Delhi High Court Sets Aside Entire LIC Award After Finding Arbitrator's Appointment Impermissible

On 6 October, the Delhi High Court allowed Life Insurance Corporation of India's (LIC) appeal against N.S. Associates Pvt. Ltd., extending the effect of an earlier Single Judge finding that LIC's unilateral appointment of the arbitrator was impermissible.

A Division Bench comprising Justices Anil Kshetarpal and Bharat Parashar held that a party cannot challenge an arbitral tribunal's authority to undo unfavourable claims while simultaneously seeking to preserve favourable portions of the same award, setting aside the award in its entirety after finding that the sole arbitrator was invalidly appointed. It observed:

“Once the appointment of the Arbitrator by the ED of the Appellant-Corporation was found to suffer from de jure ineligibility, the Arbitral Tribunal lacked the legal competence to adjudicate the disputes between the parties. The resultant proceedings and the Arbitral Award cannot, therefore, be sustained in part merely because the challenge under Section 34 had been framed by the Respondent with reference to specified claims.”

The dispute arose from arbitral proceedings between Life Insurance Corporation of India and N.S. Associates concerning monetary claims, including amounts towards the final bill, overheads during the extended contract period, bank guarantee charges and insurance costs.

At the request of N.S. Associates, LIC's Executive Director (Engineering) appointed the sole arbitrator on 14 November 2019. The arbitrator thereafter conducted the proceedings and passed an award on 10 January 2022.

The award granted N.S. Associates Rs. 35.90 lakh towards its final bill, Rs. 11.85 lakh towards overheads during the extended contract period, Rs. 10.13 lakh towards bank guarantee-related claims and Rs. 4.45 lakh towards insurance covers.

It also granted pendente lite interest at 8% per annum from 14 November 2019 until realisation, Rs. 7 lakh towards arbitration and litigation costs, and directed issuance of an updated completion certificate, while rejecting some other claims.

N.S. Associates then approached the High Court under Section 34 of the Arbitration and Conciliation Act, 1996, challenging specified portions of the award, including parts of Claim No. 1, non-grant of Goods and Services Tax, Claims Nos. 2, 3 and 4, and part of the interest claim.

On 29 October 2024, the Single Judge held that LIC's Executive Director was de jure ineligible to unilaterally appoint the sole arbitrator and that the appointment was impermissible. However, because N.S. Associates' Section 34 prayer targeted only specified claims, the Single Judge set aside the award only to that extent rather than in its entirety.

LIC thereafter moved an application under Sections 152 and 151 of the Code of Civil Procedure, 1908, on 21 May 2025, seeking correction of the operative portion of the judgment so that the entire award would stand set aside.

The Single Judge dismissed that application on 21 August 2026, reasoning that the Section 34 proceedings had been decided in terms of the relief actually sought by N.S. Associates. LIC then filed the present appeal on 21 September 2026.

Before the Division Bench, LIC argued that once the arbitrator's unilateral appointment was held impermissible and the proceedings rendered non-est, that defect could not be confined only to the claims specifically challenged by N.S. Associates.

N.S. Associates countered that LIC had never itself filed a Section 34 challenge to the award and that certain payments under the award had already been made.

Rejecting that objection, the Court held that the defect went “to the root of the constitution of the Arbitral Tribunal and, consequently, to the validity of the Arbitral Award itself.”

It clarified that LIC was not mounting a fresh challenge to the arbitrator's appointment, but was seeking the logical consequence of the finding already returned in N.S. Associates' own Section 34 proceedings.

Further, the Bench held that N.S. Associates could not “approbate and reprobate” by maintaining that the tribunal was void for the portions of the award it wanted set aside while preserving other portions arising from the very same proceedings.

It added that payments already released under the award could not validate an award rendered non-est because of the tribunal's invalid constitution.

Accordingly, the High Court modified the 29 October 2024 judgment and set aside the 10 January 2022 arbitral award in its entirety. It also set aside the 21 August 2026 order dismissing LIC's correction application.

As regards amounts already paid, the Bench said N.S. Associates may seek recovery in accordance with law, while expressly leaving its entitlement undecided.

Appearances for appellant (Life Insurance Corporation of India): Advocate Lakshay Sawhney.

Appearances for respondent (N.S. Associates Pvt. Ltd.): Advocates M. Tarique Siddiqui, Sunil Verma, Rakhshan Ahmed, Lakshmi and Rohinni Pathania.