The era of employer-appointed arbitrators in government contracts is over, but its aftermath is still working through the courts. Thousands of awards were made by arbitrators appointed unilaterally under clauses that are now unenforceable; many have been set aside. What then? A Delhi High Court order of 24 September 2026 supplies the answer: the arbitration agreement survives, the offending appointment mechanism does not, and the court appoints an independent arbitrator under Section 11 so the underlying dispute can finally be decided.
The lifecycle of a tainted arbitration
Two construction contracts for school buildings generated payment disputes. The contractual route — a Dispute Redressal Committee, then arbitration by an appointee of the Chief Engineer under Clause 25 of the General Conditions of Contract — was followed, and awards were rendered in 2023. Those awards did not survive: the appointments were unilateral, made by an interested party’s officer, and the awards were set aside on that ground. The contractor returned to the High Court under Section 11(6) for valid appointments so the disputes could be arbitrated afresh.
The order of Justice Jyoti Singh
Clause 25 declared void
The clause permitting the Chief Engineer to appoint the arbitrator was held void and unenforceable — a unilateral appointment by an interested party, contrary to the scheme of the 1996 Act as authoritatively interpreted.
Fresh sole arbitrator appointed
The Court appointed a sole arbitrator for both references, with the proceedings to be conducted under the aegis of the Delhi International Arbitration Centre.
Concession recorded
Counsel for the department accepted the settled legal position — a sign of how completely the law on unilateral appointments has stabilised.
The doctrinal spine
| Proposition | Anchor |
|---|---|
| An interested party’s employee cannot arbitrate | Section 12(5) read with the Seventh Schedule |
| One who is ineligible cannot appoint another | Supreme Court’s ineligibility line of authority |
| Arbitration agreement survives the void mechanism | Severability; Section 11(6) court appointment |
| Institutional aegis for court-appointed references | Delhi practice routing appointments through DIAC |
For limitation purposes, parties emerging from a set-aside award should move promptly: time spent in the earlier, invalid proceedings raises exclusion questions under Section 43 of the 1996 Act read with the Limitation Act, and the safest course is an early Section 11 petition rather than debate later.
What government contractors should do now
For departments, the practical lesson is to amend legacy GCC clauses and consent early to independent appointments: resisting a settled position only adds a court round before the inevitable arbitration.
This article is for general information only and is not legal advice. Appointment and limitation questions are technical; parties should obtain advice on their own matter.
Frequently Asked Questions
Why are unilateral appointment clauses invalid?
Following the Supreme Court’s ineligibility jurisprudence under Section 12(5) and the Seventh Schedule, a party interested in the dispute — or its employee or nominee chosen at its sole discretion — cannot control the appointment of the arbitrator. Clauses vesting appointment in an employer’s Chief Engineer are treated as void and unenforceable, as the Court declared of Clause 25 here.
If the clause is void, does the arbitration agreement die with it?
No. The agreement to arbitrate survives; only the appointment mechanism falls. The remedy is a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 for a court appointment of an independent arbitrator.
What had happened in these contracts?
Disputes over payments in school building contracts went through the departmental Dispute Redressal Committee without resolution, and arbitrations before Chief Engineer appointees produced awards in 2023 — which were set aside because the appointments were unilateral. The contractor then sought fresh appointments.
What did the Court order?
A sole arbitrator was appointed for both matters, with the arbitration to be held under the aegis of the Delhi International Arbitration Centre — bringing institutional rules, fee schedules and case management to the resumed proceedings. The respondent fairly conceded the legal position against unilateral appointments.