Friday, 16 November 2018

Whether High court should decide issue of res judicata or estoppel while exercising jurisdiction U/S 11 of Arbitration Act?

The question whether
the claims now sought to be raised by the petitioners would be
barred by the principles of Order II Rule 2 of CPC or on the

ground of res judicata or estoppel, in my opinion, are
questions on the merit of the claim of the petitioner and
defence of the respondent. These questions are to be
determined by the Arbitral Tribunal alone on the basis of the
pleadings and/or evidence led by the parties on these issues.
The question whether the claim of the petitioner would
be barred by the principles of res judicata or estoppel or by
Order II Rule 2 of the CPC are not matters to be considered by
this Court while exercising its jurisdiction under Section 11 of
the Act. (Indian Oil Corporation Ltd. vs. SPS Engineering
Ltd. (2011) 3 SCC 507)).
12. The legislature by amending the Act by way of the
Arbitration and Conciliation (Amendment Act) 2015 and the
insertion of Section 11(6A) of the Act has also restricted the
scrutiny of the Court at the stage of adjudicating an application
under Section 11 of the Act only to the existence of the
Arbitration Agreement.
 IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 31.10.2018
 ARB.P. 724/2018 & IA 14999/2018

PARSVNATH DEVELOPERS LIMITED Vs  RAIL LAND DEVELOPMENT AUTHORITY

CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA



1. This petition under Section 11 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) has
been filed by the petitioner seeking appointment of a nominee
Arbitrator on behalf of the respondent for constitution of the
Arbitral Tribunal to adjudicate the disputes that have arisen
between the parties in relation to the Development Agreement

dated 31.05.2013 executed between the parties.
2. The Arbitration Agreement is contained in Clause 31.4.1
of the said Agreement.
3. The petitioner invoked the Arbitration Agreement vide
its notice dated 30.5.2018 read with notice dated 18.7.2018
nominating its Arbitrator and calling upon the respondent to
nominate its Arbitrator.
4. The respondent, however, vide its reply dated 07.8.2018
refused to appoint its nominee Arbitrator on the ground that
the arbitral proceedings between the parties stood concluded
by the Arbitral Award dated 25.11.2017 and therefore, there
was no dispute to be adjudicated between the parties. It was
further contended that the claims now sought to be raised by
the petitioner would be barred by provisions of Order II Rule 2
of the Code of Civil Procedure(CPC) as also by principles of
estoppel and res judicata.
5. Though the reply filed by the respondent to the present
petition is not on record due to some office objections, similar
plea has been taken by the respondent before me in the course
of oral arguments.
6. On the other hand, counsel for the petitioner has drawn
my attention to the Statement of Claim filed by the petitioner
in the earlier arbitration proceedings and more particularly to
paragraphs 103 to 108 thereof, to contend that the petitioner
had expressly reserved its rights to claim the present claim by
way of separate arbitration proceedings. He submits that the

earlier arbitration proceedings were confined to the
applicability of Clauses 7.2.1 and 7.2.2 vis-a-vis Clause
29.8.2(b)(iii) of the Development Agreement so as to expedite
the arbitration proceedings as a claim of a large sum of money
of the petitioner of more than Rs.1034 thousand crores was
denied by the respondent on the basis of Clause 29.8.2(b)(iii)
the Agreement, instead of and in place of clause 7.2.2 of the
same.
7. He further submits that the respondent in its reply denied
the applicability of Order II Rule 2 of the CPC, however, the
Arbitral Tribunal did not render any finding on the same and
therefore, the arbitration proceedings continued on the basis of
the pleadings between the parties, with the petitioner reserving
its rights to claim further arbitration proceedings for the
remaining claim.
8. I have considered the submissions made by the counsels
for the parties. It cannot be denied that there was an
Arbitration Agreement between the parties in the Development
Agreement. It is also a matter of fact that the petitioners have
invoked the said Arbitration Agreement on more than one
occasion. It can also not be denied that the petitioners had
pleaded for reservation of its rights to claim further amounts in
the second arbitration proceedings which have resulted in the
Arbitration Award dated 25.11.2017. The question whether
the claims now sought to be raised by the petitioners would be
barred by the principles of Order II Rule 2 of CPC or on the

