The Second Round: Evidence and Finality in Re-Arbitration After an Award Is Set Aside

I. Introduction

When a court sets aside an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 ("the Act"), the dispute does not disappear. It returns, unresolved, to the parties. Indian law says much about why awards are annulled, but little about what happens next.¹ Does the second tribunal start on a clean slate or  De novo ? Are the pleadings and evidence of the first round still usable? And does anything decided along the way bind the parties in the rematch?

These questions matter more after the Constitution Bench in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. confirmed that a Section 34 court, save for narrow exceptions, can only set aside and cannot rewrite an award.² Re-arbitration is therefore the ordinary consequence of a successful challenge, not an exotic one. This piece examines how the second round begins, what binds the new tribunal, and how pleadings and evidence are treated.

II. Starting again: the gateway to the second round

The Supreme Court has long accepted that once an award is set aside, the parties are free to begin arbitration afresh. McDermott International Inc. v. Burn Standard Co. Ltd. described this as the natural consequence of a court that may annul but not correct.³ NHAI v. M. Hakeem reaffirmed that the remedy for a flawed award is fresh arbitration, not judicial modification.⁴ The arbitration agreement is not exhausted by an award that the law treats as never having existed.

Section 43(4) excludes, for limitation purposes, the period between the commencement of the first arbitration and the date of the order setting it aside.⁵ The exclusion attaches only to "the dispute so submitted", so it protects the original claims but not new ones. Time also runs again from the date of the setting-aside order, creating a dilemma where a Section 37 appeal is pending: waiting risks limitation, while commencing early risks parallel proceedings.

A res judicata objection raised at the referral stage should not be decided there. Indian Oil Corporation Ltd. v. SPS Engineering Ltd. held that a res judicata objection in a successive arbitration is for the tribunal.⁶ The narrow scope of review under Section 11, as clarified in Vidya Drolia and SBI General Insurance Co. Ltd. v. Krish Spinning, reinforces that conclusion.⁷

III. What binds the second tribunal

The annulled award binds no one. Following Bileshwar Khan Udyog Khedut Sahakari Mandali Ltd. v. Union of India, an order that is "set aside" is rendered non-existent.⁸ Its findings carry no res judicata effect, and a second tribunal that simply adopts them risks appearing not to have applied its own mind.

The judgment of the Section 34 court stands on a different footing. Issues it actually and necessarily decided can bind the parties. The principle that a decision at one stage binds later stages of the same litigation, recognised in Satyadhyan Ghosal v. Deorajin Debi, and the doctrine of issue estoppel, applied in Bhanu Kumar Jain v. Archana Kumar, both point in this direction.⁹ ¹⁰

The difficulty lies in separating what the court decided from what it merely criticised. Three categories emerge:

1. Pure questions of law or jurisdiction. A holding that a claim is contractually excluded or time-barred is a determination that binds the second tribunal.

2. Findings of perversity. Where an award is annulled for ignoring vital evidence or resting on no evidence, the court holds only that this conclusion was impermissible.¹¹ It does not decide the claim. The second tribunal may reach the same result on a properly reasoned basis.

3. Procedural grounds. Annulment for want of notice or bias decides nothing on the merits.

   
   

This framework departs, respectfully, from the view that annulment on a "no evidence" ground amounts to the court substituting its own decision.¹ After Hakeem and Gayatri Balasamy, a Section 34 court cannot substitute its view. A no-evidence finding is a species of perversity that leaves the claim open, unless the court also decides a dispositive question of law.

IV. Pleadings and new claims

It has been suggested that parties in the second round cannot deviate from their earlier pleadings.¹ The Act contains no such rule. A fresh arbitration is a new proceeding, and Section 23(3) expressly allows a party to amend or supplement its claim or defence unless the tribunal considers it inappropriate given the delay.¹² The second tribunal therefore has discretion, not a mandate to freeze the record.

Three constraints apply. First, new claims do not enjoy the Section 43(4) exclusion, which is limited to the dispute originally submitted, and may simply be time-barred.⁵ Second, principles analogous to Order II Rule 2 of the Code of Civil Procedure and constructive res judicata discourage holding back claims that could have been raised earlier. Third, the first-round pleadings survive as admissions, so a party that recasts its case invites adverse inferences.

The sensible course treats the original pleadings as the default, allowing amendments that cure defects the court identified while scrutinising new claims for limitation and abuse.

V. Treatment of evidence from the first round

Evidence is where Indian law is least settled. The starting point is Section 19. The tribunal is not bound by the Code of Civil Procedure or the Evidence Act, the parties may agree on procedure, and failing agreement the tribunal decides admissibility, relevance, materiality and weight.¹³ Nothing in the Act forbids the second tribunal from receiving the first-round record.

Documentary evidence. Documents from the first arbitration can simply be re-filed. Where their genuineness was admitted in the first round, that admission is a strong reason to dispense with fresh proof.

