Though the incorporation of the principle of res judicata in arbitration is well settled, its application becomes uncertain once an arbitral award is set aside under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred as 'the Arbitration Act'). The Supreme Court, in its various judgments, has laid down that once an issue is decided, it cannot be re-agitated across arbitral stages.2 However, the result of setting aside of an award remains unexplored as to whether it wipes out all prior findings or leaves certain aspects intact. This article examines the extent to which res judicata survives the setting aside of an arbitral award and its impact on subsequent proceedings.

Doctrine of res judicata is premised on the need of giving finality to judicial decisions. The literal meaning of the term 'res' is 'subject matter' and 'judicata' means 'adjudged' and together the term forms into 'a matter adjudged'.3 In simple words, res judicata means that once a matter, whether on question of law or fact, has been decided between parties in a proceeding which has attained finality, neither party would be allowed to initiate a proceeding for the same relief again. This doctrine is universally recognised across all jurisdictions albeit as a rule of procedure. Thus, applicability of res judicata transcends borders of jurisdiction and binds parties across jurisdictions.

Though the Arbitration Act does not specifically recognise or define res judicata, the doctrine is nevertheless applied as a common law principle. Courts have applied res judicata in arbitration proceedings at several stages including at the stage of appointment of arbitrator under Section 11 of the Arbitration Act. Recently, the Delhi High Court in JSW MG Motor India (P) Ltd. v. Tristar Auto Agencies (Vizag) (P) Ltd.,4 has reaffirmed applicability of res judicata in case of appointment of arbitrator, drawing strength from the common law principle of giving finality to decisions. The Delhi High Court applied res judicata to hold that once reference to arbitration has been denied by a Court in an application under Section 8 of the Arbitration Act, the same issue cannot be re-agitated by way of a separate petition under Section 11 of the Arbitration Act.

Similarly, in a converse situation, where a Court has already adjudicated an issue, will it be open for a party to re-agitate the same in an arbitration? The answer is an empathetic no. Once a Court has given its decision, the issue adjudged by the Court loses its arbitrability and cannot be arbitrated later, solely by virtue of res judicata.

The application of res judicata takes a complicated turn when sought to be invoked after setting aside of an arbitral award. It is well known that an arbitral award can be set aside by a Court under Section 34 of the Arbitration Act. However, what lacks clarity is whether doctrine of res judicata remain applicable to some aspects of the earlier arbitral proceedings or will it cease to apply.

A Constitution Bench of the Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Ltd.,5 has recently affirmed that Courts under Section 34 of the Arbitration Act can only set aside the arbitral award and do not have power to modify it, barring some exceptions. The phrase 'set aside' has been interpreted by the Supreme Court in Bileshwar Khan Udyog Khedut Shahakari Mandali Ltd. v. Union of India,6 to have an effect of making an order non-existent. Therefore, an arbitral award or portion thereof, as soon as is 'set aside' by a Court under Section 34 of the Act, becomes non-existent. Resultantly, Section 35 of the Arbitration Act, insofar as gives finality to arbitral awards, loses its effect once a Court exercises its power under Section 34.

A natural corollary of setting aside of an award is re-arbitration between parties. However, the first question which then arises is the stage wherefrom the new arbitration can be commenced after setting aside of an earlier award on the same issue.

For instance, if an arbitral award is set aside on the ground of lack of evidence, the findings in the award cease to exist. A plausible view would be that the pleadings and evidence already concluded by parties remain undisturbed. Though the only recourse available after setting aside of an award is to re-arbitrate, parties would obviously not be permitted to deviate from their earlier pleadings or evidence. Therefore, an award set aside by a Court on the ground of no evidence would not allow parties to re-arbitrate since in such case, setting aside of award, effectively, amounts to substitution of decision by the Court to the extent that relief ought not be granted, which again attracts res judicata.

However, if an arbitral award is set aside by a Court on the ground of perversity, it is only the finding on basis of pleadings and evidence which ceases to exist. In such case, the Court does not substitute its own findings to the award and merely sets aside the findings of the arbitral tribunal. Resultantly, the adjudication of the controversy between parties is quashed and the controversy becomes available for re-adjudication by arbitration without any impediment of res judicata.

Survival of res judicata after setting aside of an arbitral award is subject to the interference made by the Courts. Where the court substitutes its view, the bar may persist; where it merely annuls the findings, the dispute is open to fresh adjudication. Though in several judgments, the Supreme Court has laid down that setting aside renders an award non-existent, yet not every element of the prior proceedings is erased. The doctrine must therefore be applied with respect to facts of certain case, preserving both finality and fairness in arbitration.

Authors are advocates practising before the Supreme Court and High Court.

Views Are Personal

References: 

2. K.V. George v. Secretory to Government, Water and Power Department, Trivandrum and Another, Civil Appeals Nos. 4209-10 of 1989.

3. Subramaniam Swamy v. State of Tamil Nadu, Civil Appeal Nos. 10620-23 of 2013

4. JSW MG Motor India (P) Ltd. v. Tristar Auto Agencies (Vizag) (P) Ltd., ARB. P. No. 682 of 2025

5 Gayatri Balasamy v. ISG Novasoft Technologies Ltd., Civil Appeal No. 6178 of 2025

6. Bileshwar Khan Udyog Khedut Shahakari Mandali Ltd. v. Union of India, Civil Appeal No. 1660-66 of 1981