Wednesday, 13 April 2022

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

 In the present case it is not in dispute the award was not

passed on merits of the rival claims and therefore the decision in

Associated Constructions (supra) will come to the assistance of the applicant. The basis of the application is the fact that the award having been set aside and the Award not being on merits,

principles of Res Judicata cannot be attracted. It is also contended that under Order 41 Rule 5 of the Code of Civil Procedure, merely filing an appeal will not operate stay of further proceedings.

There is no prohibition against a new tribunal being appointed or the applicant being restrained in any manner from prosecuting this application. {Para 15}





Wadhwa Group Holdlings Private Limited Vs Homi Pheroze Ghandy & Anr.


DATED : 7TH MARCH, 2022.

1. The application seeks appointment of a Sole Arbitrator pursuant

to notice invoking clause 25 of a writing dated 23rd September,

2006 titled “Heads of Agreement”. The agreement is between the

applicant in its earlier name Vishwaroop Infotech Private Limited

and Homi Pheroze Ghandy-respondent no.1 and Kersi Pheroze

Ghandy (since deceased). Respondent no.2 is the Executor of the

Will of late Kersi Ghandy. Clause 25 of the agreement is the

Arbitration clause, which is reproduced below for ease of


“25. In the event of any disputes or differences

arising between the parties the same shall be

referred to arbitration under the Arbitration

and Conciliation Act, 1996.”

2. Vishwaroop Infotech Private Limited is now known as Wadhwa

Group Holdings Private Limited. The notice invoking arbitration

is dated 15th May, 2019, copy of which is at Exhibit ‘G’ sets out

that disputes and differences have arisen between the parties and

suggests the name of three persons all Advocates of this court, one

of whom is to be appointed as Sole Arbitrator. The invocation

letter is issued by the Advocates for the applicant and which is

seen to be addressed to the two respondents. The respondents

have vide their letter of 13th June, 2019 contended that the notice

is premature and the matter is yet decided conclusively and hence

the notice is barred by Res Judicata since an appeal is pending

before this court and being sub-judice, no arbitrator is required to

be appointed. In view of this denial, the present application has

been filed.

3. Mr. Khandeparkar who appears for the applicant has taken me

through the facts which reveal that on 23rd September, 2006

respondent no.1 and late Kersi Ghandy had agreed to sell and

assign the right, title and interest in immovable property

described therein to the applicant for consideration of Rs.24

crores. After the disputes arose, Commercial Arbitration Petition

no.618 of 2012 came to be filed and vide an order dated 17th July,

2012 the High Court referred the disputes to a Sole Arbitrator.

4. By his award dated 22nd April, 2013 the Arbitrator dismissed the

claim on the ground of limitation. By a separate award of 14th

August, 2014 the Sole Arbitrator dismissed the counter claim of

the applicant on the ground of Res Judicata and limitation.

Thereafter the applicant filed Arbitration Petition no.487 of 2014

and 688 of 2015 under Section 34 of the Act challenging both the

aforesaid awards. On 22nd January, 2019 this court allowed

Arbitration Petition no.688 of 2015 and set aside the award

dismissing the counter claim. Thereupon Arbitration Petition

no.487 of 2014 also came to be disposed since it did not survive.

The respondent therein being aggrieved by the order of the Single

Judge filed an Appeal under Section 37 of the Arbitration and

Conciliation Act on 22nd February, 2019 and that appeal is said to

be pending.

5. During the pendency of the appeal, the applicant herein invoked

arbitration as aforesaid. The application is opposed on behalf of

the respondents on the basis that it is premature due to the

pendency of the appeal. Mr. Khandeparkar submitted that

notwithstanding pendency of the appeal, this application can

proceed. In support of his contention, he relies upon a decision of

the Delhi High Court in Décor India P. Ltd. v/s. National Building

Const. Corpn. L.1 in which he has relied upon the decision to

demonstrate that there can be no automatic stay during the

pendency of an appeal. He submits that as recorded in paragraph

15 of that judgment, there is no automatic stay in appeals or

orders or decrees of suit, it cannot be contended that the

legislature intended to provide protection to the defendants by

providing automatic stay on filing an appeal under Section 37.

Mr. Khandeparkar submits that the decision in Décor India

(supra) deals with the situation that is presently faced by the

parties. Mr.Khandeparkar submits that the respondent cannot

prevent an arbitrator from being appointed.

6. Mr. Khandeparkar also relies upon a decision of the Supreme

Court in Indian Oil Corporation Ltd. v/s. M/s. S.P.S. Engineering

1 2007 (97) DRJ 428(DB)

Ltd.2 which dealt with the issue whether a claim is barred by Res

Judicata can be adjudicated pursuant to a Section 11 application.

