Second Arbitration Maintainable After Award Is Set Aside: Section 11 Court Cannot Deny Appointment Due to Pending Appeal: Bombay High Court

“Court’s Role Under Section 11 Is Limited to Examining Existence of Arbitration Agreement — All Other Objections, Including Limitation and Res Judicata, Are for Arbitral Tribunal” - In a significant ruling that clarifies the limited jurisdiction of courts under Section 11 of the Arbitration and Conciliation Act, 1996, the Bombay High Court allowed a second round of arbitration, following the setting aside of the earlier arbitral award under Section 34. The Court, while appointing a Sole Arbitrator, rejected the respondent’s objections based on pendency of a Section 37 appeal, limitation, and res judicata, holding that all such issues must be decided by the Tribunal and not at the referral stage.

Justice Gautam A. Ankhad, speaking for the Court, held: “This Court cannot conduct an intricate evidentiary inquiry into questions of whether the claims raised by the Applicant are time barred or whether the issue is barred by principles of res judicata. Determination of these contested facts will have to be left to the Arbitrator.” [Para 6]

Dispute on Refund of ₹51 Lakh Security Deposit Leads to Second Arbitration

The dispute arose under an Agreement for Purchase of Salvage Material dated 29 November 2011, in which the applicant had paid a security deposit of ₹51,38,000. After initial litigation including a Commercial Summary Suit, the parties were referred to arbitration, which culminated in an award dated 06 June 2022, rejecting the applicant’s claims on limitation grounds. The award was later set aside entirely by the Section 34 Court on 7 February 2024.

Subsequently, the applicant approached the High Court under Section 11 of the Act, seeking appointment of a new arbitrator to adjudicate the dispute de novo, even while Section 37 appeals against the Section 34 judgment remained pending.

“Existence of Arbitration Agreement Is the Only Test Under Section 11” – Court Applies ‘Nothing More, Nothing Less’ Standard

The respondent resisted the application, arguing that a second round of arbitration on the same dispute would be barred by res judicata, limitation, and would cause unnecessary financial burden, especially with appeals pending in the Section 37 proceedings. The respondent further claimed no fresh notice of arbitration under Section 21 had been issued.

However, the Court firmly rejected these submissions, citing the consistent position adopted by the Supreme Court in Cox and Kings v. SAP India Pvt. Ltd., (2025) 1 SCC 611, and SBI General Insurance v. Krish Spinning, (2025) 3 SCC (Civ) 567.

Justice Ankhad observed:

“The jurisdiction of the Section 11 court is now limited. It is only required to examine the existence of an arbitration agreement. This Court cannot venture into contested questions involving complex facts.” [Para 6]

Reaffirming the post-2015 Amendment position, the Court added: “The legislative mandate of prima facie determination ensures that the referral courts do not trammel the Arbitral Tribunal’s authority to rule on its own jurisdiction.” [Para 7, quoting Supreme Court]

It was undisputed that the Agreement dated 29 November 2011 contained a valid arbitration clause at Clause 16, and therefore, the requirement for appointment under Section 11 stood satisfied.

“De Novo Arbitration Required After Award Set Aside in Entirety” – Section 34 Court’s Findings Accepted

The Court further relied on the earlier Section 34 judgment, where the arbitral award had been set aside entirely due to an error on limitation without deciding the merits. The Section 34 Court had expressly observed:

“The Petitioner would have to resort to de novo arbitration in respect of all the issues.” [Para 2 quoting Section 34 order]

The applicant had also filed a Section 37 appeal, seeking reinstatement of claims instead of fresh arbitration. However, the pendency of that appeal did not preclude appointment of a new arbitrator, as long as an arbitration agreement continued to exist.

Justice Ankhad noted: “The pendency of any proceeding cannot be an impediment to appoint an arbitrator in this application. All other issues must be agitated before the Arbitral Tribunal.” [Para 7]

“Concerns on Cost Can Be Raised Before Tribunal; Tribunal Empowered to Fix Costs and Fees”

While the Court acknowledged the respondent’s concern regarding the financial burden of a second arbitration, it held that such issues must be left to the discretion of the arbitrator:

“The Respondent’s issue of financial burden is indeed a legitimate concern. However, the same can be agitated before the learned Arbitrator.” [Para 8]

The fees of the Arbitrator were to be governed by the Fourth Schedule of the Act read with the Bombay High Court (Fee Payable to Arbitrators) Rules, 2018.

Arbitrator Appointed; All Objections Left Open for Tribunal

Being satisfied of the existence of an arbitration agreement, and in light of the Section 34 court’s express direction for de novo arbitration, the Bombay High Court referred the parties to arbitration afresh, appointing Mr. Anish S. Karande as the Sole Arbitrator.

The Court directed: “All issues are kept open to be agitated before the Tribunal.” [Para 9(E)]

The arbitration is to be conducted in Mumbai, and the Tribunal is to determine the entire matter afresh, including maintainability, limitation, res judicata, costs, and any preliminary objections raised by the respondent.

This ruling reinforces the strict boundaries of judicial interference under Section 11 and reaffirms the competence-competence principle enshrined in Section 16 of the Arbitration Act, which vests the arbitrator with the power to rule on all preliminary and jurisdictional objections. It also provides clarity on how courts should proceed when a prior award is set aside in its entirety and parties seek a fresh arbitration, even during pendency of appeals.

As the Court succinctly put it: “The Section 11 Court cannot deny appointment of an arbitrator merely because the dispute has been previously arbitrated and the Award set aside. The correct forum to test arbitrability, limitation, and finality is the Arbitral Tribunal itself.”

Date of Decision: 10 October 2025