# Laxmi Kant Pandey v. Hindustan Petroleum Corporation Ltd., Lko

- **Citation:** (2026) 4 ILRA 1969
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2026-04-23
- **Case number:** Arbitration Appeal No. 53 of 2023
- **Bench:** Arun Bhansali, C.J. Jaspreet Singh
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/laxmi-kant-pandey-v-hindustan-petroleum-corporation-ltd-lko-54448
- **Pages:** 29

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4 All. Laxmi Kant Pandey Vs. Hindustan Petroleum Corporation Ltd., Lko.
1969
from service with superannuation benefits shall be entitled for those benefits and such of the employees
though visited with the same penalty but are not eligible for superannuation benefits under the Regulations
shall not be entitled to that.

22. Both the learned Single Judge and the Division Bench had followed the aforesaid decision of
this Court. Learned Single Judge noted that respondent had submitted his option for pension on 05.10.2010.
Learned Single Judge also held that objection of the appellant to the claim of pension by the respondent was
without any basis in as much as the appellate authority had specifically held that respondent would be entitled
to receive terminal benefits for the period of service he had rendered. This order of the appellate authority has
attained finality. Therefore, it was held that respondent was entitled to receive pension in view of the order
passed by the appellate authority. This view of the learned Single Judge has been endorsed by the Division
Bench in the impugned judgment. The decision in S.K. Kool (supra) is binding on us. Therefore, we do not
find any compelling reason to interfere with the concurrent findings of the learned Single Judge and the
Division Bench while exercising our jurisdiction under Article 136 of the Constitution of India.

23. Accordingly, the civil appeal is dismissed. However, there shall be no order as to cost.

44. In aforesaid circumstances, Court finds that there is substance in the argument of learned counsel for
petitioner so far as nature of punishment (removal from service) is concerned as well as that while passing
impugned orders the appropriate authority of Respondent-Bank has not taken note of above referred clause of
bipartite settlement.

45. Accordingly, without disturbing finding that both charges were found proved and petitioner has
committed gross misconduct, the matter is remitted back only to the extent that a fresh order be passed on
nature of punishment taking note of above referred clause of bipartite settlement as well as UCO Bank vs.
Vijay Kumar Handa (supra). The aforesaid exercise shall be concluded within six weeks from the date a
certified copy of this order is placed before concerned respondent.

46. The writ petition is accordingly disposed of.
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(2026) 4 ILRA 1969
APPELLATE JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 23.04.2026

BEFORE

THE HON'BLE ARUN BHANSALI, C.J.
THE HON'BLE JASPREET SINGH, J.

Arbitration Appeal No. 53 of 2023

Laxmi Kant Pandey ...Appellant
Versus
Hindustan Petroleum Corporation Ltd., Lko. ...Respondent

Issues for Consideration
1970 INDIAN LAW REPORTS ALLAHABAD SERIES
(i) Whether the appointment of the Sole Arbitrator by the Chairman and Managing Director of the respondentCorporation under the dealership agreement was invalid after the amendments to Section 12 of the Arbitration
and Conciliation Act, 1996?
(ii) Whether the appellant's letter dated 07.03.2018 amounted to an express written waiver contemplated
under the proviso to Section 12(5) of the Arbitration and Conciliation Act, 1996?
(iii) Whether the objection regarding the de jure ineligibility of the Arbitrator could be raised in proceedings
under Section 37 of the Arbitration and Conciliation Act, 1996?
(iv) Whether the arbitral award and the judgment of the Commercial Court affirming the award were liable to
be set aside?

Headnotes
Arbitration and Conciliation Act, 1996 - Ss. 12(1), 12(5), 14, 34 and 37 - Appointment of Sole
Arbitrator - Chairman and Managing Director of Corporation empowered under arbitration
clause to act as Arbitrator or nominate another Arbitrator - Statutory ineligibility.

HELD: After the amendment to Section 12 of the Arbitration and Conciliation Act, 1996, the Chairman and
Managing Director of the respondent-Corporation, being a person falling within the categories specified in the
Fifth and Seventh Schedules, became ineligible to act as an Arbitrator. Once the named Arbitrator incurred
statutory ineligibility, he equally lost the authority to nominate another Arbitrator. Consequently, the
appointment of the Sole Arbitrator by the Chairman and Managing Director was void being contrary to
Sections 12(5) and 14 of the Act. [Paras 75 to 77, 90(i) & (ii)]

Arbitration and Conciliation Act, 1996 - Proviso to S. 12(5) - Express agreement in writing -
Waiver - Meaning and scope.

