India: Interim Awards: Definition & Scope Of Challenge

I. INTRODUCTION:

Interim Awards have a crucial role in determining the course of arbitration proceedings and assisting in successful and expedient dispute resolution. Interim Awards are given a lot of weight under the Arbitration and Conciliation Act of 1996 ("Act") since they address specific case merits and have an impact on the parties' substantive rights.

However, due to the lack of detailed legislation on the definition of Interim Awards, parties often find themselves in a state of perplexity where they incorrectly interpret ordinary procedural or interlocutory rulings as Interim Awards and attempt to dispute such orders under Section 34 of the Act. This may result in uncertainty and such uncertainty thereby causes the arbitration proceedings to get prolonged and shift the dynamics of the arbitration proceedings.

There are catena of judgments wherein a clear distinction has been drawn between the Interim Orders and the Procedural Orders pronounced by the Arbitral Tribunal. This article seeks to discuss such judgments along with a few instances where the Courts have struck down the grounds challenging such orders under Section 34 of the act.

1I. DIFFERENCE BETWEEN INTERIM AWARD, PROCEDURAL ORDER AND INTERLOCUTORY ORDER:

In Cinevistaas Ltd. v. Parsar Bharti¹ the Delhi High Court held that under Section 2(1)(c) of the Act, an award includes an 'Interim Award', and whether an impugned order constitutes an Interim Award or not is to be decided by seeing the nature of the order and not the title of the application. The Court further delineates on distinguishing between a final judgment, preliminary judgment and an intermediary or interlocutory judgment while relying upon the landmark judgment of Shah Babulal Khimji v. Jayaben D. Kania,² on the basis that if there is "formal adjudication which conclusively determines", it would be a judgment where a final judgment would either "dismiss or decree in part or in full". Preliminary judgments are those that decide finally, preliminary issues such as jurisdiction, res judicata, etc. Interlocutory judgments are enumerated in Order XLIII Rule 1³. Apart from those enumerated in the Civil Procedure Code, 1908 such judgments would include those which possess 'characteristics and trappings of finality'. Therefore, if a "valuable right" is lost, it would be an interlocutory judgment. If the order is "routine in nature", it would not constitute a judgment.

III. FACTORS TO BE CONSIDERED FOR DETERMINING AN INTERIM ORDER:

In ONGC Petro Additions v. Tecnimont S.P.A and Anr⁴, the Court held that the Arbitral Tribunal while passing any procedural order may determine certain valuable rights of the parties. However, it does not necessarily mean that such determination renders an order to be an award within the meaning of Section 2(1) (c) of the Act. Whereas such determination of a valuable right in any legal proceedings would not necessarily result in an immediate actionable right. Therefore, in order to ascertain whether an order is an Interim Award or partial award, the two most important factors that would weigh upon the Court are the concept of "finality" and "issue". If the nature of the order is "final" in the sense that it conclusively decides an "issue" in the arbitration proceedings, the order would qualify to be an Interim Award, open to be challenged under Section 34 of the Act.

Similarly, in the case of Vil Rohtak Jind Highway Pvt. Ltd. v. National Highways Authority of India⁵, the Court held that an order can be considered an "Interim Award", if it completely decides an issue. Section 31(6) of the Act provides that the Tribunal may, at any time during the arbitral proceedings, make an Interim Award on any matter wherein it may make a final award. Thus, 'finality' is the key to identifying whether an 'interim order' qualifies as an "Interim Award".

Now it may be said that the Courts have through multiple judgments restricted the definition of Interim Awards and distinguished them from Procedural and Interlocutory Orders. A few such judgments have been discussed below which analyse how the Courts have interpreted the definition and scope of Interim Award.

