Karnataka High Court
M/S Re Sustainability Healthcare ... vs Bruhat Bengaluru Mahanagara Palike on 12 January, 2026
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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®
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF JANUARY, 2026
BEFORE
THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
CIVIL MISC. PETITION NO. 12 OF 2025
BETWEEN
M/S RE SUSTAINABILITY HEALTHCARE SOLUTIONS LIMITED
(A COMPANY REGISTERED UNDER THE
COMPANIES ACT, 1956)
HAVING ITS REGISTERED OFFICE AT
DOOR NO. 6-3-1089/G/10 AND 11,
GULMOHAR AVENUE, RAJ BHAWAN ROAD,
SOMAJIGUDA, HYDERABAD 500 082.
REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE
MS. NEELCHAL AGRAWAL
.... PETITIONER
(BY SRI. K.N. PHANINDRA., SR., ADVOCATE FOR
SRI. RAHUL DEV S DESHAMUORE ., ADVOCATE)
AND
Digitally signed 1. BRUHAT BENGALURU MAHANAGARA PALIKE
by SHWETHA
RAGHAVENDRA N.R. SQUARE,
BENGALURU - 560 002.
Location: HIGH
COURT OF REPRESENTED BY ITS
KARNATAKA DEPUTY COMMISSIONER (HEALTH)
2. BENGALURU SOLID WASTE MANAGEMENT LIMITED.
(A COMPANY INCORPORATED UNDER THE
COMPANIES ACT, 2013)
HAVING ITS REGISTERED OFFICE AT
30/1, 1ST AND 2ND FLOOR, UNI BUILIDING,
THIMMAIAH ROAD, VASANTH NAGAR,
BENGALURU 560051.
REPRESENTED BY ITS MANAGING DIRECTOR.
.... RESPONDENTS
(BY SRI. PRASHANTH CHANDRA., ADVOCATE FOR R2;
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SRI. SATYANAND B.S., ADVOCATE FOR R1)
THIS CMP IS FILED UNDER SECTION 11(6) OF THE
ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO APPOINT
A SOLE ARBITRATOR TO ADJUDICATE THE DISPUTES BETWEEN THE
PETITIONER AND THE RESPONDENT IN TERMS OF ARTICLE 11.2 OF
THE CONCESSION AGREEMENT DATED 11.08.2004 PRODUCED AS
ANNEXURE A.AND ETC.
THIS CMP COMING ON FOR ORDERS AND HAVING BEEN
RESERVED FOR ORDERS ON 12.12.2025, THIS DAY, THE COURT
PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
CAV ORDER
1. The Petitioner is before this Court seeking for the
following reliefs:
a) "Appoint a Sole Arbitrator to adjudicate the
disputes between the petitioner and the
Respondent in terms of Article 11.2 of the
concession Agreement dated 11.08.2004 produced
as Annexure-A;
b) And/or pass such other orders as this Hon'ble
Court may deem fit in the interest of justice and
equity."
2. The Petitioner and Respondent No.1 had entered into
a concession agreement on 11.08.2004 for the
development, operation and maintenance of an
integrated Municipal Solid Waste (MSW) processing
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facility, which was amended by a supplementary
agreement dated 24.03.2009, under which various
obligations were to be performed by both parties.
3. Alleging that Respondent No.1 had wrongfully
terminated the concession agreement on
28.05.2016, the Petitioner had invoked the
Arbitration Clause. The invocation not having been
accepted by Respondent No.1, the Petitioner had
approached this Court by filing a petition in CMP
No.198/2016. Though the Arbitration Clause
envisaged the appointment of three Arbitrators, this
Court, at the request of both the parties, had
appointed a sole Arbitrator to decide the disputes.
4. The sole Arbitrator passed an award on 03.05.2018,
partly allowing the claim of the Petitioner and
directing the payment of a sum of Rs.4,00,00,000/-
as against the claim of Rs.1,08,44,03,582/-. The said
award was challenged by the Petitioner in
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A.S.No.159/2018 and by Respondent No.1 in
A.S.No.163/2018. The III Additional City Civil and
Sessions Judge, Bengaluru, allowed the petition filed
by Respondent No.1 and set aside the arbitral award
vide a common judgement dated 12.08.2020.
5. The said common judgement was challenged in MFA
Nos.5111/2020 and 5232/2020. This Court allowed
the said appeals and set aside the order passed
under Section 34 and remitted the arbitration suits to
the Commercial Court, Bengaluru, for
reconsideration.
6. The Commercial Court reconsidered the petitions
filed by the Petitioner and Respondent No.1 under
Section 34 of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as 'the A&C Act' for
short). Com.A.S.No.159/2018 filed by the Petitioner
was allowed vide judgement dated 28.02.2023 and
the arbitral award dated 03.05.2018 was set aside.
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Com.A.S.No.163/2018 filed by Respondent No.1 was
dismissed. The Commercial Court has observed as
under:
"52. Section 34 of Arbitration and Conciliation Act
1996 Indicates that the power of the Courts is limited
to setting aside the arbitral awards, strictly in terms of
the specific grounds urged before the Court. The Act
contains no provision that allows the Courts to either
modify the arbitral awards or grant
additional/alternative reliefs that the arbitral tribunal
did not grant. The Act provides only two mechanisms
for making changes in the arbitral award passed by the
arbitral tribunal. The first being provided under Section
33, whereby the arbitral tribunal is empowered to
make clerical and technical corrections in the arbitral
award that it deems fit after receiving the request for
the same from the parties to the proceedings. The
second mechanism is under Section 34(4), whereby
the Courts can adjourn the proceedings for setting
aside arbitral awards and provide an opportunity to the
arbitral tribunal to take appropriate actions to eliminate
the grounds for setting aside such arbitral awards.
Thus, even during the pendency of the proceedings
under Section 34, the defects in the arbitral award can
only be cured by the arbitral tribunal. In view of the
above, it is clear that that power to make changes in
the arbitral award only resides with the arbitral
tribunal, and the Courts cannot make any such
changes in the arbitral award under any circumstance
whatsoever. The Courts should recognize that while
opting to resolve disputes through arbitration, the
parties consciously choose to exclude the Court's
jurisdiction. Thus, the exercise of modifying or altering
the arbitral award by the Courts not only goes against
the scheme of the Act but also defeats the objective of
the arbitration process. Therefore, after the dispute
between the parties is resolved through arbitration, the
Courts should recognize that their role is limited to
setting aside arbitral awards based on the specific
grounds enshrined under Section 34 and should
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refrain from making any modifications in the arbitral
awards."
7. It is on that basis, contending that the matter would
have to be again agitated before the arbitral
Tribunal, that the Petitioner issued a legal notice on
03.11.2023, invoking the Arbitration Clause in Article
11.2 of the concession agreement and requesting
Respondent No.1 to name a sole Arbitrator.
Respondent No.1, though initially had indicated that
the matter had been sent for legal opinion, did not
thereafter respond to the legal notice. Thereafter,
the Petitioner was informed on 18.05.2024 that the
Bangalore Solid Waste Management Limited-
Respondent No.2 had been incorporated. It is in that
background that the Petitioner was directed to
correspond with Respondent No.2. Despite the
follow-up by the Petitioner with Respondent No.2 and
a reminder notice having been issued on 29.08.2024,
no positive response having been received. Hence,
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the Petitioner is before this Court seeking for the
aforesaid reliefs.
8. The submission of Sri K.N.Phanindra, learned Senior
Counsel appearing for the Petitioner is that:
8.1. In view of the observations made by Section 34
Court Supra, the Petitioner, instead of choosing
to file a further appeal under Section 37 of the
A&C Act, has chosen to reagitate the matter
before the Arbitral Tribunal.
8.2. It is his submission that, if the Section 37 Court
were also to hold that the rights of the
Petitioner had to be agitated before the Arbitral
Tribunal, the Petitioner would be wasting
valuable time. Similarly, it is his submission as
regards approaching the Hon'ble Apex Court
under a Special Leave Petition and as such, he
submits that this Court could appoint an
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Arbitrator so as to enable the parties to
reagitate the issues before the Arbitral Tribunal.
8.3. Once an arbitral award has been set aside, a
fresh notice under Section 21 of the A&C Act is
not necessary in order to seek the appointment
of an Arbitrator under Section 11 of the A&C
Act. In this regard, he relies upon the decision
of the Hon'ble Delhi High Court in M/s.
Supercon Vs. Union of India1, more
particularly, paras 4, 6 to 10 thereof, which are
reproduced hereunder for easy reference:
"4. Against this award, the petitioner herein filed
O.M.P.(COMM) 88/2021 under Section 34 of the Act,
before the learned District Judge, Central Delhi. The
petition was allowed by a judgment dated 25.11.2023
of the learned District Judge, Commercial Court-08,
Central, Tis Hazari. The only ground upon which the
award was set aside was that the learned arbitrator
was ineligible to act and the appointing authority was
also ineligible to make the appointment, in terms of
Section 12 of the Act and the Schedules thereto, read
with judgments of the Supreme Court in TRF Limited
vs. Energo Engineering Projects Limited [(2017) 8
SCC 377] and Perkins Eastman Architects DPC vs.
HSCC (India) Limited [(2020) 20 SCC 760].
6. The only objection taken by Mr. Prakash is that
after the judgment of the learned Commercial Court
1
ARB.P.NO.506/2024 DATED 23.04.2024
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dated 25.11.2023, the petitioner has not invoked
arbitration afresh in terms of under Section 21 of the
Act.
7. Having heard learned counsel for the parties on
this point, I am of the view that the objection is
unmerited. The requirement of invocation of
arbitration derives from Section 21 of the Act, which
provides as follows:
"21. Commencement of arbitral proceedings. Unless
otherwise agreed by the parties, the arbitral
proceedings in respect of a particular dispute
commence on the date on which a request for that
dispute to be referred to arbitration is received by the
respondent."
8. In the facts of the present case, the invocation
was made prior to first arbitral proceedings. The
Division Bench judgments of this Court in Ram Kumar
vs. Shriram Transport Finance Co. Ltd. [2022 SCC
OnLine Del 4268] and Govind Singh vs. Satya Group
Pvt. Ltd. [2023 SCC OnLine Del 37] make it clear that
the award rendered by a unilaterally appointed
arbitrator or ineligible arbitrator, is itself a nullity. The
position, therefore, is that the proceedings
commenced by the original invocation have not come
to a legal or valid end. When the matter is looked up
from this angle, the relief sought is in fact for
appointment of an independent arbitrator to conduct
the same proceedings, which were commenced by
the original invocation letter.
9. My attention is also drawn to a recent judgment of
the Bombay High Court, which takes the same view.
In Kirloskar Pneumatic Company Ltd. vs. Kataria
Sales Corporation [Commercial Arbitration Petition
No. 16/2023, decided on 21.03.2024], the Bombay
High Court has summarised the position thus:-
"13 The argument of Mr. Dalal, will have to be
appreciated in the aforesaid statutory scheme, as it is
his contention that when an unilateral appointment of
an arbitrator was frowned upon and resultantly, the
award passed by such an arbitrator, who was de jure
ineligible to act is set aside, once again the
arbitration, will have to be invoked by issuing a notice
under Section 21.
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The above argument on its face is fallacious, since
the petitioner has already forwarded a request to the
respondent for referring the dispute, that had arisen
between them to arbitration and the arbitral
proceedings in respect of that dispute has
commenced. Merely because the award passed by an
ineligible arbitrator is set aside, is not sufficient
enough to give new contour to the dispute, as the
dispute between the parties still remain the same but
now what is sought by the petitioner today, is
appointment of a competent arbitrator to arbitrate
the dispute and the petitioner expect the arbitrator to
be eligible to act as such ie he shall be a neutral and
independent person and his appointment is not in
teeth of Section 12 of the Act of 1996 or schedule V
and VII of the Act.
10. I am in respectful agreement with the aforesaid
view taken by the Bombay High Court. The
alternative course, which would require a party in
these circumstances to invoke arbitration afresh and
for the arbitral proceedings to be thus "commenced"
de novo, does not commend to me. It militates
against the underlying objective of speedy and
efficient resolution of disputes, which underpin the
scheme of the Act."
8.4. By relying on Supercon's case, his submission
is that if an arbitral award is set aside,
observing that the matter has to be reagitated
before the Arbitrator, the proceedings will not
commence de novo, but would have to be
considered only with respect to the
observations made by the Section 34 Court. In
that background, he submits that no fresh
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notice under Section 21 of the A&C Act is
required to be issued.