HELD: The correspondence exchanged between the parties did not amount to an express written agreement
waiving the statutory disqualification under the proviso to Section 12(5). The appellant merely consented to
the respondent appointing an Arbitrator and did not consciously and unequivocally waive his statutory right to
object to the appointment of an ineligible Arbitrator. In the absence of a clear post-dispute written waiver, the
statutory ineligibility remained unaffected. [Paras 78 to 85, 90(iii)]

Arbitration and Conciliation Act, 1996 - Ss. 12(5), 14, 34 and 37 - De jure ineligibility of
Arbitrator - Jurisdictional objection - Can be raised at any stage.

HELD: An objection regarding the de jure ineligibility of an Arbitrator strikes at the root of the Arbitrator's
jurisdiction. Such objection is not defeated merely because it was not elaborately pleaded before the
Commercial Court. Since the issue concerns the inherent jurisdiction of the Arbitrator, it can validly be raised
even in proceedings under Section 37 of the Act. [Paras 86, 87 and 90(iv)]

Arbitration and Conciliation Act, 1996 - Ss. 12, 34 and 37 - Award by ineligible Arbitrator -
Validity.

HELD: As the Sole Arbitrator lacked jurisdiction by reason of statutory ineligibility and there was no valid
waiver under Section 12(5), the arbitral award could not be sustained. Consequently, the judgment of the
Commercial Court affirming the award was also liable to be set aside. Once the appointment itself was held
illegal, examination of the appellant's challenge regarding procedural violations during arbitral proceedings
became unnecessary. [Paras 88 to 91]

Arbitration and Conciliation Act, 1996 - Fresh arbitration - Liberty to parties.

HELD: Upon setting aside the award, liberty was granted to the parties to have a fresh Arbitrator appointed in
accordance with law for adjudication of their disputes. [Para 91]
4 All. Laxmi Kant Pandey Vs. Hindustan Petroleum Corporation Ltd., Lko.
1971
Appeal allowed. Judgment of the Commercial Court and arbitral award set aside. (E-14)

Case Law Cited
Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665 - relied on;
HRD Corporation v. GAIL (India) Ltd., (2018) 12 SCC 471 - relied on; TRF Ltd. v. Energo
Engineering Projects Ltd., (2017) 8 SCC 377 - relied on; Perkins Eastman Architects DPC v.
HSCC (India) Ltd., (2020) 20 SCC 760 - relied on; Central Organisation for Railway
Electrification v. ECI-SPIC-SMO-MCML (JV), (2025) 4 SCC 641 - relied on; Bhadra International
(India) (P) Ltd. v. Airports Authority of India, 2026 SCC OnLine SC 7 - relied on; Central
Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), (2020) 14 SCC 712 -
referred to; Union of India v. Tantia Constructions Ltd., 2021 SCC OnLine SC 271 - referred to;
State of Punjab v. Davinder Pal Singh Bhullar, (2011) 14 SCC 770 - referred to; M/s Truly Pest
Solution Pvt. Ltd. v. Principal Chief Mechanical Engineer (PCME), Chief Railway, Arbitration
Petition No. 43 of 2023 (Bombay High Court, decided on 11.11.2024) - held not applicable / no
longer good law in view of Bhadra International (India) (P) Ltd. v. Airports Authority of India,
2026 SCC OnLine SC 7.

List of Acts/Statutes
Arbitration and Conciliation Act, 1996; Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016).

List of Keywords
Arbitration; Appointment of Arbitrator; Sole Arbitrator; Ineligible Arbitrator; Express written waiver; Waiver
after dispute; Fifth Schedule; Seventh Schedule; Equal treatment of parties; Party autonomy; De jure
ineligibility; Jurisdiction of Arbitrator; Commercial Court; Dealership Agreement; Petroleum dealership.

Case Arising From
Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against the judgment and order dated
19.04.2023 passed by the Commercial Court-II, Lucknow in Arbitration Case No. 766 of 2019, affirming
the arbitral award dated 26.04.2019 passed by the Sole Arbitrator arising out of termination of the
appellant's petroleum dealership agreement dated 14.01.2013

Appearance for Parties
For the Appellants: Sri Gaurav Mehrotra, Senior Advocate, assisted by Sri Anupam Mishra and
Ms. Madhur Jhawar.
For the Respondents: Ms. Aprajita Bansal, Sri Anilesh Tewari, Ms. Gursimran Kaur and Ms.
Shreya Pahwa.

