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Informist, Friday, Nov. 28, 2025

 

NEW DELHI – The Supreme Court Friday said high courts do not have the jurisdiction to reopen or review their own orders appointing an arbitrator under the Arbitration and Conciliation Act, 1996. Once an arbitrator is named, courts become "functus officio" and cannot sit in judgment on an issue that they themselves had settled, a bench of Justice J.B. Pardiwala and Justice R. Mahadevan held. The bench rejected an order of the Patna High Court setting aside the appointment of an arbitrator in a dispute relating to Hindustan Construction Co. Ltd. and Bihar Rajya Pul Nirman Nigam Ltd. The arbitrator was appointed by the Patna High Court, but the court later set aside the arbitration proceedings between the parties.

 

Once an arbitrator is appointed, the arbitration must proceed unhindered, the Supreme Court said. There is no statutory provision to review an order appointing an arbitrator or go in appeal against it, which reflects a conscious legislative choice, the court said. "While high courts, as courts of record, do possess limited power of review, such power is extremely circumscribed in matters governed by the Arbitration Act," the bench said. "It may be exercised only to correct an error apparent on the face of the record or to address a material fact that was overlooked. It cannot be used to revisit findings of law or reappreciate issues already decided."

 

The Supreme Court said the Patna High Court's review order goes against the grain of the Arbitration Act, undermines the principle of minimal judicial interference, and effectively converts the review into an appeal in disguise. Such an exercise cannot stand, it said.

 

The court said that once the arbitrator had been appointed and the appointment had attained finality, the only remedies available to the Bihar bridge-building corporation was to approach the Supreme Court or to raise an objection before the arbitration tribunal. Having chosen neither route, and having participated in the arbitration proceedings, including joint applications for extension of the arbitrator's mandate, the Bihar Rajya Pul Nirman Nigam was stopped from reopening the matter through review, the top court said.

 

The Supreme Court noted that both parties to the dispute had participated fully in the arbitration proceedings and more than 70 hearings had been conducted. The high court had also extended the arbitrator's mandate twice. So, at this stage, the high court could not retrospectively invalidate its own appointment order, the Supreme Court said. If the arbitrator had lost the ability to act owing to recusal or disqualification, the proper course of action would have been to appoint a substitute arbitrator to take over from the existing stage of the proceedings, it said.

 

The apex court observed that restarting the arbitral process "de novo", or anew, would be both inequitable and inefficient and it was "just and proper" that the progress made be preserved. Therefore, it directed the high court to appoint a substitute arbitrator within two weeks. The newly appointed arbitrator shall continue the proceedings from the stage at which they were interrupted and endeavour to conclude them within one year, subject to any further extension by mutual consent, the court said.

 

The top court also questioned the conduct of the Bihar public-sector undertaking, observing that it was far from satisfactory. Despite repeated notices in appeal and requests for the appointment of an independent arbitrator, the then managing director of the corporation chose to remain silent, compelling Hindustan Construction to seek judicial intervention, the court noted. Such indifference by a public authority, where contractual obligations demand prompt responsiveness, falls short of the standards of fairness required of a state entity, it said.

 

The Supreme Court issued a "stern warning" to the managing director, saying public officials are custodians of public faith, not mere administrators. Any repetition of such neglect may invite adverse remarks or even personal accountability, the court said, adding that the officer was advised to reflect upon the responsibilities of public office and ensure that such indifference does not recur.

 

Bihar Rajya Pul Nirman Nigam had awarded a contract to Hindustan Construction in 2014 to build a bridge over the river Sone in the districts of Aurangabad and Rohtas. Hindustan Construction later approached the corporation to seek extension of time for completion of works and compensation for additional costs incurred during the extended period. The company then sought the appointment of an arbitrator to decide on the dispute with the state corporation.

 

In 2021, the high court appointed an arbitrator who conducted proceedings in the case for over three years. Thereafter, the Bihar corporation filed a plea seeking a review of the order appointing the arbitrator, stating that the arbitrator had been appointed president of the Meghalaya State Consumer Protection Commission. In 2024, the high court directed the arbitrator not to proceed with the arbitration and posted to a later date the request to appoint a new arbitrator. However, the high court later dismissed the plea seeking appointment of another arbitrator.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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