2025 Supreme(SC) 1979

SUPREME COURT OF INDIA
J.B. PARDIWALA, R. MAHADEVAN, JJ.
Hindustan Construction Company Ltd. Through Its Authorised Signatory Yogesh Dalal – Appellant
Versus
Bihar Rajya Pul Nirman Nigam Limited And Others – Respondents
Civil Appeal No. of 2025 [Arising out of SLP (C) No. 4211 of 2025]
Decided On : 28-11-2025

A valid arbitration agreement exists even if appointment procedures are unenforceable; courts should minimize intervention and uphold party autonomy in arbitration processes.

Headnote:

(A) Arbitration and Conciliation Act, 1996 – Section 11(6) read with Sections 16 and 34 – Appointment of Arbitrator – Arbitration and Conciliation Act, 1996 embodies legislative policy of party autonomy, limited judicial intervention, and procedural self-sufficiency – Once parties have agreed to resolve their disputes through arbitration, and such agreement satisfies requirements of Section 7, Court’s role becomes largely facilitative, confined to enabling, not obstructing arbitral process – Section 34, read with Section 16, provides for challenges to award on limited grounds, including validity of arbitration agreement, but not midstream, ensuring continuity of proceedings until an award is rendered – Entire scheme of Act strongly discourages any mid-way judicial intervention, especially by way of review, as it would run contrary to both text and spirit of Statute. (Paras 3.4, 10.1, 10.5 and 11.6)

(B) Arbitration and Conciliation Act, 1996 – Sections 11(6) and 29A – Appointment of Arbitrator – There is no statutory provision for review or appeal from order under Section 11, which reflects a conscious legislative choice – While High Courts, as courts of record, do possess limited power of review, such power is extremely circumscribed in matters governed by Arbitration Act – It may be exercised only to correct an error apparent on face of record or to address a material fact that was overlooked – It cannot be used to revisit findings of law or reappreciate issues already decided – Once Section 11 order had attained finality, only remedies available to respondents were to approach Supreme Court under Article 136 or to raise objections under Section 16 before Arbitral Tribunal – Having chosen neither route, and having participated in arbitral proceedings, including joint applications under Section 29A, they were estopped from reopening the matter through review – A later judgment cannot revive a concluded cause of action – High Court did not have jurisdiction to reopen or review its earlier order passed under Section 11(6) of A&C Act – Once appointment was made, court became functus officio and could not sit in judgment over the very issue it had already settled. (Paras 11.7, 11.8, 11.13 and 11.15)

(C) Arbitration and Conciliation Act, 1996 – Section 7 – Arbitration agreement – True test lies not in technical formality, but in intention – Where parties have acted on a shared understanding to arbitrate, they are estopped from subsequently denying existence of such an agreement – There is distinction between existence of an arbitration agreement and validity of appointment procedure – Even where a clause contains an otherwise defective unilateral appointment mechanism, Court may sever offending portion and exercise its power under Section 11(6) to appoint an independent Arbitrator – Valid and subsisting arbitration agreement exists between parties – Contrary finding of High Court is unsustainable in law and is liable to be set aside. (Paras 12.5, 12.10, 12.13 and 17)

(D) Arbitration and Conciliation Act, 1996 – Sections 29A and 12(5) – Extension of arbitral mandate – When a party joins in seeking extension under Section 29A despite having opportunity to object or seek termination, it signifies a higher degree of consent – However, such consent cannot be equated with express written waiver under Section 12(5) – Waiver is a foundational principle of arbitration, rooted in party autonomy and fairness in conduct – Arbitration, being adversarial in nature, inevitably results in a winning and a losing side – Though waiver, acquiescence, and estoppel are often discussed together in arbitral jurisprudence, they occupy distinct conceptual spaces – Waiver is intentional relinquishment of a known right; acquiescence arises from passive acceptance or delay; and estoppel precludes a party from resiling from a representation on which the other has relied – A & C Act incorporates only doctrine of waiver, presuming parties to be conscious of their conduct and its consequences – A party who has actively participated or consented to continuation of proceedings cannot later challenge same process merely because result is adverse – Section 29A empowers courts to extend mandate of an arbitral tribunal, either on a party’s application or upon sufficient cause – Joint application under Section 29A stands on a distinct footing from ordinary acts of participation such as filing pleadings. (Paras 13.1, 13.2, 13.9 and 13.10)

(E) Constitution of India – Articles 136 and 141 – Appeal – Precedential value of orders dismissing Special Leave Petitions – A non-speaking dismissal of SLP signifies only that Supreme Court, in its discretion under Article 136, has declined to interfere – It does not amount to approval of reasoning of subordinate forum – Doctrine of Merger does not apply to such dismissals – Dismissal of SLP at threshold without reasons does not elevate underlying judgment to binding precedent unless accompanied by an express declaration of law under Article 141. (Paras 14.1 and 14.2)

Facts of the case:

Present Appeal is directed against the final judgment and order dated 09.12.2024 passed by High Court of Judicature at Patna in Request Case No. 53 of 2020, whereby High Court dismissed request case filed by appellant, Hindustan Construction Company Limited, under Section 11 of Arbitration and Conciliation Act, 1996.

The issues that fall for consideration in the present appeal are as follows:

(i) Whether High Court possessed jurisdiction to review or recall its earlier order passed under Section 11(6) of the A&C Act, and whether the exercise of such power was valid in law.

(ii) Whether a valid and subsisting arbitration agreement existed between parties within meaning of Section 7 of A&C Act, and whether clause 25 of contract satisfies statutory requirements of a binding arbitration clause.

(iii) Whether joint application filed by both parties, seeking extension of the Arbitrator’s mandate under Section 29A constitutes an express or implied waiver of the ineligibility under Section 12(5), and Section 4 of the Act.

Findings of Court:

Although this is a fit case for imposing costs, we refrain from doing so, but issue a stern warning to then Managing Director of respondent company, BRPNNL. Public Officers are custodians of public faith, not mere administrators. Any repetition of such neglect may invite adverse remarks or even personal accountability. The officer is advised to reflect upon responsibilities of public office and ensure that such indifference does not recur.

Result : Appeal allowed.