Full Judgment Text
Neutral Citation Number: 2023:DHC:2276-DB
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Reserved on: 08 December, 2022
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Decided on: 29 March, 2023
+ FAO(OS) (COMM) 217/2019 & CM APPL. 40390/2019 (Stay)
GOYAL MG GASES PVT LTD ..... Appellant
Through: Mr. M.A. Niyazi, Mr. Vinay Juneja,
Ms. Kirti Bhardwaj and
Mr. Arquam Ali, Advocates.
V
PANAMA INFRASTRUCTURE
DEVELOPERS PVT LTD & ORS ..... Respondents
Through: Mr. Ajay K. Jain and Mr. Pulkit
Agarwal Advocates.
CORAM:
HON'BLE MR. JUSTICE NAJMI WAZIRI
HON'BLE MR. JUSTICE SUDHIR KUMAR JAIN
J U D G M E N T
SUDHIR KUMAR JAIN, J.
1. The present appeal has been filed under section 37(1)(c) of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act” )
read with section 13 of the Commercial Courts Act, 2015 to impugn the
order dated 05.07.2019 passed by the learned Single Judge in O.M.P.
(COMM) 235/2019.
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2. Briefly stated, the relevant facts are that the respondents were owners
of 11 windmill assets consisting of land, load and machines in Karnataka and
entered into 5 separate sale agreements dated 02.09.2016 for the sale of
aforesaid 11 windmill projects, as ongoing business/units to the appellant for
the sale consideration of Rs.19.62 crores and Addendums were also executed
on 02.09.2016 to aforesaid Agreements to Sell.
2.1 The appellant had paid Rs.1.96 crores as advance under the
Agreements to Sell and the Addendums dated 02.09.2016 to the respondents.
The appellant was required to carry out due diligence in 30 days subject to
the fulfillment of the conditions i.e. permission by seller/O&M Contractor
for the site inspection and receipt of all required documentation by the
appellant within 30 days.
2.2 The appellant vide e-mail dated 08.09.2016, requested the respondents
to provide necessary documents but failed to provide complete set of
requisite documents. The respondents also did not fulfil the first condition of
site inspection i.e. an NOC from Operations and Maintenance (O&M)
Contractor.
2.3 As per Clauses 9 of the Agreement to Sell dated 02.09.2016, the seller
shall not offer the wind power project for sale to any other party unless the
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buyer opts to exit from this agreement in writing. The respondents
unilaterally terminated the Agreement to Sell dated 02.09.2016, despite the
appellant never exercised its right to exit from the said agreement.
2.4 The appellant filed petitions under section 9 of the Act whereby the
respondents vide common interim order dated 20.12.2017 were directed to
maintain the status quo regarding the possession and ownership of the
windmill projects in terms of 5 Agreements to Sell dated 02.09.2016. The
respondents filed the reply.
2.5 The appellant filed a petition under section 11 of the Act against the
respondents and vide order dated 29.05.2018, this court had appointed a
former Judge of this court as Sole Arbitrator. The appellant filed common
statement of claim of 11 windmills along with application under section 17
of the Act. The said applications were disposed of by the Arbitral Tribunal
vide order dated 08.08.2018. The respondents filed statement of defence on
14.09.2019 wherein the respondents, for the first time, disclosed details of
the alleged sale of 11 windmill projects vide Agreement to Sell dated
19.07.2017 for total consideration of Rs.7 crores. The appellant also filed
fresh application under section 17 of the Act for interim relief seeking
direction against the respondents to deposit the sale consideration receipt
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from the alleged sale of 11 windmills and the said application was dismissed
vide order dated 23.03.2019 passed by the Arbitral Tribunal.
2.6. The appellant on 29.04.2019 moved an application under Order 1 Rule
X of the Civil Procedure Code, 1908 (hereinafter referred to as “the CPC” )
before the learned Sole Arbitrator for impleadment of transferees i.e.
(i) One Ohm Thought Power India Private Limited; (ii) Berkley
Learning Private Limited; (iii) SML Electricals India Private Limited and
(iv) M/s AS Infra, to whom the respondents had allegedly sold and
transferred the 11 windmill projects vide Agreement to Sell dated 19.07.2017
in violation to Agreement to Sell dated 02.09.2016. The learned Sole
Arbitrator vide order dated 14.05.2019 dismissed the said application for
impleadment of the subsequent transferees in the arbitration proceedings.
