Fresh Arbitration Notice is Mandatory For Second Round Of Arbitration After Earlier Award Is Set Aside: Kerala High Court

The Kerala High Court has held that a fresh arbitration notice under section 21 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) is mandatory for initiating a second round of arbitral proceedings after an earlier arbitral award has been set aside even when the award was declared as a nullity due to invalid appointment of the arbitrator. Justice S. Manu while dismissing the Arbitration petitions held that once an arbitral award is issued, the arbitration proceedings stand terminated under section 32 and therefore fresh arbitration proceedings cannot commence without issuing a fresh arbitration request. The applicant, M/s Agro Indus Credits Limited, a non-banking finance company, had extended two loans of ₹95 lakh and ₹55 lakh to the respondents under loan agreements dated 18.09.2018 and 17.07.2018 respectively. The respondents allegedly defaulted in repayment. The applicant invoked the arbitration clause and appointed an in-house arbitrator who passed arbitral awards. Execution proceedings were also initiated thereafter. However, the arbitral awards were set aside by the Commercial Court on an application filed by the respondents holding that since the appointment of the arbitral was illegal, the entire arbitral proceedings were a nullity. Subsequently, the applicant approached the High Court under section 11 seeking appointment of a new arbitrator without issuing a fresh notice under section 11. The Applicant argued that the arbitral proceedings had commenced earlier upon issuance of the original notice under section 21 and since the arbitral proceedings were set aside over invalid appointment of arbitrator, a fresh notice under section 21 was not required. Rejecting the contention, the court held that passing of an arbitral award results in termination of arbitral proceedings under section 32 irrespective of whether such award is later set aside or declared a nullity. “After the proceedings are terminated, the arbitral tribunal loses all other authority and jurisdiction over the issue. Arbitral proceedings may end for a variety of reasons, but the outcome is always the same: the arbitral reference is closed and the tribunal's authority is extinguished subject to the restricted powers granted to it by Sections 33 and 34(4)”, the court observed. It further observed that a notice under section 21 fixes the commencement of arbitral proceedings primarily for the purpose of limitation and that once arbitral proceedings are terminated, a fresh request under section 21 is mandatory for initiating fresh arbitral proceedings. The court while relying on the Supreme Court's judgment in Adavya Projects Pvt. Ltd. and referring to sections 21, 32 and 43(4) held that “therefore, marking the point of time of commencement of the subsequent arbitral proceedings is absolutely necessary. Hence, conjoint appraisal and analysis of the provisions of Sections 21, 32 and 43(4) of the Act shows that issuing a fresh notice/making another request is indispensable to initiate fresh arbitral proceedings, once an award is set aside by the court.” While distinguishing the Bombay High Court's judgment in Kirloskar Pneumatic, the court said that the impact of sections 32 and 43(4) of the Arbitration Act had not been considered by the court therein and declined to follow it. Referring to section 43(4), the court observed that “Exclusion of time spent in the earlier arbitration for limitation purposes necessarily presupposes a fresh commencement of proceedings, which can only be marked by a fresh request under Section 21.” Based on the above, the court held that the present application was premature as no fresh arbitration notice had been issued after the earlier awards were set aside. The Court concluded: “Hence, the arbitral proceedings, as far as these cases are concerned, were undoubtedly terminated with the passing of awards. Therefore, to commence fresh arbitral proceedings, making fresh requests were required. I therefore hold that these arbitration requests are premature for want of any request for fresh arbitration from the applicant, addressed to the respondents.” Accordingly, the court dismissed the present petitions holding that since no fresh notice under section 21 was issued after termination of earlier arbitral proceedings due to passing of awards, the present petitions were premature. Case Title:M/S. AGRO INDUS CREDITS LIMITEDV.S. MANGALAN S @ JAGAN MANGALAN AND ORS. Case Number: AR NO. 131 OF 2025Citation: 2025 LiveLaw (Ker) 842 Judgment Date: 18/12/2025 For Applicant: SRI.V.S.THOSHIN SMT.NAKSHATRA SHIKA For Respondents: SRI.K.SANEESH KUMAR SMT.V.B.SANTHINI Click Here To Read/Download Order

Fresh Arbitration Notice is Mandatory For Second Round Of Arbitration After Earlier Award Is Set Aside: Kerala High Court

Mohd Malik Chauhan

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