An invalid arbitral award permits fresh arbitration proceedings, disregarding res judicata, reinforcing the principle of minimal intervention by courts in arbitration.

JUDGMENT

P.B.Suresh Kumar, J.

This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (the Act ) is directed against the order dated 13.12.2010 in Arbitration O.P. No.1906 of 2008 on the files of the Court of the District Judge, Ernakulam. The appellant was the first respondent in the said proceedings.

2. The first respondent is a member of the second respondent, M/s.Cochin Stock Exchange Ltd. and was carrying on business as share broker in the name of his proprietory concern. The appellant availed the services of the first respondent for purchase and sale of shares through the second respondent. A dispute arose between the appellant and the first respondent concerning the transactions effected by the first respondent on behalf of the appellant. Disputes of this nature, in terms of the provisions contained in the Memorandum and Articles of Association of the second respondent, are to be adjudicated by recourse to arbitration by an arbitral tribunal constituted by the second respondent. An arbitral tribunal was therefore constituted by the second respondent on the request of the parties to resolve the dispute and the arbitral tribunal passed an award directing the first respondent to pay to the appellant a sum of Rs.36,72,180.56/- with interest. The award was challenged by the first respondent in court in Arbitration O.P.No.33 of 1999 invoking Section 34 of the Act. The Court set aside the award on grounds that the arbitral tribunal was not one properly constituted and that the first respondent was not given proper notice in the arbitral proceedings. Thereupon, the appellant required the second respondent to constitute an arbitral tribunal again for resolving the dispute afresh and a new arbitral tribunal was accordingly constituted for the said purpose. Even though notice was issued by the newly constituted arbitral tribunal to the first respondent, he has not chosen to contest the claim of the appellant. Having regard to the materials on record, the newly constituted arbitral tribunal also passed an award permitting the appellant to realise Rs.36,72,580/- with interest from the first respondent. That award was challenged by the first respondent in Arbitration O.P. No.1906 of 2008 on the ground that in the light of the order in Arbitration O.P.No.33 of 1999, the proceedings which culminated in the award impugned is unsustainable in law being one hit by the principles of res judicata. The court accepted the said plea of the first respondent and set aside the award on that ground as per the order impugned in the appeal. The appellant is aggrieved by the said decision of the court below.

3. Heard the learned counsel for the appellant as also the learned counsel for the respondents.

4. At the outset, it was pointed out by the learned counsel for the appellant that the limited jurisdiction vested in the court in terms of the provisions of the Act is only to ensure that arbitral awards do not suffer from the errors mentioned in Section 34 of the Act. The court cannot, in terms of the provisions of the Act, correct all the errors in the arbitral awards by modifying the same or by remitting the references to the arbitral tribunal for fresh adjudication, it was pointed out. It was argued by the learned counsel that the scheme of the Act is that if the court finds that an award suffers from any of the errors mentioned in , the award is liable to be set aside, leaving the parties to begin the arbitration afresh, if they choose to do so. It was submitted by the learned counsel that insofar as the award passed by the arbitral tribunal initially constituted was set aside only on grounds that the constitution of the arbitral tribunal was not proper and that there was no proper notice in the said proceedings to the first respondent, there was no impediment in law for the appellant to initiate proceedings afresh for resolving the dispute and the said proceedings cannot be said to be hit by the principles of res judicata.