8.5. He relies upon the decision of the Hon'ble High
Court of Judicature at Bombay, Nagpur Bench
in Mohan Murali Vs. Shri Bhagwandas2,
more particularly, paras 10, 11, 13, 14, 21 to
26 thereof, which are reproduced hereunder for
easy reference:
10. In view of the setting aside of the arbitral
award dated 12.01.2019 by the learned District
Judge, the applicant has now filed the present
application under Section 11 (6) of the Act, 1996,
seeking appointment of a fresh arbitrator to
adjudicate the dispute between the parties.
11. Learned counsel for the applicant submitted
that the learned Arbitrator failed to conduct the
arbitration proceedings in accordance with the
provisions of the Act, 1996. It is contended that
the applicant had duly filed his statement of claim,
supporting documents, and affidavit of evidence
before the learned Arbitrator. However, despite
the availability of such material on record, the
learned Arbitrator did not adjudicate the dispute
on merits as required under Section 25 of the Act,
1996.
13. Per contra, learned counsel for the non-
applicant submitted that the present application
under Section 11 (6) of the Act, 1996 is not
maintainable in the absence of prior issuance of a
2
MCA No.136/2025, dated 17.10.2025,
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legal notice invoking the arbitration clause. It is
contended that before approaching this Court for
appointment of an arbitrator, it was incumbent
upon the applicant to comply with the procedural
requirements under the Act, particularly by issuing
a notice invoking the arbitration clause and calling
upon the other party to concur in the appointment
of an arbitrator.
14. While the existence of an arbitration clause is
not disputed by the non-applicant, it is submitted
that the applicant has failed to adhere to the
mandatory pre-requisites before invoking the
jurisdiction of this Court under Section 11 (6) of
the Act. The objection raised pertains not to the
arbitrability of the dispute, bur to the procedural
lapse in approaching the Court prematurely,
without exhausting the statutory process. The
arbitration clause between the parties is not in
dispute. The respondent contends that the arbitral
award was set aside by the learned trial Court on
the ground that the procedure contemplated
under the Act, 1996 was not duly followed. The
respondent has further raised a preliminary
objection to the maintainability of the present
application under Section 11 of the Act, 1996
asserting that in view of Section 21 a fresh notice
invoking arbitration ought to have been issued by
the applicant prior to seeking appointment of an
arbitrator afresh. According to the respondent, in
the absence of such a notice, the application is
premature and not maintainable. In support of
these submissions, reliance was placed on the
following judgments:
Arif Azim Company Limited v. Aptech Limited,
reported in 2024(5) SCC 313; and M/s D.P.
Construction v. M/s Vishvaraj
Environment Pvt. Ltd., decided on 06.07.2022 in
Misc. Civil Application (Arbn) No. 31 of 2021.
21. As regards the objection raised by the non-
applicant regarding maintainability of the present
application under Section 11 (6) of the Act, 1996,
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it is to be noted that the requirement of issuing a
notice invoking the arbitration clause applies
where arbitration is sought for the first time. In
the present case, the arbitration clause had
already been invoked, an arbitrator was appointed
pursuant to judicial order, proceedings were
conducted, and an award was passed, which was
subsequently set aside by a competent Court. In
this context Section 21 of the Act reads thus:
"Unless otherwise agreed by the parties, the
arbitral proceedings in respect of a particular
dispute commence on the date on which a request
for that dispute to be referred to arbitration is
received by the respondent."
Therefore, the question of issuing a fresh notice
under Section 21 of the Act does not arise. The
legislative intent behind Section 21 is to mark the
commencement of arbitral proceedings for the
purpose of limitation as well as to provide
procedural clarity. The respondent argues that,
following the setting aside of the arbitral award,
any further proceedings would amount to a fresh
initiation of arbitration, thereby requiring the
applicant to issue a fresh notice invoking
arbitration. Once the award has been set aside,
the logical consequence is revival of the dispute,
and a fresh appointment under Section 11 (6) is
permissible. The objection raised by the non-
applicant is thus without merit.
22. However, it is pertinent to consider whether
the earlie invocation of arbitration which had led
to the constitution of arbitral tribunal and
pronouncement of an award loses its efficacy
entirely upon the award being set aside. Judicial
precedents have indicated that once an award is
set aside under Section 34, the arbitration clause
revives, and the parties are at liberty to reinitiate
arbitration unless barred by limitation or other
legal impediments In NBCC (India) Ltd. v. Zillion
Infraprojects (P) Ltd., 2022 SCC OnLine Del 1774,
the Delhi High Court observed that a fresh notice
under Section 21 may not be necessary in every
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case where the award has been set aside,
particularly where the arbitration clause subsists
and the dispute remains unresolved. That said,
the requirement of a fresh notice may be viewed
differently depending on the facts of the case.
Where the arbitral award is set aside due to
procedural infirmities (e.g., violation of natural
justice or failure to follow the agreed procedure),
and not on merits, some courts have emphasized
the need for re-invocation to ensure compliance
with due process and procedural fairness.
23. A fresh notice may not be required if original
arbitration proceedings were validly initiated. As in
such case the proceedings already initiated and
original arbitration can be recommenced.
24. The Court has to consider if initial procedural
failure (which let to the award being set aside)
was due to lack of proper notice to other side
under Section 34(2) (a) (ii). Thus in case if the
setting be critical for new arbitrator. aside was a
direct result of lack of notice, then a fresh notice
would
25. A pragmatic approach needs to be adopted.
Arbitration earlier, was duly initiated. The non-
applicant took part in arbitration proceedings.
Award was set aside on the ground other than
legality and/or requirement of notice. Therefore,
asking the applicant to issue fresh notice in the
facts and circumstances of the case, would defeat
the purpose of the Act, which is to avoid
unnecessary delays and swift disposal of arbitrable
disputes.
26. The decisions cited by the non-applicant,
including Arif Azim Co. Ltd. v. Aptech Ltd., 2024
(5) SCC 313, are distinguishable on facts. Those
decisions deal with pre-reference procedural non-
compliance, whereas the present case pertains to
a post-award situation where the award has
already been annulled by the competent court.
In view of the above discussion, this Court is of
the opinion that the applicant is entitled to seek a
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fresh reference of the dispute to arbitration under
Section 11 (6) of the Act, 1996. The prior arbitral
award having been set aside, the arbitration
clause stands revived, and a fresh appointment is
necessary to adjudicate the dispute afresh on
merits, without issuance of fresh notice for
appointment of Arbitrator."
8.6. By relying on Mohan Murali's case, his
submission is that once an arbitral award is set
aside, the issuance of a notice under Section 21
of the A&C Act would be required only when the
Arbitrator is sought to be appointed for the first
time. Once an award is set aside, there would
be no requirement to issue a fresh notice under
Section 21 of the A&C Act. An appointment
could be made under Sub-Section (6) of
Section 11 of the A&C Act by this Court without
the requirement of a prior notice.
8.7. He relies upon the decision of the Hon'ble
Bombay High Court in Kirloskar Pneumatic
Company Ltd., Vs. Kataria Sales
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Corporation3, more particularly, paras 7 to 15
thereof, which are reproduced hereunder for
easy reference:
"7. I have heard learned counsel Mr. Sunny Shah
for the petitioner, who would justify the prayer in
the petition and seek appointment of the Sole
Arbitrator in the background facts. He is opposed
in his submission by Adv. Dormaan Dalal
representing Kataria Sales, who would raise a
preliminary objection about the maintainability of
the petition and according to Mr. Dalal it being
'pre-mature' since the petition is filed under
Section 11 (6) without first invoking the
arbitration clause under Section 21.
According to him, the dispute commences only
from the date on which the request for arbitration
is received by the other side, unless otherwise
agreed between the parties. According to him,
the arbitration clause do not contemplate 're-
invocation of arbitration' and it is the submission
of Mr. Dalal that without invocation, the
proceedings under Section 11(6) are not
maintainable.
Highlighting the scheme of the enactment, the
submission is by now It is a fairly settled position
of law that the cause for filing an application
under Section 11, would arise upon the failure to
make the appointment of arbitrator within period
of 30 days from issuance of the notice by
invoking arbitration. He would invoke the
relevant observation of the Apex Court in case of
BSNL v. Nortel Networks (India) Private Limited,
3
2024 SCC Online Bom 941
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(2021) 5 SCC 738 and in particular the following
observation:
"An application under Section 11 can be filed only
after a notice of arbitration in respect of the
particular claim(s)/dispute(s) to be referred to
arbitration [as contemplated by Section 21 of the
Act] is made, and there is failure to make the
appointment."
He would also place reliance upon decision of the
learned Single Judge of this Court in case of
Associated Constructions v. Mormugoa Port Trust,
(2010) 5 Mah 739 and another decision in case of
Wadhwa Group Holdings Pvt. Ltd. v. Homi
Pheroze Ghandhy (CARBAP No. 414 of 2019)
dated 7/03/2022, to buttress his submission that
when there is no invocation, the appointment of
the arbitrator cannot be sustained.
Another decision delivered by me in case of RJ
Shah and Co. Ltd. v. State of Maharashtra
(CARBAP NO. 13 of 2021 is also relied upon by
Mr. Dalal.
8. In order to dispel the said contention, I must
first turn my attention to the Scheme of the Act
of 1996 and the procedure for appointment of
Arbitrator (s).
In light of an existing 'arbitration agreement'
between the parties as contemplated under
Section 7 of the Act, the parties are free to agree
on a procedure for appointing the Arbitrator or
Arbitrators.
This provision is however subjected to sub-
Section (6) of Section 11, which provide for
appointment of an arbitrator by the arbitral
institution designated by the Supreme Court in
case of International Commercial Arbitration or
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by the High Court, in case of Arbitrations other
than the International Commercial Arbitration in
the following scenario:
"(6) Where, under an appointment procedure
agreed upon by the parties,-
(a) A party fails to act as required under that
procedure; or
(b) the parties, or the two appointed arbitrators,
fail to reach an agreement expected of them
under that procedure; or
(c) a person, including an institution, fails to
perform any function entrusted to him or it under
that procedure,"
9. Chapter-III of the Arbitration and Conciliation
Act, 1996 set out the ground for challenge and
also set out the challenge procedure, once an
arbitrator or arbitrators are appointed.
Chapter-V of the Act relate to the Conduct of
Arbitral proceedings and it includes provisions for
determination of the rules of procedure, the place
of arbitration, language, etc.
In this chapter, Section 21, which in normal
parlance is referred to as 'invocation of
arbitration', though this specific terminology is
not part of the Section is to be found.
For the sake of convenience the Section itself
deserve a reproduction.
"21. Commencement of arbitral proceedings.
Unless otherwise agreed by the parties, the
arbitral proceedings in respect of a particular
dispute commence on the date on which a
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request for that dispute to be referred to
arbitration is received by the respondent."
10. Reading of the Section would clearly indicate
that the arbitral proceedings in respect of a
particular dispute, commence on the date on
which the request for the dispute to be referred
to arbitration is received by the respondent.
In other words, Section 21 has fixed the date of
commencement of the arbitral proceedings,
premised on the arbitration agreement between
the parties and Section 21 provide that the
commencement applicant for referring the
dispute to arbitration. shall be the date on which
the respondent received a request from the
11. The above procedure is normally understood
as 'invocation of arbitration' proceedings le,
triggering of the process, which is accepted
between the parties as a mode for settlement of
the dispute/s that has arisen between the parties,
to an arbitration agreement.
When the above provision is read as it stands, it
shall be applicable to all arbitration proceedings,
unless it is otherwise agreed between the parties.
The moment a request for referring a dispute to
arbitration is received by one party from the
other, it shall mark the commencement of arbitral
proceedings.
12. Upon receipt of such a notice at the end of
the respondent, the applicant has triggered the
arbitral proceedings, but if the party at the other
end fails to act as required i.e. agree to the
appointment of the arbitrator or a panel of
arbitrators as decided between the parties and
set out in the arbitration agreement, which
comply the test of Section 7, or if the parties,
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who have appointed the respective arbitrator fail
to reach a consensus, under the procedure, upon
an application being preferred under sub-Section
(6) of Section 11, the arbitrator/s shall be
appointed to take the process of arbitration
ahead.
