Withdrawn arbitrations with liberty do not bar a fresh Section 11 application.

The parties entered into a Loan Agreement dated 3 May 2024, which contained an arbitration clause providing for a sole arbitrator appointed by the lender.

The Applicant later withdrew both proceedings with liberty to initiate fresh proceedings, stating that the wrong loan-account number had been mentioned.

It then applied under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator.

The Respondents objected that the fresh application was barred by the principles underlying Order XXIII Rule 1 of the Code of Civil Procedure, 1908, and that any replacement of the earlier arbitrator had to be sought under Section 15(2) of the 1996 Act.

Whether the Applicant could maintain a fresh Section 11 application after withdrawing earlier arbitral proceedings concerning the same transaction, having obtained liberty to commence fresh proceedings?

Whether the Applicant was required to seek substitution of the earlier arbitrator under Section 15(2), rather than seek a fresh appointment under Section 11, where the earlier proceedings had been withdrawn and the appointment was challenged as unilateral?

Section 11 of the Arbitration and Conciliation Act, 1996, governs appointment of arbitrators by the Court.

The principles underlying Order XXIII Rule 1 CPC may apply to Section 11 proceedings: a fresh proceeding on the same cause of action may be barred where an earlier proceeding was abandoned or withdrawn without leave to institute a fresh proceeding.

However, abandonment is not readily inferred and must be supported by conduct demonstrating that the claim was given up (Rajiv Gaddh v. Subodh Parkash, 2026 INSC 302; Dani Wooltex Corporation v. Sheil Properties Pvt. Ltd., (2024) 7 SCC 1).

Section 18 of the 1996 Act requires equal treatment of parties, including equal participation in the constitution of the tribunal.

Under Bhadra International (India) Pvt. Ltd. v. Airports Authority of India, 2026 SCC OnLine SC 7, an arbitrator’s ineligibility under Section 12(5) read with the Seventh Schedule terminates the mandate; Sections 14 and 15 provide for court intervention and appointment of a substitute where applicable.

Section 15(2) concerns filling a vacancy following termination of an existing arbitrator’s mandate.

The Court accepted that the earlier proceedings had been withdrawn with liberty and that no proceeding remained pending before the earlier arbitrator.

It therefore distinguished Rajiv Gaddh, where the prior proceeding had been abandoned without liberty, and held that the Order XXIII Rule 1 bar did not apply.

The Court also held that Section 15(2) did not require the Applicant to seek substitution: the earlier proceedings were no longer continuing, and the clause gave the lender unilateral appointment power without equal participation by the Respondents.

Applying the equality principle in Bhadra International, the Court rejected the contention that the earlier appointment should be treated as a continuing mandate requiring substitution.

It appointed Mr. Jash Gandhi as sole arbitrator to decide disputes arising out of the Loan Agreement, directed the parties to share the tribunal’s costs in the first instance, and kept all merits issues open.