The Hon'ble Delhi High Court in Surender Bajaj v. Dinesh Gupta & Ors.¹ addressed an intricate question regarding the maintainability of successive applications seeking arbitral reference when prior judicial determinations have categorically rejected such attempts. The Court, dismissed the petition under Section 11 of the Arbitration and Conciliation Act,1996 (“Act”).

This dispute originated back in November 2018 when Surender Bajaj (“Petitioner”) entered in a collaboration agreement with the multiple Respondents (“Respondent”) for carrying out a construction activity on a property. According to this agreement, the Petitioner would carry out the comprehensive construction activity and in return would acquire the ownership and possession rights over the second floor of the constructed structure Despite completing the construction work as stipulated, the Respondent denied the Petitioner his contractual rights.

The Respondent initiated a civil suit before the Tis Hazari Court seeking a permanent injunction against the Petitioner claiming the ownership through a registered sale deed. The Petitioner invoked the arbitration clause of the Collaboration agreement by filing an application under Section 8 of Act.

The civil judge vide order dated May 06, 2023 dismissed the application citing several procedural and substantive deficiencies that rendered the arbitration application untenable. The court's analysis revealed that petitioner had failed to comply with the mandatory requirements of Section 8(2) of the Act, specifically the submission of the original collaboration agreement or its duly certified copy.

The Petitioner pursued an appeal before a District judge court. However, the court upheld the trail court’s order and observed that referring only the Petitioner to arbitration would result in splitting of parties and fragmenting the subject matter, which contravenes the scheme of the Act.

After this successive dismissal of applications. The Petitioner filed a fresh petition under Section 11 of the Act before Delhi High Court in an attempt to circumvent the earlier judicial decisions by seeking direct appointment of an arbitrator rather than requesting referral from ongoing civil proceedings.

The Respondent’s counsel opposed the petition and emphasized that the Respondent have already instituted a civil suit seeking a permanent injunction against the Petitioner. The Respondent contended that under these circumstances, where identical arbitration clauses and parties had been judicially examined and rejected, the present Section 11 petition was not maintainable and would amount to res judicata.

The Petitioner submitted that the controversy in the present petition was distinct from the civil suit proceedings while the civil suit sought a permanent injunction, the instant petition concerned possession rights. He further contended that the Section 8 application was rejected on technical grounds only, and such rejection would not bar recourse under Section 11 of the Act.

The Hon'ble Delhi High Court found that the appellate court's finding in paragraph 11 of the order dated April 18, 2024 clearly established that referring parties to arbitration would lead to impermissible splitting of parties and subject matter, contravening the scheme of the Act. Consequently, the Hon'ble Delhi High Court dismissed the petition under Section 11 of the Act and held that the present application seeking appointment of an independent arbitrator was barred by the principle of res judicata, as identical prayers for arbitral reference involving the same parties and arbitration clause had already been judicially rejected by both the trial court and appellate court.

The decision serves as a significant reminder that judicial determinations regarding arbitrability carry finality and cannot be circumvented through successive applications in different forums. It emphasizes the importance of procedural compliance and highlights the courts' reluctance to permit piecemeal arbitration that would result in splitting of parties or subject matter. The judgment underscores the doctrine of res judicata's application in arbitration contexts. While the Court preserved the Petitioner's right to pursue alternative legal remedies, it firmly established that repeated attempts to invoke arbitral jurisdiction through different procedural mechanisms would not be entertained when the underlying issues have been judicially determined.

By - Akarsh Pandey and Abhinav Mall