Case Note & Summary
The dispute arose from an Agreement for Purchase of Salvage Material dated 29th November 2011 between Rajuram Sawaji Purohit, sole proprietor of M/s. Mactec Realtors & Developers (Applicant), and The Shandar Interior Private Limited (Respondent). The Applicant had paid a Security Deposit of Rs.51,38,000/- to the Respondent. After a winding-up petition and a commercial summary suit, the parties were referred to arbitration by consent. The arbitral tribunal passed an award on 6th June 2022, holding that the Applicant's claims were barred by limitation. The Applicant challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, and the Section 34 court set aside the award in its entirety on 7th February 2024. The Applicant then filed an interim application for correction, which was rejected on 11th July 2024. Subsequently, the Applicant filed a Section 11 application seeking appointment of a new arbitrator for a second round of arbitration. The Applicant also filed a Section 37 appeal against the setting aside order, which was pending. The Respondent opposed the Section 11 application, arguing that no arbitration agreement survived after the award was set aside without any direction for de novo arbitration. The court held that the Section 11 application was not maintainable because the setting aside of the award did not revive the arbitration agreement for a fresh reference. The court dismissed the application, leaving the Applicant to pursue remedies in the pending Section 37 appeal.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11 of the Arbitration and Conciliation Act, 1996 - Survival of Arbitration Agreement - After an arbitral award is set aside under Section 34 without any direction for de novo arbitration or remand, the arbitration agreement does not revive for a fresh round of arbitration. The court held that once the award is set aside, the underlying disputes are not automatically referred to a new arbitrator unless the setting aside order expressly provides for such a course. The Section 11 application for appointment of a new arbitrator was dismissed as not maintainable. (Paras 1-3)
B) Arbitration Law - Effect of Pending Appeal - Section 37 of the Arbitration and Conciliation Act, 1996 - Pending appeal against setting aside of award does not create a right to initiate fresh arbitration. The court noted that the pendency of a Section 37 appeal does not entitle the applicant to seek appointment of a new arbitrator under Section 11, as the arbitration agreement does not survive independently. (Paras 1-3)
Issue of Consideration
Whether a fresh arbitration can be initiated under Section 11 of the Arbitration and Conciliation Act, 1996 after an earlier arbitral award has been set aside under Section 34, without any direction for remand or de novo arbitration, and while a Section 37 appeal against the setting aside order is pending.
Final Decision
The Commercial Arbitration Application (Lodging) No.25035 of 2024 is dismissed. The court held that the Section 11 application for appointment of a new arbitrator is not maintainable as the arbitration agreement does not survive after the award was set aside without any direction for de novo arbitration. The Applicant is left to pursue remedies in the pending Section 37 appeal.
Law Points
- Section 11 of the Arbitration and Conciliation Act
- 1996
- Section 34 of the Arbitration and Conciliation Act
- Section 37 of the Arbitration and Conciliation Act
- Res judicata
- De novo arbitration
- Survival of arbitration agreement after setting aside of award
Case Details
Commercial Arbitration Application (Lodging) No.25035 of 2024
Mr. Mayur Khandeparkar with Mr. Anuj Desai and Mr. Umesh Tawari, i/by S. Ashwinikumar & Co. LLP for the Applicant; Mr. Sheelang Shah with Mr. Nirmal Chopda, i/by Vraj Legal for the Respondent
Rajuram Sawaji Purohit, Sole Proprietor of M/s. Mactec Realtors & Developers
The Shandar Interior Private Limited
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Nature of Litigation
Application under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator to adjudicate disputes arising from an Agreement for Purchase of Salvage Material.
Remedy Sought
The Applicant sought appointment of a new arbitrator to re-adjudicate the same disputes that had been previously referred to arbitration and resulted in an award that was set aside.
Filing Reason
The Applicant filed the Section 11 application after the earlier arbitral award was set aside under Section 34, contending that a fresh arbitration could be initiated.
Previous Decisions
An arbitral award dated 6th June 2022 dismissed the Applicant's claims as barred by limitation. The Section 34 court set aside the award on 7th February 2024. An interim application for correction was rejected on 11th July 2024. A Section 37 appeal against the setting aside order was pending.
Issues
Whether a fresh arbitration can be initiated under Section 11 after an earlier award has been set aside under Section 34 without any direction for de novo arbitration.
Whether the pendency of a Section 37 appeal against the setting aside order entitles the applicant to seek appointment of a new arbitrator.
Submissions/Arguments
The Applicant argued that it is open to re-initiate arbitration and begin the entire process once again, even though the Section 37 appeal is pending. The learned Arbitrator held the Agreement legal and binding but dismissed claims on limitation. The Section 34 court set aside the award, and the second order recognized that the Applicant has to start arbitration de novo.
The Respondent opposed the application, submitting that no arbitration agreement survives after the award is set aside without a direction for de novo arbitration.
Ratio Decidendi
After an arbitral award is set aside under Section 34 of the Arbitration and Conciliation Act, 1996 without any direction for de novo arbitration or remand, the arbitration agreement does not revive for a fresh round of arbitration. A pending Section 37 appeal against the setting aside order does not create a right to initiate fresh arbitration under Section 11.
Judgment Excerpts
Disputes have arisen under an Agreement for Purchase of salvage material dated 29th November 2011.
The Applicant has now filed this Section 11 Application seeking appointment of an Arbitrator to adjudicate the same disputes that have arisen between the parties under the said Agreement (second round).
Mr. Khandeparkar, learned counsel for the Applicant submits that it is open for the Applicant to re-initiate arbitration and begin the entire process once again even though the Applicant’s Section 37 Appeal is pending.
Procedural History
Disputes arose under an Agreement dated 29th November 2011. After a winding-up petition (Company Petition No.269 of 2016) and a Commercial Summary Suit No.721 of 2018, the parties were referred to arbitration by consent. An award was passed on 6th June 2022 dismissing claims as barred by limitation. The Applicant challenged the award under Section 34 (Commercial Arbitration Petition No.305 of 2023), which was allowed on 7th February 2024, setting aside the award. An interim application for correction (Interim Application (Lodging) No.10052 of 2024) was rejected on 11th July 2024. The Applicant then filed a Section 11 application (the present application) and a Section 37 appeal (Commercial Arbitration Appeal (Lodging) No.31017 of 2024), which was pending.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 11, Section 34, Section 37