The learned Sole Arbitrator observed as under:-
(i) "... this Tribunal is of the view that if a decree is ultimately passed
in favour of the claimant and his prayer for specific performance is
granted, the sale agreement by virtue of which the respondent has sold
the windmills to the third parties would necessarily would be declared
null and void"
(ii) ''...The 4 aforenoted parties (as referred in para 2) sought to be
impleaded are neither necessary nor proper parties. These arbitral
proceedings can proceed inter se the claimant and respondent well
without they being joined as parties..."
3. The appellant filed a petition under section 34 of the Act to challenge
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the order dated 14.05.2019 on the grounds that the Arbitral Tribunal passed
the interim award against the public policy. The learned Sole Arbitrator has
failed to consider that the respondents disclosed about the alleged Sale
Agreements to the subsequent buyers only on 14.09.2018 when the
respondents filed their statement of defence along with true copies of the
Agreement to Sell dated 19.07.2017 executed between the respondents and
the subsequent buyers showing the alleged transaction of 11 windmill
projects. The learned Sole Arbitrator did not consider that till 14.09.2018,
there was no document to show any sale transaction between the respondents
and the subsequent buyers and the non-signatory to the Arbitration Clause
can also be impleaded as observed by the Supreme Court in Cheran
Properties Ltd. V Kasturi & Sons Ltd., (2018) 16 SCC 413 and in other
judgments delivered by the Supreme Court. The appellant also raised
various other grounds to challenge the orders passed by the learned Sole
Arbitrator.
4. The learned Single Judge vide impugned order dated 05.07.2019,
dismissed the petition under section 34 of the Act on the grounds of
maintainability as well as on merits. The learned Single Judge observed as
under:-
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“4. I must indicate at the very outset that it is my understanding that
petition under Section 34 would not lie qua the impugned order which,
as indicated above, dealt with an application for impleadment of third
parties who concededly are not parties to the arbitration agreement.
8.1 The application praying for impleadment of third parties is not a
matter which would dovetail • into the final award. The fact that the
petitioner is aggrieved by disposal of such an application would not
morph the order into an interim arbitral award as contended by Mr.
Aggarwal.
8.2 I have not been shown any authority which is directly on the point
and takes a view contrary to what is stated herein above.
9. Be that as it may, even on merits I find that the petition is not
sustainable.
14.1 Besides this, the arbitral tribunal has also taken the view and, in
my opinion correctly, that if the reliefs claimed by the petitioner which
are in the nature of specific performance of the agreement dated
2.9.2016 and for declaring the sale agreements dated 19.7.2017
entered into between respondents and the third parties as null and
void- are allowed, then, a "meaningful decree" would be available to,
the petitioner in the matter.
15. Mr. Aggarwal's submission that the petitioner would have no
recourse against the third party entities who have bought the
"windmill assets" situate in Karnataka is, to my mind, an erroneous
plea for the reason that the third parties cannot get a better title than
the respondents.
15.1 Besides this, in my view, it is important to bear in mind that every
order passed by an arbitral tribunal which may impact the final award
does not result in an interim award. An award is like a judicial decree
which not only determines the rights of the parties with regard to
matters in issue but also gives the reasons for reaching such a
determination. Therefore, an interim order passed by an arbitral
tribunal at an interim stage has to be tested on these parameters
before it can be said that it is in nature of an interim award. The
impugned order, in my view, tested on these parameters, cannot
qualify as an interim award.
16. Therefore, if the petitioner were to succeed finally in the matter
before the arbitral tribunal, it will have an award which hopefully
would morph into a decree which can give petitioner a cause of action
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to proceed further in the matter both against the respondents and
perhaps the third party entities.
17. The apprehensions expressed by Mr. Aggarwal, in my view, are
misplaced.
18. I find no merit in the petition both on the ground of maintainability
as well as on merits.
19. The petition is, accordingly, dismissed.”
5. The learned counsel for the appellant primarily advanced oral
arguments and also submitted written arguments. The learned counsel for
the appellant argued that the present appeal needs consideration on two
questions of law, which are:-
(i) Whether the alleged subsequent buyer who is not signatory to
the arbitration agreement can be impleaded in the arbitral
proceedings;
(ii) Whether an application rejecting a prayer for impleadment can
constitute an interim award.
5.1 The counsel for the appellant in support of his contentions as
mentioned hereinabove, cited Kasturi V lyyamperumal & Ors., (2005) 6
SCC 733 wherein it was observed as under:-
“In our view, a bare reading of this provision, namely, second part of
Order 1 Rule 10 sub-rule (2) CPC would clearly show that the
necessary parties in a suit for specific performance of a contract for
sale are the parties to the contract or if they are dead, their legal
representatives as also a person who had purchased the contracted
property from the vendor. In equity as well as in law, the contract
constitutes rights and also regulates the liabilities of the parties. A
purchaser is a necessary party as he would be affected if he had
purchased with or without notice of the contract, but a person who
claims adversely to the claim of a vendor is, however, not a necessary
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party. From the above, it is now clear that two tests are to be satisfied
for determining the question who is a necessary party. Tests are
(1) there must be a right to some relief against such party in respect of
the controversies involved in the proceedings;
(2) no effective decree can be passed in the absence of such party.”
