The Supreme Court ruled that its prior judgment did not adjudicate the merits of the case, allowing for a fresh arbitration under the Arbitration and Conciliation Act.

JUDGEMENT :

1. Whether observations made by the Supreme Court in the course of upholding an order of a Division Bench of this Court setting aside an arbitral award, would constitute a ruling on merits of the case, disabling arbitration being conducted afresh, is the issue that is presented for adjudication in the facts of this case.

Context and Factual Background:

2. Pursuant to a tender, a bid was made by the Applicant, Batliboi Environmental Engineering Ltd., formerly, Hydraulic & General Engineers (“Batliboi”), and was selected by the Respondent, Hindustan Petroleum Corporation Ltd. (“HPCL”) for construction of a sewage treatment reclamation plant at a refinery of HPCL on a turnkey basis. The arbitration agreement is contained in a purchase order dated February 27, 1992 for a value of Rs. 5.73 crores. Disputes and differences arose. Batliboi made a claim of Rs. 3.41 crores spread over eleven heads of claims on HPCL. A sole arbitrator conducted proceedings.

3. The Statement of Claim entailed five specific heads of claims from Batliboi. The Statement of Defence was accompanied by a counter-claim under seven heads of claims from HPCL. Eventually, on March 23, 1999 the Arbitral Tribunal passed an award (“Arbitral Award”), which was upheld by a Learned Single Judge of this Court exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) by an order dated December 4, 2000 (“Section 34 Judgement”).

4. An appeal by HPCL under Section 37 of the Act led to a Division Bench of this Court setting aside the Section 34 Judgement by a judgement dated November 2, 2007 (“Section 37 Judgement”). Batliboi filed a special leave petition in the Supreme Court under Article 136 of the Constitution of India, which granted leave, considered the appeal and by a reasoned judgement dated September 21, 2023 (“SC Judgement”), upheld the Section 37 Judgement, dismissing Batliboi’s appeal.

5. Batliboi invoked arbitration afresh on October 12, 2023, on the premise that the Arbitral Award having been set aside and Batliboi’s claims not having been dismissed on merits, it was constrained to invoke arbitration afresh. By a reply dated November 7, 2023, HPCL took the stance that Batliboi’s claims had been adjudicated on merits and the same disputes cannot be re-adjudicated again in arbitration. This stand-off led to the captioned Application being filed under Section 11 of the Act.

6. Therefore, at the heart of the controversy before me today lies the question of whether the disputes between the parties stand adjudicated on merits and covered by res judicata – preventing the same issues being adjudicated a second time.

Contentions of the Parties:

7. I have heard Mr. Virag Tulzapurkar, Learned Senior Counsel on behalf of Batliboi and Mr. Zal Andhyarujina, Learned Senior Counsel on behalf of HPCL, at length. I have had the benefit of their verbal arguments, written notes on submissions and also copious case law pressed into service.

8. According to Mr. Andhyarujina, in the course of rendering the SC Judgement, the Supreme Court has made extensive observations on merits of the case. The parties even tendered data in a chart to the Supreme Court, Learned Senior Counsel would submit, to buttress the point that the SC Judgement is an adjudication and expression of opinion on merits. He would submit that the SC Judgement endorses the Section 37 Judgement, which means that there are two concurrent findings on merits, and therefore, there is no scope for a fresh adjudication of the merits.

9. In contrast, Mr. Tulzapurkar would submit that the decision in the SC Judgement is essentially that the Arbitral Award did not withstand scrutiny under Section 37 read with Section 34 of the Act. Besides, he would submit, the SC Judgement has led to the Section 37 Judgement merging into the SC Judgement, which necessarily means that the Section 37 Judgement is no longer in existence. Therefore, he would submit, any reference to the Section 37 Judgement