Supreme Court Refuses To Interfere With Madras HC Order On Arbitrator Appointment In Adani-Tamil Nadu Coal Dispute

The Supreme Court on Wednesday refused to interfere with the Madras High Court's ruling upholding the appointment of a sole arbitrator in a dispute between Adani Global Pte. Ltd. and Tamil Nadu Power Generation Corporation Ltd. over a contract for the supply of 39 lakh tonnes of imported coal.

The court, however, recorded Adani's statement that it would be free to raise all other grounds available to it in the pending proceedings under Section 34 of the Arbitration and Conciliation Act.

A bench of Chief Justice Surya Kant and Justices Joymalya Bagchi and V. Mohana declined to interfere with the High Court's interpretation that Adani's post-dispute correspondence amounted to an express written agreement accepting the appointment of the sole arbitrator.

"We record the statement made by learned senior counsel for the appellant that all other contentions shall be urged before the Section 34 Court. In view thereof, we are not inclined to interfere with the impugned judgment. The appeal is dismissed," the Court said.

Appearing for Adani Global, Senior Advocate Navin Pahwa argued that the High Court had itself held that the contractual clause empowering the respondent to appoint the sole arbitrator attracted the prohibition under Section 12(5) of the Arbitration and Conciliation Act.

He contended that despite this finding, the High Court had wrongly concluded that Adani waived its objection through an exchange of correspondence.

Pahwa submitted that the proviso to Section 12(5) requires an "express agreement in writing" executed after disputes have arisen. According to him, a letter merely accepting the name of the proposed arbitrator could not amount to an express waiver of the statutory disqualification.

"Notwithstanding the agreement, unless there is an express agreement in writing after disputes have arisen, there is no compliance with the proviso to Section 12(5). There has to be an express waiver, not merely consent to the appointment," he argued.

Relying on the Supreme Court's decisions in TRF Ltd., Bharat Broadband and Bhadra International, Pahwa contended that participation in arbitral proceedings, applications seeking extension of time or written communications accepting an appointment could not validate an appointment made by an ineligible authority.

He argued that the statute required an express written waiver specifically acknowledging the disqualification under the Seventh Schedule.

The bench, however, repeatedly questioned whether the present case stood on a different footing because the correspondence took place after disputes had arisen. It noted that there was an exchange of letters between commercially sophisticated parties.

"There is an exchange of letters. The dispute had arisen, objection was taken, the respondent replied proposing the arbitrator and your client accepted it. Why should we not consider this an agreement in writing?" Justice Bagchi asked.

The court also observed that the parties were commercially aware and could not be treated as unaware of the legal consequences of their actions.

"We are not dealing with innocent, gullible people. These are commercially aware parties engaged in commercial arbitration. There is a clear exchange of letters which constitutes an agreement," the bench remarked.

When Pahwa relied on Bhadra International to contend that an express written waiver was mandatory despite any consent, the bench distinguished that decision. It observed that Bhadra arose in a different factual context, whereas the present case involved post-dispute correspondence accepting the respondent's proposed arbitrator.

Finding no reason to interfere with the High Court's interpretation, the bench dismissed the appeal while preserving Adani's right to pursue all remaining grounds in its pending challenge to the arbitral award under Section 34 of the Arbitration and Conciliation Act.

Background

The case arose from a dispute between Adani Global Pte Ltd and Tamil Nadu Power Generation Corporation Ltd under a 2016 contract for the supply of 39 lakh tonnes of imported coal.

Following disputes over deductions and other contractual claims, the respondent unilaterally appointed a sole arbitrator whose August 16, 2023 award rejected both Adani's claims and the respondent's counterclaims.

Adani challenged the award before the Madras High Court, contending that the unilateral appointment violated Section 12(5) of the Arbitration and Conciliation Act in view of Bhadra International.

On March 6, 2026, the High Court rejected the objection, holding that Adani had expressly accepted the arbitrator's appointment through a written communication dated June 29, 2021, thereby validly waiving its right to object. The Court also held that the appointment and the arbitral award were not invalid and directed the matter to proceed for hearing on the merits of the Section 34 challenge.