Please click here to download the Prism as PDF.
Delhi High Court holds that the Arbitration and Conciliation (Amendment) Act, 2015 is substantive and does not invalidate unilateral appointments made before October 23, 2015
The Hon’ble High Court of Delhi (“Delhi HC”), in its judgment of Hanson Agro Limited vs. GAIL (India) Limited[1], answered a common question of law arising in a batch of 19 (nineteen) petitions under Sections 34 and 36 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), each of which assailed the respective arbitral award on the ground that the arbitral tribunal had been unilaterally constituted by 1 (one) of the contracting parties. The Delhi HC held that the amendments introduced by the Arbitration and Conciliation (Amendment) Act, 2015 (“2015 Amendment Act”) are substantive and not merely clarificatory in character and, by virtue of Section 26[2] thereof, operate prospectively from October 23, 2015. Accordingly, where the arbitral proceedings commenced and the tribunal was constituted prior to that date, the subsequent insertion of Section 12(5) read with the Seventh Schedule[3] of the Arbitration Act cannot retrospectively render an appointment that was lawful when made void. The mere institution of a petition under Section 34 of the Arbitration Act after the cut-off date does not, by itself, attract the amended regime.
Brief facts
The petitions arose out of different unconnected commercial contracts, principally with Government entities. Although the factual matrix in each petition was distinct, a common legal issue arose regarding the validity of the constitution of the arbitral tribunal.
During the course of the hearing, the petitions were classified into 3 (three) categories with reference to the stage at which the arbitral proceedings, the arbitral award and the court proceedings stood vis-à-vis October 23, 2015. Category A comprised of cases where both the commencement of the arbitral proceedings and the award preceded the cut-off date, while the Section 34 proceedings were instituted thereafter. Category B comprised of cases where the arbitral proceedings commenced prior to the cut-off date, but the award was rendered and the Section 34 proceedings instituted thereafter. Category C comprised of cases where the arbitral proceedings and the challenge thereto arose prior to the 2015 Amendment Act, but the arbitration agreement expressly stipulated that any statutory modification or re-enactment of the arbitration law would govern the proceedings.
Issue
Whether the 2015 Amendment Act is clarificatory, and therefore applicable to arbitral proceedings commenced prior to October 23, 2015, where the award or the Section 34 proceedings post-date the cut-off date?
Findings and analysis
The Delhi HC first traced the pre-2015 statutory scheme, noting that Section 11(2)[4] of the Arbitration Act accorded primacy to the appointment procedure agreed upon by the parties, and that a consistent line of authority had held that arbitration agreements in Government contracts naming an employee of the department as arbitrator were neither void nor unenforceable. Under that regime, the mere fact that the named arbitrator was an employee of 1 (one) of the parties was not ipso facto a ground to presume bias, and a justifiable apprehension arose only where the arbitrator was the controlling or dealing authority under the contract or a direct subordinate of the decision-maker.
The Delhi HC then examined the object of the 2015 Amendment Act with reference to the 246th Report of the Law Commission of India, and observed that the Parliament, while recognising party autonomy as center point to arbitration, had consciously created specified categories of automatic statutory ineligibility under Section 12(5) read with the Seventh Schedule of the Arbitration Act. The question before the Delhi HC was therefore not whether neutrality was a principle of arbitration before 2015, which it plainly was, but whether Parliament intended the new consequence of ineligibility to operate upon arbitrations which had already commenced.
On the interplay between the 2 (two) regimes, the Delhi HC noted that after Hindustan Construction Company Limited vs. Union of India[5], wherein the insertion of Section 87[6] and the retrospective omission of Section 26 were struck down as manifestly arbitrary, Section 26 continues to govern the applicability of the 2015 amendments. However, the Delhi HC held that the distinction between ‘arbitral proceedings’ and ‘court proceedings’ recognised cannot be stretched to hold that the institution of a Section 34 petition after October 23, 2015, retrospectively subjects the underlying arbitration to every substantive amendment introduced by the 2015 Amendment Act. Such a construction would render the first limb of Section 26 serves no practical purpose in every case where an award is challenged after the cut-off date. The Delhi HC while relying on Avneet Soni vs. Kavita Agrawal[7], held that the legality of a unilateral appointment must be examined with reference to the law as it stood on the date of commencement of the arbitral proceedings under Section 21[8] of the Arbitration Act.
On the reliance placed by the petitioners on Bhadra International (India) (P) Limited vs. Airports Authority of India[9] (“Bhadra International”), the Delhi HC adopted the reasoning of the High Court of Bombay in M/s. S.E. Investments Limited (now known as Paisalo Digital Limited) vs. Star Bazaar Private Limited[10] and held that the said decision was rendered in the context of an appointment governed by Section 12(5) as introduced by the 2015 Amendment Act, and was principally concerned with whether an ineligible arbitrator could continue in office and whether such ineligibility could be waived by conduct. The observation that certain principles were ‘implicit’ in the unamended Arbitration Act cannot be elevated into a standalone rule that any appointment which would subsequently fall within the Seventh Schedule was void from its inception. The Delhi HC drew a material distinction between the existence of general principles of impartiality, independence and equal treatment under the unamended Arbitration Act, which could furnish a ground of challenge under the framework then available, and the creation of ineligibility under Section 12(5) of the Arbitration Act, which operates as an express statutory bar. A disqualification cannot be ascribed impliedly and retrospectively.