(Delivered by Hon'ble Jaspreet Singh, J.)

1. The appellant has preferred the instant appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as "the Act of 1996") assailing the judgment and
order passed by the Commercial Court-II, Lucknow dated 19.04.2023 in Arbitration Case No. 766
of 2019 whereby his petition under Section 34 of the Act of 1996 was dismissed and the arbitral
award dated 26.04.2019 passed by the Sole Arbitrator was affirmed.

Factual Background:-

2. In order to appreciate the controversy involved in the instant appeal, it will be apt to take a
brief glance at the facts leading up to this appeal.
1972 INDIAN LAW REPORTS ALLAHABAD SERIES

3. The appellant was a dealer of the respondent-corporation for retail sales of petrol/diesel and
other petroleum products. The said dealership agreement was entered between the parties on
14.01.2013 and in terms whereof the appellant was entitled to run his petrol pump under the name
and style of "Pandey Filling Station" at Village Budawa, Pargana and Tehsil Attaara, District
Banda.

4. On 14.06.2017, a Special Team under the supervision of the District Magistrate, Banda
inspected the dealership outlet of the petitioner. During inspection, the seal affixed by the Weights
and Measures Department relating to Nozzle No. (ii) of Gilbarco Dual Ms. Dispensing Unit with
Serial no. 20152000858 was found broken.

5. Based on the aforesaid discrepancy, a show cause notice was issued by the respondentcorporation dated 21.06.2017 calling upon the appellant to show cause within 15 days as to why
necessary action may not be taken against him.

6. The appellant submitted his reply dated 15.07.2017 and also by an undated letter, and both
were received by the Corporation on 17.07.2017. The appellant stated that the aforesaid nozzle no.
(ii) was not functioning properly and the appellant had already raised his complaint regarding the
same on 03.06.2017. Despite the said complaint, the Corporation on its online portal indicated that
the complaint had been resolved. This was again interjected by the appellant who raised a fresh
complaint on 06.06.2017 and the Corporation was also informed of the incorrect functioning of the
aforesaid nozzle, however, it was not physically resolved at the site rather the Corporation closed
the complaint on its online portal. This was once again brought to the notice of the respondentcorporation by the appellant that the complaint raised by him had not been resolved.

7. The appellant further stated that even during the inspection upon measuring, no short
dispensation of fuel was recorded from any of the dispensing units including from nozzle no. (ii)
and moreover all other seals were found intact.

8. The Corporation, however, did not find the reply of the appellant satisfactory and vide its
order dated 24.07.2017, the dealership agreement dated 14.01.2013 was terminated.

9. The appellant assailed the cancellation order dated 24.07.2017 by means of a writ petition
bearing Writ-C No. 62809 of 2017 which was dismissed by a Division Bench of this Court at
Allahabad leaving it open for the appellant to initiate arbitral proceedings in terms of the arbitration
Clause No. 66 contained in the agreement.

10. Thereafter, the appellant invoked the arbitration clause by means of an undated letter. In
response, the Corporation vide its reply dated 24.01.2018 acknowledged the receipt of the aforesaid
undated letter of the appellant and the Corporation informed that as the Arbitration and
Conciliation Act, 1996 had undergone an amendment which came in effect from 23.10.2015,
hence, in view of the proviso appended to Section 12(5) of the Act of 1996, a written consent was
required from the appellant to express his willingness and permit the Corporation to appoint its
employee as a Sole Arbitrator.
4 All. Laxmi Kant Pandey Vs. Hindustan Petroleum Corporation Ltd., Lko.
1973

11. The appellant responded to the aforesaid letter dated 24.01.2018 and informed the
Corporation that the appellant had appointed Sri Anil Kumar Gupta, a Chartered Accountant as an
Arbitrator and requested the Corporation to concur with the said appointment of the Sole
Arbitrator.

12. The Corporation vide its letter dated 26.02.2018 turned down the appellant's request of
concurring to the appointment of the appellant's nominated Arbitrator and further reiterated that the
appellant must give his consent, as sought in its earlier letter dated 24.10.2018, so that the
Corporation may appoint an Arbitrator, failing which the appellant may invoke the appropriate
forum for appointment of an Arbitrator.

13. The appellant vide its letter dated 07.03.2018 addressed the respondent and conveyed his
consent for the appointment of an Arbitrator by the Corporation and further requested that as he
was differently abled and had difficulties in traveling, hence, an Arbitrator of a nearby place be
appointed.

