In a significant judgment delivered by Justice Subramonium Prasad of the Delhi High Court on January 14, 2025, the Court declined to appoint an arbitrator in a dispute where the claims had already been the subject matter of a prior arbitration reference. The judgment attains significance because of lack of any clarity on the point of law where claims can keep getting re-arbitrated, after the award gets set-aside. The judgment is a step forward in bringing further sanctity to the process of arbitration and challenge procedure and the finality that the same deserves.
The case presented a unique set of facts. An arbitral award had previously been set aside under Section 34 of the Arbitration and Conciliation Act by the Delhi High Court. The Court had found that the reasoning of the arbitral tribunal revealed a lack of evidence supporting the claims of the claimant (Jaiprakash Associates Limited-JAL). Despite this, the tribunal had granted the claims based on principles of equity. The Section 34 court held that this violated Section 28(2) of the Act, which permits an arbitral tribunal to decide ex aequo et bono (on the basis of equity) only when expressly authorized by the parties.
As a result, the tribunal's award to the extent of JAL’s claims was entirely set aside. However, the NHPC’s counterclaims, awarded by the tribunal, were affirmed. In another round of proceedings, the Delhi High Court partially enforced the award, limited to the counterclaims granted in NHPC’s favor.
Subsequently, JAL requested NHPC to appoint its nominee arbitrator to constitute the Arbitral Tribunal and adjudicate the underlying dispute afresh. JAL relied on the Section 34 orders, asserting that since the award had been set aside, the underlying dispute remained unresolved and required adjudication. However, NHPC declined to appoint its nominee arbitrator, asserting that the dispute had already been adjudicated by the tribunal and subsequently by the court under Section 34, and had attained finality. JAL then proceeded to file a petition under Section 11 of the Arbitration and Conciliation Act.
The Delhi High Court, however, refused to appoint an arbitrator in the dispute, emphasizing that such a course of action would lead to an endless cycle of arbitration, contrary to the principle of res judicata. The Court held that this approach would undermine the sanctity of the arbitration process and that the re-adjudication of disputes, as proposed, was neither permissible under the Arbitration and Conciliation Act nor supported by any legal principle. The court noted that the instant matter was a post award Section 11 and if it is allowed, then the finality of an award would always be in limbo.
The Delhi High Court's ruling highlighted the need for greater clarity on this point, as it raises significant questions about the interplay between the principles of res judicata and the Arbitration and Conciliation Act. The judgment underscores the importance of addressing whether disputes, once adjudicated and set aside under Section 34, can be re-referred to arbitration and under what circumstances, if any, such a course of action would align with the law.
The team was led by Gauhar Mirza, Partner; with support from Hiral Gupta, Principal Associate; Sukanya Singh, Senior Associate; Devarshi Mohan, Associate; and Rohit Rahar, Associate. Other parties to the transaction included: Counsel for the Petitioner, Jaiprakash Associates Limited - Mr. Lovkesh Sawhney, Senior Advocate with Mr. Rohit Kumar, Advocate.
About Cyril Amarchand Mangaldas
Cyril Amarchand Mangaldas (cam) is India’s leading law firm with a global reputation of being trusted advisers to its clients. The Firm advises a large and diverse set of clients, including domestic and foreign commercial enterprises, financial institutions, private equity and venture capital funds, start-ups, government and regulatory bodies. The Firm generalists, specialists and senior ex-regulators expertly guide clients across a spectrum of transactions, sectors and regulations. The Firm is one of the largest full-service law firm in India and offices in key business centers at Mumbai, Delhi-NCR, Bengaluru, Ahmedabad, Hyderabad, Chennai, GIFT City, Singapore and Abu Dhabi.
The Firm received “National Law Firm of the Year: India” at the IFLR Asia-Pacific Awards for the second consecutive years in 2023 and 2022 and “Innovation in Advancing Markets” award at the FT Innovative Lawyers Asia Pacific 2022 Awards. The Firm had won “India Deal Firm of the Year” at the ALB India Awards and “Firm of the Year” at the IFLR1000 India Awards in 2022.
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