Res Judicata And Arbitration

This article deals with the relation of the doctrine of res judicata and arbitration. This article also discusses the concept of Arbitration and the concept of res judicata separately. This article has also dealt with the doctrine of arbitration in International Commercial Arbitration.

Introduction 

Arbitration is a method by which the disputes can be settled outside the courts. The parties to such a dispute refer it to one or more arbitrators or an arbitral tribunal. The arbitrator analyses the case takes a decision that is legally binding for both the parties involved sides. Arbitration is a generally used method for settling disputes. Arbitration can be done either voluntary or mandated by means of an arbitration clause in the agreement. Arbitration may be either binding or non-binding in nature. Non-binding arbitration is rather simile to mediation. On the other hand, decisions made by the arbitrator is normally binding on both partied to the suit when arbitration by or in accordance with the arbitration clause of the agreement. In cases where an arbitration agreement does not exist between the parties, the court may refer them to arbitration as long as there exists the consent of the parties involve or if the parties submit a joint memo or application or a joint affidavit for the same. The consent so given by the counsel of the parties should be written and not oral for reference to arbitration.[1]

What is Res-Judicata?

The principle of res judicata is to prevent law from being abused. The doctrine of res judicata is embodied in the Code of Civil Procedure under Section 11. It states that once a matter in issue is heard and finally decided by a competent court, no party to the suit can reopen the same in a subsequent litigation. In other words, by this doctrine if a dispute a matter is heard and finally decided by a competent court, a subsequent suit on the issue is legally barred. This doctrine is also called as estoppel by record. In order for this doctrine to be applied, there are certain conditions that are to be fulfilled:

  • The matter dealt in the subsequent suit must be the same as that which was direct in issue in the first suit.
  • The matter in issue in the subsequent suit should have been heard as well as finally decided by a competent court
  • The court that heard and decided the previous suit must be a competent one
  • The parties involved in both the previous suit as well as the subsequent suit should be the same
  • The parties to the subsequent suit and previous suit should be litigating under the same title.

If all the above conditions are satisfied, then the subsequent suit is barred and hence the court has to dismiss the subsequent world.

Application of Res Judicata in common Law

Once a suit is heard and finally decided by a competent court judgment, if the case has a subsequent suit with the same issues and parties involved litigating under the same titled, then the judges of the subsequent suit shall apply the doctrine res judicata as under Section 11 of the Code of Civil Procedure in order to preserve the effect of the first judgment.

The general Principle as mentioned before is that the plaintiff cannot take an action against the same defendant regarding the same suit after obtaining a valid final judgement from a competent court in the first suit.

The doctrine of res judicata is based on three maxims:

Nemo debet lis vaxari pro eadem causa – It means that no person should be vexed, annoyed, harassed or vexed twice for the same cause.

Interest republicae ut sit finis litium – It means that it is in the interest of the state that there should be an end of litigation; and lastly

Re judicata pro veritate occipitur – Decision of the court should be accepted as correct.[2]

Doctrine Of Res Judicata And Its Application On Arbitration Proceeding.

 In a condition where the matter or issue for the same title have arisen already, in such situations the matter or issue may be taken for the second time under the same title. This can be better understood with a case. In the case of Shri Sai Enterprises v. Mahanagar Telephone Nigam Ltd and ors.[3]It may be observed that the award made by the first arbitrator was challenged before the court and the court had altered the award party. The matter was later again placed before a second arbitrator by the disputed award and the second arbitrator had surpassed its jurisdiction and passed award or all claims already settled by 1st award. Hence, it may be observed that the doctrine of res judicata was not applied either on the facts of the case or on the legal aspect.

In a condition where the parties have entered into an arbitration agreement, can they refer their disputes in appeal during the pendency of appeal before the Supreme Court?  By means of Section 8 of the Arbitration and Conciliation Act, a judicial authority before which an action is brought in a matter or issue which is the subject of an arbitration agreement shall refer the parties to arbitration. Thus, the parties can refer their dispute in appeal. It is, however, necessary for the existence of such agreement between the parties before an action is brought to Court.[4]

When Full And Final Settlement Bars Arbitration

The Supreme Court has dealt this concept under a pertinent case United India Insurance Co. Ltd. v. Antique Art Exports Pvt Ltd[5]. In this case Supreme Court had maintained the sanctity of full and final settlement by its judgement in the case. The Appeal for the said suit had been filed by the Insurance Company intending to question the appointment of  the Arbitrator for the parties, by the High Court in exercise of its power provided Under Section 11(6) of the Arbitration and Conciliation Act, 1996 (the Act).[6]