14. In furtherance of the aforesaid letter, the Corporation vide its letter dated 18.04.2018
appointed Sri Sanjay Verghese as a Sole Arbitrator to resolve the disputes between the appellant
and the respondent-corporation.

15. The Sole Arbitrator entered into the reference and passed its first procedural order on
21.05.2018 fixing time lines to enable the parties to exchange the pleadings amongst themselves.

16. The appellant on 14.06.2018 furnished its statement of claim. The respondent filed its
statement of defence on 05.07.2018. Thereafter the Sole Arbitrator fixed 29.10.2018 as the first
effective date of hearing followed by another dated fixing 13.02.2019. Thereafter no further
hearing was held and the Sole Arbitrator made his award on 26.04.2019, dismissing the claims of
the appellant.

17. This award dated 26.04.2019 was challenged by the appellant before the Commercial
Court by filing a petition under Section 34 of the Act of 1996 and the Commercial Court after
hearing the parties vide its judgment and order dated 19.04.2023 dismissed the said petition and
affirmed the award dated 26.04.2018.

18. In the aforesaid factual backdrop, the appellant has challenged the judgment of the
Commercial Court and the award of the Sole Arbitrator by the instant appeal under Section 37 of
the Act of 1996.

Submissions on behalf of the Appellant:-

19. Sri Gaurav Mehrotra, learned Senior Counsel assisted by Sri Anupam Mishra and Ms.
Madhur Jhawar, learned counsel for the appellant attacked the award and the judgment of the
Commercial Court on two counts.
1974 INDIAN LAW REPORTS ALLAHABAD SERIES

(i) The first ground urged by the learned Senior Counsel for the appellant was that the
appointment of the Sole Arbitrator by the Corporation was directly hit by the legislative embargo
contained in Section 12(1) & (5) of the Act of 1996 read with the Fifth/and Seventh Schedule.

20. Elaborating his submissions, learned Senior Counsel for the appellant laid emphasis that
after the amendment of 2016 in the Act of 1996, any person who falls within the relationship as
mentioned in the Fifth and Seventh Schedule appended to the Act of 1996 becomes ineligible to act
as an Arbitrator.

21. It was further submitted that the proviso appended to Section 12(5) of the Act of 1996 is
an exception to the general rule and for the said reason, it requires strict compliance. Even though
the embargo contained in Section 12(1) & (5) of the Act of 1996 is mandatory yet in case if the
parties agree to waive their right of raising an objection emerging from Section 12(5) of the Act of
1996 then the said waiver must be by way of an express agreement in writing and that too it must
be done after the disputes had arisen between the parties.

22. It was also urged that in the instant case there was no express agreement in writing and the
appellant did not waive his right as required in terms of Section 12(5) of the Act of 1996. In
absence of any express waiver as contemplated in law, the Corporation was not justified in
appointing an Arbitrator who was within the prohibited relationship in terms of the Fifth Schedule
appended and relatable to Section 12 of the Act of 1996.

23. It was further urged that even the Sole Arbitrator did not give a clear declaration regarding
his impartiality as required in terms of Section 12(1) of the Act of 1996 read with Fifth and Sixth
Schedule.

24. In such circumstances, the appointment of the Sole Arbitrator was against the statutory
conditions which rendered the appointment as void. Consequently, the proceedings held by the Sole
Arbitrator were also void. As a fortiori, void proceedings could be challenged at any stage and
while the appellant had raised this issue before the Commercial Court in its petition under Section
34 of the Act of 1996, but the court concerned turned down the said plea on the premise that the
appellant had participated in the process of appointment of Arbitrator and had also given his
consent, as indicated in his letter dated 07.03.2018, hence, the appellant was precluded from raising
such a plea in proceedings under Section 34 of the Act of 1996.

25. The learned Senior Counsel further urged that there was no worthy consideration of the
aforesaid objection rather it was turned down by the Commercial Court in a cursory manner which
substantially and adversely affected the valuable rights of the appellant. For the said reason, it was
submitted that the entire arbitral proceedings were vitiated so also the award which deserved to be
set aside.

