The rule regarding issue estoppel relates to admissibility of evidence in subsequent proceedings which is designed to upset a finding of fact recorded on the previous occasion and mandates that the finding so rendered on earlier occasion must operate as issue estoppel in subsequent proceedings. It makes it impermissible to lead any such evidence at a subsequent stage or occasion. The law on the point was succinctly stated in Sangeetaben Mahendrabhai Patel v. State of Gujarat, (2012) 7 SCC 621:
“The court has time and again explained the principle of issue estoppel in a criminal trial observing that where an issue of fact has been tried by a competent court on an earlier occasion and a finding has been recorded in favour of the accused, such a finding would constitute an estoppels or res judicata against the prosecution, not as a bar to the trial and conviction of the accused for a different or distinct offence, but as precluding the acceptance/reception of evidence to disturb the finding of fact when the accused is tried subsequently for a different offence. This rule is distinct from the doctrine of double jeopardy as it does not prevent the trial of any offence but only precludes the evidence being led to prove a fact in issue as regards which evidence has already been led and a specific finding has been recorded at an earlier criminal trial. Thus, the rule relates only to the admissibility of evidence which is designed to upset a finding of fact recorded by a competent court in a previous trial on a factual issue. Ashwani Kumar v. State of Punjab, (2015) 6 SCC 308.
Redfern and Hunter on International Arbitration (5th Edition) published by the Oxford University Press has explained the meaning of these words “inoperative or incapable of being performed” used in the New York Convention, thus:
“At first sight it is difficult to see a distinction between the terms ‘inoperative’ and ‘incapable of being performed’. However, an arbitration clause is inoperative where it has ceased to have effect as a result, for example, of a failure by the parties to comply with a time-limit, or where the parties have by their conduct impliedly revoked the arbitration agreement. By contrast, the expression ‘incapable of being performed’ appears to refer to more practical aspects of the prospective arbitration proceedings. It applies, for example, if for some reason it is impossible to establish the arbitral tribunal.”
Albert Jan Van Den Berg, in an article titled “The New York Convention, 1958—An Overview” published in the website of ICCA (www.arbitration-icca.org/media/0/12125884227980/newyorkconventionof1958overview.pdf) referring to Artcile II(3) of the New York Convention, states:
“The words ‘null and void’ may be interpreted as referring to those cases where the arbitration agreement is affected by some invalidity right from the beginning, such as lack of consent due to misrepresentation, duress, fraud or undue influence.
The word ‘inoperative’ can be said to cover those cases where the arbitration agreement has ceased to have effect, such as revocation by the parties.
The words ‘incapable of being performed’ would seem to apply to those cases where the arbitration cannot be effectively set into motion. This may happen where the arbitration clause is too vaguely worded, or other terms of the contract contradict the parties intention to arbitrate, as in the case of the so-called co-equal forum selection clauses. Even in these cases, the courts interpret the contract provisions in favour of arbitration.”
The book Recognition and Conferment of Foreign Arbitral Awards: A Global Commentary on the New York Convention by Kronke, Nacimiento, et al (ed.) (2010) says:
“Most authorities hold that the same schools of thought and approaches regarding the term null and void also apply to terms inoperative and incapable of being performed. Consequently, the majority of authorities do not interpret these terms uniformly, resulting in an unfortunate lack of uniformity.
The term inoperative refers to cases where the arbitration agreement has ceased to have effect by the time the court is asked to refer the parties to arbitration. For example, the arbitration agreement ceases to have effect if there has already been an arbitral award or a court decision with res judicata effect concerning the same subject-matter and parties. However, the mere existence of multiple proceedings is not sufficient to render the arbitration agreement inoperative. Additionally, the arbitration agreement can cease to have effect if the time-limit for initiating the arbitration or rendering the award has expired, provided that it was the parties’ intent no longer to be bound by the arbitration agreement due to the expiration of this time-limit.
Finally, several authorities have held that the arbitration agreement ceases to have effect if the parties waive arbitration. There are many possible ways of waiving a right to arbitrate. Most commonly, a party will waive the right to arbitrate if, in a court proceeding, it fails to properly invoke the arbitration agreement or if it actively pursues claims covered by the arbitration agreement.”
Thus the arbitration agreement does not become “inoperative or incapable of being performed” where allegations of fraud have to be inquired into and the court cannot refuse to refer the parties to arbitration as provided in Section 45 of the Arbitration and Conciliation Act, 1996 on the ground that allegations of fraud have been made by the party which can only be inquired into by the court and not by the arbitrator. N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 and Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406 were decisions rendered in the context of domestic arbitration and not in the context of arbitrations under the New York Convention to which Section 45 of the Act applies. In the case of such arbitrations covered by the New York Convention, the court can decline to make a reference of a dispute covered by the arbitration agreement only if it comes to the conclusion that the arbitration agreement is null and void, inoperative or incapable of being performed and not on the ground that allegations of fraud or misrepresentation have to be inquired into while deciding the disputes between the parties. World Sport Group (Mauritius) Ltd. V. MSM Satellite (Singapore) PTE Ltd., (2014) 11 SCC 639.
The principle of issue estoppel is also known as ‘cause of action estoppel’ and the same is different from the principle of double jeopardy or autrefois acquit, as embodied in Section 403, Crpc. This principle applies where an issue of fact has been tries by a competent Court on a former occasion and a finding has been reached in favour of an accused. Such a finding would then constitute an estoppel or res judicata against the prosecution but would not operate as a bar to the trial and conviction of the accused, for a different or distinct offence. I would only preclude the reception of evidence that will disturb that finding of fact already recorded when the accused is tried subsequently, even for a distinct offence, which might be permitted by Section 403 (2) Crpc. Thus, the rule of issue estoppel prevents re-litigation of an issue which has been determined in a criminal trial between the parties. If with respect to an offence, arising out of a transaction, a trial has taken place and the accused has been acquitted, another trial with respect to the offence alleged to arise out of the transaction, which requires the court to arrive at a conclusion inconsistent with the conclusion reached at the earlier trial, is prohibited by the rule of issue estoppel. In order to invoke the rule of issue estoppel, not only the parties in the two trials should be the same but also, the fact in issue, proved or not, as present in the earlier trial, must be identical to what is sought to be re-agitated in the subsequent trial. If the cause of action was determined to exist, i.e. judgment was given on it, the same is said to be merged in the judgment. If it was determined not to exist, the unsuccessful plaintiff can no longer assert that it does; he is estopped per rem judicatam. Ravinder Singh v. Sukhbir Singh, 2013 (80) ACC 950.