5.2 The counsel for the appellant also relied on the decisions in Cheran
Properties Ltd. V Kasturi & Sons Ltd., (2018) 16 SCC 413 and in Nirmala
Jain &Ors. V Jasbir Singh & Ors., 256 (2019) DLT 186[DB], for the
proposition that a third party, who is non signatory subsequent purchaser can
be impleaded in arbitral proceedings.
6. The counsel for the respondents submit that it is only the parties to an
agreement alone who are bound by the arbitral proceedings and no third
party can be impleaded.
7. In regard to the legal proposition that whether a non-signatory
subsequent buyer can be impleaded in the arbitration proceedings, the
Supreme Court in Chrolo Controls India Private Ltd. V Severn Trent Water
Purification Inc. and Ors., (2013) 1 SCC 641 held that the parties who are
not signatory can be joined in arbitration proceedings. It was observed as
under:-
“70. Normally, arbitration takes place between the persons who have,
from the outset, been parties to both the arbitration agreement as well
as the substantive contract underlining (sic underlying) that
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agreement. But, it does occasionally happen that the claim is made
against or by someone who is not originally named as a party. These
may create some difficult situations, but certainly, they are not
absolute obstructions to law/the arbitration agreement. Arbitration,
thus, could be possible between a signatory to an arbitration
agreement and a third party. Of course, heavy onus lies on that party
to show that, in fact and in law, it is claiming “through” or “under”
the signatory party as contemplated under Section 45 of the 1996 Act.
Just to deal with such situations illustratively, reference can be made
to the following examples in Law and Practice of Commercial
Arbitration in England (2nd Edn.) by Sir Michael J. Mustill: “1. The
claimant was in reality always a party to the contract, although not
named in it. 2. The claimant has succeeded by operation of law to the
rights of the named party. 3. The claimant has become a party to the
contract in substitution for the named party by virtue of a statutory or
consensual novation. 4. The original party has assigned to the
claimant either the underlying contract, together with the agreement to
arbitrate which it incorporates, or the benefit of a claim which has
already come into existence.”
71. Though the scope of an arbitration agreement is limited to the
parties who entered into it and those claiming under or through them,
the courts under the English law have, in certain cases, also applied
the “group of companies doctrine”. This doctrine has developed in the
international context, whereby an arbitration agreement entered into
by a company, being one within a group of companies, can bind its
non-signatory affiliates or sister or parent concerns, if the
circumstances demonstrate that the mutual intention of all the parties
was to bind both the signatories and the non-signatory affiliates. This
theory has been applied in a number of arbitrations so as to justify a
tribunal taking jurisdiction over a party who is not a signatory to the
contract containing the arbitration agreement. [Russell on Arbitration
(23rd Edn.)]
72. This evolves the principle that a non-signatory party could be
subjected to arbitration provided these transactions were with group
of companies and there was a clear intention of the parties to bind
both, the signatory as well as the non-signatory parties. In other
words, “intention of the parties” is a very significant feature which
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must be established before the scope of arbitration can be said to
include the signatory as well as the non-signatory parties.
73. A non-signatory or third party could be subjected to arbitration
without their prior consent, but this would only be in exceptional
cases. The court will examine these exceptions from the touchstone of
direct relationship to the party signatory to the arbitration agreement,
direct commonality of the subject-matter and the agreement between
the parties being a composite transaction. The transaction should be of
a composite nature where performance of the mother agreement may
not be feasible without aid, execution and performance of the
supplementary or ancillary agreements, for achieving the common
object and collectively having bearing on the dispute. Besides all this,
the court would have to examine whether a composite reference of
such parties would serve the ends of justice. Once this exercise is
completed and the court answers the same in the affirmative, the
reference of even non-signatory parties would fall within the exception
afore-discussed.”
7.1 In the case of Cheran Properties Ltd. V Kasturi & Sons Ltd., (2018)
16 SCC 413 the Supreme Court held as under:-
“20. Both these decisions were prior to the three-Judge Bench decision
in Chloro Controls [Chloro Controls India (P) Ltd. v. Severn Trent
Water Purification Inc., (2013) 1 SCC 641 : (2013) 1 SCC (Civ) 689] .
