Party Accepting Section 11 Arbitrator Appointment Cannot Later Challenge Validity Of Arbitration Clause Under Pre-2015 Regime; Supreme Court
Kiran Raj
The Supreme Court Division Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan on Wednesday (February 4) set aside the orders that had nullified two arbitral awards in disputes arising from housing construction contracts and remitted the matters to the commercial court to consider remaining objections within three months. The Court held that under the pre-2015 amendment regime, once a party accepts a court order appointing an arbitrator, it cannot later dispute the existence or validity of the arbitration clause before the arbitral tribunal or while challenging the award. The disputes concerned claims for unpaid escalation amounts and related deductions, where the contracts provided for a standing committee mechanism that had not been constituted in the stipulated manner.
The Supreme Court was seized of two civil appeals arising from disputes between a contractor engaged in public construction works and a statutory housing authority. The disputes originated from contracts awarded for construction of residential units, where escalation costs and related monetary claims were raised by the contractor. The contracts contained a dispute resolution clause providing for reference of disputes to an empowered Standing Committee. Upon alleged failure of the authority to constitute the Standing Committee in accordance with the contractual terms, applications were moved before the High Court under Section 11 of the Arbitration and Conciliation Act, 1996, resulting in the appointment of sole arbitrators prior to the 2015 amendment to the Act.
Arbitral awards were passed in favour of the contractor, granting escalation amounts, refund of penalties, and interest. The housing authority challenged the awards under Section 34, contending that the Standing Committee clause did not constitute an arbitration agreement. The Commercial Court accepted this contention and set aside the awards. Appeals before the High Court were dismissed, affirming the view that the clause was not an arbitration agreement. The contractor thereafter approached the Supreme Court, raising the issue of whether, in arbitral proceedings commenced prior to the 2015 amendment, the validity and existence of the arbitration agreement could be reopened after an arbitrator had been appointed under Section 11 and such appointment had attained finality.
The Court examined the legal position prevailing prior to the 2015 amendment and referred extensively to the Constitution Bench decision in SBP & Co. v. Patel Engineering Ltd.. It observed that “the power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power.” The Court recorded that under the pre-amendment regime, the Section 11 court was bound to decide issues relating to its jurisdiction, the existence of an arbitration agreement, and the fulfilment of statutory conditions before appointing an arbitrator.
The Bench noted that “the decision of the Chief Justice on the issue of jurisdiction and the existence of a valid arbitration agreement would be binding on the parties when the matter goes to the Arbitral Tribunal and at subsequent stages of the proceeding except in an appeal in the Supreme Court.” It further stated that “where the jurisdictional issues are decided under these sections, before a reference is made, Section 16 cannot be held to empower the Arbitral Tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made.”
On the facts, the Court recorded that the orders appointing the arbitrators were passed in 2014, accepted by the respondents, and never challenged. It observed that “the parties proceeded on the basis that Clause 23 was an arbitration clause and in this scenario, the only conclusion possible is that though not very categoric there is an implied holding in the order appointing the Arbitrator about the existence and validity of the arbitration agreement.”
The Court added: “In the present case, the order appointing the Arbitrator attained finality with no challenge being thrown. The respondents accepted the order and did not challenge the appointment in this Court…The fact that the respondents accepted the order and did not challenge it only puts the matter beyond any pale of controversy. The further finding of the Commercial Court in the Section 34 application that the order of the Section 11 court did not have any precedential value and hence the order will not be binding is in the teeth of the judgment in SBP (supra).”
The Court observed: “SBP (supra) also puts the matter beyond any controversy by holding that not only will the parties be bound before the Arbitrator with regard to the finding on existence and validity of the arbitration agreement they will also be bound during the subsequent stages of the proceedings which will include the Section 34 application stage, the Section 37 appeal stage and before this Court.
The Court stated that “the Commercial Court and the High Court clearly erred in going into the existence and validity of Clause 23 and pronouncing that the said clause was not an arbitration clause.”
The Court directed that “the judgment of the High Court dated 20.02.2020 in D.B. Civil Miscellaneous Appeal No. 2435 of 2019 is set aside” and that “the appeal stands allowed.” “The proceedings before the Commercial Court in Arbitration Case No. 221 of 2018 will stand set aside” and ordered that “the matter is remitted to the Commercial Court, Judge No.3, Jaipur for hearing Arbitration Case No. 221 of 2018 on grounds other than what has been concluded hereinabove.”
“While allowing the Section 34 application on the ground that Clause 23 was not an arbitration clause, the Commercial Court recorded that the other objections were not considered. It is only fair that the matter should be remitted for consideration of the other objections. The Commercial Court No.3 is directed to dispose of Arbitration Case No. 221 of 2018 within a period of three months from the date of receipt of this judgment. Parties are to bear their own costs.”
In the connected appeal, the Court directed that “the order of the High Court dated 20.02.2020 in D.B. Civil Miscellaneous Appeal No. 796 of 2019 stands set aside,” and “the matter will stand remitted to the Commercial Court, Judge No.3, Jaipur for hearing Arbitration Case No. 114 of 2018 on grounds other than what has been concluded hereinabove. The Commercial Court No.3 shall dispose of Arbitration Case No. 114 of 2018 within a period of three months from the date of receipt of this judgment,” and that “parties are to bear their own costs.”
Advocates Representing the Parties
For the Appellants: Mr. Akshat Gupta, Adv. Mr. Prakhar Saunakiya, Adv. Mr. Pranav Jain, Adv. Ms. Sakshi Tikmany, Adv. Ms. Yoothica Pallavi, AOR
For the Respondents: Mr. K. L. Janjani, AOR Mr. Kailash J. Kashyap, Adv. Mr. Pankaj Kumar Singh, Adv. Ms. Archla, Adv.
Case Title: M/s Eminent Colonizers Private Limited v. Rajasthan Housing Board and Others
Neutral Citation: 2026 INSC 116
Case Number: Civil Appeal Nos. 753–754 of 2026
Bench: Justice J.B. Pardiwala, Justice K.V. Viswanathan