Facts Of The Case

The Respondent-claimant of this suit was running a factory and had purchased two Standard Fire and Special Perils Policies. A fire had taken place in its factory which, according to the respondent- claimant was allegedly caused due to a short circuit. The Respondent- claimant accordingly intimated the same to the Appellant Company and a surveyor was appointed subsequently. A report was later submitted by the official surveyor. Thereafter, the Appellant Company also sent an e-mail to the Respondent- claimant with the intimation that it has approved a certain amount of the claim on account of the fire, towards a full and final settlement, along with the complete details of the computed amount. The Respondent had, on the same day sent a reply accepting the computation and had also provided the required details along with a final discharge voucher and the details of the bank account to which the payment was to be credited. After about 11 weeks of the previously mentioned full and final discharge or settlement, the Respondent claimed that he was forced into signing on the settlement document. Consequently, it approached the High Court for the appointment of an Arbitrator in order to adjudicate the subject matter[7].

Case of the Appellant

According to the appellant, once the claimant had received the settled compensation and subsequently issued a discharge voucher in full and final settlement of its claim, the contract was discharged by accord and satisfaction. As a consequence, neither any contract nor any claim had survived. Also, after 11 weeks of the receipt of the settled amount between the parties, it wasn’t open for the Respondent, to state that the discharge so obtained was obtained under coercion and undue influence without furnishing any form of evidence in support of the same. According to Sub-section (6A) of Section 11 of the Arbitration and Conciliation Act that was introduced by means of the Amendment Act, 2015, it limits purpose for expediting the arbitral disputes in a time bound manner provided a prima facie arbitral claim or dispute exists under the arbitral agreement for judgement by the Arbitrator. In the given case, as there was no arbitral dispute between the parties in existence after the claim had been finally settled.[8]

Contention of the Respondent

According to the respondent, he was not in a position to negotiate and was in financial stress. The respondent had no choice but to accept the claim on as per the signed document settled by the Appellant.

The existence of an arbitration clause in the agreement, it was the duty of the Arbitrator to examine whether the claim was accepted by the Respondent voluntarily or if it was under undue influence or coercion.[9]

According to the High Court, in the instant case it was held that once there is a presence of an arbitration clause in the agreement and the payment made by the appellant company is accepted, then the whole question regarding whether such acceptance was under coercion or undue influence is something that is to be examined by the arbitrator and in this case an arbitrator was appointed.

The Supreme Court

In the case in hand, the Supreme Court had reversed the decision made by the High Court and held that at first glance no dispute existed after the discharge voucher was signed by the Respondent- claimant without any complaint. The Appellant had only after 11 weeks of the settlement of the said claim sent a letter on 27th July, 2016 for the first time with regard to it stating that the discharge voucher was not voluntarily signed but was done under undue influence and coercion with no kind of apparent evidence being placed on record for the same. In lack of any such evidence, the Supreme Court stated, it should follow that the claim had been settled with accord and satisfaction leaving no existence of any arbitral dispute under the agreement to be referred to the Arbitrator for settlement.[10]

The Supreme Court had thus in the instant case United India Insurance Co. v. Antique Art Exports Pvt Ltd., had almost taken precedence the interpretation of Section 11(6A) assumed by the Bench in the case Duro Felguera S.A. v. Gangavaram Port Limited [11]. In this case the Court had held that Court under Section 11(6A) cannot look into any other issue except the existence of an arbitration agreement.[12]

In the instant case, i.e., United India Insurance Co. v. Antique Art Exports Pvt Ltd., the Supreme Court held that as per Section 11(6A) the courts perform a judicial function and not just an administrative function.

The judgement made in this case was however overruled in the case M/s. Mayavathi Trading Pvt Ltd v. Pradyuat Deb Burman[13] In this case the three judge bench having considered the law commission reports and other judgements came to the conclusion that the decision made by the Court in the case of United India Insurance Co. v. Antique Art Exports Pvt Ltd is incorrect. The Court had overruled the judgement in this case and upheld the decision mad in the case of Duro Felguera S.A. v. Gangavaram Port Limited.

