Breach of Service Condition Cannot Invalidate Arbitral Mandate & Award
Judgment dated 28.9.2026 of the High Court of Delhi in FAP (COMM) 231/2026 of m/s Airport Handling Services Vs. IIT Kanpur
The challenge raised by the Appellant is confined to the finding of the learned District Judge that the learned Sole Arbitrator was de jure unable to act as an arbitrator by virtue of Rule 11(3)7 of the Consumer Protection (Conditions of Service of President and Members of the State Commission or District Commission) Model Rules, 2020
The Appellant is a partnership firm engaged in the business of customs clearance, shipping and freight forwarding services. The Appellant obtained registration as a Micro, Small and Medium Enterprise („MSME‟) under the Micro, Small and Medium Enterprises Development Act, 200612 on 29.08.2012. The Respondent is the Indian Institute of Technology, Kanpur, an autonomous institution of national importance constituted under the Institute of Technology Act, 1961.
The Appellant filed its claim before the Micro and Small Enterprises Facilitation Council („MSEFC‟) on 06.05.2022. Since the conciliation proceedings did not result in a settlement, the dispute was referred to the Delhi Arbitration Centre („DAC‟) on 08.06.2023 under Section 18(3) of the MSMED Act.
On 28.2.2024, the Arbitral Award was passed.
In Section 34 petition, the learned District Judge held that Rule 11(3) operated as a legal bar against the learned Sole Arbitrator undertaking arbitral work while holding the office of President of the Delhi State Consumer Disputes Redressal Commission („SCDRC‟). The learned District Judge consequently held that the learned Sole Arbitrator was de jure unable to act and, on this ground, set aside the Award.
Rule 11(3), as relied upon by the Respondent, is a provision governing the conditions of service of the President and Members of the State Commission or District Commission. The prohibition contained therein may, depending upon its interpretation and applicability, regulate the conduct of a person holding such office and may have consequences under the law governing such office. However, a service-condition restriction cannot, without more, be transposed into an ineligibility under Section 12(5).
the question before us is not whether a person holding an office under the Consumer Protection framework should, as a matter of service discipline, undertake arbitral assignments. The question is whether such service restriction, by itself, renders the person ineligible under Section 12(5) and consequently requires an express written waiver under its proviso. For the reasons already noticed, the answer must be in the negative.
The Respondent’s objection, in substance, is that the learned Sole Arbitrator, while holding the office of President of the SCDRC, could not undertake arbitral work by reason of the Service Rules. Even assuming the correctness of that premise, the consequence of such violation would have to be determined under the law governing the office of the learned Sole Arbitrator. It does not follow that the Award is automatically rendered void ab initio under the A&C Act.
The learned District Judge, therefore, fell into error in treating the alleged violation of Rule 11(3) as equivalent to an ineligibility under Section 12(5) and in consequently holding that the absence of a written waiver rendered the Award void.
Thus, the only ground on which the learned District Judge ultimately set aside the Award was the finding relating to the alleged de jure inability of the learned Sole Arbitrator under Rule 11(3) of the Service Rules. Having found the said finding to be unsustainable for the reasons set out hereinabove, there remains no other ground on which the Award stands set aside in the Impugned Judgment.
In view of the foregoing discussion, the present Appeal is allowed. The finding of the learned District Judge that the learned Sole Arbitrator was de jure unable to act as an arbitrator on account of Rule 11(3) of the Service Rules is set aside. Consequently, the judgment dated 19.05.2026, insofar as it sets aside the Award dated 28.02.2024 on the aforesaid ground, is also set aside.
