Case brief: Hindustan Construction Company Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd.

Introduction

The Hon’ble Supreme Court’s 2025 judgment in Hindustan Construction Company Ltd. (“HCC”) v. Bihar Rajya Pul Nirman Nigam Ltd. (“BRPNNL”) marks an important reaffirmation of India’s pro arbitration framework. At its heart, the case deals with a simple but powerful question:

Once a Hon’ble High Court appoints an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, can it later “review” that decision and undo the entire arbitral process?

The Hon’ble Supreme Court answers with a clear and resounding “No”. In addition, the Judgment does more inasmuch as it explains why reopening concluded Section 11 orders would destabilize arbitration, undermine party autonomy and invite never ending litigation. The Hon’ble Court’s reasoning is rooted in statutory structure of the Arbitration and Conciliation Act, 1996.

Background of the Dispute

The dispute between parties to the Judgment stemmed from a 2014 construction contract for building a bridge over the Sone river in Bihar, which contained an arbitration clause (Clause 25). When conflicts emerged during execution works, two separate arbitration processes were initiated. The constitution of the Arbitral Tribunal in the first arbitration (2019–2021) was by way of an order passed by the Hon’ble Patna High Court under Section 11 of Arbitration and Conciliation Act, 1996. These proceedings culminated in an award that BRPNNL fully accepted and implemented without challenge. This conduct by both sides established that Clause 25 was a valid arbitration agreement executed between the parties.

The second arbitration commenced in the year 2020 when HCC raised fresh prolongation claims and resultantly invoked Clause 25. After BRPNNL failed to appoint an arbitrator, the Hon’ble Patna High Court appointed Justice Shivaji Pandey (Retd.) as the sole Arbitrator in on 18.08.2021 under Section 11 of the Arbitration and Conciliation Act, 1996. The proceedings continued for over three years, involving more than 70 hearings, multiple joint applications for extension under Section 29A of the Arbitration and Conciliation Act, 1996. However, prior to conclusion of the arbitral proceedings, BRPNNL, preferred a review of the order passed on 18.08.2021 appointing the Ld. Sole Arbitrator. Concomitantly, HCC had preferred a fresh Section 11 Petition (“Fresh Section 11 Petition”) since the Ld. Sole Arbitrator could no longer continue as the Ld. Sole Arbitrator on account of his appointment President of the State Consumer Disputes Redressal Commission, Meghalaya.

However, the Hon’ble Patna High Court, not only halted the ongoing arbitral proceedings, it ultimately dismissed the Fresh Section 11 Petition on 09.12.2024, effectively holding that no arbitration agreement existed.

The Fresh Section 11 Petition was dismissed on the grounds that, in view of the amended provisions of Section 12 of the Arbitration and Conciliation Act, 1996, the proposed arbitrator was ineligible, and there was no express post-dispute waiver executed by the parties in accordance with Section 12(5) read with the Seventh Schedule. Consequently, the Hon’ble Patna High Court held that the appointment sought could not be sustained in law.

As such, not only did the Hon’ble High Court revisit the appointment under Section 11, it dismissed the Fresh Section 11 Petition thereby undoing years of arbitral progress. This drastic turn led to HCC approaching the Hon’ble Supreme Court.

Findings of the Hon’ble Supreme Court

No power of Review available for orders passed under Section 11 of the Arbitration and Conciliation Act, 1996: 

The Hon’ble Supreme Court reaffirmed that orders passed under Section 11 are final and non-reviewable, as the Arbitration and Conciliation Act, 1996 itself provides no mechanism for revisiting such appointments. Once an arbitrator is appointed, the Hon’ble High Court becomes functus officio, leaving no scope for reconsideration of such appointment. Allowing reviews would generate uncertainty, encourage tactical litigation and undermine the very objectives of arbitration i.e., speed, finality and minimal judicial intervention. Drawing from the legislative scheme of Sections 5, 7 and 11 and the seven judge bench decision in Interplay Between Arbitration Agreements and the Stamp Act, the Hon’ble Supreme Court rejected BRPNNL’s attempt to reopen proceedings three years later, characterising it as an effort to “re-enter through the back door what the statute has shut through the front door.”

Clause 25 constitutes a valid arbitration agreement

Rejecting BRPNNL’s argument that Clause 25 contained a “negative covenant” preventing arbitration if the Managing Director failed to appoint an arbitrator, no arbitration could take place, the Hon’ble Supreme Court held that the clause unquestionably reflected the parties’ intention to arbitrate. The same clause had already been used for the first arbitration, the award passed whereunder was accepted by BRPNNL, without challenge demonstrating a clear admission of the arbitration agreement by conduct. Moreover, the parties actively participated in the second arbitration for three years, which further supported its validity under Section 7(4)(c), recognising arbitration agreements through conduct. The Hon’ble Supreme Court held that the negative covenant could not override statutory principles nor nullify a clause the parties themselves had repeatedly acted upon.

Participation amounts to waiver of objections

Emphasising Sections 4 and 12(5) of the Arbitration and Conciliation Act, 1996, the Hon’ble Supreme Court held that a party which participates in arbitration without raising objections is deemed to have waived its right to later challenge the process. BRPNNL’s extensive participation, filing pleadings, attending over 70 hearings and jointly seeking multiple extensions under Section 29A created a strong estoppel against questioning either the arbitrator’s appointment or validity of Clause 25.

Conclusion

The Hon’ble Supreme Court’s decision stands as a firm and timely reaffirmation of India’s contemporary arbitration ethos i.e., minimal judicial interference, respect for party autonomy and preservation of the efficiency and integrity of arbitral proceedings. By holding that constitution of the Arbitral Tribunal under Section 11 are final and immune from review, the Hon’ble Supreme Court has sent a clear message that arbitration cannot be derailed through belated or tactical litigation.