Arbitral Award Cannot Be Challenged Through Civil Suit | Delhi High Court Says Re-Litigating Final Award Already Affirmed By Supreme Court Is Abuse Of Process
Isabella Mariam
The High Court of Delhi Single Bench of Justice Jasmeet Singh dismissed a civil suit seeking to nullify a previously upheld arbitral award, holding that the attempt constituted an abuse of the process of law. The court observed that the suit sought to re-litigate matters already adjudicated through arbitration and confirmed by the Supreme Court. In doing so, the court invoked its powers under Order VII Rule 11 of the Code of Civil Procedure, 1908, to reject the plaint at the threshold.
Justice Singh directed that permitting such a suit would undermine the finality of arbitral awards, stating, "If the present suit is allowed then no Arbitral Award after being upheld by the Hon’ble Supreme Court will ever be executed." The bench held that the Arbitration and Conciliation Act, 1996, constituted a complete code governing the arbitral process and that the civil court lacked jurisdiction to entertain challenges outside the statutory framework.
The plaintiff, a Central Public Sector Enterprise (CPSE), wholly owned by the Government of India and operating under the Ministry of Commerce and Industry, engaged in international trade, filed the suit against an international supplier of coking coal. The long-term business relationship was formalized in a Long-Term Agreement (LTA) signed on 07.03.2007 for the supply of hard coking coal.
This LTA included an arbitration clause stipulating that any disputes arising would be finally settled under the Rules of Arbitration of the International Chamber of Commerce (ICC), Paris, with the venue in New Delhi. The agreement allowed extension through addendums for additional delivery periods.
Pursuant to this, Addendum No. 1 was executed on 28.06.2007 for the fourth delivery period. On 20.11.2008, Addendum No. 2 was signed, extending the arrangement for the fifth delivery period and fixing the price at USD 300 per MT for a quantity of 466,000 MT.
The plaintiff alleged that this price was fixed fraudulently by collusion between the representatives of the supplier and key officials of the plaintiff, then holding positions as General Manager, Director (Marketing), and CMD. According to the plaint, at the time of Addendum No. 2’s execution, international coal prices had significantly dropped due to the global economic crisis, and there was no pressing demand for coal. Despite this, the officials went ahead with the agreement, allegedly causing a massive loss to the public exchequer.
The alleged fraudulent transaction became the basis for subsequent disputes. As the plaintiff failed to lift the contracted quantity, the supplier invoked the arbitration clause. The arbitral award dated 12.05.2014 directed the plaintiff to pay damages amounting to over USD 107 million (approximately INR 716 crores) with interest.
The plaintiff challenged the award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. These challenges failed, and the Supreme Court upheld the award. The plaintiff also deposited approximately INR 1,087 crores in execution of the award.
Years later, in 2022, the plaintiff initiated a confidential inquiry leading to a reference to the Central Bureau of Investigation (CBI). A Preliminary Enquiry was registered, followed by a complaint. Citing discovery of new facts, the plaintiff filed the present suit seeking declarations that the Addendum No. 2 and the award were void ab initio due to fraud.
The plaintiff prayed for declarations that the addendum and award were void and unenforceable, sought a decree for recovery of INR 8.95 crores with interest, and a permanent injunction restraining reliance on the addendum and award. The plaintiff alleged fraud inter se between its officials and the supplier, not fraud upon the court.
Senior counsel for the plaintiff argued that the Arbitration Act did not provide a remedy for fraud discovered post-award and thus the civil court’s jurisdiction was not barred. It was contended that the newly discovered fraud constituted a separate cause of action.
The defendants contended that the suit was barred by law under Section 5 and Section 34 of the 1996 Act. It was stated that the arbitral award had attained finality after confirmation by the Supreme Court. They argued that entertaining such a suit would make arbitral finality illusory.
Justice Jasmeet Singh observed, "The plaintiff herein seeks to declare the said Award as void and unenforceable and to set aside in prayers (b) and (c)... all reliefs are linked to the nullification of the Arbitral Award. Without first setting aside the Arbitral Award... no independent relief can be granted."
The court held that Section 5 of the Arbitration and Conciliation Act, 1996 provides for limited judicial intervention and begins with a non-obstante clause indicating its overriding nature. Justice Singh stated, "The non-obstante clause gives overriding effect with the conflicting/inconsistent provisions under other statutes..."
The judgment recorded, "Section 34 of 1996 Act makes it clear that no challenge to an Award can be launched outside of the said section and beyond the grounds specified therein."
On the maintainability of the suit, the court stated, "The present suit has been framed seeking declaration, recovery of money, and permanent injunction, however, in essence and substance, the plaintiff has made a collateral challenge to the said Award which has already attained finality."
Addressing the issue of fraud, the court drew a distinction, stating, "There is a clear distinction between the fraud played upon the Court and fraud inter se among the parties." It held that the alleged fraud was internal and related to the conduct of parties and not of the arbitral tribunal.
On the scope of Section 9 of the CPC, the court observed, "Section 5 read with section 34 of 1996 Act constitutes such a bar to challenge an Arbitral Award by way of filing a suit..."
Justice Singh noted that the Arbitration Act is a self-contained code and that, "Unless the 1996 Act specifically permits it, the provisions of another legislation cannot be used to override it."
In assessing the maintainability of the plaint under Order VII Rule 11 of CPC, the court reiterated: "If the plaint lacks the essential ingredients of a proper plaint, the Court should, at the threshold, nip in the bud when such bogus litigation appears to be a clear abuse of process."
Referencing the Supreme Court's judgement in "Interplay Between Arbitration Agreements under Arbitration, 1996 & Stamp Act, 1899, In re," the court stated, "Every provision of the Arbitration Act ought to be construed in view of Section 5 to give true effect to the legislative intention of minimal judicial intervention."
Justice Jasmeet Singh exercised powers under Order VII Rule 11 of the Code of Civil Procedure, 1908 and rejected the plaint filed by the plaintiff. The judgment stated: "For the foregoing reasons, the prayers already quoted above are not maintainable in view of section 5 read with section 34 of 1996 Act. Hence, the plaint filed by the plaintiff stands rejected by exercising powers under Order VII Rule 11 of CPC."
The court further concluded: "If the present suit is allowed then no Arbitral Award after being upheld by the Hon’ble Supreme Court will ever be executed. Thus, judicial time must be preserved for genuine disputes."
It also recorded: "The plaintiff in the present plaint by cleverly and eschewedly is seeking to nullify and set aside an Arbitral Award which squarely falls within the ambit of Order VII Rule 11(d) of CPC..."
On the issue of alternative remedies, the court stated: "Alleged new discovery does not revive a remedy that is otherwise barred by law."
Finally, Justice Singh directed: "Pending applications, if any, are disposed of accordingly."
Advocates Representing the Parties:
For the Petitioners: Mr. Harish Salve and Mr. Sanat Kumar, Senior Advocates with Mr. Akhil Sachar, Ms. Sunanda Tulsyan, Advocates
For the Respondents: Mr. Jayant Mehta, Senior Advocate with Mr. Sumeet Kachwaha, Mr. Samar Kachwaha, Mr. Ankit Khushu, Ms. Akanksha Mohan, Mr. Pratyush Khanna, Advocates for Defendant 1; Mr. Shyel Trehan, Senior Advocate with Mr. Sumeet Kaul, Mr. Himanshu, Ms. Vidhi Jain, Advocates for Defendants 4-7
Case Title: MMTC Limited v. Anglo-American Metallurgical Pty Limited and Others
Neutral Citation: 2025: DHC:6187
Case Number: CS (COMM) 959/2024
Bench: Justice Jasmeet Singh
