Section 11 Order Holds Finality on Arbitration Clause; High Court Verdicts Set Aside and Matters Remitted

A bench of Justices J.B. Pardiwala and K.V. Viswanathan heard appeals arising from two challenges to arbitral awards rendered in disputes between contractors and the Rajasthan Housing Board, and framed the central question whether Clause 23 of the contracting agreements qualified as an arbitration clause and whether its existence and validity could be gone into before an arbitrator where the appointment under Section 11 had been made prior to the 2015 Amendment.

The Court allowed the appeals, held that the Section 11 order appointing arbitrators — made in the SBP & Co. regime prior to the legislative changes — operated as final on the existence and validity of the arbitration agreement and therefore bound the parties during arbitral and subsequent judicial proceedings. The Court said that the Commercial Court and the High Court erred in re-opening the issue and set aside the High Court orders, remitting the matters for fresh consideration on other grounds. The Court, in its reasoning, observed: “We are inclined to the view 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 in the case of the decision being by the Chief Justice of the High Court or by a Judge of the High Court designated by him.” The judgment emphasised that under the pre‑2015 (SBP) regime an order under Section 11 was “not an administrative power. It is a judicial power,” and when such an order attained finality it operated as res judicata on the question of existence and validity of the arbitration agreement.

Background

The two appeals arose from separate construction contracts awarded by the Rajasthan Housing Board. In Civil Appeal No. 753 of 2026 (SLP (C) No.8299/2021) the appellant had executed a contract dated 08.07.2009 for construction of HIG houses and flats and claimed escalation dues under Clause 45. Clause 23 of the agreement provided for settlement of disputes by an empowered Standing Committee constituted of specified government officers. The appellant contended that the Board did not constitute the committee as required and filed a Section 11 petition; a Single Judge appointed a retired High Court judge as sole arbitrator by order dated 23.05.2014. The arbitrator awarded the claim on 15.09.2015.

The respondents challenged the award under Section 34 before the Commercial Court which set aside the award holding that Clause 23 was not an arbitration clause, relying on two Rajasthan High Court decisions. The High Court upheld that order. The appellant carried the matter to the Supreme Court.

In the second appeal (Civil Appeal No. 754 of 2026, SLP (C) No.8331/2021) facts were materially similar: contract dated 11.10.2007, Section 11 appointment on 23.05.2014, award passed in 2016, and subsequent setting aside by the Commercial Court and confirmation by the High Court on the ground that Clause 23 did not constitute an arbitration clause.

The Supreme Court held that the proceedings had been commenced and the appointment made before the 2015 Amendment and therefore the SBP & Co. principles governed. The Court found an implied finding in the Section 11 order about the existence and validity of the arbitration agreement, noted that the respondents did not challenge that appointment in this Court, and concluded that the Section 11 order operated as res judicata on that point. The Court set aside the High Court judgments dated 20.02.2020, allowed both appeals, and remitted the matters to Commercial Court No. 3, Jaipur for consideration of other objections to the awards within three months from receipt of the judgment. Parties were directed to bear their own costs.

Case Details: Case No.: CIVIL APPEAL NO. 753 OF 2026 (@ SLP (C) No.8299 OF 2021) and CIVIL APPEAL NO. 754 OF 2026 (@ SLP (C) No.8331 OF 2021) Case Title: M/s Eminent Colonizers Private Limited …Appellant Versus Rajasthan Housing Board and Ors. …Respondents Appearances: For the Petitioner(s): Mr. Akshat Gupta, Advocate For the Respondent(s): Mr. Kailash J. Kashyap, Advocate