He therefore submits that the application is liable to be allowed

and the Sole Arbitrator is required to be appointed.

7. Mr. Sawant very firmly opposed the application. According to

Mr. Sawant since the appeal is admittedly pending, there is no

occasion to agitate the issue once again. He submits that till the

appeal is decided, this application cannot proceed. On 24th

January, 2022, Mr. Sawant, on instructions, submitted that since

notice invoking arbitration has been dealt with in an Advocate’s

reply dated 13th June, 2019, copy of which is annexed to the

petition, the respondents did not intend to file any reply to this

application. Mr. Sawant has taken me through the factual matrix

to the extent it pertains to his client’s point of view inter alia

contending that the appeal filed by the respondents has been

admitted and once the appeal is admitted, it stands to reason that

no further proceeding must continue since there is always a

possibility that the order impugned in the appeal may be set aside.

If that be so, Mr. Sawant submitted that award would revive and

this application would be rendered infructuous. He therefore

2 Civil Appeal no.1282 of 2011 (SC)

arising out of SLP(c)no.11903/2010

submits that the present application is liable to be rejected as

premature since there is always a likelihood that he may succeed

in the appeal and if he does, the award will revive. Revival of the

award would render the application and the appointment of an

arbitrator unnecessary.

8. Mr. Sawant has invited my attention to the order passed by the

Division Bench of this court in Siddhivinayak Realties Pvt. Ltd. v/s.

V. Hotels Limited and others 3 in which a motion was taken out by

the original defendant no.1 for a summary judgment of dismissal

of the suit. He invited my attention to the observation of the court

in respect of Section 43(4) of the Arbitration and Conciliation Act

in particular the reference to exclusion of time and the fact that

the court had decided that the words “order of the court” referred

in Section 43(4) would mean a final order which is not subjected

to any further challenge or the order in appeal if the original

order setting aside an award is carried in appeal and affirmed. In

that situation there is a case for treating an appeal as a

continuation of the original proceeding for setting aside the


3 NMS No.119 of 2016 in COMS No.133 of 2018

dated 30th April, 2021

9. This Mr. Sawant submitted that is the very same principle that has

been laid down by the Federal Court in Lachmeshwar Prasad

Shukul v/s. Keshwar Lal Chaudhuri and others 4. Mr. Sawant

submitted that in a Lachmeshwar Prasad (supra), the court was

dealing with an issue under the Bihar Money Lenders Act, in a

retrospective action. The decree of the High Court in that case

was not final since an appeal was pending before the Division

Bench. The three judge bench of the court observed that if appeal

were to be allowed on any ground, the court would be bound to

comply with the provisions of the new Bihar Act. Mr. Sawant

canvassed this aspect inter alia observing that more recently the

Supreme Court had in the case of Union of India v/s. Varindera

Constructions Limited 5 in relation to Section 37 read with Section

34 of the Arbitration and Conciliation Act observed that the

Supreme Court had repeatedly observed that an appellate

proceding is a continuation of the original proceeding as held in

Lachmeshwar Prasad (supra). This he submitted would be the

correct position in law and therefore till the appeal filed by the

respondents is disposed finally, the fate of the award is still

unknown and therefore this application would be premature and

4 53 L.W. 373 (Patna)

5 (2020) 2 SCC 111

that the reference would be bad.

10. Mr. Sawant also relied upon the observation of the Supreme

Court in DLF Home Developers Limited v/s. Rajapura Homes

Private Limited & Anr .6 that the High Court is not required to

mechanically appoint an Arbitrator but can examine whether a

prayer for appointment can be denied if the dispute does not

correlate to the agreements.

11. I have heard the learned counsel for the parties at length.

The opposition to this application effectively seeks a stay of

proceedings in this arbitration application. The fact that

arbitration is considered expeditious remedy, is an aspect that the

respondent is obviously aware of but the respondent in the

present case effectively seek postpone the fate of the notice

invoking arbitration and that is not contemplated in the Act.

12. Section 11 of the Act requires this court to appoint an

Arbitrator where the parties have failed to act either for want of

a procedure for appointing an arbitrator or on account of not

observing such a procedure. Chapter III of the Arbitration and

Conciliation Act deals with composition of an arbitral tribunal. It

6 2021 SCC Online SC 781

deals with number of arbitrators, appointment of arbitrators,

grounds for challenge, procedure for challenge, termination of

the mandate for failure of impossibility to act and for substitution

of a tribunal. The merits of the case are not required to be gone

into at those stages. The High Court is concerned with the

appointment of an arbitrator. The contentions raised by the

respondents in the present case are obviously tied in with the fate

of the appeal and in my view considering the facts at hand the

invocation of arbitration cannot be subjected to the fate of the


13. Disposal of the appeal could lead to one of two results. If

the order in appeal is affirmed, the award is rendered

inconsequential. If the order is set aside, the award revives. The

question is whether the commencement of a fresh round of

arbitration by virtue of the current invocation can be prevented,

given the uncertainty. In my view that would not lie within the

scheme of the Act which calls upon the court to act for a party

who does not avail of his right of appointment of an arbitrator.

