Sanchayita Lahkar

The High Court of Kerala Single Bench of Justice S. Manu dismissed arbitration requests seeking appointment of an arbitrator, holding that a fresh arbitration request under Section 21 of the Arbitration and Conciliation Act, 1996 is required to commence a second round of arbitration after an earlier award has been set aside, even where the award was treated as a nullity due to an invalid, unilateral arbitrator appointment. The dispute arose from two secured loan agreements under which a non-banking finance company alleged that the borrowers defaulted on repayment. The Court found that once a final award is made, the arbitral proceedings stand terminated under Section 32, and fresh proceedings cannot be initiated on the earlier notice; the lender may move again after issuing a fresh request.

The proceedings arose from arbitration requests filed by a non-banking finance company seeking appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. The dispute related to two secured loans advanced to the respondents under separate loan agreements executed in July and September 2018. The borrowers agreed to repay the loans within thirty-six months with interest at the agreed rate, supported by demand promissory notes and security delivery letters.

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Following alleged default in repayment, the applicant invoked the arbitration clauses contained in the agreements and appointed an arbitrator. Arbitral awards were passed in December 2019. Execution petitions were subsequently filed, which led the respondents to challenge the awards before the Commercial Court. The Commercial Court set aside the awards on the ground that the arbitrator had been unilaterally appointed, rendering the arbitral proceedings null and void.

Thereafter, the applicant approached the High Court seeking appointment of an arbitrator. The respondents objected to the maintainability of the requests, contending that no fresh notice under Section 21 of the Act had been issued prior to invoking the Court’s jurisdiction. The dispute before the High Court was confined to the legal requirement of issuing a fresh request for arbitration after the earlier awards had been set aside.

The Court examined the statutory framework governing commencement and termination of arbitral proceedings. It observed that “Section 21 of the Act marks the point of time at which arbitral proceedings commence, namely, the date on which a request for reference to arbitration is received by the respondent.” The Court further noted that “receipt of the request by the respondent is a crucial and indispensable step in arbitral proceedings.”

Referring to Section 32 of the Act, the Court recorded that “the arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal.” It stated that “with the passing of the final award, the arbitral tribunal ceases to have jurisdiction over the dispute, except to the limited extent provided under the Act.”

The Court rejected the contention that earlier notices could sustain subsequent proceedings, observing that “once arbitral proceedings are terminated, the arbitral reference also comes to an end and attains finality.” It further held that “whether the award was subsequently set aside or declared a nullity is immaterial in the context of termination under Section 32.”

Analysing Section 43(4), the Court stated that “the provision contemplates exclusion of the period spent in earlier arbitration for computing limitation for commencement of fresh proceedings.” It observed that “this necessarily presupposes a fresh commencement, which can only be marked by issuance of a new request under Section 21.”

The Court expressly declined to follow the contrary view taken by the Bombay High Court, recording that “the impact of Sections 32 and 43(4) was not brought to the notice of that Court.” On a conjoint reading of the provisions, the Court concluded that “issuing a fresh notice or making a fresh request is indispensable to initiate de novo arbitral proceedings once an award is set aside.”

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The Court held that “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.”

“These arbitration requests are premature for want of any request for fresh arbitration from the applicant, addressed to the respondents. In conclusion, these Arbitration Requests are rejected as premature. Nonetheless, the rejection would not preclude the applicant from approaching this Court again after complying with the requirement of issuing notice to the respondents.”

Advocates Representing the Parties

For the Petitioners: Sri. V. S. Thoshin, Advocate; Smt. Nakshatra Shika, Advocate

For the Respondents: Sri. K. Saneesh Kumar, Advocate; Smt. V. B. Santhini, Advocate

Case Title: M/s. Agro Indus Credits Limited v. Mangalan S @ Jagan Mangalan & Ors.
Neutral Citation: 2025: KER:97789
Case Number: A.R. Nos. 131 & 138 of 2025
Bench: Justice S. Manu