Property Dispute Award Set Aside Due to Unilateral Arbitrator; Delhi High Court Appoints New Arbitrator Without Requiring Fresh Notice
Fresh Arbitration Notice Not Needed When Earlier Award Is Set Aside Only for Invalid Arbitrator Appointment: Delhi High Court
Facts
Sumant Agarwal and the other respondents were provisional allottees of two properties in the “Gold Souk Golf Links” project at Sohna, Haryana:
- Flat No. A-1201 on the 12th floor of Tower A, with an approximate super built-up area of 1,950 square feet.
- Plot No. B-45, measuring approximately 223 square yards.
Cosmo Retail Solutions Private Limited claimed that the respondents induced it to purchase their rights, title and interest in the disputed flat and plot.
According to Cosmo Retail, it paid substantial amounts on the assurance that the respondents would:
- Execute an Agreement to Sell in its favour.
- Hand over the original allotment papers.
- Complete the necessary transfer documentation after receiving full payment.
Cosmo Retail alleged that despite receiving the entire payment, the respondents failed to execute the necessary documents.
The Agreement to Sell contained an arbitration clause. It provided that disputes arising from the agreement would be referred to a mutually appointed sole arbitrator, with the arbitration taking place in Delhi under the Arbitration and Conciliation Act, 1996.
On February 27, 2024, Cosmo Retail issued a notice under Section 21 of the Arbitration and Conciliation Act invoking the arbitration clause.
Cosmo Retail subsequently appointed an arbitrator unilaterally. The arbitration resulted in an award dated February 13, 2025.
The respondents challenged the award before the Commercial Court at Dwarka. On January 5, 2026, the Court set aside the award because the arbitrator had been appointed unilaterally, contrary to the legal rule that a party interested in the outcome cannot possess exclusive power to appoint the sole arbitrator.
Cosmo Retail then approached the Delhi High Court under Section 11(6), seeking appointment of an independent arbitrator to recommence adjudication of the same property dispute.
The respondents raised a preliminary objection that Cosmo Retail was required to issue a fresh notice under Section 21 before filing the new Section 11 petition.
Issues
- Whether a fresh Section 21 notice is mandatory when an earlier arbitral award has been set aside.
- Whether setting aside the award terminated not only the earlier tribunal’s authority but also the legal effect of the original invocation notice.
- Whether the earlier notice dated February 27, 2024, sufficiently commenced arbitration concerning the disputed properties.
- Whether a new notice was necessary merely because a fresh and independent arbitrator had to be appointed.
- Whether Section 32, concerning termination of arbitral proceedings, required complete recommencement after the final award.
- Whether Section 43(4), which excludes time spent in the earlier arbitration, implied that a fresh Section 21 notice had to be served.
- Whether the arbitration petition was premature in the absence of a second notice.
- Whether the Court should appoint an independent arbitrator under Section 11(6).
Petitioner’s Arguments
Cosmo Retail argued that it had already issued a valid Section 21 notice on February 27, 2024.
That notice formally informed the respondents about:
- The existence of the dispute.
- Invocation of the arbitration agreement.
- The petitioner’s intention to refer the dispute to arbitration.
An arbitrator was then appointed, proceedings were conducted and an award was delivered. Therefore, arbitration had unquestionably commenced.
Cosmo Retail submitted that setting aside the award did not create a new dispute. The underlying controversy concerning the flat, plot, payments and transfer documents remained exactly the same.
The purpose of Section 21 was to commence arbitration and fix the relevant date for limitation. Once that purpose was achieved, a second notice would serve no substantive function.
The earlier award was set aside only because the arbitrator had been appointed unilaterally. It was not set aside because no arbitration agreement existed or because the dispute was incapable of arbitration.
Cosmo Retail relied on the Karnataka High Court’s decision in Re Sustainability Healthcare Solutions Ltd. v. Bruhat Bengaluru Mahanagara Palike, which held that when an award is set aside and the dispute revives, a fresh notice should not be elevated into a jurisdictional barrier where the opposite party already knows about the dispute and participated in the earlier proceedings.
It therefore sought appointment of an independent sole arbitrator.
Respondent’s Arguments
The respondents argued that the earlier arbitral proceedings ended when the final award was made. Under Section 32(1), the tribunal became functus officio and ceased to have authority over the dispute.
