Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(Del) 48399

Subramonium Prasad, J
Jaiprakash Associates Limited – Appellant
Versus
NHPC Limited – Respondent
ARB.P. 1061/2023

Advocates:
For the Appellants/Petitioners: Lovkesh Sawhney, Rohit Kumar
For the Respondents: Gauhar Mirza, Hiral Gupta, Sukanya Singh, Rohit Rahar, Devarshi Mohan

A referral court at the post-award stage may refuse to appoint an arbitrator if the underlying dispute has been previously adjudicated and determined to lack evidentiary support. Forcing parties into a fresh arbitration for concluded issues constitutes an abuse of process and undermines the finality of dispute resolution.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 11 and 34 - Appointment of arbitrator - Post-award petition for fresh arbitration - Scope of judicial review - When an arbitral award is set aside on grounds of absence of evidence and lack of reasoning, a referral court at the post-award stage exercises judicial functions to prevent abuse of the process - Re-agitating claims already adjudicated upon constitutes 'deadwood' and is non-arbitrable - Referral courts must intervene to prevent wastage of public and private resources where claims are ex-facie frivolous. (Paras 11, 13, 20, 23, 29).

(B) Arbitration - Referral stage - Jurisdictional limits - While the general rule is to refer disputes to arbitration, referral courts may decline to do so in exceptional cases where the claim is demonstrably non-arbitrable or constitutes an attempt to re-litigate concluded issues, which would be contrary to public policy. (Paras 31, 32).

Facts of the case:
The petitioner sought the appointment of a nominee arbitrator following a previous arbitral award being set aside by a court under Section 34. In the initial arbitration, the tribunal concluded that the claimant failed to produce material to substantiate its additional cost claims but still awarded a sum on the principle of good conscience. That award was quashed because the tribunal noted no evidence existed while simultaneously awarding compensation without legal basis. The petitioner sought a fresh round of arbitration for the same claims.

Findings of Court:
The court found that the issues stood concluded as the tribunal had already examined the evidence and reached a finding of fact that the claim lacked substantiation. Allowing a fresh arbitration for the same claims would amount to permitting a party to take a second bite at the cherry, which is an abuse of the legal process and contrary to the finality expected in dispute resolution.

Issues: Whether a court, in exercise of its power under Section 11 of the Act, should appoint a new arbitrator to decide claims that were previously rejected by a tribunal in an award that was subsequently set aside for being unreasoned and contrary to the evidence.

Ratio Decidendi: The court held that where an arbitral award has been set aside because of an inherent contradiction or lack of evidence/reasoning, and the findings of fact regarding the non-existence of evidence remain undisturbed, the matter effectively constitutes 'deadwood'. Re-litigating these claims is contrary to public policy and the objective of speedy, final dispute resolution, warranting the dismissal of the petition at the threshold.

Result: Petition dismissed.

Table of Content
1. factual history regarding project abandonment, arbitration, and the subsequent setting aside of the arbitral award. (Para 1 , 2)
2. parties' contentions on the maintainability of fresh arbitration proceedings under section 11 vs. abuse of process. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9)
3. scope of section 11 referral court jurisdiction and the threshold for 'deadwood' and non-arbitrability. (Para 10 , 11 , 12 , 13 , 14 , 15 , 16)
4. prohibition against re-litigating claims where the initial arbitration findings on merit remain undisturbed. (Para 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34)

JUDGMENT

1. The present Petition has been filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter 'Act of 1996') by the Petitioner seeking recommencement of the arbitration and appointment of nominee Arbitrator on behalf of the Respondent to adjudicate upon the disputes which have arisen between the Parties.

2. Shorn of unnecessary details, the facts leading to the present petition are as under:-

i. The Respondent invited bids with regard to execution of Dulhasti Hydro Electric Project on river Chenab at Kishtwar, Jammu and Kashmir. Tenders were invited since the same had been abandoned by a previous awardee namely M/s. Dumaz-Sogea Borie SAE.

The balance work was continued by the Petitioner between 1992 to 1995.

ii. Similarly, the work was done by the joint venture of M/s Jaiprakash Industries Limited and M/s Statkraft Anlegg AS. Subsequently, it was amalgamated with M/s Jaypee Cement Limited which came to be known as M/s Jaiprakash Associates Limited, the Petitioner herein and submitted its bid to the tender floated by the Respondent.

iii. It is stated that in the second phase, the work was divided into two packages, one for Upstream Area Works (Package 1) and the other for Downstream Area Works (Package 2). Both the phases were awarded to the Petitioner.

iv. It is stated that a Contract was entered into between the parties on

09.04.1997. The Contract dated 09.04.1997 stipulated that the work should be completed within 33 months but the work could not be completed within the stipulated term of 33 months. Extension was granted to complete the work. The project which was to be completed in the year 2000, was extended till 2007.

v. It is stated that on 11.05.2007, the certificate of completion was issued by the Respondent. The Petitioner raised bills for the two packages. It is stated that in the Bills of the Petitioner, certain additional costs which were said to have been incurred by the Petitioner on account of overstaying at the site were included.

vi. It is stated that the total claim amount towards these additional costs was Rs. 360.56 crores. It is stated that the claim was rejected by the Respondent herein. Since there was an Arbitration Clause in the Contract dated 09.04.1997, the Arbitration Clause, i.e., Clause 39.2, was invoked and the Arbitral Tribunal consisting of three Arbitrators was constituted.

vii. It is stated that in the majority Award, even though it was found that no evidence has been led by the Petitioner herein to substantiate the claim on the ground of cost incurred due to the delay, yet amount of Rs. 60 crore was awarded on the principle of good conscience and reasonable and proper estimate.

viii. The Award was challenged by both the Petitioner and the Respondent herein by filing O.M.P. (COMM) 505/2020 and O.M.P. (COMM) 482/2020 respectively. It is the case of the Respondent that the Award of Rs. 60 crores was unsustainable whereas, the Petitioner herein made a claim for enhancement of the said amount.

ix. The Learned Single Judge vide Judgment dated 26.05.2023 in O.M.P. (COMM) 482/2020, set aside the Majority Award and quashed the finding qua the grant of Rs 60 crores as additional compensation. It is held by the Learned Single Judge that on one hand the Tribunal had held that the Petitioner herein had failed to produce any material to substantiate

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2025 Supreme(Online)(Del) 48399

Subramonium Prasad, JJaiprakash Associates Limited – AppellantVersusNHPC Limited – RespondentARB.P. 1061/2023

Cases Referred (5)

Subramonium Prasad, J
Jaiprakash Associates Limited – Appellant
Versus
NHPC Limited – Respondent
ARB.P. 1061/2023