When Deciding Application For Appointment Of Arbitrator, Court Cannot Examine Whether Claim Is Barred By Res Judicata: Delhi High Court

Facts

The present petition had been filed for appointment of arbitrator under Section 11(6), ACA. The parties had entered into an agreement on 30.07.2010 whereby the Petitioner was required to carry out civil works for underground rock caverns for strategic storage of crude oil in Padur, Karnataka. The total value of the contract was Rs. 374,65,80,000. Disputes arose between the parties and on 24.02.2017, the Petitioner invoked arbitration in terms of Clause 9.0.1.0 of the GCC but receiving no response filed a petition for appointment of an arbitrator.

This application was allowed on 24.07.2017 whereby the Court appointed a Sole Arbitrator who rendered the Award on 26.06.2021 awarding a sum of Rs. 35,99,86,464 along with 9% interest in favour of the Petitioner but rejecting some of its claims. Both parties challenged the Award in separate petitions. While the Respondent challenged the Award in its entirety, the Petitioner challenged it to the extent its claims were party and wholly disallowed.

On 02.08.2024, both petitions were disposed of by a common order. Insofar as Respondent's petition was concerned, with the consent of the parties, the same was allowed and the Award to the extent it had awarded a sum of Rs. 35,99,86,464 was set aside and the Petitioner's petition was disposed of as infructuous. It is in this backdrop that the Petitioner invoked arbitration on 13.09.2024 for fresh adjudication of the disputes, proposing names of arbitrators in response to which the Respondent sent a rly dated 12.10.2024 declining to agree to arbitration on the ground that the Petitioner was estopped from reagitating the claims.

Contentions

The Counsel for the Respondent has taken the preliminary objection to the maintainability of the present petition on the grounds of waiver and res judicata. It is argued that the Petitioner on its own volition had submitted before the Court that it was willing to concede to part of the Award being set aside. Even at that stage, the Respondent had categorically contended that the Petitioner would not be entitled to agitate its claims again, inter alia on the doctrine of res judicata and principles analogous thereto

In fact, as recorded in the order dated 02.08.2024, liberty was reserved with the Respondent to take such defences as available in the event the Petitioner reagitated any issue and this position was accepted by the Petitioner. The voluntary statement made on behalf of the Petitioner constitutes an unequivocal and irrevocable waiver of its rights. Even otherwise, the claims are also barred by the principle of res judicata.

The Counsel for the Petitioner, on the other hand submitted that it is not open to this Court in a petition filed under Section 11, ACA to examine the tenability of a claim, particularly the issue whether the claim is barred by res judicata and placed reliance on the judgment of the Supreme Court in Indian Oil Corporation Limited v. SPS Engineering Limited (2011) 3 SCC 507 (“IOCL”), wherein the Supreme Court had held that it is for the Arbitral Tribunal to examine and decide whether the claim is barred by res judicata.

Observations

The Court observed that the main issue for consideration before the Court is whether a Court in a petition under Section 11, ACA can examine whether a claim is barred by res judicata or not.

The Court upheld the contention of the Petitioner that the Court cannot decide the issue whether the claims of the Petitioner are barred by res judicata and it is for the Arbitral Tribunal to adjudicate on this aspect.

The Court observed that it is settled that in the scope of jurisdiction under Section 11, ACA, the referral Court does not examine the tenability of the claims sought to be referred to arbitration by the applicant. The enquiry at this stage of appointment of arbitrator is restricted to the existence of arbitration agreement and/or whether the petition itself is barred by limitation.

The Court placed reliance on the IOCL judgment wherein the Supreme Court had held that the limited scope of Section 11 does not permit examination into the contention that the claim is barred by res judicata and it is for the arbitral tribunal to decide this matter. It was also held that there can be no threshold consideration and rejection of a claim on the ground of res judicata while considering an application under Section 11, ACA.

Accordingly, the Court allowed the petition and appointed Justice Swatanter Kumar, former Judge of Supreme Court as the Sole Arbitrator to adjudicate disputes between the parties.

Case Title – Hindustan Construction Company Ltd v. Indian Strategic Petroleum Reserves Ltd.

Citation: 2025 LiveLaw (Del) 551

Case No. – ARB.P. 1854/2024

Appearance-

For Petitioner - Mr. Sameer Parekh, Mr. Sumit Goel, Mr. Jayant Bajaj and Ms. Ruchi Krishna Chauhan, Advocates.

For Respondent - Mr. Dinesh Pardasani, Mr. Siddharth Chechani and Mr. Amrit Singh, Advocates.

Date – 07.05.2025

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