party, including the invocation of Sections 29A and 17, amounts to a waiver of ineligibility under Section 12(5).
b) Whether the concept of 'deemed waiver' by conduct applicable under Section 4 of the Act could be invoked to cure the statutory ineligibility under Section 12(5)
c) Whether seeking extension of the tribunal's mandate under Section 29A constituted waiver of the right to object to the arbitrator's ineligibility.
The Mandate of Section 12(5) of the Act
3. Section 12(5) of the Act read with the Seventh Schedule provides that where an arbitrator falls within any of the categories specified in the Seventh Schedule, he becomes ineligible to act as arbitrator, and any proceedings conducted before such an arbitrator would be void ab initio.
4. The proviso to Section 12(5), however, permits the Parties to cure such ineligibility, subject to fulfillment of two conditions:
a) The right to object under the sub-section can be waived only subsequent to a dispute having arisen between the parties;
b) Parties through an express agreement in writing agree to waive their right to object to such ineligibility
Waiver under Section 12(5) cannot be inferred from the Parties' conduct
5. Pertinently, the Respondent in the instant case contended that since the Appellant continued to actively participate in the arbitral proceedings, including preferring applications under Sections 29A and 17 of the Act, it constituted "waiver by express writing" within the meaning of the statutory proviso under Section 12(5). Therefore, the Appellant could not be allowed to resile from its earlier position and challenge the jurisdiction of the Tribunal at a belated stage.
6. The Supreme Court, however, categorically rejected this contention. The Court relying on its landmark judgement in Bharat Broadband Network Ltd. v. United Telecoms Ltd.4 held that waiver under the proviso requires an express agreement in writing concluded after disputes arise. Merely recording "no objection" in a procedural order, filing pleadings, or jointly seeking extensions under Section 29A does not satisfy the requirements of the proviso.
7. The Court relying on the judgement in Hindustan Construction Co. Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd. 5 held that preferring a Section 29A application amounted to a valid waiver only under Section 4 but was insufficient to cure the statutory ineligibility provided under Section 12(5) of the Act.
8. In essence, it is now well-settled that while a Section 29A application is the most prominent way to establish 'deemed waiver' under Section 4 of the Act, the same cannot substitute the mandate of waiver by express writing under Section 12(5). Therefore, there is no alternate to the requirement of "express agreement in writing" to constitute waiver under Section 12(5).
9. In doing so, the Court has drawn a sharp distinction between the statutory frameworks of Section 12(5) and Section 4. It has clarified that Section 4 provides for deemed waiver by conduct, where a party, despite knowledge of non-compliance with requirements of the Act, proceeds with arbitration without raising timely objection. In such cases, the party is deemed to have waived its right to object. However, this framework is inapplicable to Section 12(5) which is a substantive safeguard, and waiver thereof requires a higher threshold of an express written agreement which is non-derogable.
De jure ineligibility is an inherent jurisdictional defect and may be raised at any stage, including under Section 34
10. In line with the established jurisprudence, the Court treated Seventh Schedule ineligibility as an inherent jurisdictional defect which could be raised at any stage including Section 34. The Court held that after the delivery of an award, the defect under Section 12(5) remains cognisable under Section 34(2)(b) as a conflict with public policy and the fundamental policy of Indian law. In doing so, the Court relied on Kiran Singh v Chaman Paswan,6 wherein it was held that lack of jurisdiction renders a decision a nullity and the objection can be raised whenever and wherever enforcement is sought. This preserves a party's ability to resist enforcement even if no contemporaneous objection was raised, underscoring the non‑derogable character of Section 12(5).
The Mandate of Waiver in Writing is Limited to De Jure Ineligibility under Seventh Schedule
11. At this stage, it is apposite to highlight that the requirement of express agreement in writing to constitute waiver is only applicable to cases wherein the arbitrator has become de jure ineligible to perform his functions as he falls under the Seventh Schedule of the Act.
12. Such heightened threshold of 'waiver' will not apply to cases wherein the jurisdiction of an otherwise eligible Tribunal is assailed on the ground that his appointment is unilateral or is improper due to non-compliance of terms of the arbitration agreement. In such cases, the Court would certainly evaluate the conduct of the Parties in the arbitral proceedings to determine whether they had impliedly consented to the Tribunal's jurisdiction.
13. The Court's recent judgement in Municipal Corporation of Greater Mumbai v. M/S R.V. Anderson Associates Limited 7 provides much clarity on the aforesaid legal position. In the said case, the Court was seized of a dispute wherein the Appellant had assailed the legitimacy of the Arbitral Tribunal on the ground that its constitution was defective and not in terms of the agreement. The Court expressly noted that this was not a scenario where the Arbitrator had become ineligible under Section 12, and hence inferred waiver through the Parties' subsequent conduct affirming the legitimacy of the arbitral tribunal.
Implications for Arbitral Institutions and Parties
14. The ratio laid down by the Hon'ble Court unequivocally emphasizes that it is incumbent on the Arbitral Tribunal upon entering reference to insist the Parties to sign an express agreement signifying their consent to the jurisdiction of the Arbitral Tribunal. Such express agreement in writing would protect the sanctity of the arbitral process and safeguard the resultant award from any belated challenge under Section 12(5) of the Act.
Conclusion
15. In summary, the Court's ruling in Bhadra International provides guidance to the law on when an arbitrator may be disqualified and how far parties can rely on their contractual freedom and conduct under the Act. It confirms that parties may waive even serious disqualifications, but only if they do so consciously, expressly, and without ambiguity. The judgment makes it clear that the validity of an arbitral process cannot be assumed or implied rather it must rest on the clear and recorded consent of the parties.
16. In practical terms, the decision sends a strong message to both arbitral institutions and parties that if they wish to avoid later challenges under Section 12(5) based on arbitrator ineligibility, they must record their mutual consent in writing. Thus, an express written agreement approving the arbitrator's appointment is now a pre-requisite to protect the award from being challenged on this ground.
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