Arbitration Award Set Aside – The Arbitral Award was set aside by the Division Bench of the Bombay High Court under Section 37 of the Arbitration and Conciliation Act, 1996, and the Supreme Court upheld this decision, finding the award unsustainable due to lack of reasoning and double-counting of damages (Para 9, 16, 17).

Fresh Arbitration Invoked – Batliboi Environmental Engineering Ltd. (Applicant) invoked fresh arbitration on October 12, 2023, arguing that the earlier award was set aside without adjudication on merits, and thus, the disputes were not barred by res judicata (Para 5, 6).

Supreme Court’s Observations on Merits – The Supreme Court, while upholding the setting aside of the award, explicitly stated that it was not commenting on the merits of the case, and the findings were limited to the award’s lack of reasoning and proportionality (Para 16, 18, 20, 22).

Doctrine of Merger – The Section 37 Judgment merged into the Supreme Court’s Judgment, and the Supreme Court’s findings were limited to the jurisdiction under Section 37 read with Section 34 of the Act, which does not permit a full appellate review of the merits (Para 29, 31, 32).

Jurisdiction of Courts under Arbitration Act – The courts’ role under Sections 34 and 37 of the Act is limited to reviewing the arbitral award for basic notions of morality, legality, and perversity, and not for a full merits-based review (Para 11, 12, 14).

No Second Bite at the Cherry – The court held that the setting aside of an arbitral award restores the parties to their original positions, allowing them to arbitrate afresh, and this does not constitute a “second bite at the cherry” (Para 10, 12, 37).

The court allowed the Section 11 Application, holding that the Supreme Court’s observations did not constitute a ruling on the merits, and the parties were restored to their original positions, allowing fresh arbitration (Para 39, 40).

Major Acts:

1. Constitution of India (COI), Article 136 – Special Leave to Appeal.

2. Arbitration and Conciliation Act, 1996 (the Act) – Sections 11 (Appointment of Arbitrators), 34 (Setting Aside Arbitral Award), and 37 (Appeal against Orders under Section 34).

Subjects:

• Arbitration Award – Set aside, lack of reasoning, double-counting, unsustainable.

• Fresh Arbitration – Permissible, no adjudication on merits, res judicata not applicable.

• Supreme Court’s Jurisdiction – Limited to Section 37 and Section 34, no merits-based review.

• Doctrine of Merger – Section 37 Judgment merged into Supreme Court’s Judgment, no full appellate review.

Facts:

1. Nature of the Litigation – Arbitration dispute arising from a contract for the construction of a sewage treatment plant. The Arbitral Award was set aside by the Bombay High Court, and the Supreme Court upheld the decision (Para 2, 3, 4).

2. Who is Asking the Court and for What Remedy? – Batliboi Environmental Engineering Ltd. (Applicant) sought the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, to adjudicate the disputes afresh after the earlier award was set aside (Para 5, 6).

3. Reason for Filing the Case – The Applicant argued that the earlier award was set aside without adjudication on merits, and thus, the disputes were not barred by res judicata (Para 5, 6).

4. What Has Already Been Decided Until Now? – The Arbitral Award was set aside by the Bombay High Court under Section 37 of the Act, and the Supreme Court upheld this decision, finding the award unsustainable due to lack of reasoning and double-counting of damages (Para 4, 16, 17).

Issues:

• Whether the Supreme Court’s observations in upholding the setting aside of the Arbitral Award constituted a ruling on the merits, thereby barring fresh arbitration under the doctrine of res judicata (Para 1, 6).

Submissions/Arguments:

• Applicant (Batliboi) – The Supreme Court did not adjudicate on the merits, and the setting aside of the award restores the parties to their original positions, allowing fresh arbitration (Para 9, 10).

• Respondent (HPCL) – The Supreme Court’s observations on the merits of the case, along with the findings in the Section 37 Judgment, bar fresh arbitration under the doctrine of res judicata (Para 8, 28).

Ratio:

• The setting aside of an arbitral award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, does not constitute a ruling on the merits, and the parties are restored to their original positions, allowing them to arbitrate afresh (Para 10, 12, 39).