Order Rejecting Application For Impleading Third Party Is Not An Interim Arbitration Award: Delhi High Court

The High Court of Delhi has held that an order of the tribunal rejecting the application for impleading a party to arbitration is not an interim award but merely a procedural order, therefore, the same cannot be challenged under Section 34 of the Act. The bench of Justice Yashwant Varma held that an arbitral tribunal, during the continuance of arbitral proceedings, passes many orders and for an order to fall within the rubric of interim award it has to necessarily have certain features. The Court held that for an order to be understood as an award, it has to be decision on the merits of the dispute that conclusively determines a substantive claim, issue or question that exists between the parties. Facts The parties entered into a Concession Agreement dated 23.12.2005 for improvement, operation, maintenance, strengthening and widening of a road on NH-24 on BOT basis. Thereafter, a State Support Agreement (SSA) dated 29.11.2006 was executed between the parties and State of U.P. Disputes arose between the parties and they were referred to arbitration. After the completion of pleadings, the petitioner filed an application for impleading the State of U.P as a party to arbitration on the ground that Claim No. 6 of the respondent, which pertained to extension of Concession Agreement due to the reduction of traffic on that lane as in the meantime two additional tollways were inaugurated, could not be properly adjudicated without the presence of State of U.P and that there is a possibility of two conflicting views as the parties may bring an arbitration against the State of U.P. It also contended that the Concession Agreement and the SSA were intrinsically connected as to constitute a 'composite transaction'. Impugned Order The tribunal rejected the application for the following reasons: The State of UP and NHAI cannot be any stretch of imagination be held to be 'group of companies' or 'alter ego' as to bring the State of U.P (a non-signatory) within the confines of the arbitration agreement.There is a separate dispute resolution clause in the SSA and a party cannot be impleaded in arbitration merely on the ground that if a separate arbitration against the party is brought a conflicting view might be taken therein as any decision taken in an arbitration is based on the facts, case pleaded and material on record for adjudication. There is no pleading either in the Statement of Defence or in the Counter-claims to the effect that State of UP is a necessary party and a party cannot claim beyond its pleading. Aggrieved by the order, the petitioner challenged it under Section 34 of the Act. Contention of the Parties The petitioner challenged the impugned order on the following grounds: The tribunal has failed to consider that various provisions of CA and SSA satisfy the test of 'composite transaction', therefore, the State of UP which is a party to SSA could be joined in the proceedings. Both the agreements were interconnected and gave rise to mutual obligations and duties, therefore, State of UP was a necessary party for proper adjudication of the dispute between the parties. The respondent objected to the very maintainability of the challenge petition on the following grounds: The petition is not maintainable for the reason that the impugned order is merely a procedural order that fails to satisfy the requirement of an award as given under Section 31 of the A&C Act. The impugned order does not delve in the merits of the dispute neither it conclusively determines a substantive issue that is at the core of dispute between the parties but it merely rejects the application for impleadment as the tribunal did not deem the State to be a necessary party in view of the clauses in the CA that squarely covers the issue being raised under Claim No. 6.Clause VIII of the agreement precisely covers the entire scope of Claim No.6 on which the impleadment was sought. It provides for the effect of opening of Additional Tollway, therefore, the dispute could be decided without any reference to SSA to which the State of UP is a party. Analysis by the Court The Court observed that by the impugned order, the tribunal has not rendered any finding on Claim No. 6 or on the merits of the case, but merely rejected the application with the view that the claim could be decided without bringing the State of UP on record. The Court held that an arbitral tribunal, during the continuance of arbitral proceedings, passes many orders and for an order to fall within the rubric of interim award it has to necessarily have certain features. The Court held that for an order to be understood as an award, it has to be a decision on the merits of the dispute that conclusively determines a substantive claim, issue or question that exists between the parties. The Court held that the impugned order does not delve in ...

Order Rejecting Application For Impleading Third Party Is Not An Interim Arbitration Award: Delhi High Court

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Order Rejecting Application For Impleading Third Party Is Not An Interim Arbitration Award: Delhi High Court

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