The Supreme Court has ruled that once an arbitrator is appointed by a court and the order is not challenged, parties cannot later question the validity of the arbitration clause. The ruling came in a dispute between M/s Eminent Colonizers Pvt. Ltd. and the Rajasthan Housing Board, where the Court set aside orders of the High Court and Commercial Court that had invalidated arbitral awards.
Background of the Case
The dispute traces back to construction contracts awarded by the Rajasthan Housing Board to M/s Eminent Colonizers. The company was tasked with building housing structures in Jaipur under separate agreements executed in 2007 and 2009.
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In the 2009 contract, the contractor was awarded work worth over ₹5.27 crore for constructing high-income group houses and flats. The company claimed it completed the work ahead of schedule and at a lower cost. However, it alleged that the Housing Board failed to pay escalation costs amounting to around ₹18.95 lakh, prompting the dispute.
Similarly, in another contract, the contractor sought escalation charges and refund of a penalty imposed during the construction of low-income group flats. The dispute resolution clause in both contracts required disagreements to be referred to a Standing Committee under Clause 23 of the agreement.
When the contractor alleged that the committee was not properly constituted, it approached the High Court seeking appointment of an arbitrator.
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Appointment of Arbitrators and Arbitral Awards
In 2014, the Rajasthan High Court allowed the contractor’s application and appointed retired High Court judges as sole arbitrators in both disputes. The Housing Board did not challenge the appointment orders.
Subsequently, the arbitrators passed awards in favour of the contractor, directing payment of escalation charges and interest. In one case, the arbitrator granted over ₹17 lakh along with 9% annual interest, while in the second case, escalation charges and penalty refund were awarded with interest.
Challenge Before Commercial Court and High Court
The Housing Board challenged the arbitral awards under Section 34 of the Arbitration and Conciliation Act. The Commercial Court set aside the awards, holding that Clause 23 of the contract was not an arbitration clause. The High Court later upheld this view.
The contractor then approached the Supreme Court, arguing that once the High Court had appointed arbitrators and the order had attained finality, the issue could not be reopened.
Court’s Observations
The Supreme Court examined whether courts could re-examine the validity of the arbitration clause after the arbitrator’s appointment, especially in cases arising before the 2015 amendments to arbitration law.
The bench noted that under the legal framework applicable at the time, courts appointing arbitrators were required to examine both the existence and validity of an arbitration agreement.
“The Section 34 court erred in going into the existence and validity of Clause 23,” the bench observed, emphasising that the appointment order had attained finality.
The Court explained that the order appointing an arbitrator carries binding effect between the parties, even if the reasoning is not expressly detailed. It held that acceptance of such an order prevents parties from reopening the issue at later stages.
The bench also drew a distinction between precedent and res judicata, clarifying that the earlier order operated as res judicata between the parties. It said that once the arbitrator was appointed and the order was not challenged, the parties were bound by it throughout subsequent proceedings.
The Court further noted that the legal position would have been different if the 2015 amendments to the arbitration law had applied. Under the amended regime, courts examining applications for arbitrator appointment are required to only verify the existence of an arbitration agreement.
Supreme Court’s Decision
Allowing both appeals, the Supreme Court set aside the High Court judgments that had invalidated the arbitral awards.
The Court restored the arbitration proceedings and remitted the cases to the Commercial Court in Jaipur for fresh consideration, limiting the review to grounds other than the validity of the arbitration clause.
The Court directed the Commercial Court to dispose of both arbitration cases within three months from receipt of the judgment. The parties were directed to bear their own costs.
Case Title: M/s Eminent Colonizers Pvt. Ltd. v. Rajasthan Housing Board & Ors.
Case No.: Civil Appeal No. 753 of 2026 & Civil Appeal No. 754 of 2026
Decision Date: 4 February 2026