26. Sri Mehrotra, in support of his submissions, relied upon the decision of the Apex Court in
Central Organization for Railway Electrification v. ECI SPIC Smo MCML (JV) A Joint
Venture Company, (2025) 4 SCC 641 (hereinafter referred to as Core-II) and Bhadra
International (India) (P) Ltd. vs. Airports Authority of India: 2026 SCC Online SC 7.
4 All. Laxmi Kant Pandey Vs. Hindustan Petroleum Corporation Ltd., Lko.
1975

27. The other ground raised by Sri Mehrotra was (ii) that no adequate opportunity was
afforded by the Sole Arbitrator. The award impugned was in complete violation of principles of
natural justice. The Sole Arbitrator, after the exchange of pleadings, did not permit the contesting
parties to record their admission and denial on the documents filed by the respective parties. The
Sole Arbitrator did not frame any issues nor an opportunity to cross-examine the witness was
allowed which rendered the entire arbitral proceedings, a mere farce.

28. It was further submitted that the entire arbitral proceedings were concluded on two
effective dates. This indicated that the Sole Arbitrator decided the arbitral proceedings with undue
haste and while doing so it ignored the admitted facts including that no short dispensation of fuel
was found during inspection and though the appellant had demonstrated that one nozzle was
malfunctioning much prior to the date of inspection and was also complained of to the Corporation
but the Corporation did not rectify it and the appellant had been made a scapegoat for the
negligence of the Corporation. In such circumstances, the appellant was denied of a reasonable
opportunity to contest.

29. It was lastly submitted that though the aforesaid issues were raised before the Commercial
Court, however, the said court did not advert to the aforesaid aspect of the matter and dismissed the
petition under Section 34 of the Act of 1996 in a mechanical exercise of jurisdiction which
rendered the judgment and order dated 19.04.2023 passed by the Commercial Court-II, Lucknow
susceptible and vulnerable to judicial scrutiny under Section 37 of the Act of 1996 and it deserves
to be set aside, after allowing the appeal.

Submissions of the learned counsel for the Respondent:-

30. Ms. Aprajita Bansal, learned counsel for the respondent-corporation vehemently opposed
the submissions of the learned Senior Counsel for the appellant and urged that the appellant was
not justified in attacking the award by invoking the provisions of Section 12 (5) of the Act of 1996
as the appellant had furnished his consent and he had expressly waived his right in writing to object
to the appointment of the Sole Arbitrator and that too after the disputes had arisen.

31. It was urged that proviso appended to Section 12(5) of the Act of 1996 was clearly
attracted in the instant case and the appellant who had consented to the appointment of the Sole
Arbitrator and also participated in the arbitral proceedings, now cannot be permitted to raise a
contradictory stand to assail the award.

32. Ms. Bansal while referring to the records endevoured to demonstrate that as soon as the
appellant had made a request for appointment of an Arbitrator, the Corporation vide its letter dated
24.01.2018 expressly referred to the amended Section 12(5) of the Act of 1996 and clearly sought
the consent of the appellant in writing before proceeding to appoint any Arbitrator.

33. It was further submitted that the Corporation, on 26.02.2018 specifically informed the
appellant that it did not agree to the proposed appointment of an Arbitrator made by the appellant.
The Corporation further put the appellant to notice that he was required to furnish his written
consent in terms of the earlier letter dated 24.01.2018 to enable the Corporation to appoint an
1976 INDIAN LAW REPORTS ALLAHABAD SERIES
Arbitrator, failing which it was open for the appellant to approach the appropriate forum for getting
an Arbitrator appointed.

34. It was further submitted that in this backdrop, the appellant submitted a consent letter
dated 07.03.2018 specifically indicating therein that the appellant gives his consent to the
Corporation to appoint an Arbitrator. Acting upon the said consent, the Corporation vide its letter
dated 18.04.2018 appointed Sri Sanjay Verghese as the Sole Arbitrator. This indicates that the
appellant was made fully aware of the legal provisions and the appellant after understanding it, had
furnished his consent.

35. In the aforesaid circumstances, where the appellant had given his express consent in
writing after the disputes had arisen permitting the respondent-corporation to appoint its employee
as an Arbitrator, this was a clear case where the appellant had waived his right in terms of the
proviso appended to Section 12(5) of the Act of 1996, hence, the appellant cannot challenge the
award of the Arbitrator being in violation of Section 12(1) and (5) of the Act of 1996.

36. Ms. Bansal, further urged that while filing the petition under Section 34 of the Act of
1996, general grounds were raised but no specific ground regarding the appointment of the
Arbitrator, being violative of Section 12 (1) and (5) of the Act of 1996, was raised by the appellant.
It is only for the first time before this Court specific grounds had been raised in this appeal.

