Section 11 Petitions Seeking Relief But Not Raised In The Previous Arbitration; Gross Abuse Of Process of Court: Delhi High Court

The Delhi High Court has ruled that since the party had failed to challenge the termination of the Collaboration Agreement in the first round of arbitral proceedings, the demolition of the structure built by it under the said Collaboration Agreement would not give it a fresh cause of action. The bench of Justice Navin Chawla remarked that the cause of action for challenging the termination of the Collaboration Agreement and/or for claiming any relief under the said Collaboration Agreement, was available to the petitioner at the stage of the earlier arbitral proceedings. While holding that the claim raised by the petitioner was barred by the principle of res-judicata and was a “deadwood”, the Court dismissed the petitions filed under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act), imposing a cost of Rs. 2 Lakhs on the petitioner, Tejpal Singh, for the gross abuse of the process of the Court. The petitioner, Tejpal Singh, and the respondent, Surinder Kumar Dewan, entered into a Collaboration Agreement under which the petitioner was to construct a building on the land belonging to the respondent. After some disputes arose between the parties, the respondent terminated the Agreement and invoked the Arbitration Agreement claiming damages against the petitioner. The Arbitral Tribunal passed an award in favour of the respondent, against which the petitioner filed a petition under Section 34 of the A&C Act before the Delhi High Court, which was only partly allowed. Against this, the petitioner filed an appeal under Section 37 of the A&C Act, which was dismissed by the Division Bench of the High Court. During the pendency of the Section 34 petition, the petitioner invoked the arbitration clause against the respondent, claiming damages against him, and filed a petition under Section 11(6) of the A&C Act before the Delhi High Court. In the meantime, the respondent demolished the building constructed by the petitioner on the subject land. Claiming that such demolition gave a fresh cause of action to the petitioner, the petitioner again invoked the Arbitration Agreement and filed a second petition under Section 11 of the A&C Act before the Delhi High Court, seeking to refer the matter to arbitration. The petitioner, Tejpal Singh, submitted before the High Court that in terms of the Collaboration Agreement, he was entitled to the second floor along with the terrace in the building constructed by it. The petitioner averred that since the respondent had demolished the same, the petitioner was entitled to the claim of damages. Contending that the said dispute fell within the ambit and scope of the Arbitration Agreement between the parties, the petitioner pleaded that he was entitled to seek appointment of an Arbitrator. The petitioner added that in the previous round of arbitration, the question regarding the petitioner’s entitlement over the superstructure raised by him on the subject land, was not an issue. Arguing that a fresh cause of action had arisen in his favour on the demolition of the superstructure, the petitioner submitted that arbitration proceeding on a fresh cause of action is maintainable. To this, the respondent, Surinder Kumar Dewan, averred that the Section 11 petitions filed by the petitioner were frivolous and a gross abuse of the process of the Court. The Court observed that in the first round of arbitral proceedings, only the respondent raised his claims and the petitioner did not file any counter claim. Further, even though the petitioner challenged the Arbitral Award by filing a petition under Section 34, even at that stage, no challenge was laid to the Arbitral Award on the ground that the termination of the Collaboration Agreement by the respondent was illegal or ineffective, it took note. The Court also noted that the Division Bench in the appeal filed under Section 37, had also held that the petitioner was in breach of the Collaboration Agreement. The bench concluded that the cause of action for challenging the termination of the Collaboration Agreement and/or for claiming any relief under the Collaboration Agreement, was available to the petitioner at the stage of the earlier arbitral proceedings. Further, the cause of action, if any, arose in favour of the petitioner in 2007 when the Collaboration Agreement was terminated by the respondent. The invocation of the arbitration having been made by the petitioner, firstly, in 2018 and then again in 2022, the claim of the petitioner was ex facie barred by the law of limitation as well as barred by the principle of res-judicata, the Court said. Thus, the Court held that the petitioner cannot be allowed to challenge the termination of the Collaboration Agreement, since the same was barred by the law of limitation as well as hit by the principles of res-judicata. Dismissing the contention of the petitioner, Tejpal Singh,...

Section 11 Petitions Seeking Relief But Not Raised In The Previous Arbitration; Gross Abuse Of Process of Court: Delhi High Court

Parina Katyal

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