Supreme Court: Estoppel Plea Can’t Be Raised By Party Ignoring Its Conduct Resulting In Other Party Altering Its Position Under A&C Act
The Supreme Court reiterated that the issue of invalidity of the award, as a question of law, cannot be considered de hors the conduct of parties.
The Supreme Court held that under Arbitration and Conciliation Act, 1996 (A&C Act), a plea of estoppel cannot be raised by a party ignoring its conduct that resulted in the other party altering its position to its detriment in view of such conduct.
The Court held thus in a Civil Appeal preferred against the Judgment of the High Court which dismissed an Appeal and affirmed the finding that the dispute was non-arbitrable.
The two-Judge Bench of Justice Augustine George Masih and Justice Atul S. Chandurkar observed, “We therefore find that on the doctrine of estoppel by conduct and election the respondents cannot be permitted to now raise a plea that the compromise deed based on the award dated 30.12.2022 was a nullity in view of the provisions of Section 92 of the Code. On this count, we do not deem it necessary to go into the legality of the award dated 30.12.2022 as was done by the Courts in the impugned orders.”
The Bench reiterated that the issue of invalidity of the award, as a question of law, cannot be considered de hors the conduct of parties.
Senior Advocate C.U. Singh appeared for the Appellants while Senior Advocate Gagan Gupta appeared for the Respondents.
Factual Background
The Appellants and Respondents were trustees of Guru Tegh Bahadur Charitable Trust. On disputes arising between the parties, the Respondents claimed that the Appellants had been removed as trustees. They approached the Civil Court by filing a Suit for perpetual injunction, seeking to restrain the Appellants from entering the school being conducted by the Trust and also from interfering with the functioning of the school. The Appellants filed an Application under Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC), seeking rejection of the Plaint. The Trial Court accepted the contentions of the Appellants and rejected the Plaint, holding that in view of Section 92 of CPC, the Suit was barred. The Respondents then approached the District Court and during pendency of the Appeal, they moved an Application stating that the parties had appointed a Sole Arbitrator to resolve their disputes.
Resultantly, the Sole Arbitrator passed an award and made an arrangement between the parties as regards the manner of managing the affairs of the Trust. In view of the said award, the parties moved a joint application before the District Court stating they had accepted it and would abide by it in true spirit. Accordingly, the Appeal was disposed of. However, the Appellants alleged that they took various steps to comply with their part of obligations but the Respondents failed to discharge the same under the award. Ultimately, the Appellants filed a miscellaneous case seeking to execute the compromise decree, but the proceedings were then withdrawn by them. Thereafter, they filed an Application under Section 9 of A&C Act and the Commercial Court held that the award was a nullity and hence there was no question of its enforcement. Being aggrieved, the Appellant approached the High Court, which declined to interfere with the Order. Challenging this, the Appellants went to the Supreme Court.
Reasoning
The Supreme Court after hearing the contentions of the counsel, noted, “… after the parties accepted the consent deed, the appellants acted in accordance with its terms and altered their position. The respondents thus by their conduct of accepting the compromise deed based on the award of the arbitrator are now precluded from questioning its validity.”
The Court said that the effect of the compromise deed resulting into a decree has not been given its due importance and the conduct of the Respondents of approbation by first accepting the award and having the Appeal disposed of on that basis and thereafter of reprobation by setting up its invalidity has been lost sight of.
“The compromise deed was not challenged at any point of time by the respondents. The appellants sought to execute the decree as passed initially by filing execution proceedings on 23.11.2023. The same were however withdrawn on 08.12.2023. Thereafter jurisdiction under Section 9 of the Act of 1996 was invoked by the appellants. In our view, non-suiting the appellants on the ground that the award dated 30.12.2022 was a nullity in view of the objection raised by the respondents has resulted in grave injustice to the appellants”, it added.
The Court remarked that if the impugned adjudication is accepted, the Respondents would reap benefit from their act of approbation and reprobation and hence, the Respondents having succeeded in having a decree being passed on the strength of the arbitral award now cannot be permitted to contend that the award itself was a nullity.
“The justice of the case therefore requires that the appellants ought to be permitted to revive the execution proceedings that they had filed being Miscellaneous Case No. 122 of 2023. These proceedings were withdrawn shortly after being filed to enable the appellants to file the application under Section 9 of the Act of 1996 and there was no adjudication of the same on merits”, it further observed.
Conclusion
The Court was of the view that the Appellants cannot be left remediless especially in the backdrop of the fact that the compromise decree was passed in the Respondents’ Appeal which remained unchallenged by them.
“The appellants are at liberty to revive the execution proceedings in the form of Miscellaneous Case No.122 of 2023. The execution proceedings shall be decided on their own merits and in accordance with law”, it concluded.
Accordingly, the Apex Court allowed the Appeal and set aside the impugned Orders.
Cause Title- Sanjit Singh Salwan & Ors. v. Sardar Inderjit Singh Salwan & Ors. (Neutral Citation: 2025 INSC 988)
Appearance:
Appellants: Senior Advocate C. U. Singh, AOR Punit Dutt Tyagi, Advocates Smriti Sahai, Shikhar Tyagi, and Pragati Singh.
Respondents: Senior Advocate Gagan Gupta, AOR Sanchit Garga, Advocates Amit Wadhwa, and Shashwat Jaiswal.
