India: Can Impleadment Of A Party Be Sought As An Interim Award Under Section 31 (6) Of The Arbitration And Conciliation Act?

INTRODUCTION

Section 31(6) of the Arbitration and Conciliation Act, 1996 (hereinafter, the Act) allows an arbitral tribunal to make an interim award during the arbitral proceedings on any matter with respect to which a final arbitral award may be made by it. The Hon'ble Supreme Court has explained in McDermott International Inc. v. Burn Standard Co. Ltd. and Ors¹ that Section 31(6) contemplates an interim award and the same is not one in respect of which a final award can be made but it may be a final award on the matters covered thereby, but made at an interim stage. As such, the apex Court has equated an interim award to a final award, but made at an interim stage. Section 2(c) of the Act provides that an arbitral award includes an interim award. Further, Section 17 of the Act which deals with interim measures ordered by arbitral tribunals, provides that a tribunal can provide "such other interim measure of protection as may appear to be just and convenient to the tribunal²". This article discusses the position of impleadment being sought as an interim award under the Act and the Indian jurisprudence on the same.

JURISPRUDENCE ON THE PROPOSITION

In Goyal MG Gases Pvt. Ltd. v. Panama Infrastructure Developers Pvt. Ltd and Ors³, the impugned order of the tribunal dealt with dismissal of an application for impleadment of third parties who were concededly not the parties to the agreement and the order was in challenge under Section 34 of the Act before the Delhi High Court. The petitioner contended that the order of the tribunal resulted into an interim award and therefore, section 34 petition would lie as contemplated under section 16(6) of the Act. Dismissing the petition, the Bench noted that every order passed by an arbitral tribunal which may impact the final award does not result in an interim award. It was observed that "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 award⁴."

In National Highways Authority of India v. Lucknow Sitapur Expressway Ltd⁵ a petition under section 34 of the Act was filed against an order of the arbitral tribunal rejecting the application of the petitioner seeking impleadment of the State of Uttar Pradesh as a party in the ongoing arbitral proceedings. It was the petitioner's stand that the order was an interim award. The Bench observed that for order to qualify as an arbitral award either as final or interim, it must settle a matter at which the parties are at an issue and is in the form as required under section 31 of the act. "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 award⁶." Relying on Russel on Arbitration, Bench provided a contrast between an award, which in principle is a final determination of a particular issue or claim in arbitration and the orders and directions which address the procedural mechanisms to be adopted in the reference. The bench held that "for an order of the Tribunal to be understood as an award, it is essential that it answer the attributes of a decision touching upon the merits of the dispute between the parties or conclusively settling an issue or answering a question which pertains to the heart of the dispute. An order of the Arbitral Tribunal, to put it differently, in order to constitute an award, interim or otherwise, would be one which decides a substantive dispute or question which exists between the parties. In order to qualify as an award, the decision must be with respect to an issue which constitutes a vital element of the dispute."

The bench dismissed the petition holding that the impugned order of the tribunal rejecting application for impleadment did not constitute an award.

In Rites Ltd. v. Apex Construction Company and Ors⁷. the Delhi High Court dealt with the issue wherein the Petitioner (Rites) pleaded that the decision of the tribunal rejecting the application of Rites to separately implead the Respondent No. 2 is required to be treated as an interim award and as such, it will be amenable to challenge under Section 34 of the Act. The Bench held that the tribunal merely rejected the application of Rites seeking impleadment as the same was beyond the terms of reference and noted the instant petition as not maintainable. Thus, rejection of impleadment was not considered as an interim award.

In Vistrat Real Estates Pvt. Ltd. v. Asian Hotels North Ltd⁸, petition under section 11(6) was preferred seeking appointment of an Arbitrator before the Delhi High Court. The Bench held that once a valid agreement exists between the parties, the arbitrator shall have the discretion for impleading third parties in arbitral proceedings under the Doctrine of CompetenceCompetence.

In Delta Distilleries Ltd. v. Shaw Wallace and Co. Ltd⁹ the decision of the arbitrator allowing the application of the Respondents to implead the third Respondent in place of the second Respondent was challenged before the Bombay High Court.

Holding that the tribunal rightly allowed the application for bringing the third respondent on record, the bench noted that the interest of the second claimant to the arbitration proceedings was devolved upon the third respondent after the Court sanctioned the scheme of amalgamation under the Companies Act, 1956¹⁰. It was observed that after devolution of interest, the transferee upon whom the interest is devolved is entitled to be impleaded and the challenge therefore was dismissed by the bench.

CONCLUSION

The above decisions highlight that the judicial dicta favours the position that orders of impleadment do not constitute an interim award. Particularly, the decision of the Delhi High Court in Goyal MG (supra) has provided qualifications for an interim order of an arbitral tribunal to culminate into an interim award under the Act. The same is reflective in Lucknow Sitapur Expressway (supra) as well wherein final determination of a particular issue or claim in arbitration was distinguished from orders and directions which address the procedural mechanisms in the arbitral proceedings.

Footnotes

1 McDermott International Inc. v. Burn Standard Co. Ltd. and Ors (2006) 11 SCC 181, para 68.

2 Section 17(1)(e) of the Arbitration and Conciliation Act, 1996.

3 Goyal MG Gases Pvt. Ltd. v. Panama Infrastructure Developers Pvt. Ltd and Ors, 2019 SCC Online Del 9067.

4 ibid, para 32.

5 National Highways Authority of India v. Lucknow Sitapur Expressway Ltd, 2022 SCC Online Del 4527.

6 ibid, para 18

7 Rites Ltd. v. Apex Construction Company and Ors, 2022 SCC OnLine Del 86.

8 Vistrat Real Estates Pvt. Ltd. v. Asian Hotels North Ltd, 2022 SCC OnLine Del 1139.

9 Delta Distilleries Ltd. v. Shaw Wallace and Co. Ltd, 2007 SCC OnLine Bom 1049.

10 ibid, para 14.

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