In Chloro Controls [Chloro Controls India (P) Ltd. v. Severn Trent
Water Purification Inc., (2013) 1 SCC 641 : (2013) 1 SCC (Civ) 689]
this Court observed that ordinarily, an arbitration takes place between
persons who have been parties to both the arbitration agreement and
the substantive contract underlying it. English Law has evolved the
“group of companies doctrine” under which an arbitration agreement
entered into by a company within a group of corporate entities can in
certain circumstances bind non-signatory affiliates. The test as
formulated by this Court, noticing the position in English law, is as
follows: (SCC pp. 682-83, paras 71 & 72)
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“71. Though the scope of an arbitration agreement is limited
to the parties who entered into it and those claiming under or
through them, the courts under the English law have, in
certain cases, also applied the “group of companies
doctrine”. This doctrine has developed in the international
context, whereby an arbitration agreement entered into by a
company, being one within a group of companies, can bind its
non-signatory affiliates or sister or parent concerns, if the
circumstances demonstrate that the mutual intention of all the
parties was to bind both the signatories and the non-signatory
affiliates. This theory has been applied in a number of
arbitrations so as to justify a tribunal taking jurisdiction over
a party who is not a signatory to the contract containing the
arbitration agreement. [Russell on Arbitration (23rd Edn.)]
72. This evolves the principle that a non-signatory party
could be subjected to arbitration provided these transactions
were with group of companies and there was a clear
intention of the parties to bind both, the signatory as well as
the non-signatory parties. In other words, “intention of the
parties” is a very significant feature which must be
established before the scope of arbitration can be said to
include the signatory as well as the non-signatory parties.”
The Court held that it would examine the facts of the case on the
touchstone of the existence of a direct relationship with a party which
is a signatory to the arbitration agreement, a “direct commonality” of
the subject-matter and on whether the agreement between the parties
is a part of a composite transaction: (SCC p. 683, para 73)
“73. A non-signatory or third party could be subjected to
arbitration without their prior consent, but this would only be
in exceptional cases. The court will examine these exceptions
from the touchstone of direct relationship to the party
signatory to the arbitration agreement, direct commonality of
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the subject-matter and the agreement between the parties
being a composite transaction. The transaction should be of a
composite nature where performance of the mother
agreement may not be feasible without aid, execution and
performance of the supplementary or ancillary agreements,
for achieving the common object and collectively having
bearing on the dispute. Besides all this, the Court would have
to examine whether a composite reference of such parties
would serve the ends of justice. Once this exercise is
completed and the Court answers the same in the affirmative,
the reference of even non-signatory parties would fall within
the exception afore-discussed.”
21. Explaining the legal basis that may be applied to bind a non-
signatory to an arbitration agreement, this Court in Chloro Controls
case [Chloro Controls India (P) Ltd. v. Severn Trent Water
Purification Inc., (2013) 1 SCC 641 : (2013) 1 SCC (Civ) 689] held
thus : (SCC p. 694, paras 103.1, 103.2 & 105)
“103.1. The first theory is that of implied consent, third-party
beneficiaries, guarantors, assignment and other transfer
mechanisms of contractual rights. This theory relies on the
discernible intentions of the parties and, to a large extent, on
good faith principle. They apply to private as well as public
legal entities.
103.2. The second theory includes the legal doctrines of
agent-principal relations, apparent authority, piercing of veil
(also called “the alter ego”), joint venture relations,
succession and estoppel. They do not rely on the parties'
intention but rather on the force of the applicable law.
105. We have already discussed that under the group of
companies doctrine, an arbitration agreement entered into by
a company within a group of companies can bind its non-
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signatory affiliates, if the circumstances demonstrate that the
mutual intention of the parties was to bind both the signatory
as well as the non-signatory parties.”
23. As the law has evolved, it has recognised that modern business
transactions are often effectuated through multiple layers and
agreements. There may be transactions within a group of companies.
The circumstances in which they have entered into them may reflect an
intention to bind both signatory and non-signatory entities within the
same group. In holding a non-signatory bound by an arbitration
agreement, the court approaches the matter by attributing to the
transactions a meaning consistent with the business sense which was
intended to be ascribed to them. Therefore, factors such as the
relationship of a non-signatory to a party which is a signatory to the
agreement, the commonality of subject-matter and the composite
nature of the transaction weigh in the balance. The group of
companies’ doctrine is essentially intended to facilitate the fulfilment
of a mutually held intent between the parties, where the circumstances
indicate that the intent was to bind both signatories and non-
signatories. The effort is to find the true essence of the business
arrangement and to unravel from a layered structure of commercial
arrangements, intent to bind someone who is not formally a signatory
but has assumed the obligation to be bound by the actions of a
signatory.
