'Full and Final' Settlement Does Not Bar Arbitration On Fresh Disputes: Delhi High Court Reiterates

The Delhi High Court has reiterated that a “full and final” settlement does not automatically bar arbitration if fresh disputes arise from the settlement's implementation and the parties have agreed to arbitrate such disputes.

A single-judge bench of Justice Jyoti Singh ruled that an arbitration clause incorporated in a settlement agreement and reflected in a consent award constitutes a valid arbitration agreement under the Arbitration and Conciliation Act, 1996.

The court clarified that “execution of a full and final settlement may not preclude a party from taking recourse to arbitration if a dispute arises from the settlement itself,” This is particularly where the parties have expressly agreed to resolve future disputes through arbitration.

A consent award, which is an arbitral award on agreed terms, records a settlement reached between parties during arbitration. While the arbitral tribunal does not decide the merits of the dispute, the award gives the settlement the same enforceability as a decree of court.

The dispute arose from a 2015 collaboration agreement between Ashutosh Infra Private Limited and Pebble Downtown India Pvt. Ltd. for the development of a commercial mall in Faridabad.

After disputes over the development. Arbitration was initiated between the parties. Pursuant to it,  parties entered into a settlement on December 31, 2021. A consent award was passed in April 2022, apportioning specific portions of the commercial building between them.

Ashutosh Infra later claimed that the carpet area on the fourth and fifth floors was substantially higher than what had been represented during settlement. It alleged that Pebble Downtown breached the settlement by executing allegedly ante-dated lease deeds and by refusing to share the excess built-up area.

When Pebble Downtown declined to submit the dispute to arbitration, Ashutosh Infra moved the Delhi High Court seeking the appointment of an arbitrator.

Pebble Downtown opposed the request, maintaining that the settlement was “full and final” and that the consent award had the force of a final decree. Allowing arbitration at this stage, it argued, would make a “mockery of the settlement.”

The court, however, was not persuaded.  According to it, settlement itself expressly provided for arbitration in the event disputes arose from its implementation.

Holding that a valid arbitration agreement existed between the parties, the High Court appointed a sole arbitrator to adjudicate the disputes.

It also left it open to the arbitrator to decide whether third parties, including lessees such as PVR Limited, should be impleaded in the proceedings.

For the Petitioner (Ashutosh Infra Private Limited): Anand Kumar, Aditya Giri, Chetan Singh, Harshit Kumar, Preetesh Sharma

For Respondent No. 1 (Pebble Downtown India (P.) Ltd.):  Akhil Sibal, Vikas Mishra, Nikhil Chawla, Varun Ahuja, Sugandha Shahi, Nilay Kaushal

For Respondent No. 2: Dhanesh Relan, Brinda Ajmani, Shikhar Misra

For Respondents No. 3 and 4: Rajshekar Rao, Nandini Sahni, Tanya Singh