Ineligible person cannot appoint arbitrator

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ineligible person cannot appoint arbitrator

In a recent judgment in the Bharat Broadband Network Ltd. (BBNL) v United Telecoms Ltd case, the Supreme Court held that the appointment of an arbitrator by a person ineligible to be an arbitrator is void ab initio (invalid from the outset) according to section 12(5) of the Arbitration and Conciliation Act 1996 (act). n a recent judgment in the Bharat Broadband Network Ltd. (BBNL) v United Telecoms Ltd case, the Supreme Court held that the appointment of an arbitrator by a person ineligible to be an arbitrator is void ab initio (invalid from the outset) according to section 12(5) of the Arbitration and Conciliation Act 1996 (act).

In this case, involving a contractual dispute, United Telecoms invoked the arbitration clause in 2017 and sought the appointment of an arbitrator. The chairman and managing director (CMD) of BBNL appointed K H Khan as the arbitrator. Later, BBNL sought the withdrawal of Khan from the proceedings because an ineligible person could not appoint an arbitrator and the CMD of one of the parties to the arbitration was ineligible to act as an arbitrator. Therefore, the appointment would be held null and void. However, United Telecoms did not object to the continuation of Khan as arbitrator. As Khan rejected the request for withdrawal, the order was challenged by BBNL under sections 14 and 15 of the act before Delhi High Court.

The high court dismissed the challenge, holding that BBNL was estopped from questioning the mandate of the arbitrator appointed by it. The court also gave a waiver of objections as per proviso to section 12(5) of the act based on the conduct of the parties, i.e., BBNL appointing the arbitrator and United Telecoms filing claim statement in proceedings before him.

BBNL challenged the high court judgment. The Supreme Court, allowing the appeal of BBNL, held that the ineligibility under section 12(5) of the act was de jure in nature, leading to automatic termination of his mandate.

The Supreme Court held that the fact that United Telecoms filed a claim statement before the arbitrator cannot constitute a waiver and that the waiver of objection under section 12(5) of the act should be express and in writing.

The dispute digest is compiled by Bhasin & Co, a corporate law firm based in New Delhi. The authors can be contacted at [email protected]. Readers should not act on the basis of this information without seeking professional legal advice.