Court Rules Consent Awards Are Amenable to Challenge Under Section 34 of Arbitration and Conciliation Act, 1996; Finds No Justifiable Doubts on Arbitrator’s Impartiality Despite Prior Professional Relations
In a significant judgment delivered on August 18, 2026, the Delhi High Court dismissed the challenge filed by Lalit Modi under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), seeking to set aside an arbitral award passed in favor of BDR Builders and Developers Pvt. Ltd. The Court upheld the validity of the consent arbitral award dated November 21, 2016, which was subsequently engrossed on stamp paper on January 12, 2017, for registration purposes.
The dispute arose from an Agreement to Sell dated June 24, 2014, relating to an immovable property situated at 32, Paschimi Marg, Vasant Vihar, New Delhi. Following financial transactions between the parties and ensuing disagreements, both parties jointly referred their disputes to arbitration as per the arbitration clause in the Agreement. The sole arbitrator, Shri Naresh Gupta, accepted the reference and conducted arbitration proceedings commencing October 2016.
On November 14, 2016, both parties informed the arbitrator that they had amicably settled all disputes, and the terms of the settlement were recorded and signed by all involved. The arbitral award on agreed terms was pronounced on November 21, 2016, directing specific performance of the Agreement and delivery of possession to the respondent. Both parties also executed an acceptance document on the same day, expressly agreeing not to challenge the award.
Lalit Modi contested the award on several grounds, primarily alleging that the arbitrator lacked independence and impartiality due to his prior professional relationship with BDR Builders and its directors. Modi claimed that the arbitrator had failed to disclose these connections as mandated under Section 12(1) of the A&C Act, which requires arbitrators to disclose any circumstances likely to raise justifiable doubts about their impartiality. Modi also challenged the procedural propriety of engrossing the award on stamp paper after the original pronouncement, contending it amounted to a fresh award.
The Court rejected these contentions after a detailed analysis of the statutory provisions and judicial precedents. It held that:
1. Consent awards are amenable to challenge under Section 34: The Court clarified that the Arbitration and Conciliation Act does not exempt awards on agreed terms from judicial scrutiny. Although the scope of interference is limited, such awards can be challenged on grounds like invalidity of the arbitration agreement, procedural irregularities, or public policy violations.
2. Engrossment on stamp paper is a ministerial act: The subsequent engrossment of the award on stamp paper for registration did not constitute a fresh or substituted award and did not alter substantive rights. The award attained finality on the date of its pronouncement.
3. Non-disclosure does not ipso facto invalidate the award: Mere non-disclosure under Section 12(1) does not automatically render an arbitrator ineligible or invalidate the arbitral proceedings. The Court emphasized the need to establish either statutory disqualification as per Section 12(5) read with the Seventh Schedule or justifiable doubts as per Section 12(3) read with the Fifth Schedule.
4. Prior professional engagements outside the prescribed period do not create justifiable doubts: The arbitrator’s prior professional services to the respondent from 2008 to 2012 were beyond the three-year period specified in the Fifth Schedule and thus did not raise justifiable doubts about his independence.
5. No material to establish bias or statutory ineligibility: The Court found no cogent or authentic material to support allegations of bias or conflict of interest. The typed copy of an alleged reply by the arbitrator was not admitted as evidence due to lack of authenticity.
6. Judicial interference is limited: The Court reiterated that interference under Section 34 should not reappraise evidence or substitute its view for that of the arbitrator unless the award is patently illegal or violates fundamental public policy.
Accordingly, the Court dismissed the Objection Petition filed by Lalit Modi and allowed the Execution Petition by BDR Builders to proceed for enforcement of the award. The judgment underscores the finality and sanctity of consent arbitral awards while affirming the limited scope of judicial review under the Arbitration and Conciliation Act, 1996.
Bottom Line :
Arbitration and Conciliation Act, 1996 Section 34 - An arbitral award on agreed terms or consent award is amenable to challenge under Section 34 of the Arbitration and Conciliation Act, 1996 - Mere non-disclosure by arbitrator under Section 12(1) does not ipso facto invalidate the arbitral proceedings - Challenge on grounds of arbitrator’s independence and impartiality requires establishing justifiable doubts or statutory ineligibility as per Fifth and Seventh Schedules.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Sections 12, 13, 14, 30, 31, 34, Fifth Schedule, Seventh Schedule
Lalit Modi v. BDR Builders and Developers Private Limited, (Delhi) : Law Finder Doc id # 2963712
