High Court Cannot Reopen Arbitration Maintainability In Award Challenge After Final Reference-Stage Ruling: Supreme Court

The Supreme Court has recently held that where a court has already conclusively ruled in proceedings under Section 11 of the Arbitration and Conciliation Act, 1996 that arbitration is maintainable and that finding has attained finality, the issue cannot be reopened later in a Section 37 challenge to the arbitral award.

“When the Courts have ruled on the fact that application under Section 11 of the Act was maintainable and when such a decision has attained finality, revisiting the issue of maintainability and setting aside the award on the ground of jurisdictional error is incorrect.”, the top court ruled.

Applying the principle of res judicata, Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe set aside a judgment of the Chhattisgarh High Court which had invalidated the arbitral proceedings by reopening the issue of maintainability despite earlier judicial orders, including the Supreme Court's 2008 decision.

“The conclusion of the High Court that the earlier judgments are not res judicata is not correct in our opinion.”, it noted.

The dispute was between Ram Avatar Agrawal Road Construction Private Limited, now known as SPA Paving Projects Pvt Ltd, and the State of Chhattisgarh.

The contractor approached the Chhattisgarh High Court under Section 11 seeking the appointment of an arbitrator.

On September 16, 2005, the High Court appointed an arbitrator to adjudicate the dispute.

The State of Chhattisgarh challenged that order before the Supreme Court, contending that the dispute was governed by the Chhattisgarh Madhyastham Adhikarna Adhiniyam, 1983 and therefore ought not to proceed under the Arbitration and Conciliation Act, 1996.

However, on January 22, 2008, the Supreme Court dismissed the State's appeal after noting that the contractor had fulfilled the contractual requirements and that the statutory tribunal was unavailable when arbitration was invoked.

The arbitral proceedings culminated in an award dated March 21, 2008.

The State subsequently challenged the award under Section 34 before the District Judge.

By an order dated November 25, 2010, the District Judge rejected the objections on merits after noting that both parties had participated in the arbitral proceedings and no ground for setting aside the award had been established.

The matter thereafter reached the Chhattisgarh High Court in a Section 37 appeal.

Instead of examining the arbitral award on merits, the High Court held on February 5, 2024 that the arbitral proceedings themselves were not maintainable in view of the 1983 State enactment and consequently set aside the award.

SPA Paving Projects Pvt. Ltd. then challenged this judgment before the Supreme Court.

Allowing the appeal, the Supreme Court held that the High Court could not reopen a jurisdictional objection that had already attained finality between the parties.

It accordingly set aside the High Court's judgment and restored the arbitration challenge for adjudication on merits.

Noting that the arbitration proceedings had originated in 2005, the Court requested the High Court to dispose of the pending appeal expeditiously, preferably within four months.

For SPA Paving Projects Pvt. Ltd.: Advocates Padmesh Mishra, Shivam Shukla, Vastavikta Bhardwaj, Sameer Singh, Vijant, Neelam Singh.

For State of Chhattisgarh: Advocates Bishwajit Dubey, Vinayak Sharma, Ravinder Kumar Yadav, Aprajita Verma, Vivek Sharma.