Whether Rejection Of Application For Amendment of Counter-Statement Constitutes An 'Interim Award': Calcutta High Court Explains

The Calcutta High Court on Friday while hearing an appeal to an impugned order expounded in detail on whether an interim relief granted by an Arbitrator would constitute an 'interim award' thereby allowing it to be set aside under Article 34 of the Arbitration and Conciliation Act, 1996. The concerned petition was filed before the Court for setting aside an alleged "interim award" dated 15th October, 2020 passed by a Sole Arbitrator. The Arbitrator vide the said award had rejected the petitioner's application for amendment of the counter-statement seeking introduction of counter-claims/equitable set-off by the petitioner. The counsel for the petitioner had argued that the impugned order of the Arbitrator constituted an 'interim award' on the ground that the Arbitrator had finally decided the counterclaim/ set-off and held that the claims made therein were barred by limitation. Thus the petitioner contended that in rejecting the aforementioned claims, the Arbitrator had put an end to the lis between the parties. Whereas, the counsel for the respondent had submitted that the Memorandum of Understanding (MOU) dated 28th October 2016 under dispute was an independent contract and that the arbitration was only confined to the twelve Purchase Orders (POs). Further, it was contended that the MOU did not have an arbitration clause and thus could not be interpreted to be a part of the original reference to the arbitral tribunal. Thus, the impugned order does not constitute an 'interim award'. After examining the rival contentions, Justice Moushumi Bhattacharya proceeded to make observations on the following issues, Maintainability of the petition under Section 34 of the Arbitration and Conciliation Act, 1996: The counsel for the petitioner submitted that the impugned order of the Arbitrator rejecting the amendment to the Statement of Defence of the respondent for incorporating a Counter-Claim constitutes an "Interim Award" under the 1996 Act and would therefore come within the purview of section 34 for setting aside of the said award. On the other hand, the counsel for the respondent argued that the order under challenge is not an award/interim award and further that the arbitral tribunal lacked jurisdiction under section 23(2A) of the Act to adjudicate the Counter Claim. Therefore, such a petition under section 34 of the Act is not maintainable. The Court observed that under section 31(6) of the Act, an 'interim award' is described as one which an Arbitrator has the option to give at 'any time' during the course of the arbitral proceedings before making the final award. Therefore, by definition an 'interim award' denotes a pronouncement in the interregnum similar to an interim order which proposes to settle a part of the claim pending final hearing of the action filed in the court. However, the Court added an important caveat by observing, "…an interim award cannot go beyond what the tribunal is empowered to grant by way of final relief on a complete consideration of the facts or upon trial. It is hence axiomatic that a decision which is intended as an interim measure, must be within the span and possibilities of the relief which can be granted by the Court/ Tribunal in the action filed." Pursuant to the perusal of the record, the Court opined that the concerned Memorandum of Understanding or the consequences of its breach was not a part of the reference before the Arbitrator. Elucidating further, the Court observed, "In the present case, the rejection of Lindsay's application for amendment may have primarily been on the bar of limitation but was also on the fact that Lindsay's claim for damages of Rs 10 crores did not arise out of the 12 transactions which formed the subject matter of the reference. Shorn of any other consideration, the basic premise is that rejection of an attempt to introduce a new cause of action, which is not part of the subject matter of the reference, cannot amount to an interim award under section 31(6) of the Act. This is by reason of the fact that the decision (of rejection) of the matter (being a claim for damages arising out of the alleged breach of the MOU) was not a part of and had no causal or factual link to the claim arising out of the 12 POs." The Court therefore ruled that the impugned order did not constitute an 'Interim Award' as defined under sections 29(1)(c) and 31(c) of the Act. As a result, the present application was not maintainable under Section 34 of the Act. Relevance of Section 23 of The Arbitration and Conciliation Act, 1996: Amendment of pleadings in an arbitration is governed by Section 23 of the Act which has been enumerated below for reference, 23. "(1) Within the period of time agreed upon by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or...

Whether Rejection Of Application For Amendment of Counter-Statement Constitutes An 'Interim Award': Calcutta High Court Explains

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Whether Rejection Of Application For Amendment of Counter-Statement Constitutes An 'Interim Award': Calcutta High Court Explains

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