The Delhi HC further observed that the Constitution Bench in Railway Electrification vs. ECI SPIC SMO MCML (JV)[11] had considered the entire law relating to independence, impartiality, bias, party autonomy and unilateral appointment, both prior to and after the 2015 Amendment Act, but had neither overruled the decisions permitting unilateral appointment under the pre-2015 regime nor disapproved them by necessary implication and had expressly made its ruling prospective. The judgments relied upon by the petitioners were distinguished on facts, the Delhi HC noting that in each of them the arbitrator had either been appointed after the cut-off date, or the parties had agreed to be bound by the amended regime, or there existed a specific non-disclosure attracting Section 12(1)[12] of the Arbitration Act.
In respect of Category C, the Delhi HC held that the position is already settled. Delhi HC reiterated the position that a general and forward-looking reference in the arbitration agreement to the governing statute “or any amendment thereto” does not, by itself, constitute an agreement within the meaning of Section 26 to apply the 2015 Amendment Act. Where, however, the clause contains specific language indicating an intention to adopt statutory modifications, the Delhi HC must examine the clause in its entirety together with the subsequent conduct of the parties, and where such language and conduct establish a clear mutual intention to adopt the amended regime, the amended provisions would apply.
Conclusion
The Delhi HC accordingly answered the reference by holding that: (a) an objection relating to the unilateral appointment or de jure ineligibility of an arbitrator is maintainable in proceedings under Section 34 of the Arbitration Act in accordance with the principles laid down in Bhadra International; (b) the 2015 Amendment Act is substantive in nature, cannot be treated as merely clarificatory, and will therefore apply prospectively; and (c) where the arbitration clause provides for the applicability of an amended enactment or of any amendment, its application would depend upon the language of the clause and the conduct of the parties. Furthermore, the Delhi HC confined itself only to the questions of law framed.
The ruling is significant for award-holders under arbitrations invoked prior to October 23, 2015, since the ground of unilateral appointment, now routinely raised in petitions under Section 34 of the Arbitration Act, will be tested against the unamended regime and will not succeed merely because the appointment would today attract disqualification under the Seventh Schedule of the Arbitration Act. Equally, parties challenging such awards will need to locate their objection to independence and impartiality within the remedial framework available under the unamended Arbitration Act. They must also demonstrate, from the specific wording of the arbitration clause read with the conduct of the parties, a clear mutual intention to adopt the amended regime. The judgment also serves as a reminder that a decision of the Hon’ble Supreme Court of India is not to be read as a statute. Isolated observations, divorced from the issue before the Delhi HC, cannot be relied upon to attribute to the court a conclusion it did not reach.
This Prism is prepared by:
|
Ananya Kumar |
Aparna Gupta |
Vaibhav Khanna |
|
For more details, please contact km@jsalaw.com.
[1] Hanson Agro Limited vs. GAIL (India) Limited [O.M.P. (COMM) 356/2016] (decided on September 1, 2026)
[2] Section 26 of the 2015 Amendment Act provides that nothing contained in that Act will apply to arbitral proceedings commenced, in accordance with Section 21 of the principal Act, before its commencement, unless the parties otherwise agree, but that it will apply in relation to arbitral proceedings commenced on or after the date of its commencement.
[3] Section 12(5) of the Arbitration Act, read with the Seventh Schedule, renders a person whose relationship with the parties, counsel or the subject matter of the dispute falls within any of the specified categories ineligible to be appointed as an arbitrator, notwithstanding any prior agreement to the contrary, subject only to an express waiver in writing after the disputes have arisen.
[4] Section 11(2) of the Arbitration Act provides that, subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
[5] Hindustan Construction Company Limited vs. Union of India, (2020) 17 SCC 324
[6] Section 87 of the Arbitration Act discussed the effect of arbitral and related court proceedings commenced.
[7] Avneet Soni vs. Kavita Agrawal, 2026 SCC OnLine Del 3236
[8] Section 21 of the Arbitration Act states that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
[9] Bhadra International (India) (P) Limited vs. Airports Authority of India, 2026 SCC OnLine SC 7
[10] M/s. S.E. Investments Limited (now known as Paisalo Digital Limited) vs. Star Bazaar Private Limited, 2026 SCC OnLine Bom 8602
[11] Railway Electrification vs. ECI SPIC SMO MCML (JV), (2025) 4 SCC 641
[12] Section 12(1) of the Arbitration Act mandates the requirement that the prospective arbitrators disclose in writing any relationships or circumstances raising justifiable doubts about their independence, impartiality, or availability.
