Hindustan Construction Company Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd., 2025 INSC 1365 - Arbitration Act - Waiver Regime - Review Powers

Arbitration and Conciliation Act, 1996 -Section 4, 12(5), 29A -Only Seventh Schedule disqualifications attract the stringent waiver regime of Section 12(5). In all other cases viz., procedural lapses, delays, or non-jurisdictional irregularities, Section 4 applies. Accordingly, a joint application under Section 29A amounts to a valid waiver under Section 4, save in cases of statutory ineligibility under Section 12(5) - Where the disqualification under Section 12(5) is attracted, the language being plain and mandatory, a joint application merely seeking extension, without an informed written waiver, cannot cure ineligibility. Conversely, where no such disqualification exists, the conduct of the parties, especially in jointly invoking Section 29A, constitutes waiver under Section 4. (Para 13.11-12)

Arbitration and Conciliation Act, 1996 -Section 4, 12(5), 29A -When both parties jointly seek an extension, they signify continued consent and confidence in the tribunal. Under Section 29A(5), even a single party may apply; the other is free to oppose. The Court may, in its discretion, extend the mandate with or without substituting the arbitrator- When a party joins in seeking extension under Section 29A despite having the opportunity to object or seek termination, it signifies a higher degree of consent. However, such consent cannot be equated with an express written waiver under Section 12(5). The statutory language is categorical: only an express written post-dispute waiver can cure Seventh Schedule ineligibility. (Para 13.10)

Arbitration and Conciliation Act, 1996 -Section 11 -There is no statutory provision for review or appeal from an order under Section 11, which reflects a conscious legislative choice- While High Courts, as courts of record, do possess a limited power of review, such power is extremely circumscribed in matters governed by the Arbitration Act. It may be exercised only to correct an error apparent on the face of the record or to address a material fact that was overlooked. It cannot be used to revisit findings of law or reappreciate issues already decided. [Context: In this case, SC held : High Court did not have the jurisdiction to reopen or review its earlier order passed under Section 11(6) of the A&C Act. Once the appointment was made, the court became functus officio and could not sit in judgment over the very issue it had already settled. The review order cuts against the grain of the Act, undermines the principle of minimal judicial interference, and effectively converts the review into an appeal in disguise. Such an exercise cannot stand](Para 11)

Arbitration and Conciliation Act, 1996 -Section 7 - The true test lies not in technical formality, but in intention. Where parties have acted on a shared understanding to arbitrate, they are estopped from subsequently denying the existence of such an agreement. (Para 12.5)-

Arbitration and Conciliation Act, 1996 -Section 7,11- Even where a clause contains an otherwise defective unilateral appointment mechanism, the Court may sever the offending portion and exercise its power under Section 11(6) to appoint an independent arbitrator, thereby giving effect to the parties’ genuine intention to arbitrate -While a named authority may be ineligible to act as arbitrator, such ineligibility does not invalidate the arbitration agreement itself. (Para 12.10-13) [Context: In this case, SC held that the clause that vests exclusive appointment power in one party and forecloses arbitration in default of such appointment must be severed as void and unenforceable. However, the substantive agreement to arbitrate survives by virtue of the doctrine of severability.]

Constitution of India - Article 141 -A non-speaking dismissal of an SLP signifies only that this Court, in its discretion under Article 136, has declined to interfere. It does not amount to approval of the reasoning of the subordinate forum. The doctrine of merger does not apply to such dismissals.  Dismissal of an SLP at the threshold without reasons does not elevate the underlying judgment to binding precedent unless accompanied by an express declaration of law under Article 141 - A non-speaking dismissal of an SLP neither endorses the reasoning of the judgment challenged nor transforms it into binding precedent. At best, such a decision has persuasive value; its only legal effect is to bring finality to the dispute between the parties in that particular case.(Para 14.1-3)

Arbitration and Conciliation Act, 1996 -Section 15 - An arbitrator’s mandate terminates upon withdrawal or by agreement of the parties, and that a substitute arbitrator must be appointed following the same procedure as the original appointment- Substitution preserves continuity, and prior proceedings remain valid unless either party objects. (Para 17)

Arbitration and Conciliation Act, 1996 -Section 18 - The sub-clause provides that “if for any reason the matter shall not be referred to arbitration” is vague, uncertain, and arbitrary - Held: The expression “for any reason” confers an unguided and absolute veto, particularly objectionable in a public contract. Such a clause fails the test of manifest arbitrariness and violates Section 18 of the Act, which mandates equal treatment of parties. (Para 12.15)

Arbitration - Waiver, acquiescence, and estoppel - Though waiver, acquiescence, and estoppel are often discussed together in arbitral jurisprudence, they occupy distinct conceptual spaces. Waiver is the intentional relinquishment of a known right; acquiescence arises from passive acceptance or delay; and estoppel precludes a party from resiling from a representation on which the other has relied. The Act, however, incorporates only the doctrine of waiver – presuming parties to be conscious of their conduct and its consequences. The Act elevates silence to waiver by importing an element of intent, thereby preventing parties from approbating and reprobating. A party who has actively participated or consented to continuation of the proceedings cannot later challenge the same process merely because the result is adverse. The legislative design thus discourages tactical objections and multiplicity of proceedings. (Para 13.2)

Arbitration - Arbitration is often a friend in conferences but a foe in practice… In practice, Arbitration has at times become more cumbersome than civil litigation.(Para 3)

Arbitration - Public -private contract- Public -private contract, must withstand not only conventional contractual scrutiny but also constitutional scrutiny- Arbitral appointments in public contracts must satisfy the requirements of fairness, equality, and non-arbitrariness under Article 14. (Para 12.14) unilateral appointment clauses in public-private contracts violate Article 14 and offend the principle of nemo judex in causa sua. (Para 12.11)

Arbitration and Conciliation Act, 1996 -Section 8,11,16- Section 11 is confined to a prima facie examination of the existence of an arbitration agreement. All other questions including validity, enforceability, and jurisdiction are matters for the arbitral tribunal under Section 16 - Rferral courts must avoid undertaking detailed fact-finding or adjudication at the Section 8 or Section 11 stage. (Para 11.5)