Once that award was set aside, any further arbitration had to commence afresh. Section 21 states that arbitral proceedings commence when the respondent receives a request to refer the particular dispute to arbitration.
According to the respondents, a new Section 21 notice was therefore mandatory before Cosmo Retail could file another Section 11 petition.
They relied upon Section 43(4), which excludes the period between commencement of the earlier arbitration and the date on which its award was set aside when calculating limitation for subsequent proceedings.
The respondents argued that the reference to “commencement” in Section 43(4) demonstrated that fresh proceedings were contemplated.
They relied on:
- Harkisandas Tulsidas Pabari v. Rajendra Anandrao Acharya, decided by the Bombay High Court.
- Agro Indus Credits Ltd. v. Mangalan S, decided by the Kerala High Court.
Those decisions treated a fresh request under Section 21 as necessary after an earlier award had been set aside.
Analysis of the Law
Purpose of Section 21
Section 21 provides that, unless the parties agree otherwise, arbitral proceedings concerning a particular dispute commence when the respondent receives a request to refer that dispute to arbitration.
Its primary functions include:
- Formally notifying the respondent that arbitration is being invoked.
- Fixing the commencement date for limitation.
- Providing an opportunity to respond to the proposed reference.
- Permitting objections concerning the proposed arbitrator.
The commencement date is particularly important because Section 43 applies the Limitation Act to arbitration.
Effect of the original notice
Cosmo Retail had already issued a Section 21 notice before the first arbitration. The respondents were aware of the dispute, an arbitral tribunal was constituted and the proceedings culminated in an award.
The legal purpose of informing the respondents and fixing the limitation date had therefore already been fulfilled.
The underlying dispute did not change merely because the award was set aside.
Setting aside for unilateral appointment
The award was set aside because the arbitrator’s appointment procedure was legally invalid. The defect concerned the tribunal’s constitution, not:
- The existence of the arbitration agreement.
- The existence of the dispute.
- The validity of the original invocation notice.
- The arbitrability of the property claims.
A properly appointed arbitrator could therefore adjudicate the revived dispute.
Termination of tribunal versus termination of dispute
Delivery of a final award ordinarily terminates the tribunal’s mandate under Section 32. That means the original arbitrator cannot automatically resume adjudication except in limited statutory circumstances.
However, the end of the tribunal’s mandate is different from erasure of the dispute or nullification of the earlier notice.
Appointment of a new arbitrator does not necessarily mean that the parties must repeat every procedural step already validly completed.
Section 43(4) and limitation
Section 43(4) provides that when an award is set aside, the period between commencement of arbitration and the court’s order setting aside the award must be excluded when calculating limitation for subsequent proceedings concerning the same dispute.
The High Court held that this provision does not mean that subsequent proceedings must necessarily be a new arbitration preceded by another notice.
The excluded period may be relevant to:
- A fresh arbitration.
- A civil suit where the dispute is held non-arbitrable.
- Proceedings before an arbitral institution.
- Reconstitution of the tribunal.
- Appointment of another arbitrator.
The words “commencement of proceedings, including arbitration” do not impose a universal requirement of a second Section 21 notice.
Scope of Section 11
At the Section 11 stage, the Court examines the existence of an arbitration agreement and whether a valid reference mechanism requires judicial assistance.
Questions concerning the merits of the property dispute, limitation of individual claims and counterclaims remained open for determination by the arbitrator.
Precedent Analysis
Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760
The Supreme Court held that a party interested in the outcome of a dispute cannot possess unilateral authority to appoint the sole arbitrator.
The earlier award was set aside because Cosmo Retail had unilaterally appointed the arbitrator contrary to this principle.
Mahavir Prasad Gupta & Sons v. State, National Capital Territory of Delhi, 2025 SCC OnLine Del 4241
The Delhi High Court applied the rule against unilateral appointment. This precedent also supported cancellation of the earlier award.
Re Sustainability Healthcare Solutions Ltd. v. Bruhat Bengaluru Mahanagara Palike, 2026:KHC:1929
The Karnataka High Court held that setting aside an award revives the disputes and restores the parties to the position existing before adjudication.
It treated the requirement of a fresh Section 21 notice as procedural rather than a jurisdictional bar where the respondent was already aware of the dispute and had participated in the earlier arbitration.
The Delhi High Court found this reasoning supportive of Cosmo Retail’s case.
Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd., 2025 SCC OnLine SC 806
The Supreme Court explained that a Section 21 notice principally fixes the date of commencement for limitation. It is also a necessary procedural step before seeking appointment under Section 11 where arbitration has not previously been invoked.
The Court distinguished the present situation because Cosmo Retail had already issued such a notice concerning the same dispute.
Bhaghreeratha Engineering Ltd. v. State of Kerala, Civil Appeal No. 39/2026
The Supreme Court described Section 21 as procedural and primarily concerned with commencement and limitation. It does not create the arbitration agreement or restrict the tribunal’s jurisdiction only to claims expressly listed in the notice.
The Delhi High Court relied upon this understanding of Section 21’s limited procedural purpose.
State of Goa v. Praveen Enterprises, (2012) 12 SCC 581
The Supreme Court held that claims not expressly stated in a Section 21 notice are not automatically excluded from arbitration if they fall within the arbitration agreement.
Their limitation may be calculated separately, but the tribunal’s jurisdiction does not depend entirely upon their inclusion in the invocation notice.
Harkisandas Tulsidas Pabari v. Rajendra Anandrao Acharya, 2025 SCC OnLine Bom 2697
The Bombay High Court held that fresh proceedings had to be commenced under Section 21 after an earlier award was set aside.
The Delhi High Court distinguished that decision because, on its reading, no valid Section 21 notice had been issued in the first instance and the party had directly asked the former arbitrator to resume proceedings.
Here, Cosmo Retail had issued a notice before the first arbitration and sought appointment of a new independent arbitrator through the Court.
Agro Indus Credits Ltd. v. Mangalan S, 2025 SCC OnLine Ker 14437
The Kerala High Court held that once an award terminates the tribunal’s authority, a fresh request is required to commence another arbitration after the award is set aside.
The Delhi High Court did not adopt that position for the present facts because the same dispute had already been properly invoked through an earlier notice.
Court’s Reasoning
The High Court held that the short question was whether a second Section 21 notice was necessary after the first award had been set aside.
Cosmo Retail had served a notice on February 27, 2024. That notice commenced arbitration and informed the respondents of the dispute. A tribunal was constituted and an award followed.
The award was set aside solely because the arbitrator had been appointed unilaterally. The property dispute itself remained alive and unchanged.
Once the same dispute had commenced through a valid notice, it did not have to be “recommenced” merely because a new arbitrator was required.
A Section 21 notice primarily communicates the existence of the dispute and freezes the limitation date. Both objectives had already been achieved.
The Court rejected the argument that Section 43(4) automatically required fresh invocation. That provision protects limitation by excluding time spent in an unsuccessful arbitration. It does not prescribe the procedural form of every subsequent proceeding.
The Court also observed that there may be several outcomes after an award is set aside. Parties may approach an arbitral institution, a court may appoint another arbitrator, the matter may return to the same arbitrator in a permissible case, or a civil suit may be filed if the dispute is non-arbitrable. A fresh notice would not be necessary in every situation.
The respondents’ preliminary objection was therefore rejected.
The Court appointed an independent sole arbitrator and expressly left all claims, counterclaims, limitation objections and merits open for adjudication.
Conclusion
The Delhi High Court held that Cosmo Retail was not required to issue a fresh Section 21 notice before seeking appointment of another arbitrator.
The original notice dated February 27, 2024, had already commenced arbitration concerning the same property dispute and fixed the relevant limitation date.
Setting aside the earlier award because of unilateral appointment did not erase the notice or create a new dispute. It only required adjudication before a lawfully constituted tribunal.
Mr. Kapil Sankhla was appointed sole arbitrator. The arbitration was directed to proceed under the aegis and rules of the Delhi International Arbitration Centre.
The arbitrator was directed to file the disclosure required under Section 12(2) within two weeks of entering upon the reference. All claims, counterclaims, limitation questions and merits were kept open.
Case Details
Case: Cosmo Retail Solutions Private Limited v. Sumant Agarwal and Others
Court: High Court of Delhi at New Delhi
Case Number: Arbitration Petition 293/2026 with IA 4036/2026
Judge: Justice Subramonium Prasad
Date: July 16, 2026
Result: Petition disposed of by appointing Mr. Kapil Sankhla as sole arbitrator under the Delhi International Arbitration Centre; respondents’ objection regarding absence of a fresh Section 21 notice rejected.
