High Court Exercises Judicial Function Under S. 11 (6) of Arbitration Act; Principle Of Res Judicata Applicable To S. 11 Petition: Delhi High Court

The Court noted that the Supreme Court’s decision in United India Insurance Company Limited vs. Antique Art Export Pvt Ltd (2019) has been overruled by a three Judge Bench of the Supreme Court in M/s. Mayavati Trading Pvt. Ltd. vs. Pradyuat Deb Burman (2019), where the Apex Court had ruled that the Court, in view of Section 11(6A), must confine itself to the examination of the existence of an arbitration agreement.

However, the bench of Justice V. Kameswar Rao reckoned that the dispute between the parties with regard to appointment of Arbitrator had attained finality with the decision of the Supreme Court in Antique Art Export (2019), and in the review petition filed before it, where the Apex Court had ruled that the dispute was not arbitrable in view of the discharge voucher signed by the claimant.

While dismissing the contention of the petitioner/claimant that the judgment in Antique Art Export (2019) is erroneous / without jurisdiction, and thus the same is not binding between the parties, the Court concluded that the Section 11 petition filed by it was not maintainable inter se between the parties, since the same was barred by the principle of res judicata.

The petitioner, Antique Art Export Pvt Ltd, who is engaged in the business of manufacturing, selling and export of carpets and rugs, availed insurance policies from the respondent, United India Insurance Company Ltd. After a fire took place in the factory of the petitioner, the petitioner raised an insurance claim. Certain disputes arose between the parties under the Insurance Policy relating to the claim amount, and the same were referred to arbitration by the Delhi High Court in a petition filed by the petitioner under Section 11.

Against this, the respondent filed a Special Leave Petition (SLP) before the Supreme Court. The Supreme Court in United India Insurance Company Limited vs. Antique Art Export Pvt Ltd (2019), allowed the insurance company’s appeal and set aside the High Court’s order where it had appointed a Sole Arbitrator. The Apex Court had concluded that no arbitrable dispute existed between the parties. Against the said judgment of the Supreme Court, the petitioner filed a Review Petition, which was dismissed by the Supreme Court.

Thereafter, the petitioner, Antique Art Export, again approached the Delhi High Court by filing a petition under Section 11 (6) of the A&C Act, seeking appointment of an Arbitrator.

The petitioner submitted that the Supreme Court in Antique Art Export (2019), while allowing the appeal of the respondent, had ruled that prima facie no dispute subsisted between the parties after the petitioner had signed a discharge voucher without any demur or protest. Thus, the claim under the policy was finally settled with accord and satisfaction, the Supreme Court had held.

The petitioner, Antique Art Export, had contested the validity of the discharge voucher and had claimed that the same was signed by it under undue influence and coercion.

The petitioner pleaded before the High Court that the judgment passed by the two Judge bench of the Supreme Court in Antique Art Export (2019), was thereafter overruled by a three Judge bench of the Supreme Court in M/s. Mayavati Trading Pvt. Ltd. vs. Pradyuat Deb Burman (2019).

It added that the Apex Court in Mayavati Trading (2019), while overruling the said judgment, had held that, in view of Section 11(6A) of the A&C Act, as inserted by the Amendment Act of 2015, the Court, while dealing with an application under Section 11, must confine itself to the examination of the existence of an arbitration agreement.

The Apex Court in Mayavati Trading (2019) had ruled that the Court in a Section 11 petition, cannot decide on the arbitrability of a dispute and cannot delve on the issue whether accord and satisfaction had taken place or not, since the issue of accord and satisfaction has been overruled legislatively.

The petitioner, Antique Art Export, thus sought benefit of the law laid down in Mayavati Trading (2019) while seeking appointment of Arbitrator. It added that the issue whether full and final settlement had taken place or not, is a question that can be left to the Arbitrator.

While holding that the principle of res judicata shall be applicable to a petition filed under Section 11, the High Court dismissed the contention of the petitioner that in view of the judgment of the Supreme Court in Mayavati Trading (2019), the judgment of the Apex Court in Antique Art Export (2019) is erroneous / without jurisdiction, and thus the same is not binding between the parties inter-se.

“I am not impressed by the said submission. It is true that the judgment in the case of Antique Art Export (supra) has been overruled by three Judge Bench of Supreme Court in the case of M/s. Mayavati Trading Pvt. Ltd. (supra) but the fact remains, the dispute / issue inter-se parties with regard to the appointment of Arbitrator has attained finality with the decision of the Supreme Court in Antique Art Export (supra), hence, the present petitions shall be barred by principle of res judicata,” the Court said.

The bench, therefore, held that the finding of the Supreme Court in Antique Art Export (2019), which arose from a Section 11 petition filed before the High Court, where the Apex Court had ruled that there were no arbitrable disputes between the parties, was binding between the parties and any subsequent litigation was barred by the principle of res judicata.

The Court further observed that the Supreme Court in M/s. Mayavati Trading Co. (2019), while interpretating Section 11 (6A), had overruled Antique Art Export (2019), on the ground that the latter does not lay down the correct law. However, it was not the conclusion of the Apex Court that the judgment in Antique Art Export (2019) is a nullity. Not being a nullity, the judgment in the case of Antique Art Export (2019) is binding between the parties, the High Court ruled.

The bench thus concluded that the Section 11 petition filed by the petitioner was not maintainable inter se between the parties, as the issue of appointment of Arbitrator had attained finality with the orders passed by the Supreme Court- in Antique Art Export (2019) and in the review petition filed by the petitioner. The Court thus dismissed the petition.

Case Title: Antique Art Export Pvt Ltd vs. United India Insurance Company Ltd

Citation: 2023 LiveLaw (Del) 260

Counsel for the Petitioner: Mr. Manish Kaushik and Mr. Ajit Singh, Advs

Counsel for the Respondent: Mr. Amit Kumar Singh, Ms. K. Enatoli Sema, Ms. Chubalemla Chang and Mr. Tavikato Achumi, Advs.

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