Once an arbitral tribunal is constituted in this
manner, follows the regime of arbitration, which
is set out in chapter-V by filing of statement of
claim and defence, hearing, appointment of an
expert etc. and this proceeding would culminate
on declaration of an award by the arbitrator
under Section 31
13. The argument of Mr. Dalal, will have to be
appreciated in the aforesaid statutory scheme, as
it is his contention that when an unilateral
appointment of an arbitrator was frowned upon
and resultantly, the award passed by such an
arbitrator, who was de jure Ineligible to act is set
aside, once again the arbitration, will have to be
invoked by issuing a notice under Section 21.
The above argument on its face is fallacious,
since the petitioner has already forwarded a
request to the respondent for referring the
dispute, that had arisen between them to
arbitration and the arbitral proceedings in
respect of that dispute has commenced. Merely
because use award passed by an ineligible
arbitrator is set aside, is not sufficient enough to
give new contour to the dispute, as the dispute
between the parties still remain the same but
now arbitrate what is sought by the petitioner
arbitrator to the dispute tor to be eligible to act
as such person and his appointment is today, is
appointment of a competent and the petitioner
expect the arbitrator he shall be a neutral and
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independent not in teeth of Section 12 of the Act
of 1996 or schedule V and VII of the Act.
14. Dispute which in colloquial language is
understood as a disagreement between two parties
is often referred to as altercation, squabble,
bickering etc. As per Cambridge dictionary the
word dispute is defined as 'an argument or
disagreement, especially an official one between
e.g. workers and employers or two countries with a
common border'
The disagreement between the parties before me
arose long back, when the respondent refused to
pay the amounts due under the invoices and
made only part payment.
This constrained the petitioner to invoke
arbitration, and it must be clarified that when it is
said that it invoked arbitration, what it did was it
forwarded a notice to respondent apprising it
about the amount due and payable under the
Dealership Agreement between the parties, with
respective obligations cast on each of them and
which contained the clause, providing that any
dispute that would arise between the parties shall
be referred to and settled through Arbitration.
The only problem arose, is the appointment of an
Arbitrator was unilaterally made by the petitioner
and as such it was capable, of casting a doubt on
the independence and impartiality of the
arbitrator and hence not permissible in law.
Though the Sole Arbitrator unilaterally appointed
continued with the proceedings and even
declared an award dated 23/11/2023, it is set
aside on 7/01/2023, by the competent Court on
this very ground.
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15. In the sequence of events mentioned above,
when the arbitration mechanism is already
triggered and the proceedings have commenced
upon the issuance of the notice by the petitioner
to the respondent on 30/10/2018, and therefore
when the petitioner now seek appointment of an
independent and impartial arbitrator, through the
mechanism of sub-Section (6) of Section 11, I do
not deem it necessary that it should be preceded
by a fresh notice under Section 21, though the
respondent preferred to call it as 'Invocation
notice', as the arbitration proceedings are already
commenced and the respondent is aware about
the existence of a dispute and also of the fact,
that this dispute in terms of the agreement
between the parties deserve to be resolved
through an independent arbitrator.
For the above, the submission of Mr. Dalal do not
deserve any consideration and is rejected."
8.8. By relying on Kataria Sales Corporation's
case, his submission is that in terms of the
scheme of appointment of an Arbitrator under
the A&C Act, invocation of the arbitration clause
is only required to be made on the first
occasion. Once an arbitrator has passed an
award, the same is set aside by the competent
Court, requiring the parties to reagitate the
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matter before an Arbitrator and a fresh notice
under Section 21 of the A&C Act is not
required.
8.9. As regards the objections raised by the
Respondents in their objections that an award
having earlier been rendered, the claim of the
Petitioner is barred by the principles of res
judicata. His submission is that the Section 34
Court having categorically opined that it does
not have the power to vary the arbitral award
and it is only the arbitral Tribunal which can do
so, the aspect of res judicata would not apply in
the given facts in support of this contention.
8.10. He relies upon the decision of the Hon'able
Apex Court in Bharat Sanchar Nigam
Limited and Another Vs. Nortel Networks
India Private Limited4, more particularly,
4
2021 (5) SCC 738
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paras 29 to 34 and 45 to 47 thereof, which are
reproduced hereunder for easy reference:
"29. The 1996 Act was amended by the
Arbitration and Conciliation (Amendment) Act,
2015 which came into force with effect from 23-
10-2015. The said Amendment was based on the
recommendations of the 246th Report of the Law
Commission of India. The 2015 Amendment Act
made three significant changes:
29.1. It replaced the Chief Justice of the High
Court as the appointing authority for exercising
the default power of appointment in the case of
domestic arbitrations, by the High Court
concerned; and, in respect of international
commercial arbitrations, the default power would
be exercised by the Supreme Court, in place of
the Chief Justice of India.
29.2. It inserted sub-Sections (6-A) and (6-B) in
Section 11, which reads as:
"11. Appointment of arbitrators.-(1)-(6)
(6-A) The Supreme Court or, as the case may be,
the High Court, while considering any application
under sub-Section (4) or sub-Section (5) or sub-
Section (6), shall, notwithstanding any judgment,
decree or order of any Court, confine to the
examination of the existence of an arbitration
agreement.
(6-B) The designation of any person or institution
by the Supreme Court, or, as the case may be,
the High Court, for the purposes of this Section
shall not be regarded as a delegation of judicial
power by the Supreme Court or the High Court."
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Sub-Section (6-A) by a non-obstante clause
provided that notwithstanding any judgment,
decree or order of any court, the scope of
examination at the Section 11 stage, would be
confined to the existence of the arbitration
agreement. The effect of the amendment was that
if the existence of the arbitration agreement was
not in dispute, all other issues would be left for of
kompetenz-kompetenz, which empowers the
tribunal to rule on its own the Arbitral Tribunal to
decide. This was in reinforcement of the doctrine
jurisdiction, including any objections with respect
to the validity of the arbitration agreement; and
thereby minimise judicial intervention at the pre-
reference stage.
29.3. Sub-Section (6-B) was inserted to provide
that the designation of any person or institution,
by either the Supreme Court or the High Court, as
the b appointing authority under Section 11.
would not be regarded as a delegation of judicial
power.
30. The amendments to Section 11 were brought
in to legislatively overrule Construction22, etc.,
which had enlarged the scope of power of the
appointing the line of judgments including SBP &
Co. 20 Boghara Polyfab21 Master authority to
decide various issues at the pre-reference stage.
31. Sub-Section (6-A) came up for consideration
in Duro Felguera, S.A.V. at the appointment
stage. In an under Section 11, the Court should
only look into the existence of the arbitration
agreement, before making the reference. Post the
2015 Amendment, all that the courts are required
to examine is whether an arbitration agreement is
in existence nothing more, nothing less: (SCC PP.
759 & 765, paras 48 & 59)
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"48. Section 11(6-A) added by the 2015
Amendment, reads as follows:
11. (6-A) The Supreme Court or, as the case may
be, the High Court, while considering any
application under sub-Section (4) or sub-Section
(5) or sub-Section (6), shall, notwithstanding any
judgment, decree or order of any court, confine to
the examination of the existence of an arbitration
agreement.
From a reading of Section 11(6-A), the intention
of the legislature is crystal clear i.e. the court
should and need only look into one aspect-the
existence of an arbitration agreement. What are
the factors for deciding as to whether there is an
arbitration agreement is the next question. The
resolution to that is simple-it needs to be seen if
the agreement contains a clause which provides
for arbitration pertaining to the disputes which
have arisen between the parties to the
agreement.
59. The scope of the power under Section 11(6) of
the 1996 Act was considerably wide in view of the
decisions in SBP & Co.20 and Boghara Polyfab21.
This position continued till the amendment
brought about in 2015. After the amendment, all
that the courts need to see is whether an
arbitration agreement exists-nothing more,
nothing less. The legislative policy and purpose is
essentially to minimise the Court's intervention at
the stage of appointing the arbitrator and this
intention as incorporated in Section 11(6-A) ought
to be respected." (emphasis in original and
supplied)
32. In Mayavati Trading (P) Ltd. v. Pradyuat Deb
Burman 24, a three-Judge Bench held that the
scope of power of the Court under Section 11(6-A)
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had to be construed in the narrow sense. In para
10, it was opined as under: (SCC pp. 724-25)
"10. This being the position, it is clear that the law
prior to the 2015 Amendment that has been laid
down by this Court, which would have included
going into whether accord and satisfaction has
taken place, has now been legislatively overruled.
This being the position. it is difficult to agree with
the reasoning contained in the aforesaid
judgment25, as Section 11(6-A) is confined to the
examination of the existence of an arbitration
agreement and is to be understood in the narrow
sense as has been laid down in the judgment in
Duro Felguera, S.A.23"
(emphasis in original)
33. In Uttarakhand Purv Sainik Kalyan Nigam Ltd.
v. Northern Coal Field Ltd. 26, this Court took
note of the recommendations of the Law
Commission in its 246th Report, the relevant
extract of which reads as: (SCC p. 460, para 7)
"7.6. The Law Commission in the 246th Report27
recommended that:
33. the Commission has recommended
amendments to Sections 8 and 11 of the
Arbitration and Conciliation Act, 1996. The scope
of the judicial intervention is only restricted to
situations where the court/judicial authority finds
that the arbitration agreement does not exist or is
null and void. Insofar as the nature of intervention
is concerned, it is recommended that in the event
the court/judicial authority is prima facie satisfied
against the argument challenging the arbitration
agreement, it shall appoint the arbitrator and/or
refer the parties to arbitration, as the case may
be. The amendment envisages that the judicial
authority shall not refer the parties to arbitration
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only if it finds that there does not exist an
arbitration agreement or that it is null and void. If
the judicial authority is of the opinion that prima
facie the arbitration agreement exists, then it shall
refer the dispute to arbitration, and leave the
existence of the arbitration agreement to be
finally determined by the Arbitral Tribunal.'
(emphasis in original)
34. In view of the legislative mandate contained
in the amended kompetenz principle. The doctrine
of kompetenz-kompetenz implies that the be
decided by the arbitrator under Section 16, which
enshrines the kompetenz-Arbitral Tribunal is
empowered, and has the competence to rule on
its own intended to minimise judicial intervention
at the pre-reference stage, so that the
jurisdiction, including determination of all
jurisdictional issues. This was arbitral process is
not thwarted at the threshold when a preliminary
objection is raised by the parties.
45. In a recent judgment delivered by a three-
Judge Bench in Vidya Drolia v. Durga Trading
Corpn. 31, on the scope of power under Sections
8 and 11, it has been held that the Court must
undertake a primary first review to weed out
"manifestly ex facie non-existent and invalid
arbitration agreements, or non-arbitrable
disputes". The prima facie review at the reference
stage is to cut the deadwood, where dismissal is
barefaced and pellucid, and when on the facts and
law, the litigation must stop at the first stage.
Only when the Court is certain that no valid
arbitration agreement exists, or that the subject-
matter is not arbitrable, that reference may be
refused.
45.1. In para 144, the Court observed that the
judgment in Mayavati Trading 24 had rightly held
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that the judgment in Patel Engg. 20 had been
legislatively overruled. Para 144 reads as: (Vidya
Drolia case31, SCC pp. 114-15)
"144. As observed earlier, Patel Engg. Ltd.20
explains and holds that Sections 8 and 11 are
complementary in nature as both relate to
reference to arbitration. Section 8 applies when
judicial proceeding is pending and an application is
filed for stay of judicial proceeding and for
reference to arbitration. Amendments to Section 8
vide Act 3 of 2016 have not been omitted. Section
11 covers the situation where the parties
approach a court for appointment of an arbitrator.
Mayavati Trading (P) Ltd.24, in our humble
opinion, rightly holds that Patel Engg. Ltd.20 has
been legislatively overruled and hence would not
apply even post omission of sub-Section (6-A) to
Section 11 of the Arbitration Act. Mayavati Trading
(P) Ltd.24 has elaborated upon the object and
purposes and history of the amendment to Section
11, with reference to sub-Section (6-A) to
elucidate that the Section, as originally enacted,
was facsimile with Article 11 of the e UNCITRAL
Model of law of arbitration on which the
Arbitration Act was drafted and enacted."
(emphasis supplied)
While exercising jurisdiction under Section 11 as
the judicial forum, the court may exercise the
prima facie test to screen and knockdown ex facie
meritless, frivolous, and dishonest litigation.
