Navigating the Complexities of Re-initiation in Arbitration: A Legal Perspective on Res Judicata and Fresh Proceedings
Introduction
In the complex landscape of arbitration, particularly in the context of the principles governing the re-initiation of proceedings and the applicability of res judicata, the legal framework offers a nuanced pathway for addressing disputes. The Arbitration and Conciliation Act, 1996 (the Act) while not explicitly addressing the matter of re-initiating proceedings post an arbitral award, provides mechanisms through Section 34 for setting aside an award and Section 37 for appeal in certain circumstances. The principle of res judicata, deeply rooted in the principles of equity and natural justice, dictates that a matter cannot be adjudicated upon more than once if it involves the same parties, subject matter, and has been decided on its merits previously.
However, arbitration’s procedural flexibility and the distinct nature of arbitral proceedings, as indicated by the Supreme Court of India and various High Courts, suggest a tailored approach to the application of res judicata in arbitration.
Different Scenarios
In the first scenario, concerning domestic arbitration where an award is set aside, legal precedents demonstrate a willingness to allow the re-initiation of arbitration under specific conditions. This perspective is supported by judgments such as Kinnari Mullick vs. Ghanshyam Das Damani [(2018) 11 SCC 328], where the three-judge bench of the Supreme Court held that the court has very limited discretion to relegate parties under Section 34(4). This limited remedy available under Section 34 (4) is required to be invoked by the party in the arbitral proceedings before the award is set aside.
This position was further elucidated in State Trading Corporation of India Ltd. v. Toepfer International Asia PTE Ltd. [2014 SCC OnLine Del 3426], where the Delhi High Court while interpreting Section 34 held that the legislative intent in the section was to make the result of the annulment procedure prescribed therein potentially different from that in an appeal. Annulment operates to negate a decision, in whole or in part, thereby depriving the portion negated of legal force and returning the parties to that portion, to their original litigating positions.
Following that the Delhi High Court in the case of Steel Authority of India Vs Indian Council of Arbitration [(2015) SCC Online Del 13394] while rejecting the application of res judicata, observed that all the disputes that are covered under the arbitration agreement remains unresolved, the parties would be free to take the recourse of arbitration for resolution of the said disputes and the other party would be contractually bound to submit the disputes to arbitration.
These cases highlight the courts’ stance that setting aside an award essentially annuls it, allowing parties to revert to their original positions before the arbitration and potentially initiate fresh proceedings, underlining the survival of the arbitration agreement itself.
In the second scenario, dealing with awards that have reached finality, the courts have distinguished between an award and other decisions of an Arbitral Tribunal, underscoring that an award concludes the dispute with a res judicata effect. This distinction is crucial in understanding the finality of arbitration awards and their implications on the parties’ ability to re-litigate the same issues. The Supreme Court while distinguishing an award and a decision of an arbitral tribunal in the case of Centro trade Minerals and Metal Inc. v. Hindustan Copper Ltd. [(2017) 2 SCC 228], referred to Comparative International Commercial arbitration, observed that an award: (i) concludes the dispute as to the specific issue determined in the award so that it has res judicata effect between the parties; if it is a final award, it terminates the tribunal’s jurisdiction; (ii) disposes of parties’ respective claims; (iii) may be confirmed by recognition and enforcement; (iv) may be challenged in the courts of the place of arbitration.
Moreover, the introduction of new facts or evidence post the arbitration award presents a compelling argument for re-arbitration, given that such developments could fundamentally alter the basis on which the original award was made. The Supreme Court’s observations in PSA Sical Terminals Pvt. Ltd. vs. Board Of Trustees Of V.O. Chidambranar Port Trust Tuticorin [CA 3699-3700 OF 2018] reinforces the premise that overlooking vital evidence or misinterpreting the contractual obligations can render an award liable to be set aside for patent illegality. Therefore, giving the opportunity to parties to re-initiate the proceedings and resolve their disputes.
Conclusion
In conclusion, while the arbitration framework does not explicitly navigate the nuances of re-initiating proceedings post an award, the interplay of legal provisions and judicial interpretations offers a structured approach to address such scenarios. This approach balances the principles of finality and justice, ensuring that arbitration remains an effective and equitable means of dispute resolution. The evolving judicial stance, particularly in accommodating new evidence and understanding the implications of setting aside an award, reflects the dynamic nature of arbitration as a dispute resolution mechanism.
[with inputs from Akshat Goswami, B.A.LL.B. [Third Year], Jindal Global Law School]