ground of res judicata or estoppel, in my opinion, are
questions on the merit of the claim of the petitioner and
defence of the respondent. These questions are to be
determined by the Arbitral Tribunal alone on the basis of the
pleadings and/or evidence led by the parties on these issues.
9. Counsel for the petitioner has placed reliance on the
judgment of the Supreme Court in SBP & CO. vs. Patel
Engineering Ltd. & Anr. (2005) 8 SCC 618, to contend that
the power exercised by this Court is a judicial power and,
therefore, this Court must determine whether the Arbitration
Agreement ceases to exist upon passing of the Award dated
25.11.2017.
10. In my opinion, the existence of the Arbitration
Agreement itself is not in dispute. The dispute is whether the
claim now sought to be raised by the petitioner would be
barred by the principles of Order II Rule 2 of the CPC and/or
principles of res judicata and/or estoppel. It cannot be denied
that an Arbitration Agreement can be invoked a number of
times and does not cease to exist only with the invocation for
the first time. The Supreme Court in Dolphin Drilling Ltd. vs.
Oil and Natural Gas Corporation Ltd. (2010) 3 SCC 267, has
held as under:
“8. The plea of the respondent is based on the words
“all disputes” occurring in Para 28.3 of the agreement.
Mr.Aggrawal submitted that those two words must be
understood to mean “all disputes under the agreement”

that might arise between the parties throughout the
period of its subsistence. However, he had no answer as
to what would happen to such disputes that might arise
in the earlier period of the contract and get barred by
limitation till the time comes to refer “all disputes” at
the conclusion of the contract. The words “all disputes”
in Clause 28.3 of the agreement can only mean “all
disputes” that might be in existence when the arbitration
clause is invoked and one of the parties to the agreement
gives the arbitration notice to the other. In its present
form Clause 28 of the agreement cannot be said to be a
one-time measure and it cannot be held that once the
arbitration clause is invoked the remedy of arbitration is
no longer available in regard to other disputes that
might arise in future.”
11. The question whether the claim of the petitioner would
be barred by the principles of res judicata or estoppel or by
Order II Rule 2 of the CPC are not matters to be considered by
this Court while exercising its jurisdiction under Section 11 of
the Act. (Indian Oil Corporation Ltd. vs. SPS Engineering
Ltd. (2011) 3 SCC 507)).
12. The legislature by amending the Act by way of the
Arbitration and Conciliation (Amendment Act) 2015 and the
insertion of Section 11(6A) of the Act has also restricted the
scrutiny of the Court at the stage of adjudicating an application
under Section 11 of the Act only to the existence of the
Arbitration Agreement.
13. In view of the above, I see no impediment in appointing
a nominee Arbitrator for the respondent to adjudicate the
disputes that are sought to be raised by the petitioners in

relation to the abovementioned Development Agreement. In
such proceedings, all objections of the respondent shall remain
open and it would be for the Arbitral Tribunal to decide the
same, may be as primary issues.
14. As the earlier arbitral proceedings had been conducted
by the Arbitral Tribunal which had Justice Vikramjit Sen,
Retired Judge of the Supreme Court, as the nominee Arbitrator
of the respondent, I appoint Justice Vikramajit Sen as the
nominee Arbitrator of the respondent. The two Arbitrators
shall now proceed to appoint the Presiding Arbitrator in
accordance with the arbitral procedure agreed between the
parties.
15. The Arbitrators shall give disclosure under Section 12 of
the Act before proceeding with the reference. Merely because
they had earlier adjudicated the disputes between the parties by
way of arbitration resulting in the Award dated 25.11.2017, it
will not be considered as a ground of bias or ineligibility of the
Arbitrators.
16. There shall be no order as to costs.
17. All contentions of the parties shall remain open in such
arbitration proceedings.
NAVIN CHAWLA, J
OCTOBER 31, 2018

Print Page

No comments:

Post a comment