Appointment of Arbitrator at post-award stage – Duty of the Referral Court is onerous

On 9.4.1997, the contract was entered into between the parties awarding the work of Dulhasti Hydro Electric Project on river Chenab.  On 11.5.2007, the completion certificate was given by the Respondent.   The petitioner raised the bills including additional costs claim of Rs.360.56 crores.  This was rejected.  The arbitrational clause 39.2 was invoked.  The Award for Rs.60 crores was passed.  This was set-aside by the learned Single Judge vide judgment dated 26.5.2023 holding that there was no material to grant Rs.60 crores.

In this section 11 petition, the prayer was for recommencement of arbitration and appointment of nominee Arbitrator of the Respondent.  It was contended that fresh proceedings can be initiated within the time line under Section 43(4) of the AA and therefore, the petition is maintainable.

HELD that the general rule favours reference to arbitration, it is equally settled that “manifest injustice” remains key exception to this rule. The concept of “Manifest justice” extends to scenarios where the dispute is so evidently flawed that it is clear that relegating the parties to arbitration would serve no purpose.

The Court cannot be expected to act mechanically merely to deliver a purported dispute to the arbitrator.   In a situation where the award has been set-aside and another round of arbitration is sought only to take a second bite at the berry.   If this practice is encouraged, the finality to an Award would always be in a limbo.

At the post-award stage, the Referral Court has to take into consideration many other factors including the fact that such proceedings are not misused by the parties.

 Judgment dated 14.1.2025 of the High Court of Delhi in ARB.P. 1061/2023 of M/s. Jaiprakash Associates Limited   Vs.   M/s NHPC Limited