Limited jurisdiction of the courts would ensure
expeditious and efficient disposal at the referral
stage. At the referral stage, the Court can
interfere "only" when it is "manifest" that the
claims are ex facie time-barred and dead, or there
is no subsisting dispute. Para 148 of the judgment
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reads as follows: (Vidya Drolia case 31, SCC p.
119)
"148. Section 43(1) of the Arbitration Act states
that the Limitation Act, 1963 shall apply to
arbitrations as it applies to court proceedings. g
Sub-Section (2) states that for the purposes of
the Arbitration Act and the Limitation Act,
arbitration shall be deemed to have commenced
on the date referred to in Section 21. Limitation
law is procedural and normally disputes, being
factual, would be for the arbitrator to decide
guided by the facts found and the law applicable.
The court at the referral stage the position in case
of disputed "no-claim certificate" or defence on
the ples be referred to the Arbitral Tribunal for
decision on merits. Similar would be barred and
dead or there is no subsisting dispute. All other
cases should of novation and "accord and
satisfaction". As observed in Premium Nafta
transactions inter se would knowingly create a
system which would require Products Ltd. 32, it is
not to be expected that commercial men while
entering or avoided or rescinded, as the case may
be, and then if the contract is held that the court
should first decide whether the contract should be
rectified to be valid, it would require the arbitrator
to resolve the issues that have arisen."
(emphasis supplied)
45.2. In para 154.4, it has been concluded that:
(Vidya Drolia case31, SCO p . 121)
"154.4. Rarely as a demurrer the court may
interfere at Sections 8 agreement is non-existent.
invalid or the disputes are non-arbitrable. though
the nature and facet of non-arbitrability would, to
some extent, or 11 stage when it is manifestly
and ex facie certain that the arbitration determine
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the level and nature of judicial scrutiny. The
restricted and limited review is to check and
protect parties from being forced to arbitrate
when the matter is demonstrably "non-arbitrable"
and to cut off the relating to non-arbitrability are
plainly arguable; when consideration in deadwood.
The court by default would refer the matter when
contentions summary proceedings would be
insufficient and inconclusive: when facts are
contested; when the party opposing arbitration
adopts delaying tactics are impairs conduct of
arbitration proceedings. This is not the stage for
the court to enter into a mini trial or elaborate
review so as to usurp the jurisdiction of the
Arbitral Tribunal but to affirm and uphold integrity
and efficacy of arbitration as an alternative
dispute resolution mechanism."
(emphasis supplied)
45.3. In para 244.4 it was concluded that: (Vidya
Drolia case 31, SCC p. 162)
"244.4. The court should refer a matter if the
validity of the arbitration agreement cannot be
determined on a prima facie basis, as laid down
above i.e. "when in doubt, do refer".
(emphasis supplied)
46. The upshot of the judgment in Vidya Drolia³¹
is affirmation of the position of law expounded in
Duro Felguera 23 and Mayavati Trading 24, which
continue to hold the field. It must be understood
clearly that Vidya Drolia³¹ has not resurrected the
pre-amendment position on the scope of power as
held in SBP & Co. v. Patel Engg. Ltd. 20
47. It is only in the very limited category of cases,
where there is not even a vestige of doubt that
the claim is ex facie time-barred, or that the
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dispute is non-arbitrable, that the court may
decline to make the reference. However, if there is
even the slightest doubt, the rule is to refer the
disputes to arbitration, otherwise it would
encroach upon what is essentially a matter to be
determined by the tribunal."
8.11. As regards the other objection raised by the
Respondent that the period of limitation has
expired inasmuch as the first cause of action
having expired, a fresh arbitration cannot be
initiated, Article 137 of the Limitation Act,
1963, (hereinafter referred to as 'the Limitation
Act' for short) being applicable.
8.12. His submission again is that the second
reference to arbitration would not be barred
under Article 137 of the Limitation Act and the
limitation period of three years would not be
applicable. In this regard he relies upon the
decision of the Hon'ble Apex Court in Bharat
Sanchar Nigam Limited and Another Vs.
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Nortel Networks India Private Limited5,
more particularly, paras 14 to 19 thereof, which
are reproduced hereunder for easy reference:
"14. Since none of the Articles in the Schedule to the
Limitation Act, 1963 provide a time period for filing
an application for appointment of an arbitrator under
Section 11, it would be covered by the residual
provision Article 137 of the Limitation Act, 1963.
Article 137 of the Limitation Act, 1963 provides:
"THIRD DIVISION -- APPLICATIONS
Description of application Period of Time from which
limitation period begins to
run
137. Any other application for Three When the right to
which no period of years apply accrues."
limitation is provided
elsewhere in this Division.
15. It is now fairly well-settled that the limitation for filing
an application under Section 11 would arise upon the
failure to make the appointment of the arbitrator within a
period of 30 days from issuance of the notice invoking
arbitration. In other words, an application under Section
11 can be filed only after a notice of arbitration in respect
of the particular claim(s)/dispute(s) to be referred to
arbitration [as contemplated by Section 21 of the Act] is
made, and there is failure to make the appointment.
16. The period of limitation for filing a petition seeking
appointment of an arbitrator(s) cannot be confused or
5
(2021) 5 SCC 738
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conflated with the period of limitation applicable to the
substantive claims made in the underlying commercial
contract. The period of limitation for such claims is
prescribed under various Articles of the Limitation Act,
1963. The limitation for deciding the underlying
substantive disputes is necessarily distinct from that of
filing an application for appointment of an arbitrator. This
position was recognised even under Section 20 of the
Arbitration Act, 1940. Reference may be made to the
judgment of this Court in J.C. Budhraja v. Orissa Mining
Corpn. Ltd. [J.C. Budhraja v. Orissa Mining Corpn. Ltd.,
(2008) 2 SCC 444 : (2008) 1 SCC (Civ) 582] wherein it
was held that Section 37(3) of the 1940 Act provides that
for the purpose of the Limitation Act, an arbitration is
deemed to have commenced when one party to the
arbitration agreement serves on the other party, a notice
requiring the appointment of an arbitrator. Para 26 of this
judgment reads as follows : (SCC p. 460)
"26. Section 37(3) of the Act provides that for the
purpose of the Limitation Act, an arbitration is deemed to
have been commenced when one party to the arbitration
agreement serves on the other party thereto, a notice
requiring the appointment of an arbitrator. Such a notice
having been served on 4-6-1980, it has to be seen
whether the claims were in time as on that date. If the
claims were barred on 4-6-1980, it follows that the claims
had to be rejected by the arbitrator on the ground that
the claims were barred by limitation. The said period has
nothing to do with the period of limitation for filing a
petition under Section 8(2) of the Act. Insofar as a
petition under Section 8(2) is concerned, the cause of
action would arise when the other party fails to comply
with the notice invoking arbitration. Therefore, the period
of limitation for filing a petition under Section 8(2)
seeking appointment of an arbitrator cannot be confused
with the period of limitation for making a claim. The
decisions of this Court in Inder Singh Rekhi v. DDA [Inder
Singh Rekhi v. DDA, (1988) 2 SCC 338] , Panchu Gopal
Bose v. Port of Calcutta [Panchu Gopal Bose v. Port of
Calcutta, (1993) 4 SCC 338] and Utkal Commercial
Corpn. v. Central Coal Fields Ltd. [Utkal Commercial
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Corpn. v. Central Coal Fields Ltd., (1999) 2 SCC 571] also
make this position clear."
17. Various High Courts have taken the view that Article
137 of the Limitation Act would be applicable to an
application under Section 11 of the Arbitration Act.
17.1. The question of the applicability of Article 137 to
applications under Section 11 of the 1996 Act came up for
consideration before the Bombay High Court in Leaf
Biotech (P) Ltd. v. Municipal Corpn., Nashik [Leaf Biotech
(P) Ltd. v. Municipal Corpn., Nashik, 2010 SCC OnLine
Bom 1363 : (2010) 6 Mah LJ 316] wherein it was held
that the period of limitation for an application under
Section 11 would be governed by Article 137 of the
Limitation Act.
17.2. Subsequently, in Deepdharshan Builders (P) Ltd. v.
Saroj [Deepdharshan Builders (P) Ltd. v. Saroj, 2018 SCC
OnLine Bom 4885 : (2019) 1 AIR Bom R 249] the Bombay
High Court framed the following issue : (SCC OnLine Bom
para 38)
"38. ... (ii) Whether Article 137 of the Schedule to the
Limitation Act, 1963 would apply to the arbitration
application filed under Section 11(6) of the Arbitration Act
and if applies whether Section 5 of the Limitation Act,
1963 would be applicable to this arbitration application
and if Section 5 applies to this arbitration application,
whether the applicant has made out a sufficient cause for
condonation of delay in filing this arbitration application?"
The Bombay High Court held that : [Deepdharshan
Builders (P) Ltd. case [Deepdharshan Builders (P) Ltd. v.
Saroj, 2018 SCC OnLine Bom 4885 : (2019) 1 AIR Bom R
249] , SCC OnLine Bom paras 42 & 46-48]
"42. In my view, since the proceedings under Section
11(6) of the Arbitration Act are required to be filed before
the High Court, Article 137 of the Schedule to the
Limitation Act, 1963 would apply to such application filed
under Section 11(6) of the Arbitration Act. In my view,
since Article 137 of the Schedule to the Limitation Act,
1963 would apply to the arbitration application under
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Section 11(6) of the Arbitration Act, Section 5 of the
Limitation Act, 1963 would also apply to the arbitration
application filed under Section 11(6) of the Arbitration
Act.
***
46. It is not in dispute that under Section 20 of the
Arbitration Act, 1940, an application was required for
taking the arbitration agreement on record and for
appointment of an arbitrator in accordance with the
arbitration agreement before a court. Since the said
proceedings under Section 20 were required to be filed
before an appropriate court, the provisions of Article 137
of the Limitation Act, 1963 were applicable to such
proceedings filed before such appropriate court. In my
view, since the proceedings under Section 11(6) or
Section 11(9) of the Arbitration Act for seeking
appointment of Arbitral Tribunal are also now required to
be filed before the High Court or the Hon'ble Supreme
Court, as the case may be. Article 137 of the Schedule to
the Limitation Act, 1963 would apply. It is not in dispute
that no other Article of Schedule to the Limitation Act,
1963 provides for any other period of limitation for filing
an arbitration application filed under Section 11(6) or
Section 11(9) of the Arbitration Act respectively.
47. It is not in dispute that Article 137 of the Schedule to
the Limitation Act, 1963, such application has to be filed
within three years from the date when the right to apply
accrues. In my view, under Article 137 of the Limitation
Act, 1963, application for appointment of an arbitrator
under Section 11(6) or Section 11(9) of the Arbitration
Act before the High Court or the Hon'ble Supreme Court
would apply from the date when a notice invoking an
arbitration agreement is received by other side and other
side refuses to the name suggested by the opponent or
refusing to suggest any other name in accordance with
the provisions of Section 11 or the agreed procedure
prescribed in the arbitration agreement within the time
contemplated therein or specifically refuses to appoint any
arbitrator in the event of such other party being an
appointing authority.
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48. In my view, the limitation prescribed under Article
137 of the Schedule to the Limitation Act, 1963 which
applies to an application under Section 11(6) or Section
11(9) of the Arbitration Act filed before the High Court or
before the Hon'ble Supreme Court cannot be mixed up
with the period of limitation applicable to the claims
prescribed in various other Articles of the Schedule to the
Limitation Act, 1963. Both these periods of limitation i.e.
one applicable to the claims being made and another
being applicable to the application under Section 11(6) or
Section 11(9) of the Arbitration Act to which Article 137 of
the Schedule to the Limitation Act, 1963 applies, are two
different periods of limitation and cannot be made
applicable to each other."
(emphasis supplied)
The special leave petition [SLP (C) No. 305 of 2019]
against the said judgment was dismissed vide order dated
16-1-2019 [Saroj v. Deeparshan Builders (P) Ltd., 2019
SCC OnLine SC 1996] .
