Second Arbitral Reference Maintainable When Award Is Set Aside Without Adjudication On Merits: J&K&L High Court

The Jammu & Kashmir and Ladakh High Court has held that a second reference to arbitration is maintainable where an arbitral award has been set aside under section 34 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") without any adjudication on merits of the claims, leaving the underlying disputes unresolved. Justice Sanjay Dhar said while allowing the application seeking appointment of a fresh arbitrator after the earlier award had been set aside by the Designated Commercial Court, Srinagar. The dispute arose from a contract relating to construction of a 54-metre span bridge over Ferozpora Nalla. Disputes arose regarding delay, faulty design and foreclosure of the contract. In the earlier proceedings, the arbitral tribunal had rejected most of the claims of the contractor, allowing only one claim partially. The Designated Commercial Court set aside the entire on being challenged by both parties under section 34 expressly observing that the parties were free to initiate fresh arbitral proceedings. After the award was set aside, the contractor issued a fresh notice under section 21 of the Arbitration Act and filed an application under section 11 seeking appointment of a fresh arbitrator. The respondents objected to the initiation of fresh arbitral proceedings contending that once the claims had been rejected by the arbitral tribunal, they stood reduced to deadwood and second reference would amount to giving a second chance to the contractor. The court drew a clear distinction between jurisdiction on application filed under section 11 pre award and post award, holding that at the post award stage, the court must consider the arbitral award, orders passed under sections 34 and 37 and whether the disputes in the earlier proceedings have been conclusively decided on merits. The court referred to the Delhi High Court's judgment in Jaipraksh Associates Limited where it was held that where the court held that although disputes are generally referred to arbitration, the court at post award stage must intervene to prevent manifest injustice especially when claims are clearly non arbitrable and legally untenable. Permitting a second of arbitration in such cases, the court ruled, would amount to a second bite at the cherry and defeat the objective of the Arbitration Act to ensure speedy and conclusive dispute resolution. “ If it is found by the Referral Court while considering the application for second reference that the disputes between the parties have been finally resolved in terms of the arbitral award passed pursuant to first reference or in terms of the judgment of the Court under Section 34/37 of the Act of 1996, it would be a case of dead claim and an application for second reference would not be maintainable. ”, it said. Relying on McDermott International Inc., the court reiterated that once an arbitral award is set aside, the court may leave the parties to initiate fresh arbitral proceedings unless claims have been conclusively adjudicated on merits. The court noted that in the present case, the commercial court while setting aside the award did not adjudicate the claims on merits and left parties to commence arbitration afresh. It further noted that no appeal under section 37 was either filed giving finality to the order passed by the court. It observed that “But it is a case where the learned Designated Commercial Court has not rendered any finding of its own on the merits of the award and has set it aside on the basis of the concession made by the parties with regard to the manner in which the award has been passed by the Arbitral Tribunal. In this view of the matter the underlying disputes between the parties have remained unresolved.” Accordingly, the court rejected the contention of the respondents that the claims were deadwood and allowed the present application. Case Title: M/S Sohrab Iqbal Goni (JV) Vs. Director, Transport J&K Economic Reconstruction AgencyCitation: 2025 LiveLaw (JKL) 349 Case Number: Arb P. No.27/2025 Order Date: 26/12/2025 For Petitioners: Mr. Azhar-ul-Amin, Advocate. For Respondents: Mr. Waseem Gull, GA. Click Here To Read/Download Order

Second Arbitral Reference Maintainable When Award Is Set Aside Without Adjudication On Merits: J&K&L High Court

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Second Arbitral Reference Maintainable When Award Is Set Aside Without Adjudication On Merits: J&K&L High Court

Mohd Malik Chauhan

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