"No Scope for Further Arbitration": Karnataka High Court Rejects Petition, Citing Finality of Judicial Findings
Kiran Raj
The Karnataka High Court has dismissed a petition seeking the appointment of a sole arbitrator in a dispute arising from a lease agreement between Starlog Enterprises Limited and the Board of Trustees of New Mangalore Port Trust. The court stated that the arbitration proceedings had already been conducted, and the resulting award had been set aside through judicial review, leaving no further scope for arbitration under the same agreement.
The matter was heard by Justice Sachin Shankar Magadum, who issued the order on February 25, 2025, stating, “The arbitration clause embedded in the agreement dated 31.03.2009 cannot be invoked for matters that have already been adjudicated upon and concluded by both the Arbitral Tribunal and the judiciary, including the Hon'ble Apex Court.”
The dispute originates from a registered lease deed dated March 31, 2009, under which Starlog Enterprises Limited entered into a lease agreement with the Board of Trustees of New Mangalore Port Trust. The petitioner contended that the respondent had unlawfully terminated the lease, necessitating arbitration as per Clause 12 of the lease deed.
The petitioner had previously invoked arbitration in 2015 through CMP No. 66/2015, leading to the appointment of a sole arbitrator. The arbitrator, after considering the matter, issued an award on February 8, 2017, in Arbitration Case No. 61/2016, directing the respondent to refund the security deposit and reimburse the expenses incurred for constructing a perimeter wall. The total amount awarded was Rs. 6,28,49,016.
Dissatisfied with the award, the respondent challenged it under Section 34 of the Arbitration and Conciliation Act, 1996, before the District and Sessions Court. The court set aside the award through its judgment dated June 29, 2018, stating that the lease agreement did not provide for the refund of the deposit or reimbursement of construction costs. The order recorded, “Indisputedly, there is no clause in the agreement for the refund of upfront payment after the lapse of 30 years period of the lease deed or when the lease agreement is terminated before the efflux of time or to claim compensation for the alleged expenses incurred towards the construction of compound wall.”
The petitioner filed an appeal before the Karnataka High Court in MFA No. 7245/2018, which upheld the decision under Section 34. The Supreme Court, in SLP (Civil) No. 16473/2021, declined to interfere with the findings, thereby concluding the matter.
The present petition sought to invoke the arbitration clause again under Section 11(5) of the Arbitration and Conciliation Act, arguing that the arbitral award had been set aside but the underlying dispute remained unresolved. The respondent objected, stating that the issues had already been adjudicated in previous proceedings, with the Karnataka High Court and the Supreme Court having examined and decided the claims.
The court recorded, “The termination of the contract has been legally validated and stands final. Furthermore, the relief granted by the Arbitrator regarding the refund of the statutory deposit and the reimbursement for construction costs incurred by the petitioner was specifically set aside by the Court under Section 34 proceedings and subsequently upheld by the Hon'ble Apex Court.”
The petitioner relied on judgments, including SBI General Insurance Co. Ltd. v. Krish Spinning Mills Pvt. Ltd. and Vidya Drolia v. Durga Trading Corporation, to argue that the court's role under Section 11 was limited to verifying the existence of an arbitration agreement, not assessing the arbitrability of the dispute. The court, however, observed that the present case was not one where arbitration had been denied initially, but rather one where arbitration had already taken place and the resulting award had been set aside.
The judgment further stated, “Two significant conclusions emerge from the preceding legal trajectory. Firstly, the termination of the contract has been legally validated and stands final. Secondly, the petitioner chose not to challenge the Arbitrator’s decision on this issue.”
The respondent cited the Delhi High Court's decision in M/s. Jaiprakash Associates Limited v. M/s. NHPC Limited, which held that in cases where prior arbitration proceedings had conclusively addressed the dispute, further arbitration would not be permissible. The Karnataka High Court found that the issues raised had already been considered by the arbitral tribunal and subsequently adjudicated in judicial proceedings.
The judgment noted, “The petitioner’s attempt to initiate fresh arbitration proceedings under Section 21 of the Arbitration and Conciliation Act is therefore fundamentally misconceived and legally impermissible.”
The court recorded that the findings in the earlier arbitral proceedings, including the decision that the lease termination was legally valid, had attained finality. The judgment stated, “The only potential recourse available to the petitioner, if any, would be through a competent civil court, as the liberty granted in the Section 34 judgment pertains solely to seeking relief in an appropriate legal forum outside of arbitration.”
The judgment further observed, “The judgments cited by the petitioner, including Payu Payments Private Limited vs. The New India Assurance Co. Ltd., Vidya Drolia vs. Durga Trading Corporation, and Kunhayammed & Others vs. State of Kerala and Another, primarily address issues related to the interpretation of arbitration agreements, the scope of judicial interference under Section 34, and the finality of judicial decisions. However, these precedents are not applicable to the present case, as the core issues of contract termination and refund have already attained finality through decisions affirmed by the Hon’ble Apex Court.”
The court concluded that the arbitration clause in the lease agreement could not be invoked for the same claims that had already been settled through judicial review.
"The civil miscellaneous petition is devoid of merits and accordingly, stands dismissed."
Advocates Representing the Parties
For Petitioner: Pradeep Nayak, Sanjana M., and Akshita Goyal, Advocates.
For Respondent: Tejas S.R. and Fathima Naha, Advocates from Dua Associates.
Case Title: Starlog Enterprises Limited v. Board of Trustees of New Mangalore Port Trust
Case Number: CMP No. 372 of 2023
Bench: Justice Sachin Shankar Magadum
[Read/Download order]