25. Does the requirement, as in Section 7, that an arbitration
agreement be in writing exclude the possibility of binding third parties
who may not be signatories to an agreement between two contracting
entities? The evolving body of academic literature as well as
adjudicatory trends indicate that in certain situations, an arbitration
agreement between two or more parties may operate to bind other
parties as well. Redfern and Hunter explain the theoretical foundation
of this principle:
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“… The requirement of a signed agreement in writing, however, does
not altogether exclude the possibility of an arbitration agreement
concluded in proper form between two or more parties also binding
other parties. Third parties to an arbitration agreement have been held
to be bound by (or entitled to rely on) such an agreement in a variety
of ways: first, by operation of the „group of companies‟ doctrine
pursuant to which the benefits and duties arising from an arbitration
agreement may in certain circumstances be extended to other members
of the same group of companies; and, secondly, by operation of
general rules of private law, principally on assignment, agency, and
succession…. [Id at p. 99.] ”
The group of companies doctrine has been applied to pierce the
corporate veil to locate the “true” party in interest, and more
significantly, to target the creditworthy member of a group of
companies [Op cit fn. 16, 2.40, p. 100.] . Though the extension of this
doctrine is met with resistance on the basis of the legal imputation of
corporate personality, the application of the doctrine turns on a
construction of the arbitration agreement and the circumstances
relating to the entry into and performance of the underlying contract.
[Id, 2.41 at p. 100.]
26. Russell on Arbitration [24th Edn., 3-025, pp. 110-11.] formulates
the principle thus:
“Arbitration is usually limited to parties who have consented
to the process, either by agreeing in their contract to refer
any disputes arising in the future between them to arbitration
or by submitting to arbitration when a dispute arises. A party
who has not so consented, often referred to as a third party or
a non-signatory to the arbitration agreement, is usually
excluded from the arbitration. There are however some
occasions when such a third party may be bound by the
agreement to arbitrate. For example, …, assignees and
representatives may become a party to the arbitration
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agreement in place of the original signatory on the basis that
they are successors to that party's interest and claim
“through or under” the original party. The third party can
then be compelled to arbitrate any dispute that arises.”
28. Explaining group of companies doctrine, Born states:
“the doctrine provides that a non-signatory may be bound by
an arbitration agreement where a group of companies exists
and the parties have engaged in conduct (such as negotiation
or performance of the relevant contract) or made statements
indicating the intention assessed objectively and in good
faith, that the non-signatory be bound and benefited by the
relevant contracts. [Id at pp. 1448-49.]
“While the alter ego principle is a rule of law which
disregards the effects of incorporation or separate legal
personality, in contrast the group of companies doctrine is a
means of identifying the intentions of parties and does not
disturb the legal personality of the entities in question. In
other words:
“the group of companies doctrine is akin to
principles of agency or implied consent, whereby
the corporate affiliations among distinct legal
entities provide the foundation for concluding that
they were intended to be parties to an agreement,
notwithstanding their formal status as non-
signatories. [Id at p. 1450.]”
29. The decision in Indowind [Indowind Energy Ltd. v. Wescare
(India) Ltd., (2010) 5 SCC 306 : (2010) 2 SCC (Civ) 397] arose from
an application under Section 11 of the Arbitration and Conciliation
Act, 1996. Indowind was not a signatory to the contract and was held
not to be a party to the agreement to refer disputes to arbitration.
Indowind[Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC
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306 : (2010) 2 SCC (Civ) 397] held that an application under Section
11 was not maintainable. The present case does not envisage a
situation of the kind which prevailed before this Court in Indowind
[Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC 306 :
(2010) 2 SCC (Civ) 397] . The present case relates to a post award
situation. The enforcement of the arbitral award has been sought
against the appellant on the basis that it claims under KCP and is
bound by the award. Section 35 of the Arbitration and Conciliation
Act, 1996 postulates that an arbitral award “shall be final and binding
on the parties and persons claiming under them respectively”
(emphasis supplied). The expression “claiming under”, in its ordinary
meaning, directs attention to the source of the right. The expression
includes cases of devolution and assignment of interest (Advanced Law
Lexicon by P. RamanathaAiyar [ 3rdEdn., Vol. I, p. 818.] ).
The expression “persons claiming under them” in Section 35
widens the net of those whom the arbitral award binds. It
does so by reaching out not only to the parties but to those
who claim under them, as well. The expression “persons
claiming under them” is a legislative recognition of the
doctrine that besides the parties, an arbitral award binds
every person whose capacity or position is derived from and
is the same as a party to the proceedings. Having derived its
capacity from a party and being in the same position as a
party to the proceedings binds a person who claims under it.
