The Kerala High Court has set aside an arbitral award after finding that the arbitrator committed a jurisdictional error by deciding a fresh reference based on the arbitral award that had already been set aside. The Court held that once an award is annulled, the dispute must be decided afresh, and no earlier findings can be treated as binding.
The dispute arose out of differences among partners of Pattasseril Business Associates LLP, leading to an earlier arbitration in which an award was passed on February 27, 2019. Both sides challenged the said award, and it was ultimately set aside under Section 34 of the Arbitration and Conciliation Act, 1996. Thereafter, in a fresh reference, a substitute arbitrator was appointed by order, who passed a fresh award in favour of respondents 1 to 3. The appellant challenged this award under Section 34. However, the Commercial Court refused to interfere as re-appreciation of evidence was beyond the scope of its jurisdiction.
The Division Bench comprising Chief Justice Soumen Sen and Justice Syam Kumar V.M. held that the arbitrator had fundamentally erred in treating findings from the set-aside award as final and binding, and in applying the principle of res judicata without re-examining the pleadings and evidence. The Court observed that once an award is set aside, the dispute requires de novo consideration, and no finding from the earlier proceedings can survive.
The Court further noted that the arbitrator failed to adjudicate the counterclaims independently, which amounted to a failure to exercise jurisdiction. It also found that the Commercial Court did not properly discharge its duty under Section 34 by overlooking these jurisdictional defects.
By consent of both parties, and following the principles laid down in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. 2025 KHC 6421, the High Court appointed Justice V.G. Arun (Retd.), former Judge of the Kerala High Court, as the sole arbitrator to decide the disputes afresh.
Accordingly, the High Court set aside the impugned arbitral award and the Commercial Court’s order, and directed expeditious disposal of the arbitration by the newly appointed arbitrator.
Appearances:
For the Appellant – Senior Advocate Anil Xavier, with Advocate E.M. Murugan, K.R. Lekshmi, P.R. Prateesh, P Rakesh, and Nileena V.P.
For the Respondents – Advocate Liju V. Stephen, Indu Susan Jacob, and Taj K. Tom.