18. Other decisions of the High Courts on the applicability
of Article 137 are Prasar Bharti v. MAA Communication
[Prasar Bharti v. MAA Communication, 2010 SCC OnLine
Del 526 : (2010) 115 DRJ 438] and Golden Chariot
Recreations (P) Ltd. v. Mukesh Panika [Golden Chariot
Recreations (P) Ltd. v. Mukesh Panika, 2018 SCC OnLine
Del 10050, SLP (C) Diary No. 40627 of 2018 against this
decision was dismissed on 31-1-2019 [Golden Chariot
Recreations (P) Ltd. v. Mukesh Panika, 2019 SCC OnLine
SC 1997]] passed by the Delhi High Court. The SLP filed
in Golden Chariot was dismissed vide order dated 31-1-
2019 in Golden Chariot Recreations (P) Ltd. v. Mukesh
Panika [Golden Chariot Recreations (P) Ltd. v. Mukesh
Panika, 2019 SCC OnLine SC 1997] .
19. The reasoning in all these judgments seems to be
that since an application under Section 11 is to be filed in
a court of law, and since no specific Article of the
Limitation Act, 1963 applies, the residual Article would
become applicable. The effect being that the period of
limitation to file an application under Section 11 is 3 years
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from the date of refusal to appoint the arbitrator, or on
expiry of 30 days, whichever is earlier."
8.13. By relying on Nortel Networks' case, his
submission is that once an award which had
been passed has been set aside, the parties
would be returned to their original litigating
positions and as such, the parties can reagitate
the matter before an Arbitrator.
8.14. He draws a distinction between the scope of
Section 34 of the A&C Act and an appeal filed
as against a regular civil decree. In this regard,
he relies upon the decision of the Division
Bench of the Hon'ble Delhi High Court in State
Trading Corporation of India Ltd. Vs.
Toepfer International Asia Pte Ltd6., para 7
to 9, 11, 12, 17 and 18, which are reproduced
here under for easy reference:
6
2014 SCC OnLine Del 3426/(2014) 144 DRJ 220 (DB)
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"7. Arbitration is intended to be a faster and less
expensive alternative to the courts. If this is one's
motivation and expectation, then the finality of the
arbitral award is very important. The remedy provided
in Section 34 against an arbitral award is in no sense
an appeal. The legislative intent in Section 34 was to
make the result of the annulment procedure prescribed
therein potentially different from that in an appeal. In
appeal, the decision under review not only may be
confirmed, but may also be modified. In annulment, on
the other hand, the decision under review may either
be invalidated in whole or in part or be left to stand if
the plea for annulment is rejected. Annulment operates
to negate a decision, in whole or in part, thereby
depriving the portion negated of legal force and
returning the parties, as to that portion, to their
original litigating positions. Annulment can void, while
appeal can modify. Section 34 is found to provide for
annulment only on the grounds affecting legitimacy of
the process of decision as distinct from substantive
correctness of the contents of the decision. A remedy
of appeal focuses upon both legitimacy of the process
of decision and the substantive correctness of the
decision. Annulment, in the case of arbitration focuses
not on the correctness of decision but rather more
narrowly considers whether, regardless of errors in
application of law or determination of facts, the
decision resulted from a legitimate process.
8. In the case of arbitration, the parties through their
agreement create an entirely different situation
because regardless of how complex or simple a dispute
resolution mechanism they create, they almost always
agree that the resultant award will be final and binding
upon them. In other words, regardless of whether
there are errors of application of law or ascertainment
of fact, the parties agree that the award will be
regarded as substantively correct. Yet, although the
content of the award is thus final, parties may still
challenge the legitimacy of the decision-making process
leading to the award. In essence, parties are always
free to argue that they are not bound by a given
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"award" because what was labeled an award is the
result of an illegitimate process of decision.
9. This is the core of the notion of annulment in
arbitration. In a sense, annulment is all that doctrinally
survives the parties' agreement to regard the award as
final and binding. Given the agreement of the parties,
annulment requires a challenge to the legitimacy of the
process of decision, rather than the substantive
correctness of the award.
11. Arbitration under the 1940 Act could not achieve
the savings in time and money for which it was enacted
and had merely become a first step in lengthy
litigation. Reference in this regard can be made to para
35 of Bharat Aluminium Company v. Kaiser Aluminium
Technical Services Inc. (2012) 9 SCC 552. It was to get
over the said malady that the law was sought to be
overhauled. While under the old Act, the award was
unenforceable till made rule of the court and for which
it had to pass various tests as laid down therein and
general power/authority was vested in the court to
modify the award, all this was removed in the new Act.
The new Act not only made the award executable as a
decree after the time for preferring objection with
respect thereto had expired and without requiring it to
be necessarily made rule of the court but also did away
with condonation of delay in filing the said objections.
The reason/purpose being expediency. The grounds on
which the objections could be filed are also such which
if made out, the only consequence thereof could be
setting aside of the award. It is for this reason that
under new Act there is no power to the court to modify
the award or to remit the award etc. as under the old
Act. A perusal of the various grounds enunciated in
Section 34 will show that the same are procedural in
nature i.e., concerning legitimacy of the process of
decision. While doing so, the ground, of the award
being in conflict with Public Policy of India, was also
incorporated. However the juxtaposition of Section
34(2)(b)(ii) shows that the reference to 'Public Policy'
is also in relation to fraud or corruption in the making
of the award. The new Act was being understood so
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[see Konkan Railway Corporation Ltd. v. Mehul
Construction Co. (2000) 7 SCC 201 (para 4 and which
has not been set aside in S.B.P. & Co. v. Patel
Engineering Ltd. (2005) 8 SCC 618)] till the Supreme
Court in Saw Pipes Ltd. (supra) held that the phrase
'Public Policy of India' is required to be given wider
meaning and if the award on the face of it is patently in
violation of statutory provisions, it cannot be said to be
in public interest and such award/judgment/decision is
likely to adversely affect the administration of justice.
In para 37 of the judgment it was held that award
could be set aside if it is contrary to fundamental policy
of Indian Law or the interest of India or justice or
morality or if it is patently illegal. A rider was however
put that illegality must go to the root of the matter and
if the illegality is of trivial nature it cannot be held that
the award is against the public policy. Yet another test
laid down is of the award being so unfair and
unreasonable that it shakes the conscience of the
court.
12. The courts have thereafter been inundated with
challenges to the award. The objections to the award
are drafted like appeals to the courts; grounds are
urged to show each and every finding of the arbitrator
to be either contrary to the record or to the law and
thus pleaded to be against the Public Policy of India. As
aforesaid, the courts are vested with a difficult task of
simultaneously dealing with such objections under two
diverse provisions and which has led to the courts in
some instances dealing with awards under the new Act
on the parameters under the old Act.
17. The Supreme Court in Rashtriya Ispat Nigam Ltd.
v. Dewan Chand Ram Saran (2012) 5 SCC 306 refused
to set aside an arbitral award, under the 1996 Act on
the ground that the view taken by the Arbitral Tribunal
was against the terms of the contract and held that it
could not be said that the Arbitral Tribunal had
travelled outside its jurisdiction and the Court could not
substitute its view in place of the interpretation
accepted by the Arbitral Tribunal. It was reiterated that
the Arbitral Tribunal is legitimately entitled to take the
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view which it holds to be correct one after considering
the material before it and after interpreting the
provisions of the Agreement and if the Arbitral Tribunal
does so, its decision has to be accepted as final and
binding. Reliance in this regard was placed on
Sumitomo Heavy Industries Ltd. v. ONGC Ltd. (2010)
11 SCC 296 and on Kwality MFG. Corporation v. Central
Warehousing Corporation (2009) 5 SCC 142. Similarly,
in P.R. Shah, Shares & Stock Broker (P) Ltd. V. B.H.H.
Securities (P) Ltd. (2012) 1 SCC 594 it was held that a
Court does not sit in appeal over the award of an
Arbitral Tribunal by reassessing or reappreciating
evidence and an award can be challenged only under
the grounds mentioned in Section 34(2) and in the
absence of any such ground it is not possible to
reexamine the facts to find out whether a different
decision can be arrived at. A Division Bench of this
Court also recently in National Highways Authority of
India v. Lanco Infratech Ltd. MANU/DE/0609/2014 held
that an interpretation placed on the contract is a
matter within the jurisdiction of the Arbitral Tribunal
and even if an error exists, this is an error of fact
within jurisdiction, which cannot be reappreciated by
the Court under Section 34 of the Act. The Supreme
Court in Steel Authority of India Ltd. v. Gupta Brother
Steel Tubes Ltd. (2009) 10 SCC 63 even while dealing
with a challenge to an arbitral award under the 1940
Act reiterated that an error by the Arbitrator relatable
to interpretation of contract is an error within his
jurisdiction and is not an error on the face of the award
and is not amenable to correction by the Courts. It was
further held that the legal position is no more res
integra that the Arbitrator having been made the final
Arbiter of resolution of dispute between the parties, the
award is not open to challenge on the ground that
Arbitrator has reached at a wrong conclusion.
18. If we were to start analyzing the contract between
the parties and interpreting the terms and conditions
thereof and which will necessarily have to be in the
light of the contemporaneous conduct of the parties, it
will be nothing else than sitting in appeal over the
arbitral award and which is not permissible."
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8.15. Lastly, he submits that once an arbitral award
is set aside, the parties are but required to
begin the arbitration once again, since neither
the Section 37 Court nor even the Apex Court,
exercising its jurisdiction in a special leave
petition, can modify the award passed by the
Arbitrator.
8.16. In this regard, he relies upon the decision of
the Hon'ble Delhi High Court in Steel
Authority of India Limited Vs. Indian
Council of Arbitration and Another7, more
particularly, paras 21, 22, 27, 45 to 49 thereof,
which are reproduced hereunder for easy
reference.
"21. Mr. Ganguli, thereafter, submitted that the
principle of res judicata would apply to arbitration
proceedings. He referred to the decision of the Supreme
Court in K.V. George, Secy. To Govt., Water and Power
Deptt. : (1989) 4 SCC 595 in support of his contention
that the principle of res judicata would also apply to the
arbitration proceedings and submitted that the claims
7
2015 SCC OnLine Del 13394/(2015) 225 DLT 348
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made by GE Shipping were barred by principle of res
judicata.
22. Mr. Ganguli next contended that Section 34 of the
Act also contemplated an order whereby the Court
would remand the disputes to the Arbitral Tribunal. He
submitted that in the present case although GE Shipping
had succeeded in its petition under Section 34 of the
Act, the Court had merely set aside the arbitral award
and not remanded the matter. He submitted that since
this decision had become final, therefore, it was not
open for GE Shipping to re-agitate the said issue. He
referred to the decision of a Division Bench of this Court
in National Highways Authority of India v. ITD
Cementation India Ltd. : (2007) 4 Arb. LR 555 (Delhi)
whereby a Division Bench of this Court had remitted the
disputes to the arbitrator on the issue of quantification
of the amount and further directed that the parties
would be afforded an opportunity to adduce evidence on
the question of quantification of the amount before
making a fresh award. Mr. Ganguli also drew attention
of this Court to another decision of a Division Bench of
this Court in BSNL v. Canara Bank : 169 (2010) DLT
253 (DB) wherein this Court had referred to the decision
in Vindhya Tele Links Ltd. v. Bharat Sanchar Nigam Ltd.
: FAO(OS) 433/2006 whereby this Court had rejected
the contention that the power to remit the disputes to
the arbitrator was foreign to the Act. Mr. Ganguli
contended that once it was established that this Court
had the power to remit the disputes to the arbitrator
under Section 34 of the Act and as the same has not
been done, the disputes could not be re-agitated before
the Arbitral Tribunal.
27. The learned counsel further contended that the
principles of res judicata were not applicable as the
award rejecting the claims made by GE Shipping had
been set aside and, thus, the disputes between the
parties had not been finally adjudicated. The learned
counsel also joined issues on whether the Court had the
power to remit an award under Section 34 of the Act.
He submitted that once the Court has decided to set
aside the award under Section 34 of the Act, it would
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have no power to pass further directions to remand the
matter to the Arbitral Tribunal. He submitted that the
decisions in the case of IVRCL Infrastructures & Projects
Ltd. (supra) and Videsh Sanchar Nigam Ltd. (supra)
could not be considered as authorities for the
proposition that once an award had been set aside, the
arbitration agreement would stand exhausted in respect
of the disputes, which were subject matter of the award.
He submitted that the same would be contrary to the
decision of the Supreme Court in Mcdermott
International Inc. v. Burn Standard Corporation Ltd. :
(2006) 11 SCC 181.
