It is not uncommon in arbitration for parties to lose interest in the proceedings midway and step away from it, sometimes because the case isn’t going their way, sometimes for technical or strategic reasons, and sometimes for no clear reason at all. But the real question is whether such party can subsequently revive the dispute through invoking fresh arbitration proceedings. This issue has been settled by the Hon’ble Supreme Court in the decision of Rajiv Gaddh v. Subodh Parkash, 2026 SCC OnLine SC 507.

Genesis of the dispute

Before going into the discussion on law, it is pertinent to take note of the facts leading to the genesis of the present dispute.

• The said dispute arose out of a joint real estate venture between two businessmen – Rajiv Gaddh (the Appellant) and Subodh Parkash (the Respondent), who together participated in an auction conducted by Jammu & Kashmir Bank for 550 marlas of land in Hoshiarpur, Punjab.
• The bid was made through the respondent’s firm, M/s. Aastha Trading Company, while another joint entity, M/s. JMD Special Steel Pvt. Ltd., was used for funding and registration. The parties also took out a secured mortgage of Rs. 4.30 Crores by HDFC Bank.
• Subsequently, the parties executed three interlinked agreements to resolve their disputes over the Hoshiarpur Land and other joint ventures. The said agreements also contained a common arbitration clause.
• Owing to a dispute, in 2015, the Respondent invoked the arbitration clause and filed a Petition under Section 11 of the Arbitration and Conciliation Act, 1996 (“the Act”), before the High Court seeking appointment of an Arbitrator.
• Accordingly, the High Court appointed Justice M.S. Sullar as sole arbitrator, who subsequently recused himself. Justice V.K. Jhanji was then appointed, only for the Respondent to raise allegations of bias in February 2017, prompting another recusal. Justice Aftab Alam was ultimately appointed in September 2017.
• However, by 2019, the Respondent’s participation from the arbitration proceedings ceased altogether. In addition to this, the Respondent also sent an email to the Arbitrator alleging bias and expressed his decision to not participate in the further proceedings. The Arbitrator declined to treat this as a valid ground for terminating the proceedings and proceeded to pass an award, decreeing the Appellant’s claim and dismissing the Respondent’s.
• Even at this stage, the Respondent was granted one last opportunity by the arbitral tribunal to revive his claim by filing an amended statement of claim within three months. However, the Respondent failed to avail this last opportunity granted by the tribunal.

The Respondent’s Second Attempt

In 2021, basis a judgment of the Supreme Court which upheld the validity of the auction conducted by J&K Bank and confirmed the entitlement of parties hereto to the land, the Respondent issued a fresh arbitration notice and filed another Petition under Section 11 of the Act, before the High Court of Punjab & Haryana seeking appointment of an Arbitrator. The High Court accepted the contention of the Respondent and the question of res judicata was left to be decided by the arbitral tribunal itself. This order of the High Court came to be challenged as the present appeal before the Supreme Court.

The Decision

First, the court re-affirmed the settled position of law that question of res judicata does not arise for consideration in a Section 11 proceeding, as held in Indian Oil Corporation Limited v. SPS Engineering Limited, (2011) 3 SCC 507. The jurisdiction at Section 11 stage is confined to determining the existence of an arbitration agreement and nothing more. This stance is consistent with the earlier ruling in SBI General Insurance Co. Ltd. v. Krish Spinning where the Supreme Court had comprehensively examined and explained the scope of standard of judicial scrutiny at the stage of a Section 11 Petition.

Secondly, the court also dismissed the contention of the Respondent that the 2021 judgment of the Supreme Court which upheld validity of the auction gave rise to a fresh cause of action between the parties for the purpose of their inter se agreements.

Most importantly, the court examined the applicability of Order 23 Rule 1 of the CPC to Section 11 proceedings. The said provision precludes a party, who abandons or withdraws from a suit or a part of their claim without obtaining the leave of the court, from instituting a fresh suit in respect of the subject-matter of the earlier suit. Here, the Court followed its recent two-Judge Bench decision in HPCL Bio-Fuels Ltd. v. Shahaji Bhanudas Bhad, 2024 SCC OnLine SC 3190, which had categorically held that the principles of Order 23 Rule 1 would apply to proceedings under Section 11(6) of the Act. It was affirmed that in the absence of any liberty at the time of withdrawal of the first application, the fresh application under Section 11 of the Act is not maintainable. It was further noted that abandonment cannot be readily inferred but if it is established that the conduct of the claimant is such that it leads to the sole conclusion that he has given up their claim, inference of abandonment can be drawn (Dani Wooltex Corporation and Ors., v. Sheil Properties Pvt. Ltd. and Anr., (2024) 7 SCC 1). The court drew an inference of abandonment from the email sent by the Respondent to the Arbitrator, expressing his decision to not participate in the further proceedings. Therefore, the subsequent Petition under Section 11 of the Act, was held to be barred and not maintainable based on the principles enshrined under Order 23 Rule 1 of the CPC. The court also remarked that allowing such a petition would be abuse of process and contrary to public policy.

Key Takeaways

• The question of res judicata does not arise for consideration at the stage of Section 11 proceedings under the Arbitration and Conciliation Act, 1996.
• Order 23 Rule 1 of the CPC applies to arbitration proceedings and therefore, a party who abandons arbitration proceedings without obtaining leave of the Arbitral Tribunal is precluded from instituting fresh arbitration proceedings and any subsequent application under Section 11 by such a party shall not be maintainable.
• Abandonment from arbitration proceedings can be inferred from the conduct of the Claimant if the same is such that it leads to the sole conclusion that they have given up their claim.

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