The issue in every such a case is whether the person against
whom the arbitral award is sought to be enforced is one who
claims under a party to the agreement.”
8. The perusal of above cited decisions delivered by the Supreme Court
reflects that a party which is non-signatory to the agreement can be
impleaded as a necessary party in Arbitration Proceedings. However, issue
which needs judicial consideration and determination is that whether an
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order dismissing application under Order 1 Rule X CPC can be taken as an
interim award.
9. This court with regard to that apropros, whether rejection of an
application for impleadment of parties constitute an interim award, this court
has, in Rhiti Sports V Powerplay Sports, 2018 SCC OnLine Del 8678,
observed as under:-
“16. A plain reading of Section 32 of the Act indicates the fact that the
final award would embody the terms of the final settlement of disputes
(either by adjudication process or otherwise) and would be a final
culmination of the disputes referred to arbitration. Section 31(6) of the
Act expressly provides that an Arbitral Tribunal may make an interim
arbitral award in any matter in respect of which it may make a final
award. Thus, plainly, before an order or a decision can be termed as
„interim award‟, it is necessary that it qualifies the condition as
specified under Section 31(6) of the Act: that is, it is in respect of
which the arbitral tribunal may make an arbitral award.
17. As indicated above, a final award would necessarily entail of (i) all
disputes in case no other award has been rendered earlier in respect of
any of the disputes referred to the arbitral tribunal, or (ii) all the
remaining disputes in case a partial or interim award(s) have been
entered prior to entering the final award. In either event, the final
award would necessarily (either through adjudication or otherwise)
entail the settlement of the dispute at which the parties are at issue. It,
thus, necessarily follows that for an order to qualify as an arbitral
award either as final or interim, it must settle a matter at which the
parties are at issue. Further, it would require to be in the form as
specified under Section 31 of the Act.
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18. To put it in the negative, any procedural order or an order that
does not finally settle a matter at which the parties are at issue, would
not qualify to be termed as “arbitral award”.
19. In an arbitral proceeding, there may be several procedural orders
that may be passed by an arbitral tribunal. Such orders may include a
decision on whether to hold oral hearings for the presentation of
evidence or for oral argument, or whether the arbitral proceedings are
to be conducted on the basis of documents and other materials as
required to be decided - unless otherwise agreed between the parties -
in terms of Section 24(1) of the Act. There are also other matters that
the arbitral tribunal may require to determine such as time period for
filing statement of claims, statement of defence, counter claims,
appointment of an expert witness etc. The arbitral tribunal may also be
required to address any of the procedural objections that may be
raised by any party from time to time. However, none of those orders
would qualify to be termed as an arbitral award since the same do not
decide any matter at which the parties are at issue in respect of the
disputes referred to the arbitral tribunal.
20. At this stage, it may be also relevant to refer to certain
authoritative texts as to what would constitute an award. In Russell on
Arbitration (Twenty-Third Edition), the author explains as under:-
“No statutory definition. There is no statutory definition of an
award of English arbitration law despite the important
consequences which flow from an award being made. In
principle an award is a final determination of a particular
issue or claim in the arbitration. It may be contrasted with
orders and directions which address the procedural
mechanisms to be adopted in the reference. Such procedural
orders and directions are not necessarily final in that the
tribunal may choose to vary or rescind them altogether. Thus,
questions concerning the jurisdiction of the tribunal or the
choice of the applicable substantive law are suitable for
determination by the issue of an award. Questions concerning
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the timetable for the reference or the extent of disclosure of
documents are procedural in nature and are determined by
the issue of an order or direction and not by an award. The
distinction is important because an award can be the subject
of a challenge or an appeal to the court, whereas an order or
direction in itself cannot be so challenged. A preliminary
decision, for example of the engineer or adjudicator under a
construction contract which is itself subject to review by an
arbitration tribunal, is not an award.”
21. In Mustill & Boyd on Commercial Arbitration (Second Edition),
the author suggests two characteristics, which could be accepted as
indicia of an award. The relevant extract of the aforesaid text reads as
under:-
“….we do suggest two characteristics which we believe
would be accepted as indicia of an award by the arbitrating
community at large:
1. An award is the discharge, either in whole or in part,
of the mandate entrusted to the tribunal by the parties;
namely to decide the dispute which the parties have referred
to them. That is, the award is concerned to resolve the
substance of the dispute. Important aspects of the arbitrators
duties are naturally concerned with the processes which lead
up to the making of the awards, and they are empowered to
arrive at decisions which enable those processes to be
performed. The exercise of these powers are, however,
antecendent to the performance of the mandate, not part of
the ultimate performance itself. Thus, procedural decisions,
and the documents in which they may be embodied are not
“awards”.
