Whether Same Disputes Already Adjudicated On Merits Can Be Re-Adjudicated Again In Arbitration? - Bombay High Court Answers
The Bombay High Court allowed an Arbitration Application in which the issue was whether the Supreme Court's observations in the course of upholding an Order of a Division Bench would constitute a ruling on merits of the case, disabling arbitration being conducted afresh.
The Bombay High Court has answered whether same disputes being already adjudicated on merits can be re-adjudicated again in arbitration.
The Court was hearing an Arbitration Application in which the issue was regarding whether observations made by the Supreme Court in the course of upholding an Order of a Division Bench of the High Court setting aside an arbitral award, would constitute a ruling on merits of the case, disabling arbitration being conducted afresh.
A Single Bench of Justice Somasekhar Sundaresan held, “The jurisdiction created for purposes of judicial review by the Courts into an arbitral award is a limited one, which is governed by Section 34 and Section 37 of the Act. When seen from that prism and taking into account the explicit findings of the Supreme Court in the SC Judgement, it becomes evident that the Supreme Court expressly stated that it did not intend to pronounce upon the merits of the matter at all. Therefore, the vexed question of whether this Application seeking appointment of an arbitrator constitutes the proverbial “second bite at the cherry” has to, in my opinion, be necessarily answered in the negative.”
The Bench explained that the setting aside of an arbitral award would place parties to the arbitration in the original position that they were in, before the proceedings began, leaving it open to them to arbitrate again, is an essential feature of the legislative design and structure of the Arbitration and Conciliation Act, 1996 (A&C Act).
Senior Advocate Virag Tulzapurkar appeared on behalf of the Applicant while Senior Advocate Zal Andhyarujina appeared on behalf of the Respondent.
Facts of the Case
Pursuant to a tender, a bid was made by the Applicant i.e., Batliboi Environmental Engineering Ltd., which was selected by the Respondent i.e., Hindustan Petroleum Corporation Ltd. (HPCL) for construction of a sewage treatment reclamation plant at a refinery of HPCL on a turnkey basis. The arbitration agreement was contained in a purchase order for a value of Rs. 5.73 crores. Subsequently, disputes and differences arose and the Applicant made a claim of Rs. 3.41 crores spread over eleven heads of claims on HPCL. A Sole Arbitrator conducted proceedings and an award was passed which was upheld by the High Court’s Single Judge.
An Appeal by HPCL led to the Division Bench setting aside the Section 34 A&C Act Judgment. The Applicant filed a Special Leave Petition (SLP) in the Supreme Court, which granted leave, considered the Appeal, and upheld the Section 37 Judgment. The Applicant invoked arbitration on the premise that the Arbitral Award having been set aside and its claims not having been dismissed on merits, it was constrained to invoke arbitration afresh. HPCL took the stance that Applicant’s claims had been adjudicated on merits and the same disputes cannot be re-adjudicated again in arbitration. This stand-off led to the Application being filed before the High Court.
Reasoning
The High Court after hearing the arguments from both sides, observed, “When parties opt for arbitration and that leads to an arbitral award, the Act disallows Courts to conduct an appellate review of arbitral awards, choosing instead, to limit the scope of judicial review of arbitral awards, to the contours of the jurisdiction available on limited grounds set out in Section 34 of the Act. Judicial review of an arbitral award is framed in a binary position – the award is either upheld or set aside on the grounds available in Section 34. No Court is permitted to modify the Arbitral Award, and to substitute its judgement for the judgement of the Arbitral Tribunal.”
The Court said that the necessary corollary would be that the position of the parties undisturbed by the Arbitral Award would stand restored. It further noted that the Arbitral Award ought to have been held as not being sustainable in exercise of the jurisdiction under Section 37 of the Act read with Section 34 of the Act.
“The Supreme Court explicitly ruled that it was not commenting on the merits. Taking such explicit findings into account and that too in the context of the specific nature of the jurisdiction that Section 34 and Section 37 of the Act entails, I am of the opinion that no case has been made out to deviate from the norm that the parties are restored to the original pre-Arbitral Award position”, it added.
The Court, therefore, referred all the disputes and differences to arbitration and appointed Justice S.C. Gupte, a former Judge of the Bombay High Court as a Sole Arbitrator to adjudicate upon the same.
Accordingly, the High Court allowed the Application.
Cause Title- Batliboi Environmental Engineering Ltd. v. Hindustan Petroleum Corporation Limited (Neutral Citation: 2025:BHC-OS:4031)
Appearance:
Applicant: Senior Advocate Virag Tulzapurkar, Advocates Aadil Parsurampuria, Aalam Parsurampuria, and Prashant Parsurampuria.
Respondent: Senior Advocate Zal Andhyarujina, Advocates Vijay Purohit, Jahaan Dastur, Pratik Jhaveri, Faizan Mithaiwala, and Vinit Kamdar.
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