Arbitration Clause Cannot Be Invoked Again Over Matters Which Have Already Been Adjudicated: Karnataka High Court

The Karnataka High Court has said the Arbitration clause in the lease agreement cannot be invoked for matters that have already been adjudicated upon and concluded by both the Arbitral Tribunal and the competent courts.

Justice Sachin Shankar Magadum held thus while dismissing a petition filed by Starlog Enterprises Limited, who had approached the court praying for the appointment of a sole arbitrator to arbitrate the disputes that had arisen between him and New Mangalore Port Trust.

It said, “Given that both critical issues, the legality of the contract's termination and the refund of amounts claimed have attained finality through due legal process, the petitioner cannot invoke the arbitration clause again on the same grounds. The petitioner's attempt to initiate fresh arbitration proceedings under Section 21 of the Arbitration and Conciliation Act is therefore fundamentally misconceived and legally impermissible.”

The port trust had cancelled the lease deed entered into with the petitioner. Following this, the petitioner approached the High Court for the appointment of the sole arbitrator, which was allowed. The Arbitrator had then passed an arbitral award on 08.02.2017, upholding the cancellation of the lease deed but directed the respondent to refund the security deposit and perimeter fencing amount incurred by the petitioner to him.

The respondent challenged the award before the jurisdictional District and Sessions Court under Section 34 of the Arbitration and Conciliation Act, 1996, which set aside the award, holding that the Lease Deed did not provide for refund of the deposit amount or reimbursement of the costs incurred for constructing the perimeter wall. The order was confirmed up to the Supreme Court.

Findings:

On going through the records, the bench noted that the primary relief sought by the petitioner, which involved challenging the termination of the contract, was decisively negated by the Arbitrator. This adverse finding against the petitioner was not contested by initiating proceedings under Section 34 of the Arbitration and Conciliation Act. Consequently, the Section 34 proceedings were confined solely to the issue of refund of the statutory deposit and the amount expended on the construction of the perimeter wall and these limited reliefs were also set aside by the court.

Emphasising that this case involves post-award developments under Section 34 proceedings, where the award has been conclusively set aside.

It said “It is a well-established legal principle that once an award is set aside, the parties may ordinarily invoke the arbitration clause anew by resorting to Section 21 of the Arbitration and Conciliation Act. However, this principle is inapplicable here because the issues raised by the petitioner were already adjudicated upon by the Arbitrator and subsequently addressed in Section 34 proceedings, with the findings being affirmed by the Hon'ble Apex Court. The contention of the petitioner that since the entire award was set aside, their right to invoke arbitration under Section 21 still subsists is misconceived.”

Then it held, “The findings under Section 34 proceedings have a direct bearing on the maintainability of the present civil miscellaneous petition. The Court, while adjudicating Section 34 proceedings, unequivocally addressed the pertinent issues, and these findings remain binding upon both parties.”

It also rejected the assertion of the petitioner that the setting aside of the entire award revives their right to seek fresh arbitration.

Dismissing the petition, it said “The petitioner's claim under Section 65 of the Indian Contract Act or any related legal principle cannot be entertained within the domain of arbitration. All relevant issues have been conclusively resolved through the arbitration proceedings and subsequent judicial reviews, leaving no scope for further arbitration under the existing agreement.”

Appearance: Advocates PRADEEP NAYAK, SANJANA .M, AKSHITA GOYAL, for Petitioner.

Advocats TEJAS .S.R, FATHIMA NAHA, for DUA ASSOCIATES FOR RESPONDENT

Citation No: 2025 LiveLaw (Kar) 90

Case Title: Starlog Enterprises Limited Board of Trustees of New Mangalore Port Trust

Case No: CIVIL MISC. PETITION NO. 372 OF 2023

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