18 May 2021
The issue of whether simplicitor orders terminating an arbitral proceeding is an award under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), has been a question that has been plaguing various Courts in India for a while now. The issue is crucial in nature, as it determines the remedy of a party aggrieved by such an order. While some Courts have taken the view that such an order is an award appealable under Section 34 of the Arbitration Act, others have not. This ambiguity is a cause of concern for litigants since it delays the entire time bound arbitral process intended under the Arbitration Act and leaves the litigant in a lurch. However, the Hon’ble High Court of Delhi (“Delhi HC”) in PCL SUNCON v National Highway Authority of India[1] (“PCL SUNCON Case”) has addressed this issue and cleared the said ambiguity to a great extent.
What is an ‘Award’ under the Arbitration Act?
Before delving into the decision in the PCL SUNCON Case, one must understand the meaning of the term award under the Arbitration Act. Award has been defined under Clause (c) of Sub-section (1) of Section 2 of the Arbitration Act, in wide terms. The said Clause defines an ‘arbitral award’ to include an interim award. It is settled law that an award, whether interim or final, conclusively and finally determines certain or all aspects of the lis between the parties, as the case may be.[2]
While an arbitral award does bring the arbitral proceedings to an end, viz a particular or all issue(s) between the parties, an arbitral proceeding can also be brought to an end by an order of the arbitral tribunal as contemplated under Sub-section (2) of Section 32 of the Arbitration Act or otherwise, like dismissal for non-prosecution.
Facts and Arguments of PCL SUNCON Case
This case was a domestic arbitration, wherein a three-member tribunal had been constituted. A statement of claims by the petitioner and counter claims by the respondent, National Highway Authority of India (“NHAI”), had been filed. The arbitral tribunal convened eight sittings, after which no sitting was convened on account of the unavailability of one of the Tribunal members. Ultimately, the said arbitrator resigned.
The petitioner could not nominate a substitute member for over a year since the resignation, due to a variety of reasons. Therefore, the remaining two arbitrators terminated the proceedings under Clause (c) of Sub-section (2) of Section 32 of the Arbitration Act. However, this was not communicated to the petitioner, who became aware of the same when a substitute arbitrator was nominated by it.
Thereafter, the petitioner filed an application under Clause (a) of Sub-section (1) of Section 14, read with Section 15 of the Arbitration Act to substitute the arbitrator who had resigned. The respondent challenged the maintainability of the application on the ground that the termination of arbitration proceedings would constitute a final award, which can be reviewed only under Section 34 of the Arbitration Act.
The argument put forward by NHAI was that the proceedings had been terminated by virtue of Clause (c) of Sub-section (2) of Section 32 of the Arbitration Act and not under Clause (a) of Sub-section (1) of Section 14 and thus, it would be a final award. It relied on Angelique International Limited v. SSJV Projects Private Limited and Anr (“Angelique”),[3] passed by the Delhi HC, which followed the decision of the Division Bench of the Hon’ble High Court of Calcutta (“Calcutta HC”) in India Trading Company v. Hindustan Petroleum Corporation Limited[4] (“India Trading Company”). In both cases, it was held that an order terminating arbitration proceedings is a final award, subject to review only under Section 34 of the Arbitration Act.
The petitioner, to counter the same, argued, it is settled law that a petition under Section 14 of the Arbitration Act against orders under Clause (c) of Sub-section (2) of Section 32 of the Arbitration Act is maintainable and relied on Lalitkumar V. Sanghavi (Dead) through LRs and Anr. v. Dharamdas V. Sanghavi and Ors. (“Lalitkumar”)[5] for the same. The petitioner also argued that the orders passed under Sub-section (2) of Section 32 of the Arbitration Act and termination of the arbitral proceedings on account of non-prosecution of claims, cannot be construed to be an award. It relied on various judgement of the Delhi HC and the Hon’ble High Court of Bombay (“Bombay HC”) in this regard.[6]
Setting the record straight
At the outset, it is important to take note of the Bombay HC decision in Neeta Lalitkumar Sanghavi[7]. The Bombay HC, in this case, disagreed with the reasoning of the Delhi HC’s decision in Joginder Singh Dhaiya v. M.A. Tarde Thr. LRs (“Joginder Singh”)[8], wherein it was held that since the order of the tribunal resulted in the termination of the arbitration proceedings and would bar the petitioners from re-agitating the same in any other proceedings, the said order would partake the character of an award, since it has finality attached to it and determined the vital rights of the parties. On the contrary, the Bombay HC, taking note of the provisions of Section 32 of the Arbitration Act, inter alia held that every order passed by an arbitral tribunal terminating arbitral proceedings would not be an award, which is appealable under Section 34 of the Arbitration Act.
