The Supreme Court has held that a fresh application for the appointment of an arbitrator under §11(6) of the Arbitration and Conciliation Act 1996 is not maintainable if the first application was withdrawn unconditionally, without seeking liberty to refile.
Background
HPCL issued tenders to enhance the capacity of various process stations and boiling houses in Bihar. Shahaji was the successful bidder. Disputes arose when HPCL refused to pay amounts owed to Shahaji, citing unsatisfactory performance. Shahaji issued a legal notice and, upon continued non-payment, sent a Demand Notice under the Insolvency and Bankruptcy Code 2016. Shahaji also invoked arbitration by filing an application under §11(6) of the Arbitration Act for the appointment of an arbitrator. To pursue insolvency proceedings against HPCL, Shahaji withdrew the initial application for the appointment of an arbitrator without seeking liberty to refile.
When the insolvency petition was dismissed due to pre-existing disputes, Shahaji filed a fresh application under §11(6) before the Bombay High Court, which was allowed. HPCL appealed to the Supreme Court, arguing that the application was time barred and violated the principles of Order 23 Rule 1 of the Civil Procedure Code 1908, which prevent re-litigation of the same issue without the court's permission.
Decision
The Supreme Court held that a party cannot file a fresh application for the appointment of an arbitrator without obtaining permission to refile at the time of withdrawal. To arrive at its conclusion, the Supreme Court extended the principles of Order 23 Rule 1 to applications under §11(6) of the Arbitration Act.
The Court underlined the following points:
- The principles of Order 23 Rule 1 apply to all proceedings, not just suits, unless explicitly prohibited by statute or inapplicable due to specific facts.
- The legislative intent behind Order 23 Rule 1 is to prevent undue delays by discouraging repetitive litigation, particularly in arbitration, which is intended to be time efficient.
- The unconditional withdrawal of an application to appoint an arbitrator amounts to abandoning the arbitration process, making the application of the Order 23 Rule 1 principles even more critical.
Conclusion
The Supreme Court's ruling underscores the importance of judicial efficiency and the need to prevent abuse of process by repeatedly filing and withdrawing applications.
Footnote
* 2024 INSC 851
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