Court Can Appoint An Arbitrator During The Pendency Of An Appeal Against An Award, Set Aside On Reasons Other Than Merit : Bombay High Court

The Single Bench of Justice A.K. Menon has further held that an objection as to the claims being barred by Res Judicata since an appeal is pending before the Court is outside the limited scope of judicial examination permissible under S. 11 of the A & C Act. The Court held that invocation of the arbitration cannot be subjected to the fate of the appeal.

Facts

The parties entered into an agreement a sale and purchase. A dispute arose between the parties which were referred to arbitration. The arbitrator dismissed the claims of the petitioner as barred by limitation and the counter-claims of the respondent as being barred by limitation and Res Judicata.

The petitioner filed its objection to the award and the Court set aside the award. Aggrieved by the order of the Court, the respondent filed an appeal under S. 37 of the Act. The said appeal is pending adjudication.

The petitioner filed an application for the appointment of the arbitrator for deciding the claims afresh. The respondent opposed the application.

Contention Of The Parties

The petitioner sought the appointment of the arbitrator on the following grounds:

• That the award was set aside for other reasons and not on merits, therefore, the principles of Res Judicata are not attracted.
• That the award made in the earlier proceedings has been set aside, therefore, the claims of the petitioner are to be decided afresh.
• That there can be no automatic stay during the pendency of an appeal.
• That the Court while appointing an arbitrator shall not look into the issues of the claims being barred by Res Judicata.

The Respondent opposed the arbitration petition on the following grounds:

• That an appeal against the order setting aside the award is pending, therefore, the matter has not attained finality in view thereof, the present application is barred by Res Judicata.
• Since the appeal is pending admitting this petition would amount to re-agitating the claims.
• Since the appeal is pending there shall be a stay on all the proceedings concerning the same claims as there is always a chance that the appeal may be allowed and the arbitral award may be reinstated.
• That only a final order could be the basis of fresh proceedings.

Analysis By The Court

The Court held that S.11 of the Act envisages minimal scrutiny by the Court while making an appointment and the objection as to the petition being hit by Res Judicata shall be decided by the arbitrator only as the same requires consideration of pleadings.

The Court observed that the lack of finality of the award before the arbitral tribunal would be a view on the matter on merits and the same is outside the limited authority conferred under S. 11 of the Act.

The Court held that when the award is set aside for reasons other than merit, it is always open to the parties to invoke the same arbitration clause to initiate fresh arbitration proceedings.

Case Title: Wadhwa Group Holdings Pvt. Ltd. v. Homi Pheroze Ghandy and Anr.

Citation: 2022 LiveLaw (Bom) 134

Date: 07/03/2022

Counsel for the applicant: Mr. Mayur Khandeparkar a/w Ms. Sachi Udeshi, Bhakti Mehta, Pooja Rathi i/b. Wadia Ghandy & Co.

Counsel for the Respondents: Mr. Vishwajit Sawant, Sr. Advocate a/w Ms. Priyanka Ved, Priya Rombade & Mr. Sharan Shetty i/b. Deven Dwarkadas & Partners

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