2. Constituting as it does the discharge of the arbitrators
mandate the award has two effects:
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(a) Since the parties have, by their agreement to arbitrate,
promised to be bound by the arbitrator‟ decision of their
dispute, they are for all purposes bound by it between
themselves, although others are not so bound. That is, the
dispute becomes res judicata, with all that the concept implies
for the purposes of English law as regards issues explicitly or
implicitly decided as intermediate steps on the way to the
final decision, issues which could have been raised, the effect
on parties with derivative interests, and so on. (b) Since the
making of the award constitutes a complete performance of
the mandate entrusted to the arbitrators, it leaves them with
no powers left to exercise: except of course, in the case of a
partial award, when the exhaustion of the arbitrator‟ powers
is complete as to part and incomplete as to the remainder.”
22. In Centrotrade Minerals and Metal Inc. v. Hindustan Copper Ltd.,
(2017) 2 SCC 228, the Supreme Court had, inter alia, referred to the
passages from Comparative International Commercial Arbitration
Kluwer Law International, 2003 and Redfern and Hunter on
International Arbitration (sixth edition) and observed as under:—
“9….The distinction between an award and a decision of an
Arbitral Tribunal is summarized in Para 24-13 [Chapter 24:
Arbitration Award in Julian D.M. Lew, Loukas A. Mistelis, et
al., Comparative international Commercial arbitration]. It is
observed that an award:
(i) concludes the dispute as to the specific issue determined in
the award so that it has res judicata effect between the
parties; if it is a final award, it terminates the tribunal's
jurisdiction;
(ii) disposes of parties' respective claims;
(iii) may be confirmed by recognition and enforcement;
(iv) may be challenged in the courts of the place of
arbitration
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10. In International Arbitration [Chapter 9. Award in Nigel Blackaby,
Constantine Part asides, et al., Redfern and Hunter on International
Arbitration (Sixth Edition), 6 edition: Kluwer Law International,
Oxford University Press 2015 pp. 501-568] a similar distinction is
drawn between an award and decisions such as procedural orders and
directions. It is observed that an award has finality attached to a
decision on a substantive issue. Paragraph 9.08 in this context reads
as follows:
“9.08 The term “award” should generally be reserved for
decisions that finally determine the substantive issues with
which they deal. This involves distinguishing between awards,
which are concerned with substantive issues, and procedural
orders and directions, which are concerned with the conduct
of the arbitration. Procedural
orders and directions help to move the arbitration forward;
they deal with such matters as the exchange of written
evidence, the production of documents, and the arrangements
for the conduct of the hearing. They do not have the status of
awards and they may perhaps be called into question after
the final award has been made (for example as evidence of
“bias”, or “lack of due process”).”
23. The question whether in the given circumstances, a determination
by an arbitral tribunal is an award has come up before courts in
several matters. In ShyamTelecom Ltd. v. Icomm Ltd., 2010 (116) DRJ
456, this Court considered the challenge laid to an order of the
arbitral tribunal dismissing an amendment application filed by the
petitioner. In this context, the Court observed as under:—
“Clearly an interim Award has to be on a matter with
respect to which a final Award can be made i.e. the interim
Award is also the subject matter of a final Award. Putting it
differently therefore an interim Award has to take the colour
of a final Award. An interim Award is a final Award at the
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interim stage viz a stage earlier than at the stage of final
arguments. It is a part final Award because there would
remain pending other points and reliefs for adjudication. It is
therefore, that I feel that an interim Award has to be in the
nature of a part judgment and decree as envisaged under
Section 2 (2) of CPC and the same must be such that it
conclusively determines the rights of the parties on a matter
in controversy in the suit as done in a final judgment. An
interim order thus cannot be said to be an interim Award
when the order is not in the nature of a part decree. In my
opinion the impugned order in view of what I have said
hereinabove, is not an interim Award as it is not in the nature
of a part decree being only an interim order.”
24. In Sahyadri Earthmovers v. L&T Finance Limited, 2011 (6)
BomCR 393, the Bombay High Court considered an application filed
whereby the petitioner had, inter alia, prayed for directions to be
issued to the arbitral tribunal to “formulate and prescribe the
appropriate legal procedure for adjudicating the arbitration
proceedings and convening the arbitration meetings and more
particularly to record the evidence as per the Indian Evidence Act”.
