High Court Cannot Review Its Section 11 Appointment Order; Arbitration Clause Severable and Proceedings to Resume

A bench of Justices J.B. Pardiwala and R. Mahadevan heard an appeal by Hindustan Construction Company Ltd. challenging the Patna High Court’s December 9, 2024 order which dismissed the appellant’s petition under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator. The appeal raised questions on the High Court’s power to review its earlier Section 11 appointment, the validity of Clause 25 of the contract as an arbitration agreement, and whether the parties’ conduct amounted to waiver of objections.

The Supreme Court allowed the appeal, set aside the Patna High Court judgment and directed the High Court to appoint a substitute arbitrator within two weeks who would continue the proceedings from the stage at which they stood and endeavour to conclude the award within one year (subject to further extensions under Section 29A). The Court held that the High Court acted beyond its jurisdiction in reviewing its earlier Section 11 appointment and that the exclusionary portion of Clause 25 — which vested unilateral appointment power in the Managing Director and foreclosed arbitration if that mode could not be followed — was void and severable, leaving a valid arbitration agreement intact. The Court emphasised minimal judicial interference in arbitration and the doctrine of competence‑competence, observing the statutory scheme of the A&C Act. The Court, in its reasoning, observed: “For the reasons discussed above, this Court is of the considered view that the High Court did not have the jurisdiction to reopen or review its earlier order passed under Section 11(6) of the A&C Act. Once the appointment was made, the court became functus officio and could not sit in judgment over the very issue it had already settled. The review order cuts against the grain of the Act, undermines the principle of minimal judicial interference, and effectively converts the review into an appeal in disguise.” The Court also noted the contract term that “no person other than a person appointed by such Managing Director ... should act as arbitrator and if for any reason that is not possible, the matter shall not be referred to arbitrator at all,” characterising that provision as exclusionary and unenforceable.

Background The dispute arose from a public works contract dated 4 March 2014 for construction of a bridge in Bihar under Clause 25, which provided a multi-stage pre‑arbitral process culminating in appointment of a sole arbitrator by the Managing Director of Bihar Rajya Pul Nirman Nigam Ltd. The appellant earlier invoked Clause 25, obtained a Section 11 appointment from the Patna High Court (Justice P.K. Sinha (Retd.)) in August 2019 and secured an award that respondents accepted and paid. Thereafter, fresh claims relating to extension of time and additional costs were pursued; the Managing Director did not appoint an arbitrator and the appellant filed Request Case No. 53 of 2020 under Section 11. The High Court appointed Justice Shivaji Pandey (Retd.) on 18 August 2021; arbitration proceeded over 70 sittings and the parties jointly sought and obtained multiple six‑month extensions under Section 29A.

Despite active participation, the respondents filed a civil review in the High Court and, by an order of 4 October 2024, the High Court stayed the proceedings and directed a re‑listing for appointment of a new arbitrator, later dismissing the Section 11 petition on 9 December 2024. The appellant challenged that dismissal before the Supreme Court.

The Supreme Court reviewed statutory provisions (Sections 4, 5, 7, 11, 12, 14, 15, 16 and 29A) and precedent emphasising limited judicial intervention at the Section 11 stage and the separability of arbitration clauses. It held that the High Court lacked jurisdiction to reopen its Section 11 order by review, that Clause 25 evidenced a binding arbitration agreement under Section 7(4)(c) given the parties’ conduct, and that the unilateral exclusionary appointment mechanism was severable. On waiver, the Court distinguished the requirement of an “express agreement in writing” under Section 12(5) for curing Seventh Schedule ineligibility from procedural waiver under Section 4, concluding that no statutory ineligibility was shown and that the parties’ joint conduct under Section 29A amounted to waiver of procedural objections.

The final result: the appeal was allowed, the Patna High Court’s impugned order was set aside, a substitute arbitrator was to be appointed within two weeks, proceedings were to continue from the existing stage with a one‑year target, and no costs were imposed though the Court issued a stern warning to the respondent’s then Managing Director for procedural neglect.

Case No.: 2025 INSC 1365 Case Title: Hindustan Construction Company Ltd. through its Authorised Signatory Yogesh Dalal v. Bihar Rajya Pul Nirman Nigam Limited and Others Appearances: For the Petitioner(s): [Names not specified in judgment] For the Respondent(s): [Names not specified in judgment]