Consent to Set Aside Arbitral Award and Appoint New Arbitrator to Adjudicate Limitation and Merits Afresh

In April 2017, the parties entered into an agreement for the sale of 100% shareholding of MRJ Infratech Pvt. Ltd.

After disputes arose, an arbitrator was appointed in 2018. During the first round of arbitration, the purchasers sought to amend their claim; the proceedings resulted in an award dated 13.07.2022.

Both parties challenged this award under Section 34 of the Arbitration and Conciliation Act, 1996 ("the Act"), leading to a consent order setting aside the award and appointing a fresh arbitrator.

In the second round, the arbitrator dismissed the purchasers' claims and the sellers' counter-claims as time-barred via an award dated 21.03.2025.

The arbitrator held that Section 43(4) of the Act was inapplicable and the refund/compensation claims were not raised in the first round's original statement of claim.

1. Whether the arbitral award dated 21.03.2025, dismissing the claims and counter-claims as time-barred, is legally sustainable given that the arbitrator allegedly failed to deal with the sellers' case and the prior amendment application.

2. Whether a fresh arbitrator should be appointed to determine the specific issue of limitation regarding the amendment application from the first round and the counter-claim from the second round.

Section 34 of the Arbitration and Conciliation Act, 1996, regarding the setting aside of arbitral awards.

Section 43(4) of the Act, which deals with the exclusion of time when an award is set aside by the court.

Principle of consent-based adjudication and the court’s power to appoint a substitute arbitrator under the Act to ensure the adjudication of disputes on merits where the previous award failed to address the core arguments of the parties.

The Court observed from the record that the arbitrator in the second round had not fully addressed the case set up by the sellers.

The purchasers argued that the court in the previous Section 34 proceeding had noted their grievance regarding the undecided amendment application, yet the second arbitrator concluded the claims were barred without adequately considering the procedural history.

During the hearing, both parties reached a consensus that the current award should be set aside because the findings on limitation required deeper adjudication—specifically whether the amendment application in the first round was filed within time and whether Section 43(4) applied to the second round's counter-claims.

Since the court found that the arbitrator failed to deal with the sellers' position, it accepted the joint request to set aside the award and refer the matter back to a fresh tribunal to decide these preliminary issues of limitation followed by merits.

By consent of the parties, it appointed a new Sole Arbitrator to adjudicate the disputes afresh, with directions that the tribunal must first determine whether the amendment application in the first round and the counter-claim in the second round were within the period of limitation.

All rights and contentions on merits remain open, and the arbitrator is to proceed in accordance with Schedule IV and Section 12 of the Act. The petitions were allowed in these terms.