In another landmark case, the Delhi High Court in the case of Union of India v. Videocon Industries Limited[14]  the High Court had granted an anti-suit injunction for the Plaintiff and had passed an order of perpetual injunction restraining the Defendant from pursuing the claim before a Commercial Court in London. The Delhi High Court in this case held that re-initiation of proceedings before the London Courts was unfair and abuse of the process of law and is in violation of the doctrine of res judicata and issue estoppel provided under Section 11 of the Code of Civil Procedure.[15]

The Doctrine of Res Judicata in International Commercial Arbitration

Due to the increasing relevance and intricacy of international arbitration it is to be expected that the need for res judicata in international arbitration practice will also grow. The relevance of Res Judicata in International commercial Arbitration is a largely unsolved problem and one that requires more insight. The issues of Res Judicata arises before the arbitration tribunals in various situations. These situations vary with regard to the nature of the court or a tribunal having made the first final and binding decision. Such issues may arise between (i) arbitral tribunals and state Courts ;( ii) different arbitral tribunals; (iii) within the same arbitral proceeding between a partial and final award; and (iv) Supra- national courts or tribunals and arbitral tribunals[16]

In international arbitration the issues of res judicata occurs most commonly between state court and arbitral tribunals[17]. In practice however it is rare for an arbitral tribunal to be faced with the same question of with regard to the same facts and same cause of action. And between the same parties. Mostly the reason for this is the substantial issues before the arbitral tribunal is usually covered by the arbitration agreement entered into by the parties and hence is less likely for the same to have been dealt before the State Court.

Res judicata issues may also arise in circumstances connecting the positive res judicata effect and issue estoppel. This is likely to happen when one party brings in a new arbitration proceedings on the grounds that a prior award did not exhaust and all the differences existing between the parties as in the case of PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA[18]

A res judicata issue may also arise where an arbitral tribunal is requested to reconsider or interpret its prior partial or final award. The res judicata doctrine in this case will impose limits on the arbitral tribunal’s power to reconsider or interpret its prior awards[19]

Doctrine of Res Judicata: An Analysis with Regard to Public Policy

The doctrine of res judicata in international arbitration is as mentioned before, that where the subject matter of the dispute has already been decided by a national court or by a previous arbitrator, it should be barred by law as the existence of two enforceable awards regarding the same issue, between the same parties would be conflicting to procedural public policy.[20]

In certain countries, the concept of res judicata is not something that is codified but rather something that come into existence by means of case laws, for example the Swiss Law. Under Swiss Law, the only case where a violation of procedural public policy was affirmed was by an award that disregarded the fundamental procedural principal of res judicata. Hence, by this doctrine, a tribunal should be barred from deciding the same suit in the event there is a final, conclusive and binding judgment or arbitration award regarding the same cause of action, with the same claims and between the same parties.[21]

By means of a recent decision of the German Federal Court of Justice of October 2018, the Court had decided that a violation of the doctrine of res judicata not only occurs when a tribunal neglects that it is bound by the effect of res judicata of an award or a judgment given in a separate proceeding, but when a tribunal has incorrectly assumed to be bound by any decision or award made in a separate proceeding. The Court held that the underlying concept of this decision is due process, as one may be prohibited from bringing a claim which it is entitled to in court or arbitration in violation of German public policy under the German Code of Civil Procedure Section 1059(2).[22]

Conclusion

The concept of res judicata is somewhere in between substantive and procedural laws. The principle of res judicata is to prevent law from being abused.  There is no right or wrong answer, nor any established approach that is adopted by an international arbitration tribunal in with regard to the doctrine of res judicata. It will be within the discretion of the particular tribunal, to decide after taking into consideration all relevant factors to that specific dispute, including the arbitration agreement and earlier decision. This in turn makes res judicata an area of doubt for parties and their legal representatives involved in arbitration.[23]

FAQs

What Is Arbitration?

Arbitration is a method by which the disputes can be settled outside the courts. The parties to such a dispute refer it to one or more arbitrators or an arbitral tribunal. The arbitrator analyses the case takes a decision that is legally binding for both the parties involved sides. Arbitration is a generally used method for settling disputes.

What Is Doctrine Of Res Judicata?

The principle of res judicata is to prevent law from being abused. The doctrine of res judicata is embodied in the Code of Civil Procedure under section 11. It states that once a matter in issue is heard and finally decided by a competent court, no party to the suit can reopen the same in a subsequent litigation

What Are Three Maxims Based On The Doctrine Of Res Judicata?

The doctrine of res judicata is based on three maxims:

Nemo debet lis vaxari pro eadem causa – It means that no person should be vexed, annoyed, harassed or vexed twice for the same cause;Interest republicae ut sit finis litium – It means that it is in the interest of the state that there should be an end of litigation; and lastly.Re judicata pro veritate occipitur – Decision of the court should be accepted as correct.

