The Delhi High Court has ruled that when the main relief claimed by the claimant has been rejected by the Arbitral Tribunal, the Arbitral Tribunal cannot award an interim or ancillary amount, which is included under the same claim, in favour of the claimant.
The Single Bench of Justice Sanjeev Narula held that when the main relief is rejected by the Arbitral Tribunal, axiomatically, the interim relief ought to be rejected as well.
The petitioner Orchid Infrastructure Developers (P) Ltd. awarded a contract to the respondent Five Star Constructions Pvt. Ltd. for construction of a certain property. After a dispute regarding the payment of dues for the work done by the respondent arose between the parties, the respondent invoked the Arbitration Clause and the Arbitral Tribunal was appointed. The Arbitral Tribunal passed an award partly allowing the claim of the respondent and directed the petitioner to pay a certain sum of money to the respondent. The petitioner filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 before the Delhi High Court challenging the arbitral award.
The petitioner Orchid Infrastructure submitted before the High Court that since the Arbitrator had rejected the main claim of the respondent regarding the expenditure incurred on the work executed by it, which included a claim for interim relief, the Arbitrator could not have award the said interim relief to the respondent. Thus, the petitioner averred that the said interim relief could not be granted in isolation.
The Court noted that the Arbitrator had ruled that the claim raised by the respondent with respect to the expenditure incurred by it on the execution of the work, was based on falsehood. The Court noted that despite this, the Arbitrator had allowed a part of the said claim, claimed as interim relief, on the ground that the petitioner had not specifically denied the said part in its counter-claim and therefore, the said part was deemed to have been admitted as correct.
Thus, the Court observed that the Arbitrator had partly allowed the claim in favour of the respondent on the basis of a presumed admission by the petitioner.
The Court ruled that as per the Statement of Defence filed by the petitioner, there was no admission made by the petitioner and that there was a clear denial of the said claim in its entirety.
The Court held that once the Arbitrator had come to the conclusion that the respondent/claimant was disentitled to the said claim raised by it, the Arbitrator could not have awarded an interim or ancillary amount, since the same was included under the said claim by way of an interim relief.
The Court observed that the amount awarded in favour of the respondent was included in the main relief sought by the respondent, which was rejected by the Arbitral Tribunal. The Court held that on rejection of the main relief, axiomatically, the interim relief ought to have been rejected.
The Court added that the Arbitral Tribunal had ruled that the respondent/claimant had failed to prove the final bill raised by it and that the Tribunal had concluded that no work was done by the respondent in the relevant period. Thus, the Court noted that the Arbitrator had rejected the final bill raised by the respondent.
Therefore, the Court ruled that the Arbitral Tribunal could not have proceeded to award the said amount in favour of the respondent. The Court added that the said award made no reference to any evidence and was thus, entirely assumptive.
Holding that the said award was patently unreasonable, the Court allowed the petition and set aside the arbitral award that directed the petitioner to pay the said sum of money.
Case Title: Orchid Infrastructure Developers (P) Ltd. versus Five Star Constructions Pvt. Ltd.
Citation: 2022 LiveLaw (Del) 712
Dated: 19.07.2022 (Delhi High Court)
Counsel for the Petitioner: Mr. Manish Sharma, Advocate. Ms. Jigyasa Sharma and Mr. Ninad Dogra, Advocates.
Counsel for the Respondent: Ms. Kawaljit Kochar, Advocate.