Arbitration Can Resume Without Fresh Notice After Award Is Set Aside: Karnataka High Court

The Karnataka High Court has held that once an arbitral award is set aside, the disputes stand revived and can be referred back to arbitration without requiring the parties to issue a fresh notice under Section 21 of the Arbitration and Conciliation Act, 1996.

Section 21 deals with the commencement of arbitral proceedings through notice to the opposing party.

Justice Suraj Govindaraj held that this requirement is procedural and not jurisdictional and cannot be invoked to block arbitration after an award has been annulled.

“The legal consequence of such an order is that the award is obliterated and ceases to exist in the eye of law,” the court held, clarifying that annulment of an award returns the parties to arbitration to resolve the same disputes.

“The requirement of a fresh notice under Section 21 is procedural and cannot be elevated to a jurisdictional bar so as to defeat the substantive right of a party to seek arbitration,” the court added, noting that the opposing party was already aware of the disputes and had participated in earlier arbitral proceedings.

The ruling came on a petition filed by Re Sustainability Healthcare Solutions Limited. The dispute arose from a concession agreement signed in 2004 with the Bruhat Bengaluru Mahanagara Palike to develop, operate, and maintain an integrated municipal solid waste processing facility.

The agreement was terminated in 2016, after which the company invoked arbitration. A sole arbitrator appointed by the High Court passed an award in 2018, partly allowing the company's claim and directing payment of Rs 4 crore.

Both sides challenged the award. After appellate remand, the Commercial Court set it aside in February 2023, holding that courts lack the power to modify arbitral awards and that any corrections can only be made by the arbitral tribunal.

With the dispute still unresolved, the company issued a notice in November 2023 seeking the appointment of a fresh arbitrator. No response was received. The company was later directed to correspond with Bengaluru Solid Waste Management Limited, but this also drew no response.

Opposing the plea, the respondents argued that since no appeal was filed against the Commercial Court's order, the petition for appointment of an arbitrator was not maintainable and that a fresh Section 21 notice was mandatory.

Rejecting the objection, the High Court held that once an award is set aside, the arbitration clause and the underlying disputes stand revived.

The court accordingly allowed the petition and appointed Justice Ajit J. Gunjal, former judge of the Karnataka High Court, as the sole arbitrator.

For Petitioner: Senior Advocate K.N Phanindra and Advocate Rahul Dev S Deshamuore

For Respondents: Advocates Prashanth Chandra and Satyanand B.S