Whether Parties Entered Into An Arbitration Agreement Can Refer Their Disputes In Appeal During The Pendency Of An Appeal Before Supreme Court?

Under section 8 of the Act, A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall refer the parties to arbitration. Hence the parties can refer their dispute in appeal, but it is necessary that agreement must be already in existence before the action is brought in the Court

Does The Doctrine Of Res Judicata Have Any Relevance In International Commercial Arbitration?

Due to the increasing relevance and intricacy of international arbitration it is to be expected that the need for res judicata in international arbitration practice will also grow. The relevance of Res Judicata in International commercial Arbitration is a largely unsolved problem and one that requires more insight. In international arbitration the issues of res judicata occurs most commonly between state court and arbitral tribunals.

References

Paliwala, M. (2019, December 11). Res Judicata: All You Need to Know About. IPleaders. https://blog.ipleaders.in/overview-on-doctrine-of-res-judicata/amp/.

VIA Mediation Centre. (n.d.). Resjudicata in Arbitration | VIA Mediation Centre. Https://Viamediationcentre.Org/. Retrieved October 16, 2020, from https://viamediationcentre.org/readnews/NDIw/Resjudicata-in-Arbitration.

Ambika, S. S. (2020, February 5). WHEN FULL AND FINAL SETTLEMENT BARS ARBITRATION. Singhania And Partners. https://singhania.in/supreme-court-judgement-the-arbitration-and-conciliation-act-1996/.

Sharan, S. (2019, May 31). When Full and Final Settlement Bars Arbitration. Litigation, Mediation & Arbitration – India. https://www.mondaq.com/india/trials-appeals-compensation/810812/when-full-and-final-settlement-bars-arbitration#:%7E:text=India%3A%20When%20Full%20And%20Final%20Settlement%20Bars%20Arbitration&text=To%20print%20this%20article%2C%20all,in%20United%20India%20Insurance%20Co.

Posts, V. M. (2019, October 12). Supreme Court overrules United India Insurance Co v. Antique Art Exports Pvt. Ltd. WordPress.Com. https://hemanthrao.com/2019/09/23/supreme-court-overrules-united-india-insurance-co-v-antique-art-exports-pvt-ltd/.

Nishith Desai Associates: Applicability of Res Judicata: Supreme Court of India decision vis-a-vis Issue before London Court. (n.d.). Http://Www.Nishithdesai.Com. Retrieved October 17, 2020, from http://www.nishithdesai.com/information/research-and-articles/nda-hotline/nda-hotline-single-view/article/applicability-of-res-judicata-supreme-court-of-india-decision-vis-a-vis-issue-before-london-court.html?no_cache=1&cHash=e1354df5d471b1c416c363b6bf2350f8.

ILA, Interim Report, pp. 3 et seq.; See also SHEPPARD, The Scope and Res Judicata Effect of Arbitral Awards, p. 274; CRIVELLARO, p. 86; MAYER, Litispendance, connexité et chose jugée dans l’arbitrage international, pp.195 et seq

 ILA, Interim Report, p. 4; SHEPPARD, The Scope and Res Judicata Effect of Arbitral Awards, p. 275; CRIVELLARO, p. 86.

Schaffstein, S. (n.d.). THE DOCTRINE OF RES JUDICATA BEFORE INTERNATIONAL ARBITRAL TRIBUNALS. Https://Qmro.Qmul.Ac.Uk/. Retrieved October 17, 2020, from https://qmro.qmul.ac.uk/xmlui/bitstream/handle/123456789/8665/Schaffstein_S_PhD_Final.pdf?sequence=1

http://arbitrationblog.kluwerarbitration.com/author/selin-ece-tekin/. (2019, February 23). Res Judicata: An Analysis for the Sake of Public Policy. Kluwer Arbitration Blog. http://arbitrationblog.kluwerarbitration.com/2019/02/24/res-judicata-an-analysis-for-the-sake-of-public-policy/.

Jojo, C. (n.d.). Res judicata and issue estoppel in arbitration. Https://Www.Nortonrosefulbright.Com/ .Retrieved October 17, 2020, from https://www.nortonrosefulbright.com/en-in/knowledge/publications/16cd03ce/emres-judicataem-and-issue-estoppel-in-arbitration


[1] Paliwala, M. (2019, December 11). Res Judicata: All You Need to Know About. IPleaders. https://blog.ipleaders.in/overview-on-doctrine-of-res-judicata/amp/ .

