The rule that an employee of a contracting party cannot sit as arbitrator feels so settled that its temporal limits are easy to forget. In Delhi Metro Rail Corporation Ltd v. Sh. Pankaj (since deceased) through LRs (FAO (COMM) 23/2025, decided 30 September 2026), a Division Bench of the Delhi High Court — Justice Anil Kshetarpal and Justice Bharat Parashar — upheld an award rendered by a DMRC officer appointed as sole arbitrator in March 2015, holding that Section 12(5) and the Seventh Schedule, introduced by the 2015 Amendment, do not reach back to arbitrations commenced before 23 October 2015.
The dispute and its timeline
DMRC licensed parking sites at Dwarka metro stations to a contractor in 2013. Disputes arose over the area actually handed over, and the contractor invoked arbitration on 3 June 2014. DMRC appointed one of its own senior officers as sole arbitrator on 24 March 2015 — months before the 2015 Amendment commenced on 23 October 2015. The arbitrator made disclosures of independence, conducted the reference, and in July 2017 rejected the contractor’s claims while allowing DMRC’s counter-claim. The District Judge set the award aside; DMRC appealed under Section 37 read with the Commercial Courts Act.
The clause at the centre
Clause 45 of the contract referred all disputes to a sole arbitrator nominated by DMRC, recorded that there would be no objection if the nominee was a DMRC employee, and provided that the arbitration would follow the Arbitration and Conciliation Act, 1996 “as amended from time to time including provisions in force at the time the reference is made.” The question was whether that formula amounted to an agreement to apply the 2015 Amendment — with its Seventh Schedule ineligibility for employees — to an arbitration already commenced in 2014.
What the Division Bench held
Section 26 of the 2015 Amendment keeps the new regime off arbitrations commenced before 23 October 2015, unless parties otherwise agree. The arbitration here commenced with the June 2014 invocation; the March 2015 appointment preceded the Amendment.
Read whole, Clause 45 tied the applicable provisions to the law in force when the reference was made. Words contemplating future amendments did not clearly opt the parties into the post-2015 ineligibility regime for a reference already under way.
Under the pre-2015 framework, employee status alone was no statutory bar. The contract expressly authorised the appointment; no specific circumstances of controlling authority or subordination in the dispute were shown. TRF, Perkins and allied rulings operate within the amended regime and were distinguished.
The appeal was allowed and the District Judge’s judgment setting aside the award was reversed.
The dividing line in practice
Employee-arbitrators permissible if the contract allowed; challenges need proof of actual bias or other grounds under the unamended law. Seventh Schedule arguments fail.
Employees and other Seventh Schedule persons are ineligible de jure; appointments by an ineligible person are equally void, and waiver requires an express written agreement after disputes arise under the proviso to Section 12(5).
Takeaways
The decision does not dilute the modern insistence on independent tribunals; it enforces the temporal architecture Parliament chose. Counsel on both sides of a Section 34 or Section 37 matter involving an older award should begin with a single question: when did this arbitration commence?
Frequently Asked Questions
When does Section 12(5) ineligibility apply?
Section 12(5) read with the Seventh Schedule, inserted by the Arbitration and Conciliation (Amendment) Act, 2015, makes persons in listed relationships — including employees of a party — ineligible to act as arbitrator. By Section 26 of the Amendment Act, the new regime applies to arbitral proceedings commenced on or after 23 October 2015, unless the parties agree otherwise.
Does a clause saying "as amended from time to time" import the 2015 Amendment?
Not by itself. The Court read the clause as a whole: it also tethered the governing provisions to the law in force when the reference was made. General words contemplating future amendments were held not to be the clear agreement Section 26 requires for applying the amended regime to an already-commenced arbitration.
Was an employee-arbitrator valid before the 2015 Amendment?
Under the pre-amendment law, employment with a party was not by itself a statutory disqualification. Where the contract expressly authorised the appointment and recorded that an employee-arbitrator was unobjectionable, the appointment complied with the agreed mechanism, absent specific circumstances showing bias or direct subordination in the dispute.
What does this mean for old awards under challenge?
Awards from arbitrations commenced before 23 October 2015 cannot be set aside merely by invoking TRF, Perkins or the Seventh Schedule. Challenges must engage the law as it stood then — actual bias, breach of natural justice, or the grounds under Section 34 as they applied to the old regime.