While Mr. Sawant may be correct in his submission that a fresh

suit would be hit by Res Judicata, I find that the institution of the

suit cannot be prevented. Res Judicata may be a good defence but

in an arbitration at the Section 11 stage the objection on the

ground of Res Judicata is forming part of the defence to be

considered by an arbitrator.

14. In my view in the facts of the case the court under Section

11 is not required to deal with that aspect since that would not

fall for consideration under the extent limited scope of High

Courts jurisdiction under Section 11(6) of the Act. Section 11(6)

clearly provides for different situations which would require the

appointment to be made by the High Court. Furthermore, as we

have seen the award is not set aside on merits but this court has

set aside the award and in that view of the factual aspects, a

decision of this court in Associated Constructions (supra) would

be of relevance. Moreover, a decision in Indian Oil Corporation

(supra) also clearly sets out that the objection on the ground of

Res Judicata does not arise for consideration under provisions of

Section 11 and that it should be exempted by an arbitral tribunal.

15. In the present case it is not in dispute the award was not

passed on merits of the rival claims and therefore the decision in

Associated Constructions (supra) will come to the assistance of the

applicant. The basis of the application is the fact that the award

having been set aside and the Award not being on merits,

principles of Res Judicata cannot be attracted. It is also contended

that under Order 41 Rule 5 of the Code of Civil Procedure, merely

filing an appeal will not operate stay of further proceedings.

There is no prohibition against a new tribunal being appointed or

the applicant being restrained in any manner from prosecuting

this application.

16. The need to expedite the pre-appointment process and clear

roadblocks in that process also finds support in the recent

decision of the Supreme Court in Interncontinental Hotels Group

(India) Pvt. Ltd. and Another v/s. Waterline Hotels Pvt. Ltd .7 in

which the court has observed that the jurisdiction of the court to

adjudicate issues at the pre-appointment stage is very limited and

that a prima facie view is to be taken. The issues of arbitrability /

validity are matters to be adjudicated by the arbitral tribunal and

only exception that courts can adjudicate to cut the deadwood. It

describes the watch word for the courts under section 11 as

follows; “when in doubt, do refer”.

7 2022 SC OnLine SC 83

17. In Indian Oil (supra) the Supreme Court observed that a

question whether a claim is barred by Res Judicata cannot arise

for consideration under Section 11 of the Arbitration and

Conciliation Act and such an issue would have to be considered

by the tribunal since it will require consideration of pleadings.

Adverting to the scope of Section 11, the Supreme Court observed

that the provisions does not permit examination of the

maintainability or tenability of the claim on facts or in law. There

can be no threshold consideration and rejection of a claim on the

ground of Res Judicata, while considering an application under

Section 11 of the Act. This is one aspect that has been pressed into

service. This court has in Associated Constructions v/s.

Mormugoa Port Trust8 observed that once an award is set aside

for reasons other than merits, the applicants could commence


18. In the present case also we are at the pre-appointment

stage and as stated above, Post appointment it is always open to

raise all defences before the tribunal including the aspect of Res

Judicata. Therefore the lack of finality of the award before the

arbitral tribunal would be a view on the matter on merits. In DLF

8 2010 (5) Mh.L.J. 739

(supra) the issue the court considered as in the content of

examining whether the dispute correlate to the agreement

between the parties. That does not fall for consideration in the

case at hand and hence the respondent cannot get an assistance

from that decision. In Varindera Consultants (supra), the court

was considering the bar of limitation, hence of no assistance to the

respondents. In my view the other aspects of Res Judicata may be

taken up before the tribunal.

19. In view of the above, I am of the view that the application is

liable to be allowed. Accordingly, I pass the following order;

(i) Mr. Karl Tamboly, Advocate, is appointed as Sole Arbitrator

to adjudicate upon claims and counter claims, if any.

(ii) The learned Arbitrator is requested to file his disclosure

statement under Section 11(8) and Section 12(1) within

four weeks with the Prothonotary and Senior Maser and

provide copies to the parties.

(iii) Parties to appear before the Sole Arbitrator on a date to be

fixed by him at his earliest convenience.

(iv) Fees payable to the Sole Arbitrator will be in accordance

with the Bombay High Court (Fee Payable to Arbitrators)

Rules, 2018.

(v) Arbitration Application is disposed in the above terms.

(vi) No costs.

(A. K. MENON, J.)

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