37. The learned counsel for the respondent-corporation further urged that the appellant had
been put to clear notice and he was given an opportunity to re-consider whether he wanted the
Corporation to appoint an Arbitrator. Now, after having given his written consent to the
Corporation to appoint its employee as an Arbitrator, the appellant is now prevented from raising
such an objection for the first time in appeal.

38. It was further submitted that the appellant participated in the entire arbitral proceedings
before the Sole Arbitrator without any demur and with full awareness regarding the consent given
to the Corporation. No objections were raised regarding the impartiality of the Arbitrator. Even
after the claims were dismissed by means of the award dated 26.04.2019 and the appellant assailed
the said award but even then no specific ground challenging the appointment of the Sole Arbitrator
was taken in proceedings under Section 34 of the Act of 1996. The said ground of Section 12(5)
has been taken in the instant appeal without there being any foundation for such a challenge in the
earlier stage of the proceedings and this cannot be countenanced in law, at this stage.

39. The learned counsel for the respondent-corporation further submitted that as far as the
principles laid down by the Apex Court in Core-II (Supra) judgment is concerned, it is not
disputed nor the judgment of the Apex Court in Bhadra International (Supra) can be said to aid
the appellant for the reason that both the decisions clearly preserve the party-autonomy and the
right of the parties to get an Arbitrator appointed even though he may fall in any category
enumerated in Fifth & Seventh Schedule provided there was scrupulous compliance of the proviso
appended to Section 12(5) of the Act of 1996.
4 All. Laxmi Kant Pandey Vs. Hindustan Petroleum Corporation Ltd., Lko.
1977

40. In the instant case, once the consent was submitted in writing by the appellant after the
disputes had arisen, referring to the letters of the Corporation, thereafter there can be no doubt that
the appellant knowingly had consented in the appointment of the Arbitrator and now is precluded to
turn around to assail the appointment.

41. In such circumstances, if the appellant is permitted to resile from the consent then it would
be against the public policy and it would amount to putting a premium to an unscrupulous act of a
party. For the aforesaid reasons, the decisions of the Apex Court cited by the appellant do not come
to his aid.

42. The learned counsel for the respondent-corporation also urged that in so far as the claims
having been decided in haste is concerned, the same is not tenable as the appellant fully
participated in the proceedings and the Sole Arbitrator recorded his statement that he did not wish
to adduce any further evidence and it is only thereafter that the Arbitrator made his award.

43. It was further urged that during the entire arbitral proceedings, the appellant did not
request nor made any prayer to the Sole Arbitrator to frame issues or to get an endorsement made
on the documents for admission and denial. The appellant also did not make any request to crossexamine any witness, now, he is precluded from challenging the award on alleged ground of
procedural error which does not touch the roots of the matter. Furthermore, the appellant could not
demonstrate any prejudice which may have been caused for such procedural infractions and in
absence thereof, the aforesaid ground is not sufficient to set aside an award. Thus, the appeal
deserves to be dismissed.

44. In support of her submissions, Ms. Bansal has relied upon a decision of the Bombay High
Court in Arbitration Petition No. 43 of 2023 (M/s Truly Pest Solution Pvt. Ltd. v. Principal
Chief Mechanic Engineer (PCME), Chief Railway, decided on 11th November, 2024.

Record of Proceedings

45. Before making an analysis, it will be relevant to state that during the course of
submissions, the appellant had furnished a supplementary affidavit with an advance copy to the
learned counsel for the respondent-corporation. The said supplementary affidavit seeks to bring on
record two letters issued by the Corporation dated 26.02.2018 and 18.04.2018.

46. The learned counsel for the respondent-corporation very fairly consented that the same be
taken on record as it was part of the arbitral record, however, liberty was sought to refer to those
letters during course of her submissions. With the aforesaid understanding, the said supplementary
affidavit was taken on record.

Discussions and Analysis:-

47. The Court has heard the learned counsel for the parties and also perused the material
available on record.
1978 INDIAN LAW REPORTS ALLAHABAD SERIES

48. Before dealing with the submissions of the respective parties, it will be pertinent to take a
birds eye view of the legislative background of the amending Act No. 3 of 2016 which came into
effect from 23.10.2015 by which the Act of 1996 was amended and the leading pronouncement on
the subject.

49. The 246th report of the Law Commission was a prelude to the legislative amendment,
introduced in the Arbitration and Conciliation Act, 1996. The proposed amendment of 2016 aimed
to reduce judicial intervention, ensuring Arbitrator's neutrality and implementing time lines to
expedite arbitral proceedings.

