The Supreme Court has reaffirmed that the failure to invoke an alternative appointment mechanism under an arbitration clause does not extinguish the co-arbitrators’ power to appoint the presiding arbitrator, provided the parties have acquiesced to the process. This judgment clarifies the limits of jurisdictional challenges under the Arbitration and Conciliation Act, 1996, and reinforces the principle that procedural delays and conduct can defeat claims of nullity.
Background & Facts
The Dispute
The dispute arose from a 1995 consultancy agreement between the Municipal Corporation of Greater Mumbai (MCGM) and M/s R.V. Anderson Associates Limited for upgrading sewerage operations. The contract, funded by the World Bank, included a three-member arbitral tribunal mechanism under Clause 8.3(b). After payment disputes emerged, the Respondent invoked arbitration in 2005. Both parties appointed their respective arbitrators by October 2005, but the presiding arbitrator was not appointed within 30 days.
Procedural History
- 07.10.2005: MCGM appointed Mr. Sharad Upasani as its nominee arbitrator.
- 08.11.2005: Respondent proposed conciliation and requested arbitration proceedings be put on hold.
- 07.01.2006: MCGM acknowledged the request for conciliation but did not object to the arbitration process.
- 30.04.2007: Co-arbitrators appointed Justice D.R. Dhanuka (Retd.) as presiding arbitrator - MCGM did not object.
- 24.04.2008: After Dhanuka’s resignation, Co-arbitrators appointed Mr. John Savage - MCGM remained silent.
- 29.10.2008: Co-arbitrators appointed Mr. Anwarul Haque as presiding arbitrator - MCGM did not respond.
- 09.01.2009: Preliminary meeting held with MCGM’s representatives present - no objection raised.
- 20.02.2009: MCGM first challenged the tribunal’s constitution, alleging nullity due to delay.
- 17.07.2009: Arbitral Tribunal dismissed the Section 16 challenge.
- 05.06.2010: Final award issued in favor of Respondent.
- 19 - 20.10.2022: Bombay HC dismissed Section 34 application.
- 04.07.2025: Bombay HC Division Bench dismissed Section 37 appeal.
- 2026: Supreme Court heard appeal.
Relief Sought
MCGM sought to set aside the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, on grounds of lack of jurisdiction due to improper constitution of the tribunal. It claimed that after 30 days from the appointment of the second arbitrator, only the Secretary General of ICSID could appoint the presiding arbitrator.
The Legal Issue
The central question was whether the co-arbitrators lose their power to appoint the presiding arbitrator after 30 days if the parties do not invoke the ICSID mechanism under Clause 8.3(b) of the arbitration agreement, and whether such a failure constitutes a jurisdictional defect rendering the award void.
Arguments Presented
For the Appellant
Senior Counsel Siddharth Bhatnagar argued that Clause 8.3(b) uses the word ‘shall’ to make ICSID appointment mandatory after 30 days. He contended that the co-arbitrators’ power is extinguished upon expiry of the period, rendering any subsequent appointment a nullity under Section 34(2)(a)(v). He relied on the principle of party autonomy, asserting that courts cannot rewrite contractual terms. He emphasized that the tribunal was coram non judice and the award was void ab initio.
For the Respondent
Senior Counsel Shyam Divan countered that Clause 8.3(b) is an enabling provision, not a restrictive one. He argued that the ICSID route is a fallback, not the exclusive method. He cited the parties’ conduct - MCGM’s participation in multiple appointments and failure to object for over three years - as constituting waiver under Section 4. He relied on Consolidated Construction Consortium Ltd. v. Software Technology Parks of India and SEPCO v. GMR Kamalanga Energy Ltd. to argue that courts must not interfere with plausible interpretations of arbitration clauses.
The Court's Analysis
The Court examined Clause 8.3(b) of the Agreement, which provides that if the two party-appointed arbitrators fail to appoint the presiding arbitrator within 30 days, the third arbitrator ‘shall’ be appointed by the Secretary General of ICSID ‘at the request of either Party’. The Court held that the use of ‘shall’ imposes a duty on ICSID to act only upon a request, not a restriction on the co-arbitrators’ authority.
"The intent of the clause appears to be that in case both Arbitrators cause a delay in appointment of the third arbitrator, the parties retain the authority to remedy the delay and after 30 days of such non-appointment, they have liberty to apply before the ICSID to address the delay and upon making such a request, the ICSID shall appoint the third Arbitrator."
The Court rejected the notion that the co-arbitrators’ power is automatically revoked after 30 days, noting that such an interpretation would lead to commercial absurdity - leaving the tribunal in perpetual limbo. It emphasized that the clause is a ‘fail-safe’, not a termination mechanism.
The Court further analyzed the conduct of MCGM. Despite being notified of three successive appointments of presiding arbitrators - Dhanuka, Savage, and Haque - MCGM remained silent. It participated in the preliminary meeting in January 2009 without objection. Only after the award was rendered did MCGM raise the jurisdictional challenge. The Court held that such conduct, even in the absence of statutory waiver under Section 4, undermines the credibility of the objection.
"A party cannot keep a ‘jurisdictional ace’ up their sleeve and then claim that filing of the jurisdictional challenge under Section 16 would go back in time and wipe out the past conduct and acquiescence of the party."
The Court affirmed that while Section 16(2) permits jurisdictional challenges before the statement of defence, the tribunal and courts must consider the party’s prior conduct to assess the bona fides of the objection. The tribunal’s interpretation - that the ICSID route is permissive - was deemed plausible and entitled to deference.
The Verdict
The Supreme Court dismissed the appeal. It held that the co-arbitrators retained the authority to appoint the presiding arbitrator even after 30 days, as the ICSID mechanism was an enabling fallback, not an exclusive requirement. The MCGM’s prolonged silence and active participation in the arbitration process precluded it from later challenging the tribunal’s constitution. The award was upheld.
What This Means For Similar Cases
Appointment Power Survives 30-Day Window Unless ICSID Is Invoked
- Practitioners must now argue that failure to invoke ICSID does not invalidate co-arbitrator appointments under multi-member tribunals.
- Drafting arbitration clauses with ‘shall’ does not automatically convert fallback mechanisms into mandatory exclusives - context and intent matter.
- Parties should explicitly state if a fallback mechanism is the only path to avoid ambiguity.
Conduct Trumps Technical Non-Compliance
- Silence in the face of repeated notifications about tribunal appointments constitutes acquiescence.
- Participation in preliminary meetings, without objection, bars later jurisdictional challenges even if technically filed within Section 16(2) timelines.
- Arbitrators and counsel must document all communications and objections promptly to avoid estoppel.
Courts Will Not Sanction Tactical Objections
- Challenges raised only after an adverse award are viewed with skepticism.
- The Court will not permit parties to exploit procedural delays to undermine finality.
- Section 4 waiver may not apply if the challenge is timely, but conduct can still defeat the claim on merits under principles of good faith and party autonomy.