Oral testimony. Transcripts are harder, because the new tribunal cannot observe demeanour. The closest statutory analogue is Section 27 of the Bharatiya Sakshya Adhiniyam, 2023 (formerly Section 33 of the Evidence Act), which admits earlier testimony between the same parties where the witness is dead, untraceable or unavailable without unreasonable delay or expense, provided the adverse party could cross-examine.¹⁴ The provision does not bind a tribunal, but its conditions supply a principled test: if they are met, the transcript may be admitted; if not, the witness should ordinarily be recalled, if necessary with court assistance under Section 27 of the Act.¹⁵

When the evidence itself changes. The Act says nothing about evidence that differs from what was filed in the first round, so the question falls to the tribunal's discretion under Sections 23(3) and 19.¹² ¹³ Three situations arise. First, a party may seek to file new documents or witnesses. Because the second round is a fresh proceeding rather than an appeal, the restrictive test for additional evidence in Order XLI Rule 27 of the Code of Civil Procedure does not apply, but its logic is useful: the tribunal may ask whether the material could have been produced earlier with due diligence, and whether it addresses the very gap the Section 34 court identified. Second, a party may seek to withdraw or replace evidence it relied on earlier. Withdrawal does not erase the record, and earlier documents and admissions remain available to the opponent. Third, a witness may depart from earlier testimony. The prior transcript can then be put to the witness in cross-examination, on the principle in Section 148 of the Bharatiya Sakshya Adhiniyam, and the inconsistency goes to weight. In each case, the tribunal must give the other side a fair chance to respond, or risk a fresh challenge under Section 34(2)(a)(iii).¹⁶

The natural justice limit. Sections 18 and 34(2)(a)(iii) require that each party be given a full opportunity to present its case.¹⁶ Relying on untested testimony, or refusing to let a party lead evidence that the first award was annulled for overlooking, exposes the second award to the same fate as the first.

Efficiency. Ideally, at the first procedural hearing the parties agree which documents, transcripts and expert reports are adopted, which witnesses must be re-examined, and on what issues. This also helps the tribunal meet the twelve-month timeline in Section 29A, which runs afresh from completion of pleadings.¹⁷

VI. Who decides, and how much is reopened

Should the original arbitrator sit again? One whose reasoning was annulled has already formed a view on the merits, which may raise justifiable doubts under Section 12(3). The Fifth and Seventh Schedules both list "previous involvement in the case", though whether this covers a prior arbitral mandate is arguable.¹⁸ Where annulment rested on bias, reappointment is plainly unsuitable; otherwise, a fresh tribunal is the safer course.

The scope of the second round also depends on how much of the award fell. Under the proviso to Section 34(2)(a)(iv), and as recognised in J.G. Engineers (P) Ltd. v. Union of India, a court may set aside only a severable part of an award.¹⁹ The surviving portion remains final under Section 35, and the second tribunal's jurisdiction is confined to what was annulled.

Sometimes a second round can be avoided altogether. Section 34(4) allows the court, on a party's request, to remit the award to the same tribunal to eliminate curable defects. Kinnari Mullick v. Ghanshyam Das Damani and I-Pay Clearing Services (P) Ltd. v. ICICI Bank Ltd. confine this power, but where available it preserves the record entirely.²⁰

VII. How many rounds can there be?

The Act sets no limit. Each time an award is set aside, the arbitration agreement survives and the parties may arbitrate again, so in principle the cycle of award, Section 34 challenge, Section 37 appeal and fresh arbitration can repeat. Nothing in Section 43(4) confines its limitation exclusion to a single setting aside.⁵

In practice, four brakes apply. First, each round narrows the dispute, because issues finally decided by the courts along the way bind the parties. Second, the Section 29A timeline applies afresh to every proceeding.¹⁷ Third, the tribunal may award costs under Section 31A against a party that prolongs the dispute without merit.²¹ Fourth, courts increasingly prefer remedies that avoid another round: remission under Section 34(4) and the limited power of modification recognised in Gayatri Balasamy both respond to the delay and expense of starting over.² ²⁰ Parties may also agree, after a setting aside, to take the dispute to a civil court instead. Repeated rounds remain legally possible, but they are rarely commercially rational.

VIII. Conclusion

The second round is neither a rerun nor a blank slate. The annulled award vanishes, but the court's actual determinations, the parties' admissions and much of the evidentiary record survive. The second tribunal should treat the Section 34 judgment as a map of what it may not do, the first-round record as a resource rather than a constraint, and fairness as the test for every evidentiary shortcut. Legislative guidance would help.

Endnotes

1. Parv Garg & Siddharth Garg, When Finality Fails: Res Judicata After Setting Aside of Awards; Arbitration and Conciliation Act, 1996, s. 34.

2. Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605 (Constitution Bench).

3. McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.

4. Project Director, National Highways Authority of India v. M. Hakeem, (2021) 9 SCC 1.

5. Arbitration and Conciliation Act, 1996, s. 43(4).

6. Indian Oil Corporation Ltd. v. SPS Engineering Ltd., (2011) 3 SCC 507.

7. Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1; SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 INSC 532.

8. Bileshwar Khan Udyog Khedut Sahakari Mandali Ltd. v. Union of India, Civil Appeal Nos. 1660–66 of 1981.

9. Satyadhyan Ghosal v. Deorajin Debi, AIR 1960 SC 941.

10. Bhanu Kumar Jain v. Archana Kumar, (2005) 1 SCC 787.

11. Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131; Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49.

12. Arbitration and Conciliation Act, 1996, s. 23(3).

13. Ibid., s. 19(1)–(4).

14. Bharatiya Sakshya Adhiniyam, 2023, s. 27; Indian Evidence Act, 1872, s. 33 (repealed).

15. Arbitration and Conciliation Act, 1996, s. 27.

16. Ibid., ss. 18 and 34(2)(a)(iii).

17. Ibid., s. 29A(1).

18. Ibid., s. 12(3), Fifth Schedule and Seventh Schedule, entry 16.

19. Ibid., s. 34(2)(a)(iv), proviso; J.G. Engineers (P) Ltd. v. Union of India, (2011) 5 SCC 758.

20. Ibid., s. 34(4); Kinnari Mullick v. Ghanshyam Das Damani, (2018) 11 SCC 328; I-Pay Clearing Services (P) Ltd. v. ICICI Bank Ltd., (2022) 3 SCC 121.

21. Arbitration and Conciliation Act, 1996, s. 31A