45. In my view, the contention that the arbitration
proceedings initiated by GE Shipping are barred by
principles of res judicata is also flawed. Admittedly, the
award declining the claims of GE Shipping was set aside
by this Court under Section 34 of the Act. The finding of
the Arbitral Tribunal that lay time did not commence till
12th February, 2008 - which was the basis for rejecting
GE Shipping's claims for demurrages and balance freight
- was held by this Court as unsustainable in law. This
Court had also held that the award passed by the
Tribunal was passed on misreading of documents and,
therefore, rejection of GE Shipping's claim could not be
sustained in law. This Court also found that the
Tribunal's finding that vessel in question was not ready
in all respects at the time when the NOR was issued,
was not based on any evidence but on a conjecture and,
thus, suffered from a patent irregularity. In view of the
aforesaid findings, GE Shipping's claims still survived
and could not be stated to have been be finally decided.
In the circumstances, it is difficult to understand as to
how principles of res judicata could possibly apply.
46. The petitioner's contention that since the disputes
had been subject matter of an arbitration award, the
arbitration agreement stood exhausted also cannot be
accepted. An arbitration agreement merely provides for
an alternative forum for resolution of disputes. Thus, all
disputes that the parties agree to resolve by arbitration
are to be resolved by arbitration. Thus, as long as the
disputes that are covered under the arbitration
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agreement remain unresolved, the parties would be free
to take recourse to arbitration for resolution of the said
disputes and the other party would be contractually
bound to submit the disputes to arbitration. Plainly, the
claims made by GE Shipping arise under the Charter
party and thus are covered under clause 57 of the
Charter party, that is, the arbitration agreement.
47. It was also earnestly argued that since this Court
had not remanded the disputes to arbitration while
setting aside the arbitration award under Section 34 of
the Act, de novo arbitration was not permissible. This
contention is also not sustainable in law. The question
whether the Court has the power to remand the
disputes to arbitration under Section 34 of the Act has
been subject matter of several decisions by this Court.
There is apparently, a conflict in the views expressed in
National Highways Authority of India (supra) and
Vindhya Tele Links Ltd. (supra) and in the later
decisions of this court. However, a Division Bench of this
Court Puri Construction Pvt. Ltd. V. Larsen & Toubro Ltd.
: FAO(OS) 23/2009 had noticed several conflicting
decisions with regard to the aforesaid issue and
following the principle laid down by the Supreme Court
in Mcdermott International Inc. (supra) held that "the
power to modify, vary or remit the award does not exist
under Section 34 of the Act". Thus, it is now no longer
open for the petitioner to contend that since this Court
did not remit the award under Section 34 of the Act, the
disputes therein could not be referred to a de novo
arbitration.
48. Notwithstanding the issue whether a Court has the
power to remit the award under Section 34 of the Act,
the fact is that this Court had by a judgment dated 9th
May, 2012 set aside the award rejecting GE Shipping's
claim but had not remitted the matter. Thus the claims
of GE Shipping remained to be finally adjudicated.
Admittedly, the parties had agreed to resolve the
disputes arising out of the Charter Party by arbitration.
Thus, it would not be open for SAIL to avoid resolution
of such disputes through arbitration. At this stage, it is
necessary to refer to the following observations of the
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Supreme Court in Mcdermott International Inc. (supra)
whereby the Supreme Court had held as under : -
"The 1996 Act makes provision for the supervisory role
of courts, for the review of the arbitral award only to
ensure fairness. Intervention of the court is envisaged in
few circumstances only, like, in case of fraud or bias by
the arbitrators, violation of natural justice, etc. The
court cannot correct errors of the arbitrators. It can only
quash the award leaving the parties free to begin the
arbitration again if it is desired. So, scheme of the
provision aims at keeping the supervisory role of the
court at minimum level and this can be justified as
parties to the agreement make a conscious decision to
exclude the court's jurisdiction by opting for arbitration
as they prefer the expediency and finality offered by it."
49. A plain reading of the aforesaid passage also clearly
indicates that once an award has been set aside, the
parties would be free to begin the arbitration once
again. Thus, in my view, the contention that GE
Shipping could not initiate the arbitration after the
decision of this Court under Section 34 of the Act,
cannot be accepted. Mr. Ganguli sought to suggest that
the observation made by Supreme Court in Mcdermott
International Inc. (supra) was a "stray observation" and
was not determinative of the issue at hand. This
contention is also unacceptable. First and foremost, the
observations of the Supreme Court are relevant to the
decision rendered by it; secondly, in Puri Construction
Pvt. Ltd. (supra) a division bench of this Court followed
the principles laid down by the Supreme Court in
Mcdermott International Inc. (supra) while interpreting
the provisions of Section 34 of the Act."
8.17. He relies on the decision of the Hon'ble Bombay
High Court in Associated Constructions Vs.
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Mormugoa Port Trust8, more particularly,
paras 11 to 19 thereof, which are reproduced
hereunder for easy reference:
"11. The question, therefore, is whether in view of the
said award having been set aside, except as to one
claim on grounds other than on merit, the present
application under Section 11 of the said Act is
maintainable.
12. The learned counsel appearing on behalf of the
applicant relied upon following observations of the
Supreme Court in Mc Dermott International Inc. v. Burn
Standard Co. Ltd., JT 2006 (11) SC 376.
"55. The 1996 Act makes provision for the supervisory
role of Courts, for the review of the arbitral award only
to ensure fairness, intervention of the Court is
envisaged in few circumstances only, like, in case of
fraud or bias by the Arbitrators, violation of natural
justice, etc. The Court cannot correct errors of the
Arbitrators. It can only quash the award leaving the
parties free to begin the arbitration again if it is desired.
So scheme of the provision aims at keeping the
supervisory role of the Court at minimum level and this
can be justified as parties to the agreement make a
conscious decision to exclude the Court's jurisdiction by
opting for arbitration as they prefer the expediency and
finality offered by it."
(emphasis supplied)
13. The learned counsel appearing on behalf of the
Applicant also relied upon the following observations in
the said judgment of the Division Bench of this Court in
Appeal No. 981 of 2001 decided on 4th October, 2007 in
the case of Pushpa Mulchandani v. Admiral Radhakishan
Tahliani (Retd.), 2008 (7) LJ SOFT 161:--
8
(2010) 5 Mah LJ 739
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26. It is, thus, clear that if the Court finds that the
award is vitiated because of violation of principles of
natural justice or such other reasons, which cannot be
called as "adjudication" on merits, the Court can set
aside the Award and if the Award is set aside for such
reasons, it is open to the parties to invoke the
arbitration clause again and initiate arbitration
proceedings. In our opinion, in this regard reference can
be made to the provisions of sub-Section (4) of Section
43. They read as under:--
43(4) Where the Court orders that an arbitral award be
set aside, the period between the commencement of the
arbitration and the date of the order of the Court shall
be excluded in computing the time prescribed by the
Limitation Act, 1963 (36 of 1963), for the
commencement of the proceedings (including
arbitration) with respect to the dispute so submitted.
When the award is set aside for the reasons other than
merits, then it is open to the parties to the arbitration
agreement, if arbitration agreement survives, to invoke
the arbitration agreement and to have the matter
referred to arbitration. In other contingencies they can
adopt other remedy that may be available to them and
in that situation, either for adopting any other remedy
or in initiating arbitration, the period spent during the
earlier arbitration is liable to be excluded while
computing the period of limitation."
These observations have not been set aside by the Full
Bench. In fact, this aspect did not fall for consideration
in the reference to the Full Bench.
14. The judgments support the submission on behalf of
the Applicant that a fresh arbitration is permissible at
least in the event of an award being set aside for
reasons other than on merits. In the present case the
entire award except as to one claim, was set aside for
reasons other than on merits. This is clear from the fact
that although the award in respect of only three
items/claims was set aside, the entire award was set
aside. The claims, other than those referred to in the
judgment, were not considered or even referred to. In
any event, as noted earlier, at least the claim in respect
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of a sum of Rs. 1,50,000/- was set aside, not on merits
but on the ground that no reasons were furnished. This
was obviously in view of the Judgments which held that
under the 1996 Act an award cannot be segregated and
therefore even if a part thereof is liable to be set aside
the entire award must be set aside. The Applicants are
therefore entitled to begin the arbitration again.
15. Mr. Shetty then submitted that it is only the Court
setting aside an award that can permit a fresh
arbitration under the same arbitration agreement. He
based his submission upon the observation of the
Supreme Court extracted above: "It can only quash the
award leaving the parties free to begin the arbitration
again if it is desired." He submitted that the term "It"
implies that it is only the Court that sets aside the
award that can leave the parties free to begin the
arbitration again.
16. There is nothing in the judgment of the Supreme
Court that even remotely suggests the same. In fact the
Supreme Court did not consider this aspect. The
Supreme Court has not specified as to the manner in or
the stage at which the parties are free to begin the
arbitration again. Having held that the parties are free
to begin arbitration again there is nothing in the Act, the
judgment or in principle that warrants restricting the
enforcement of this right to any particular stage, point
of time or proceeding.
17. Mr. Shetty also submitted that the observations of
the Supreme Court and the Division Bench of this Court
in the case of Pushpa Mulchandani (supra) indicate that
after an Award is set aside a fresh arbitration can begin
again only with the consent of both the parties.
18. The submission is based on the erroneous
presumption that the exercise of the right to begin the
arbitration again is dependent upon a fresh arbitration
agreement. An arbitration agreement, can be entered
into only with the consent of the parties. Once an
arbitration agreement is entered into it may be invoked
by any of the parties unilaterally. If one of the parties
refuses to abide by the arbitration agreement, the other
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party is entitled to invoke or enforce it under the said
Act. Where an award is set aside as in the above case,
the commencement of the arbitration again is pursuant
to and under the existing arbitration clause. The same is
neither based on nor dependent upon a fresh arbitration
agreement between the parties.
19. It is not necessary to decide whether this Court has
the discretion whether or not to allow the arbitration to
begin again for I am clearly of the view that in the
present case it must be exercised in the Applicants
favour. A rejection of this application would be a
travesty of justice. The entire award has been set aside
only because a part of it was found to be contrary to
law. Thus, even that part of the award which was found
to be sustainable or at least was not held to be
unsustainable is set aside. This as noted above was in
view of the judgments of this Court prior to their being
overruled by the judgment of the Full Bench."
8.18. On the basis of all the above, he submits that
the Petitioner and the Respondents have no
option but to reagitate their claim before the
Arbitrator. Insofar as the Respondent No.1 is
concerned, if the Respondent does not want to
reagitate the counterclaims which have been
filed by the Respondent, which have been
rejected, it is the choice of the Respondent. But
as regards the claims of the Petitioner, the
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Petitioner wishes to agitate all his claims before
an Arbitrator to be appointed by this Court.
9. Sri Prashant Chandra, learned counsel for
Respondent No.2 would, however, submit that:
9.1. The arbitration Clause contemplates a panel of
three Arbitrators; the present petition filed for
the appointment of a sole Arbitrator is not
maintainable.
9.2. The Section 34 petition filed by the Petitioner
having been dismissed. The Petitioner cannot
seek for appointment of a fresh Arbitrator.
9.3. The decision of the Commercial Court in
Commercial A.S.No.159/2018 not having
attained finality. In terms of there being an
appeal provided under Section 37 of the A&C
Act, a fresh application for the appointment of
an Arbitrator under Section 11 of the A&C Act is
not maintainable.
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9.4. His submission is that there is no liberty which
has been reserved in the order passed by the
Commercial Court in Com.A.S.No.159/2018
entitling the Petitioner to appoint an Arbitrator
afresh or to approach this Court for
appointment of an Arbitrator as the principle of
res judicata would apply, requiring this Court to
dismiss the petition as filed.
9.5. His submission is that the termination having
occurred on 28.05.2016, no fresh arbitration
can be initiated. Any claim as regards the said
cause of action is hopelessly barred by
limitation since there is no surviving cause of
action, nor is there a new cause of action which
is arising. The Petitioner has not averred
anywhere in the petition as regards the cause
of action. At the most, this alleged cause of
action can only relate to the termination dated
28.05.2016, which is barred by limitation.
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9.6. The Petitioner has not entered into any
agreement with Respondent No.2 and
Respondent No.2 cannot be made subject to
arbitration proceedings. The arraying of
Respondent No.2 as a party, is completely
misconceived.
