Order Of Arbitral Tribunal Refusing To Entertain Additional Counter-Claims Filed Without An Application Under Section 23 Is Not An ‘Interim Award’: Delhi High Court

The High Court of Delhi has held that an order of the arbitral tribunal refusing to entertain additional counter-claims filed without making any application under Section 23 of the Act is not an ‘interim award’, therefore, it cannot be challenged under Section 34 of the Act. The bench of Justices Najmi Waziri and Sudhir Kumar Jain held that order of the tribunal refusing to entertain additional counter-claims filed without requisite permission/authority of the tribunal is not an interim award as it neither conclusively settle any issue between the parties so to have the res judicate effect nor foreclose the right of the aggrieved party to refile the counter-claims by seeking “authority” or permission on an application under section 23 of the Act. Facts The appeal arose out of the order of the single judge dated 28.02.2022 passed in a Section 34 petition preferred by the respondent against an order of the arbitral tribunal dated 26.08.2020 by which the tribunal refused to entertain the counter-claims of respondent as having been filed without any authority. Before the single bench, the appellant objected to the maintainability of the petition on the ground that the order passed by the tribunal was merely a procedural order and not an interim award which could be directly challenged under Section 34 of the Act. The single bench held that the order of the tribunal refusing to entertain the counter-claims was an interim order within the meaning of Section 31 of the Act, therefore, it could be directly challenged under Section 34 of the Act and it set aside the order of the tribunal and directed it to decide the counter-claims of the respondent on their merits. Aggrieved by the decision of the single bench, the appellant filed an appeal under Section 37 of the Act. Contention of the Parties The appellant made the following argument support the order of the arbitral tribunal and to challenge the impugned order: The arbitration commenced in the year 2015 and Section 23(4) provides that the pleading including the counter-claim if any must be filed and completed within 6 months, however, the respondent without any prior intimation filed the counter-claims only in the late 2019.The respondent did not adhere to the timeline fixed by the tribunal. The counter-claims were filed without any application under Section 23 of the Act seeking the permission of the tribunal to prefer counter-claims.There was no mention of any counter-claims in the statement of defence except for a self-serving statement. The order of the tribunal refusing to allow additional counter-claims is only a procedural order and not on the merits of the dispute which settles any issue between the parties, therefore, it cannot be termed as an ‘interim award’. The respondent countered the above submissions by making the following arguments: The order of the tribunal had foreclosed the right of the respondent to file the counter-claims, therefore, it had finally determined the dispute between the parties, ergo, it could be directly challenged under Section 34 of the Act. The valuable right of a party in filing of a counter-claim should not be taken away lightly.Insofar as section 23 of the Act provides for filing of counter-claim, there is no reason for curtailing the right of the respondent to make counter-claim(s). Analysis by the Court The Court observed that the tribunal had reserved the right of the parties to file their claim and counter-claims till 31.05.2015 and no counter-claim was preferred by the respondent in the permitted time period. It further observed that the tribunal allowed the counter-claims of the respondent to the tune of Rs. 12.2 crores, since it was the only claim it had sought in its Section 17 application dated 04.02.2019. However, remaining counter-claims for Rs. 1282 Crores were never mentioned anytime before. The Court observed that the tribunal was correct in refusing to allow the respondent to materially alter its original counter-claim by slipping-in the two additional claims along with the permitted counter-claims. It further observed that the tribunal had not decided the counter-claims on their merits but simply refused to adjudicate them for having been filed without the required authority. It also mentioned that the respondent could always make an application under Section 23 to seek the authority from the tribunal to file the additional counter-claims. The Court held that an order of the arbitral tribunal refusing to entertain additional counter-claims filed without making any application under Section 23 of the Act is not an ‘interim award’, therefore, it cannot be challenged under Section 34 of the Act. The Court held that order of the tribunal refusing to entertain additional counter-claims filed without requisite permission/authority of the tribunal is not an interim award as ...

Order Of Arbitral Tribunal Refusing To Entertain Additional Counter-Claims Filed Without An Application Under Section 23 Is Not An ‘Interim Award’: Delhi High Court

ausaf ayyub

Tags