The said application was moved under Section 9 read with Section 19
of the Act, but was occasioned by an order passed by the arbitral
tribunal on an application filed by the petitioner for determining the
arbitral procedure. In the aforesaid context, the Court observed as
under:
“3. The first and foremost thing is that section 9 or section 19
or any other section under the Arbitration Act, nowhere
permit a party to challenge such order passed by the
Arbitrator pending the arbitration proceedings. It is neither
final award and/or interim award. Therefore, there is no
question of invoking even Section 34 of the Arbitration Act.
The Arbitration Act permits or provides the power of Court to
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entertain or interfere with the order passed by the Arbitrator,
only if it is prescribed and not otherwise. Section 5 of the
Arbitration Act is very clear which is reproduced as under.”
25. In the present case, the impugned order relates to rejection of the
petitioner's application to file additional documents. Clearly, this is a
procedural matter and does not decide any issue for adjudicating the
dispute between the parties. Thus, the contention that the same would
qualify as an interim award is wholly unmerited.
30. There are several types of orders against which a remedy is
specifically provided under the Act. In case of a challenge to the
jurisdiction of an arbitral tribunal, the decision rejecting such
challenge is not immediately amenable to judicial review and the party
raising such challenge has to necessarily await the final award to
pursue the said challenge, albeit against the arbitral award. However,
an order accepting the said challenge is appealable under Section
37(2) of the Act. Similarly, a decision of the arbitral tribunal rejecting
the challenge under Section 12(1) of the Act cannot be immediately
assailed and the party challenging the arbitrator(s) has to necessarily
follow the discipline of Section 13 of the Act. If such challenge is
rejected, the arbitral tribunal is required to continue with the
proceedings and make an arbitral award. The party raising the
challenge to the appointment of an arbitrator would, subject to
provision of Section 34(2) of the Act, be at liberty to challenge the
arbitral award.”
10. A Co-ordinate Bench of this court, in O.M.P.(COMM) 477/2022,
titled National Highway Authority of India V Lucknow Sitapur
Expressway Ltd., also observed as under:-
“...17. As was correctly explained by the Court in Rhiti Sports, in
order to hold that an order passed by the Tribunal has the attributes of
an award, it would have to be established that the same decides
“matters of moment” or disposes of a substantive claim raised by
parties. This has been duly recognised by precedents as well as the
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authoritative texts noticed in Rhiti Sports, as orders which effectively
conclude a fundamental dispute or question that stands raised on
merits as distinguished from mere procedural orders.
18. As this Court views and considers the order of the Tribunal
impugned herein, it is of the firm opinion that the same fails to answer
the attributes of an award as is understood under the provisions of the
Act. The order impugned neither finally decides a question touching
upon the merits of the respective claims nor does it decisively conclude
a dispute which exists between the parties. The impugned order also
fails to answer to the attributes of a determination of an issue which
could be said to have a bearing on the ultimate reliefs sought by
parties. The respondent would still have to establish whether the
concession period is liable to be extended in light of the provisions
contained in the C.A. Whether the expressways alluded to would
constitute competing roads would also be a question which would be
open to be agitated before the Arbitral Tribunal. That Tribunal would
still have to consider and decide whether the claim would sustain in
terms of Clause VIII...”
11. It is reflecting that an order would said to be an award or interim
award when it decides a substantive dispute which exists between the parties.
It is essential before an order can be understood as an award that it answers
the attributes of the decision on the merits of the dispute between the parties
or accords in conclusively settling a dispute which pertains to core issue.
Therefore to qualify as an award it must be with respect to an issue which
constitutes a vital aspect of the dispute. As held in the case of Rhiti Sports
the order passed by the arbitral tribunal would have the attributes of an
interim award when same decides the ‘matters of moment’ or disposes of a
substantive claim raised by the parties. Accordingly, an order passed by the
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Arbitral Tribunal rejecting the application for impleadment neither decides
the substantive question of law nor touches upon the merits of the case. The
impugned order, as such, has not travelled the distance to answer the
attributes of determination of an issue.
12. The learned Sole Arbitrator rightly observed that the subsequent
transferees are neither the necessary parties nor proper parties for disposal of
the claims and arbitral proceedings can proceed between the appellant and
the respondents and if the decree is passed in favour of the appellant, in that
eventuality subsequent sale agreement shall become null and void.
13. We do not find any illegality in the impugned order which could call
for interference by this court.
14. Accordingly, the present appeal along with pending applications, if
any, stands dismissed.
(SUDHIR KUMAR JAIN)
JUDGE
(NAJMI WAZIRI)
JUDGE
MARCH 29, 2023
N/SD
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