9.7. He refers to and relies upon the decision of the
Co-ordinate Bench of this Court in Starlog
Enterprises Limited Vs. Board of Trustees
of New Mangalore Port Trust9, more
particularly, paras 21 and 22 thereof, which are
reproduced hereunder for easy reference:
"21. In light of the findings recorded by the
Court under Section 34 proceedings and
subsequently affirmed by the Hon'ble Apex
Court, the pivotal issue that arises for
determination before this Court is whether the
setting aside of the arbitral award by judgment
and award dated 08.02.2017 permits the
petitioner to invoke the arbitration clause as per
the agreement dated 31.03.2009. This Court
emphatically holds that the answer to this
question is 'No'.
9
CMP.No.372/2023 dated 25.02.2025
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22. The primary relief sought by the petitioner,
which involved challenging the termination of
the contract, was decisively negated by the
Arbitrator while answering Issue No.1. This
adverse finding against the petitioner was not
contested by initiating proceedings under
Section 34 of the Arbitration and Conciliation
Act. Consequently, the Section 34 proceedings
were confined solely to the issue of refund of
the statutory deposit and the amount expended
on the construction of the perimeter wall. These
limited reliefs were also set aside by the Court
under Section 34 proceedings and affirmed by
the Hon'ble Apex Court, leaving no scope for
further arbitration on these matters."
9.8. By relying on Starlog Enterprises' case, his
submission is that the setting aside of the
arbitral award by judgment and award would
not permit the Petitioner to invoke the
Arbitration Clause as per the agreement. An
adverse finding having been given by the
Section 34 Court, the same cannot be
reagitated in the arbitration proceedings and as
such, no Arbitrator could be appointed at the
request of the Petitioner.
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10. Heard Sri K.N.Phanindra, learned Senior Counsel for
the Petitioner and Sri. Prashanth Chandra, learned
counsel for Respondent No.2, Sri Satyanand B.S.,
learned counsel for Respondent No.1 and perused
papers.
11. The points that would arise for consideration are:
1) Whether the Petitioner has any locus to
agitate the lis in the contract entered into
between M/s.Ramky Energy and
Environment Ltd. and Respondent No.1,
more particularly, against Respondent
No.2?
2) Firstly, whether an arbitration notice under
Section 21 of the A&C Act is required to be
issued once an arbitral award is set aside,
and even if so issued, can such a notice be
issued when an award has already been
passed by the sole Arbitrator and
subsequently set aside?
3) On passing an award, the arbitration
proceedings having been terminated in
terms of Section 32 of the A&C Act, could
fresh proceedings be initiated for
arbitration?
4) Whether the present arbitration notice
dated 03.11.2023 can be said to be barred
by the law of limitation?
5) Whether the Petitioner can maintain the
present petition without availing the
remedy under Section 37 of the A&C Act
and, on failure in those proceedings,
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without availing the remedy of filing a
special leave petition before the Hon'ble
Apex Court, the notice dated 03.11.2023 not
having been issued to Respondent No.2
could Respondent No.2 be made a party to
these proceedings and be subjected to
arbitral proceedings?
6) Whether a sole Arbitrator could be
appointed when the Arbitration Clause
contemplates a Panel of three Arbitrators?
7) What order?
12. I answer the above points as under:
13. Answer to Point No.1: Whether the Petitioner has any
locus to agitate the lis in the contract entered into
between M/s.Ramky Energy and Environment Ltd. and
Respondent No.1, more particularly, against Respondent
No.2?
13.1. An objection as to locus standi is raised on
behalf of the Respondents on the ground that
the Petitioner, M/s. Re Sustainability Healthcare
Solutions Limited, is not a signatory to the
original agreement entered into with
Respondent No.1 and, therefore, cannot
maintain the present proceedings.
13.2. The objection is wholly misconceived. The
agreement in question was admittedly executed
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by M/s. Ramky Infrastructure Limited with
Respondent No.1. The record unequivocally
establishes that the said entity subsequently
underwent a change of name--first to M/s.
Ramky Energy and Environment Limited and
thereafter to M/s. Re Sustainability Healthcare
Solutions Limited. This is a case of mere change
of nomenclature and not one of novation,
assignment, or corporate succession by
transfer. The corporate identity of the
contracting party has remained unchanged.
13.3. What is of decisive significance is that
Respondent No.1, in proceedings initiated by it
under Section 34 of the A&C Act, has itself
expressly pleaded and acknowledged that M/s.
Re Sustainability Healthcare Solutions Limited
was formerly known as M/s. Ramky Energy and
Environment Limited and earlier as M/s.Ramky
Infrastructure Limited. Having unequivocally
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recognised the Petitioner as the contracting
entity in earlier proceedings, Respondent No.1
cannot now be permitted to approbate and
reprobate by disputing the Petitioner's locus
standi in the present proceedings.
13.4. The objection is, therefore, barred by the
doctrine of estoppel by conduct. A party which
has consciously treated the Petitioner as the
contracting party in earlier judicial proceedings
is precluded from contending otherwise when it
suits its convenience. Such a plea strikes at the
root of procedural fairness and cannot be
countenanced.
13.5. Insofar as Respondent No.2 is concerned, it is
not in dispute that it is a Special Purpose
Vehicle (SPV) constituted for the
implementation of solid waste management
functions in Bengaluru. Respondent No.2
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operates as the instrumentality through which
Respondent No.1 discharges its obligations
under the agreement. Consequently, the
contractual rights and obligations originally
undertaken by Respondent No.1 are
enforceable through and against Respondent
No.2, which has stepped into the operational
shoes of Respondent No.1 for all practical
purposes.
13.6. The existence of such an SPV arrangement
does not divest the Petitioner of its right to
maintain the lis. At best, it bears upon the
manner of enforcement and the entities against
whom relief may be effectuated. It does not
affect the maintainability of the proceedings or
the Petitioner's locus standi.
13.7. Accordingly, I answer point No.1 by holding
that the Petitioner--formerly known as M/s.
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Ramky Energy and Environment Limited and
earlier as M/s. Ramky Infrastructure Limited--
has the requisite locus standi to agitate the lis
arising out of the agreement, and the
proceedings are maintainable against
Respondent No.1, with consequential
enforceability against Respondent No.2 in
accordance with law.
14. ANSWER TO POINT No.2: Firstly, whether an
arbitration notice under Section 21 of the A&C
Act is required to be issued once an arbitral
award is set aside, and even if so issued, can
such a notice be issued when an award has
already been passed by the sole Arbitrator and
subsequently set aside?
14.1. The Section 34 Court, having held that the
award requires interference, has set aside the
award without making any changes or
corrections in the award by observing that it is
only an arbitral Tribunal which can do so. Thus,
merely passing of an award would not therefore
amount to res judicata as sought to be
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contended by Sri Prashanth Chandra, learned
Senior Counsel, and as has been held by the
Hon'ble Apex Court in Nortel Networks' case
supra.
14.2. The objection of the Respondents is premised
on the contention that since an arbitral award
had already been rendered by the sole
Arbitrator, the disputes stood concluded and,
consequently, the present arbitral proceedings
are not maintainable. Such a contention
proceeds on a fundamental misconception as to
the legal effect of an order passed under
Section 34 of the A&C Act.
14.3. A careful reading of the observation made by
the Court under Section 34, as extracted
hereinabove, makes it evident that the Court
found serious and material infirmities in the
arbitral award warranting interference.
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However, the Court consciously refrained from
modifying or correcting the award, not because
the award was found to be sustainable, but
solely on account of the statutory limitations
imposed by Section 34 of the A&C Act, which
restrict the Court's power to either uphold or
set aside the award.
14.4. Having found the award to be legally
unsustainable, the Section 34 Court proceeded
to set aside the award, expressly observing that
any reappreciation of evidence or correction of
errors could only be undertaken by an arbitral
tribunal. The legal consequence of such an
order is that the award is obliterated and
ceases to exist in the eye of law.
14.5. Once an arbitral award is set aside, it becomes
non est and incapable of conferring any finality
upon the disputes between the parties. The
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doctrine of res judicata applies only where
there is a final and binding adjudication. An
award which has been set aside under Section
34 does not meet this threshold. Consequently,
the mere fact that an award had earlier been
rendered does not bar the parties from re-
agitating their disputes through arbitration.
14.6. This position is no longer res integra. The
Hon'ble Supreme Court has consistently held
that setting aside of an arbitral award revives
the disputes between the parties and restores
their right to seek adjudication afresh in
accordance with law, subject to the terms of
the arbitration agreement and the law of
limitation.
14.7. Insofar as the requirement of issuance of a
notice under Section 21 of the Act is concerned,
a notice under Section 21 serves the limited
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purpose of formally invoking the arbitral
process. Once an arbitral award has been set
aside and the disputes stand revived, the
initiation of fresh arbitral proceedings cannot be
rendered impermissible on the ground that an
award had earlier been passed. The setting
aside of the award restores the parties to the
position as if no adjudication had taken place.
In such circumstances, the requirement of a
fresh notice under Section 21 is procedural and
cannot be elevated to a jurisdictional bar so as
to defeat the substantive right of a party to
seek arbitration, particularly when the opposite
party is already fully aware of the disputes and
has previously participated in arbitral
proceedings.
14.8. As regards limitation, the period during which
the arbitral proceedings and the proceedings
under Section 34 were pending is liable to be
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excluded while computing limitation for the
purpose of initiating fresh arbitral proceedings.
A party which has bona fide pursued its
remedies under the Act cannot be non-suited
on the ground of limitation once the award is
set aside and the disputes are revived. To hold
otherwise would render the statutory remedy
under Section 34 illusory and defeat the very
object of the Act.
14.9. Accordingly, I answer Point No.2 by holding
that the passing of an arbitral award which has
subsequently been set aside in proceedings
under Section 34 does not operate as res
judicata. The disputes stand revived, and the
parties are entitled to seek resolution through
fresh arbitral proceedings in accordance with
law, subject to limitation and the terms of the
arbitration agreement, as recognised by the
decisions of the Hon'ble Supreme Court in
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Nortel Networks, Steel Authority of India, and
Associated Construction.
14.10. Hence, I answer point No.2 by holding that
passing an award which has been set aside in
Section 34 proceedings cannot amount to res
judicata, leaving the parties free to agitate their
rights in a fresh arbitral proceeding, as held by
the Hon'ble Apex Court in Steel Authority of
India's case and Associated Constructions'
case supra.
15. ANSWER TO POINT NO.3: On passing an award,
the arbitration proceedings having been
terminated in terms of Section 32 of the A&C
Act, could fresh proceedings be initiated for
arbitration?
15.1. By referring to Section 32 of the A&C Act, it is
sought to be contended that the mandatary of
the arbitration mechanism having been
terminated, the abrupt proceedings have come
to an end. Section 32 of the A&C Act is
reproduced hereunder for easy reference:
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"32. Termination of proceedings.
(1)The arbitral proceedings shall be
terminated by the final arbitral award or by an
order of the arbitral tribunal under sub-
Section
(2)The arbitral tribunal shall issue an order for
the termination of the arbitral proceedings
where
(a)the claimant withdraws his claim, unless
the respondent objects to the order and the
arbitral tribunal recognises a legitimate
interest on his part in obtaining a final
settlement of the dispute,
(b)the parties agree on the termination of the
proceedings, or
(c)the arbitral tribunal finds that the
continuation of the proceedings has for any
other reason become unnecessary or
impossible.
(3)Subject to Section 33 and
sub-Section (4) of Section 34, the mandate of
the arbitral tribunal shall terminate with the
termination of the arbitral proceedings."
15.2. The submission on behalf of Respondent No.2,
founded on Section 32 of the Arbitration and
Conciliation Act, 1996, is that once a final
arbitral award is passed, the arbitral
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proceedings stand terminated and the mandate
of the arbitral tribunal comes to an end,
thereby extinguishing any further recourse to
arbitration in respect of the same disputes.
15.3. The contention proceeds on a misreading of
Section 32. The said provision deals with the
termination of arbitral proceedings before a
particular arbitral tribunal and the consequent
termination of the mandate of that tribunal. It
does not bring about the extinction of the
arbitration agreement, nor does it foreclose the
substantive right of the parties to seek
resolution of their disputes through arbitration
where the award does not attain finality.
15.4. The statutory scheme of Section 32 itself
makes this position explicit. Sub-section (3)
thereof provides that the termination of the
tribunal's mandate is subject to Sections 33 and
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34 of the Act. The Act, therefore, contemplates
that notwithstanding the termination of
proceedings before the arbitral tribunal,
statutory remedies challenging the award
remain available, and the arbitral process does
not attain irreversible finality merely upon the
passing of an award.
