Arbitration and Conciliation Act, 1996 – s.11 – Appointment of arbitrator – Validity of arbitration clause – Contract agreement containing dispute resolution clause – Dispute between the parties regarding non-payment of escalation cost – Application u/s.11 by the appellant-contractor – Allowed by the Single judge and arbitrator was appointed – Respondent-Housing Board accepted the order and it attained finality – Single Judge order was before the introduction of s.11(6A) of the 1996 Act – Arbitrator allowed the claim of the appellant and objection as to validity of the arbitration clause, was held to be unsustainable – Respondents then filed s. 34 application to set aside the award on the ground of non-existence of an arbitration clause, the Clause 23 of the Agreement did not have the character of an arbitration clause – Commercial Court held that the order of s.11 Court did not have precedential value and the order appointing arbitrator was not binding in nature, also the arbitrator faulted for not deciding on the existence of the arbitration agreement – In appeal, the High Court upheld the order of Commercial Court that clause 23 was not an arbitration clause – Correctness:
Held: Single Judge, when he entertained s.11 application and interpreted a contractual document had jurisdiction to do so u/s.11 – Right or wrong, that decision should bind – Respondents did not carry the order appointing an arbitrator in appeal – In view thereof, the holding in SBP’s case squarely applies and the respondents could not have challenged the existence and validity of the arbitration clause before the arbitrator – Order appointing the Arbitrator read with the law laid down in SBP’s case that not only will the parties be bound before the Arbitrator with regard to the finding on existence and validity of the arbitration agreement they will also be bound during the subsequent stages of the proceedings which would include the s.34 application stage, the s.37 appeal stage and before this Court, clearly operates as a res judicata, as regards the existence of and validity of the arbitration agreement between the parties – Commercial Court missed the conceptual distinction between “Precedent” and “Res judicata” and thus, fell into an error – Commercial Court and the High Court erred in going into the existence and validity of clause 23 and pronouncing that the said clause was not an arbitration clause – Judgment of the High Court set aside – Matter remitted to the Commercial Court. [Paras 29-32]
Jurisprudence – Precedent and Res Judiciata – Distinction: Held: Decision between two parties which sets out a principle of law will operate as a precedent for disputes between two other parties too – Precedent operates in rem – In contrast, res judicata operates in personam between the same parties either in the later stage of the same litigation between them or in a different litigation between them. [Para 24]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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