[2] Paliwala, M. (2019, December 11). Res Judicata: All You Need to Know About. IPleaders. https://blog.ipleaders.in/overview-on-doctrine-of-res-judicata/amp/ .

[3] (2006) 11 SCC 181

[4] VIA Mediation Centre. (n.d.). Resjudicata in Arbitration | VIA Mediation Centre. Https://Viamediationcentre.Org/ .Retrieved October 16, 2020, from https://viamediationcentre.org/readnews/NDIw/Resjudicata-in-Arbitration .

[5] (2019) 5 SCC 362

[6] Ambika, S. S. (2020, February 5). WHEN FULL AND FINAL SETTLEMENT BARS ARBITRATION. Singhania And Partners. https://singhania.in/supreme-court-judgement-the-arbitration-and-conciliation-act-1996/ .

[7] Ibid

[8] Sharan, S. (2019, May 31). When Full and Final Settlement Bars Arbitration. Litigation, Mediation & Arbitration – India. https://www.mondaq.com/india/trials-appeals-compensation/810812/when-full-and-final-settlement-bars-arbitration#:%7E:text=India%3A%20When%20Full%20And%20Final%20Settlement%20Bars%20Arbitration&text=To%20print%20this%20article%2C%20all,in%20United%20India%20Insurance%20Co .

[9] Ibid

[10] Ambika, S. S. (2020, February 5). WHEN FULL AND FINAL SETTLEMENT BARS ARBITRATION. Singhania And Partners. https://singhania.in/supreme-court-judgement-the-arbitration-and-conciliation-act-1996/ .

[11] (2017) 9 SCC 729

[12] Posts, V. M. (2019, October 12). Supreme Court overrules United India Insurance Co v. Antique Art Exports Pvt. Ltd. WordPress.Com. https://hemanthrao.com/2019/09/23/supreme-court-overrules-united-india-insurance-co-v-antique-art-exports-pvt-ltd/ .

[13] 2019 (8) SCC 714

[14] CS (OS) 3314/2011

[15] Nishith Desai Associates: Applicability of Res Judicata: Supreme Court of India decision vis-a-vis Issue before London Court. (n.d.). Http://Www.Nishithdesai.Com . Retrieved October 17, 2020, from http://www.nishithdesai.com/information/research-and-articles/nda-hotline/nda-hotline-single-view/article/applicability-of-res-judicata-supreme-court-of-india-decision-vis-a-vis-issue-before-london-court.html?no_cache=1&cHash=e1354df5d471b1c416c363b6bf2350f8 .

[16] ILA, Interim Report, pp. 3 et seq.; See also SHEPPARD, The Scope and Res Judicata Effect of Arbitral Awards,p. 274; CRIVELLARO, p. 86; MAYER, Litispendance, connexité et chose jugée dans l’arbitrage international, pp.

195 et seq

[17] ILA, Interim Report, p. 4; SHEPPARD, The Scope and Res Judicata Effect of Arbitral Awards, p. 275;

CRIVELLARO, p. 86.

[18] SA [2006] 1 SLR 197

[19] Schaffstein, S. (n.d.). THE DOCTRINE OF RES JUDICATA BEFORE INTERNATIONAL ARBITRAL TRIBUNALS. Https://Qmro.Qmul.Ac.Uk/. Retrieved October 17, 2020, from https://qmro.qmul.ac.uk/xmlui/bitstream/handle/123456789/8665/Schaffstein_S_PhD_Final.pdf?sequence=1

[20] http://arbitrationblog.kluwerarbitration.com/author/selin-ece-tekin/ . (2019, February 23). Res Judicata: An Analysis for the Sake of Public Policy. Kluwer Arbitration Blog. http://arbitrationblog.kluwerarbitration.com/2019/02/24/res-judicata-an-analysis-for-the-sake-of-public-policy/ .

[21] Ibid

[22] http://arbitrationblog.kluwerarbitration.com/author/selin-ece-tekin/ . (2019, February 23). Res Judicata: An Analysis for the Sake of Public Policy. Kluwer Arbitration Blog. http://arbitrationblog.kluwerarbitration.com/2019/02/24/res-judicata-an-analysis-for-the-sake-of-public-policy/ .

[23] Jojo, C. (n.d.). Res judicata and issue estoppel in arbitration. Https://Www.Nortonrosefulbright.Com/ .Retrieved October 17, 2020, from https://www.nortonrosefulbright.com/en-in/knowledge/publications/16cd03ce/emres-judicataem-and-issue-estoppel-in-arbitration

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