15.5. Where an arbitral award is set aside in
proceedings under Section 34, the legal
consequence is that the award is rendered non
est and is obliterated in the eye of law. Once
the award ceases to exist, the termination of
proceedings under Section 32 cannot be relied
upon as a bar to further arbitration. The
foundation for invoking Section 32 as a
disabling provision disappears with the setting
aside of the award. The termination
contemplated thereunder signifies the
conclusion of proceedings before a particular
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arbitral tribunal; it does not result in the
permanent extinction of the arbitration
mechanism or the disputes themselves,
especially where the award has been judicially
set aside.
15.6. Upon the setting aside of the award, the parties
stand relegated to the position as if no
adjudication had taken place. In such
circumstances, the disputes revive and may be
referred afresh to arbitration, subject to the
terms of the arbitration agreement and the law
of limitation.
15.7. Accordingly, I answer Point No.3 by holding
that while the passing of an arbitral award
results in the termination of proceedings and
the mandate of the arbitral tribunal under
Section 32 of the Act, the setting aside of such
award under Section 34 revives the disputes
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between the parties. The parties are therefore
entitled to agitate their claims in fresh arbitral
proceedings, as held by the Hon'ble Delhi High
Court in Steel Authority of India's case and
by the Bombay High Court in Associated
Constructions' case supra.
16. ANSWER TO POINT NO.4: Whether the present
arbitration notice dated 03.11.2023 can be said
to be barred by the law of limitation?
16.1. It is contended on behalf of the Respondents
that the notice dated 03.11.2023 issued under
Section 21 of the Arbitration and Conciliation
Act, 1996, is barred by limitation, on the
premise that the cause of action arose upon
termination of the contract on 28.05.2016 and
that the invocation of arbitration after more
than seven years is ex facie time-barred.
16.2. The submission proceeds on an erroneous
assumption that the limitation applicable to the
present notice must necessarily be traced back
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to the original cause of action arising from
termination of the contract. As noticed earlier,
the arbitration clause had already been invoked
pursuant to the original disputes, arbitral
proceedings were conducted, and an award had
been rendered by the arbitral tribunal. The
present notice is not an invocation of the
arbitration clause for the first time.
16.3. It is well settled that the initial invocation of an
arbitration clause is governed by the law of
limitation applicable to the underlying cause of
action, and a notice under Section 21 issued for
the first time must fall within the period
prescribed under the Limitation Act, ordinarily
referable to Article 137. However, where an
arbitral award has been rendered and
subsequently set aside under Section 34 of the
Act, the legal landscape materially changes.
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16.4. Upon the setting aside of an arbitral award, the
disputes between the parties stand revived and
a fresh cause of action arises to seek
adjudication of those disputes through
arbitration. In such a situation, the clock of
limitation cannot mechanically be reverted to
the date of the original cause of action. To do
so would render the statutory remedy under
Section 34 illusory and defeat the scheme of
the Act, which expressly contemplates the
possibility of further arbitral proceedings upon
the setting aside of an award.
16.5. In the present case, the arbitral award came to
be set aside by the Court under Section 34 on
28.02.2023. The notice under Section 21
invoking fresh arbitral proceedings was issued
on 03.11.2023, i.e., within a period of
approximately nine months from the date on
which the award was set aside. In such
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circumstances, the issuance of the notice
cannot be tested on the anvil of limitation
referable to the original termination of contract
in the year 2016.
16.6. Once an award is set aside, the question is not
one of statutory limitation in the strict sense,
but one of delay, laches, or acquiescence.
Unless the delay is such as to demonstrate
abandonment of the claim or results in manifest
prejudice to the opposite party, the right to
seek fresh arbitration cannot be defeated on
the ground of limitation.
16.7. In the present matter, the Petitioner has
explained the intervening period by stating that
it was considering its remedies, including the
filing of an appeal under Section 37 of the Act,
and upon due deliberation, elected to seek re-
adjudication of the disputes through arbitration.
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The delay of approximately nine months, in the
facts of the case, cannot be said to be
unreasonable, inordinate, or indicative of
acquiescence so as to non-suit the Petitioner at
the threshold.
16.8. Accordingly, I answer Point No.4 by holding
that the arbitration notice dated 03.11.2023 is
not barred by the law of limitation. The notice
having been issued within a reasonable period
after the setting aside of the arbitral award, no
case is made out to reject the invocation of
arbitration on the ground of limitation, delay, or
laches.
17. ANSWER TO POINT NO.5: Whether the
Petitioner can maintain the present petition
without availing the remedy under Section 37
of the A&C Act and, on failure in those
proceedings, without availing the remedy of
filing a special leave petition before the Hon'ble
Apex Court, the notice dated 03.11.2023 not
having been issued to Respondent No.2 could
Respondent No.2 be made a party to these
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proceedings and be subjected to arbitral
proceedings?
17.1. The Respondents contend that the Petitioner,
having chosen not to challenge the order
passed under Section 34 of the Act by way of
an appeal under Section 37, and thereafter not
having approached the Hon'ble Supreme Court,
is disentitled from invoking fresh arbitral
proceedings and from maintaining the present
petition under Section 11 of the Act.
17.2. The contention is devoid of merit. The remedies
under Sections 34 and 37 of the Act, and the
discretionary jurisdiction under Article 136 of
the Constitution, are corrective remedies
directed against the validity of an arbitral award
or a judicial order. Proceedings under Section
11 of the Act, on the other hand, are
constitutive in nature, intended to facilitate the
constitution of an arbitral tribunal once disputes
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are found to be arbitrable. These remedies
operate in distinct fields, and the election not to
pursue an appellate remedy cannot be
construed as a bar to invoking arbitration
afresh when the award has been set aside and
the disputes stand revived.
17.3. There is no provision under the Act which
mandates exhaustion of the appellate remedy
under Section 37, or the filing of a special leave
petition, as a condition precedent for seeking
re-adjudication of disputes through arbitration.
To read such a requirement into the statute
would run contrary to the scheme of the Act,
which consciously preserves party autonomy in
the choice of remedies.
17.4. The further objection that the present petition
is vitiated by delay and laches also cannot be
accepted at this stage. The award was set aside
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on 28.02.2023; the notice under Section 21
was issued on 03.11.2023; a further notice was
issued on 09.09.2024; and the present petition
under Section 11 was filed on 08.01.2025.
Whether the interregnum demonstrates
abandonment, acquiescence, or causes
prejudice to the Respondents is a matter
involving factual adjudication.
17.5. At the stage of consideration of a petition under
Section 11 of the Act, this Court is required to
undertake only a prima facie examination.
Unless the claim is ex facie barred by limitation
or the arbitration agreement itself is
demonstrably non-existent or inoperative,
issues of delay, laches, waiver, or acquiescence
fall within the domain of the arbitral tribunal
and cannot be conclusively determined by this
Court.
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17.6. Insofar as Respondent No.2 is concerned, the
objection that it cannot be made a party to the
arbitral proceedings on the ground that it was
not a signatory to the agreement and was not
issued a notice dated 03.11.2023 under Section
21 of the Act is wholly misconceived.
17.7. The record clearly discloses that the Petitioner
initially sought appointment of an arbitrator
against Respondent No.1. It was Respondent
No.1 which categorically asserted that it was no
longer the entity responsible for the subject
matter of the dispute, as a separate company,
namely Bengaluru Solid Waste Management
Limited (Respondent No.2), had been
constituted to carry out the solid waste
management functions and that any claim of
the Petitioner could only be agitated against
Respondent No.2. It is pursuant to this stand
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taken by Respondent No.1 that Respondent
No.2 was impleaded in the present proceedings.
17.8. Respondent No.2, having thus stepped into the
operational and functional shoes of Respondent
No.1 in respect of the very contract and
obligations in dispute, is a successor-in-interest
for the purposes of the present arbitration.
Once such succession is asserted by
Respondent No.1 itself, Respondent No.2
cannot resist arbitral proceedings on the
technical plea that it was not an original
signatory to the agreement or that it was not
separately addressed in the initial notice under
Section 21.
17.9. The requirement of a notice under Section 21 is
to communicate the invocation of arbitration
and the disputes sought to be referred. Where
Respondent No.2 claims through Respondent
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No.1, and where it is impleaded on the basis of
Respondent No.1's own stand, the absence of a
separate notice addressed to Respondent No.2
does not vitiate the proceedings, particularly
when Respondent No.2 has full notice of the
disputes and has actively contested the present
petition.
17.10. The law does not countenance a situation
where a party first asserts succession and
substitution to avoid liability, and thereafter
resiles from that position to resist arbitration.
Such conduct attracts the doctrine of
approbation and reprobation and cannot be
permitted.
17.11. Accordingly, Point No.5 is answered by holding
that:
17.11.1. The Petitioner is entitled to maintain the
present petition under Section 11 of the
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A&C Act without availing the appellate
remedy under Section 37 or approaching
the Hon'ble Supreme Court;
17.11.2. The issue of delay or laches does not bar
the present petition and, in any event, is a
matter to be examined by the arbitral
tribunal; and
17.11.3. Respondent No.2, having stepped into the
shoes of Respondent No.1, can validly be
made a party to the arbitral proceedings
notwithstanding the absence of a separate
notice dated 03.11.2023 addressed to it.
18. ANSWER TO POINT NO.6: Whether a sole
Arbitrator could be appointed when the
Arbitration Clause contemplates a Panel of
three Arbitrators?
18.1. It is not in dispute that the arbitration clause in
the agreement between the parties
contemplates adjudication of disputes by a
panel of three Arbitrators. It is equally not in
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dispute that, in the earlier round of arbitral
proceedings between the very same parties
arising out of the same agreement, both parties
had consciously and unequivocally consented to
the appointment of a sole Arbitrator.
18.2. The said consent was not incidental or
provisional. It was acted upon by the parties,
resulted in the constitution of an arbitral
tribunal consisting of a sole Arbitrator, and
culminated in the passing of an arbitral award.
Having once consciously waived the
requirement of a three-member tribunal and
participated in arbitral proceedings before a
sole Arbitrator without demur, the Respondents
cannot now be permitted to resile from that
position.
18.3. The Arbitration and Conciliation Act, 1996, is
founded on the principle of party autonomy.
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The number of arbitrators, though initially
stipulated in the arbitration clause, is not
immutable and can be varied by mutual
consent of the parties. Such consent, once
acted upon, constitutes a valid waiver of the
contractual stipulation relating to the
composition of the arbitral tribunal.
18.4. In the present proceedings, the Petitioner has
stated that it has no objection even if a panel of
three Arbitrators is constituted. However, such
a submission does not dilute the legal position
that the Respondents, having earlier consented
to a sole Arbitrator, stand bound by such
consent.
18.5. Learned counsel appearing for the Respondents
has, upon enquiry by the Court, fairly
submitted that the Respondents have no
objection to the appointment of a sole
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Arbitrator. This submission reinforces the
conclusion that there exists a consensus
between the parties for adjudication of the
disputes by a sole Arbitrator.
18.6. In proceedings under Section 11 of the Act,
where the Court is required to facilitate the
constitution of the arbitral tribunal, such
consensus must be given due effect. Insistence
on a three-member tribunal in the face of
express consent for a sole Arbitrator would
defeat the objective of expeditious and effective
dispute resolution.
18.7. Accordingly, I answer Point No.6 by holding
that notwithstanding the arbitration clause
contemplating a panel of three Arbitrators, the
appointment of a sole Arbitrator is legally
permissible and justified in the facts of the
present case, having regard to the prior waiver,
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the conduct of the parties, and their present
consensus.
19. ANSWER TO POINT NO.7: What order?
19.1. In view of the above, I pass the following:
ORDER
i. The CMP is allowed.
ii. Sri Justice Ajit J Gunjal, a former judge of this Court is appointed as a sole arbitrator to arbitrate the dispute between the parties under the aegis of the Arbitration Centre attached to this Court.
iii. Registry is directed to forward a copy of this order to the Director, Arbitration & Conciliation Centre for doing the needful. iv. Since the order is passed in the presence of both the counsels, the counsels are directed to appear before the Director, Arbitration &
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Sd/-
(SURAJ GOVINDARAJ) JUDGE KTY List No.: 2 Sl No.: 1