The Delhi HC in PCL SUNCON Case, agreeing with the argument of the petitioner, held that the judgment in Angelique and India Trading Company had not considered the judgment delivered by the Hon’ble Supreme Court of India (“SC”) in Lalitkumar. Similarly, the Delhi HC, concurring with the decision of the Bombay HC,[9] as discussed above, observed that the decision in Joginder Singh was incorrect in holding that an order whereby the arbitrator did not allow substitution of legal representatives on account of limitation and then abated the proceedings, was an award.
The Delhi HC also agreed with the argument of the petitioner that orders terminating arbitral proceedings under Clause (c) of Sub-section (2) of Section 32 or due to non-prosecution of claims would not amount to an award. It clarified the meaning of an award, as discussed above, and recognised the importance of identifying the same, in light of the implications under the Arbitration Act. The Single Judge of the Delhi HC also referred to its own judgment in Rhiti Sports Management Pvt. Ltd. v. Power Play Sports & Events Ltd,[10] in this regard. The Delhi HC arrived at the conclusion that the judgment in Angelique and India Trading Company are contrary to the settled law in light of the judgment in Indian Farmers[11] and various other judgments passed by the Delhi HC in this regard.[12]
Concluding Remarks
The judgment by the Delhi HC has served an important purpose in clarifying the position of law i.e. an arbitral order simplicitor, terminating arbitral proceedings, is not an award appealable under Section 34 of the Arbitration Act. This was a much needed clarification specifically in light of the ambiguity created by Angelique and Joginder Singh. That being said, while this judgment has binding effect in New Delhi, the same may not be the position with regard to West Bengal, where India Trading Company still occupies the field. The Calcutta HC may choose to follow the ratio of India Trading Company. The SC or a larger bench of the Calcutta HC would have to step in and further clarify the position by reiterating the law laid down in the catena of judgment discussed above and overrule India Trading Company.
For further information, please contact:
Radhika Dubey, Partner, Cyril Amarchand Mangaldas
radhika.dubey@cyrilshroff.com
[1] See: 2021 SCC OnLine Del 313
[2] See: McDermott International Inc v. Burn Standard Co. Ltd (2006) 11 SCC 181, Centrotrade Minerals and Metal Inc. v. Hindustan Copper Ltd., (2017) 2 SCC 228 Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products: (2018) 2 SCC 534 and Shyam Telecom Ltd. v. Icomm Ltd., 2010 (116) DRJ 456.
[3] See: 2018 SCC OnLine Del 8287
[4] See: 2016 SCC OnLine Cal 479
[5] See: (2014) 7 SCC 255
[6] See: Economic Transport Organisation v. Splendor Buildwell Pvt. Ltd.: MANU/DE/1755/2018; Bridge & Roof Co. (India) Ltd. v. Guru Gobind Singh Indraprastha University and Anr.: 2017 SCC OnLine Del 10412; Puneet Kumar Jain v. MSTC Limited and Ors.: MANU/DE/7910/2017; Shushila Kumari and Anr. v. Bhayana Builders Private Limited: 2019 SCC OnLine Del 7243; Gangotri Enterprises Limited v. NTPC Tamil Nadu Energy Company Limited: (2017) 237 DLT 690; Pandit Munshi and Associates Ltd. v. Union of India and Ors.: 2015 (2) ARB LR 40 (Delhi); and Ramesh D. Shah v. Tushar D. Thakkar: 2017 SCC OnLine Bom 9251
[7] See: Neeta Lalitkumar Sanghavi and Another v. Bakulaben Dharmadas Sanghavi and Others 2019 SCC OnLine Bom 250
[8] See: O.M.P. 370 of 2014, decided on 27.12.2014.
[9]See: Neeta Lalitkumar Sanghavi and Another v. Bakulaben Dharmadas Sanghavi and Others 2019 SCC OnLine Bom 250
[10]See: 2018 SCC OnLine Del 8678
[11]See: Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products: (2018) 2 SCC 534
[12]See: Bridge & Roof Co. (India) Ltd. v. Guru Gobind Singh Indraprastha University and Anr. 2017 SCC OnLine Del 10412, Puneet Kumar Jain v. MSTC Limited and Ors.: MANU/DE/7910/2017 and Economic Transport Organisation v. Splendor Buildwell Pvt. Ltd.: MANU/DE/1755/2018