50. The said amendment of 2016 came into effect on 23.10.2015 and it inter-alia amended
Section 12 of the Act of 1996 to disqualify such individuals who had some relationship with the
party, counsel, or with the subject matter of dispute, as it could give rise to a direct conflict of
interest. The said amendment also endevoured to prevent a party to a dispute to unilaterally appoint
an Arbitrator, often of their own choice or an employee or an affiliated person, who could be
inclined to favour such a party who had the right to appoint. The relationship which was considered
as offending were identified and it found expression in the Fifth and Seventh Schedule which were
incorporated in the Act. For better appreciation, the amended Section 12 of the Act of 1996 is being
reproduced hereinafter:-

"12. Grounds for challenge.- [(1) When a person is approached in connection with his
possible appointment as an arbitrator, he shall disclose in writing any circumstances,"

(a) such as the existence either direct or indirect, of any past or present relationship with
or interest in any of the parties or in relation to the subject-matter in dispute, whether financial,
business, professional or other kind, which is likely to give rise to justifiable doubts as to his
independence or impartiality; and

(b) which are likely to affect his ability to devote sufficient time to the arbitration and in
particular his ability to complete the entire arbitration within a period of twelve months.

Explanation1.-The grounds stated in the Fifth Schedule shall guide in determining
whether circumstances exist which give rise to justifiable doubts as to the independence or
impartiality of an arbitrator.

Explanation 2.-The disclosure shall be made by such person in the form specified in the
Sixth Schedule.]

(2) An arbitrator, from the time of his appointment and throughout the arbitral
proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in
sub-section (1) unless they have already been informed of them by him.

(3) An arbitrator may be challenged only if-

(a) circumstances exist that give rise to justifiable doubts as to his independence or
impartiality, or

(b) he does not possess the qualifications agreed to by the parties.

(4) A party may challenge an arbitrator appointed by him, or in whose appointment he
has participated, only for reasons of which he becomes aware after the appointment has been
made.
4 All. Laxmi Kant Pandey Vs. Hindustan Petroleum Corporation Ltd., Lko.
1979

[(5) Notwithstanding any prior agreement to the contrary, any person whose
relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the
categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:

Provided that parties may, subsequent to disputes having arisen between them, waive the
applicability of this sub-section by an express agreement in writing."

51. The purpose and rationale behind the Amending Act No. 3 of 2016 which came in force on
23.10.2025 was noticed by the Apex Court in Voestalpine Schienen Gmbh v. DMRC: (2017) 4
SCC 665 and the relevant paragraphs read as under:-

"17. We may put a note of clarification here. Though, the Law Commission discussed the
aforesaid aspect under the heading "Neutrality of Arbitrators", the focus of discussion was on
impartiality and independence of the arbitrators which has relation to or bias towards one of the
parties. In the field of international arbitration, neutrality is generally related to the nationality of
the arbitrator. In international sphere, the "appearance of neutrality" is considered equally
important, which means that an arbitrator is neutral if his nationality is different from that of the
parties. However, that is not the aspect which is being considered and the term "neutrality" used is
relatable to impartiality and independence of the arbitrators, without any bias towards any of the
parties. In fact, the term "neutrality of arbitrators" is commonly used in this context as well.

18. Keeping in mind the aforequoted recommendation of the Law Commission, with
which spirit, Section 12 has been amended by the Amendment Act, 2015, it is manifest that the main
purpose for amending the provision was to provide for neutrality of arbitrators. In order to achieve
this, sub-section (5) of Section 12 lays down that notwithstanding any prior agreement to the
contrary, any person whose relationship with the parties or counsel or the subject-matter of the
dispute falls under any of the categories specified in the Seventh Schedule, he shall be ineligible to
be appointed as an arbitrator. In such an eventuality i.e. when the arbitration clause finds foul with
the amended provisions extracted above, the appointment of an arbitrator would be beyond pale of
the arbitration agreement, empowering the court to appoint such arbitrator(s) as may be
permissible. That would be the effect of non obstante clause contained in sub-section (5) of Section
12 and the other party cannot insist on appointment of the arbitrator in terms of the arbitration
agreement.
* * *

20. Independence and impartiality of the arbitrator are the hallmarks of any arbitration
proceedings. Rule against bias is one of the fundamental principles of natural justice which applied
to all judicial and quasi-judicial proceedings. It is for this reason that notwithstanding the fact that
relationship between the parties to the arbitration and the arbitrators themselves are contractual in
nature and the source of an arbitrator's appointment is deduced from the agreement entered into
between the parties, notwithstanding the same non-independence and non-impartiality of such
arbitrator (though contractually agreed upon) would render him ineligible to conduct the
arbitration. The genesis behind this rational is that even when an arbitrator is appointed in terms
of contract and by the parties to the contract, he is independent of the parties. Functions and duties
require him to rise above the partisan interest of the parties and not to act in, or so as to further,
the particular interest of either parties. After all, the arbitrator has adjudicatory role to perform
and, therefore, he must be independent of parties as well as impartial. The United Kingdom
1980 INDIAN LAW REPORTS ALLAHABAD SERIES
Supreme Court has beautifully highlighted this aspect in Hashwani v. Jivraj [Hashwani v. Jivraj,
(2011) 1 WLR 1872 : 2011 UKSC 40] in the following words : (WLR p. 1889, para 45)

"45. - the dominant purpose of appointing an arbitrator or arbitrators is the impartial
resolution of the dispute between the parties in accordance with the terms of the agreement and,
although the contract between the parties and the arbitrators would be a contract for the provision
of personal services, they were not personal services under the direction of the parties."

52. From a close reading of Section 12 and the Fifth and Seventh Schedule, it would reveal
that the Fifth Schedule contains 34 entries while the Seventh Schedule contains 19 entries.
Moreover, the first 19 entries in the Fifth Schedule are replicated in the Seventh Schedule. The
Fifth Schedule is referable to Section 12(1) (b) while the Seventh Schedule is referable to Section
12(5) of the Act of 1996.

53. The category of relationship which gives justiciable grounds of doubt as to the
independence or impartiality of an Arbitrator is in Fifth Schedule. In so far as the Seventh Schedule
is concerned, it relates to situation where a person would be ineligible for being appointed as an
Arbitrator, unless the parties to the disputes enter into an agreement in writing, after the disputes
have arisen, expressly waiving the right to challenge such appointment.

54. Sections 12 (1) and (2) requires a prospective Arbitrator to disclose in writing any
circumstances which is likely to give rise to justifiable doubt as to his independence or impartiality
to act as an Arbitrator. Explanation 1 states that the grounds mentioned in the Fifth Schedule shall
guide so as to determine what would be such justifiable doubts and Explanation 2 mandates such
disclosure by the Arbitrator in the form mentioned in the Sixth Schedule.

55. On the other hand, Section 12(5) provides that notwithstanding any prior agreement to the
contrary, any person whose relationship with the parties, counsel or the dispute falls under any of
the categories specified in the Seventh Schedule shall make such person ineligible to be appointed
as an Arbitrator subject to the post dispute express written waiver as mentioned in the proviso.

56. Illustratively, upon considering the Fifth and the Seventh Schedule, it would reveal that in
a given factual scenario such as an Arbitrator being an employee of a party, it will have distinct
consequences depending on whether it is invoked for the purposes of the Fifth or the Seventh
Schedule.

57. In case if the said disability is invoked for the purposes of the Fifth Schedule then it has to
be considered in terms of Section 12(1) and (4) and Section 13 of the Act of 1996. The
circumstances, as mentioned in the Fifth Schedule will act as a guide to ascertain justifiable doubts
and it would trigger the mandatory disclosure for an Arbitrator in terms of the Sixth Schedule. In
case if a party is so aggrieved then it would lead such an aggrieved party to invoke the challenge
procedure before the Tribunal under Section 13 of the Act of 1996. In case if the challenge fails
then the issue can be raised after the award is made by filing a petition under Section 34 of the Act
of 1996 to set aside the award on the said ground. Needless to say that the disclosure as required in
terms of Section 12(1) read with the Sixth Schedule is mandatory.
4 All. Laxmi Kant Pandey Vs. Hindustan Petroleum Corporation Ltd., Lko.
1981

58. However, in case the said objection is raised for the purposes of the Seventh Schedule then
it has to be seen in context with Section 12(5) and Section 14 of the Act of 1996. In such
circumstances, where a proposed Arbitrator or an Arbitrator appointed falls within any of the
entries mentioned in the Seventh Schedule, he runs the risk of dejure-ineligibility and his mandate
automatically terminates and a party can directly go to the Court under Section 14 and may not
have to first raise a challenge in terms of Section 13 which has been noticed in the preceding
paragraph. This disability which is incurred can only be cured by, a post dispute, express written
waiver under the proviso to Section 12(5) of the Act of 1996.

59.