IV. INSTANCES WHERE THE CHALLENGE OF INTERIM AWARD IS ACCEPTED

The Supreme Court in Indian Farmers Fertilizer Co-operative Limited v. Bhadra Products⁶ dealt with an issue that arose for consideration, that's whether an award on the issue of limitation may be said to be an "Interim Award" and whether a decision on point of limitation would then go to jurisdiction, and therefore, be covered by Section 16 of the Act. The Supreme Court held that any point of dispute between the parties which has to be answered by the Arbitral Tribunal, can be the subject matter of an 'interim arbitral award'. In that light, it was observed that since the Arbitrator had disposed of one of the issues between the parties in finality i.e., the issue of limitation, the award made therein was an "Interim Award" within the expression "Arbitral Award" and the scope of Section 2(1)(c) of the Act; and would therefore, be amenable to challenge under Section 34 of the Act.

In the case of Cinevistaas Ltd. (supra), where the Arbitral Tribunal rejected the additional claims sought, the High Court held that such rejection of the amendment of claims resulted in greater delay rather than expeditious disposal. The Court concluded that such rejection of the amendments was in the nature of the final adjudication of the claims and is therefore, in the nature of an Interim Award, hence the Section 34 petition is clearly maintainable.

V. INSTANCES WHERE THE CHALLENGE OF INTERIM AWARD IS REJECTED:

In Punj Lloyd Ltd. v. Oil and Natural Gas Corporation Ltd.,⁷ the Bombay High Court held that an order of the tribunal refusing to allow amendment to the claim did not constitute an Interim Award or a final award and such order was not amenable to appeal under section 34 of the Act. The Court also stated that merely because there is no other remedy available under the provisions of the Act to challenge such a decision at this stage in view of the limited judicial intervention permitted under Section 5 of the Act, such decision cannot be construed as an award within the meaning of Section 2(1)(c) of the Act. Although the Court granted liberty to the Petitioner therein to take all the grounds of challenge as available in law including the decision rendered by the arbitral tribunal rejecting the application for amendment of claim at that stage.

The Delhi High Court in the case of Punit A. Bhardwaj v. Rashmi Juneja.,⁸ upheld the order of Arbitral Tribunals, rejecting the application filed by the petitioner for amendment of the statement of claim under Section 23(3) of the Act due to claims being barred by limitation. The High Court upheld the order of the Arbitral Tribunal and stated that the Claimant wants to deliberately delay the disposal of the arbitration orders by way of adjudication on merits and the statute clearly vests discretion in the arbitral tribunal to disallow a party to amend or supplement its pleadings on the ground that the application is belated. A similar view has been taken by the Delhi High Court in its recent judgment in NTPC v. L&T Limited.⁹

In the case of ONGC Petro Additions (supra), vide the impugned order the Arbitral Tribunal rejected ONGC's application for placing additional documents on record. The High Court rejected the challenge by ONGC and observed that the impugned order does not decide an issue or the subject matter of adjudication between the parties. The Arbitral Tribunal has only decided the question as to whether the Petitioner would be permitted to file additional documents at a later stage. The impugned order though conclusively determines the application; however, it cannot be said that the subject matter of arbitration and the rights of the parties in respect thereof have been finally determined. Therefore, the impugned order was held to be merely procedural and not falling in the ambit of the 'Interim Award' and hence the Court rejected the petition on the ground of maintainability.

VI. CONCLUSION:

In the effort to determine whether the Order constituted an "Interim Award", the parties must focus on the concept of finality and the issue at hand. In case the nature of the order is final, and it conclusively decides an issue in the arbitration proceedings, then the order would qualify to be an Interim Award and such an order was amenable to appeal under section 34 of the Act. It may be stated that there is no straitjacket formula applied by the Courts to determine whether a procedural or interlocutory order is an Interim Award, rather, the courts have often applied the settled principles of law as discussed in landmark judgments such as Shah Babulal Khimji (supra) to define the scope of the interim award and determine if any such procedural order or interlocutory order can be said to be an Interim Award, in the facts and circumstances of those case.

Further, it may be kept in mind by the Parties that the process of arbitration is an alternative dispute resolution process which is preferred by them to resolve their disputes in a time-bound manner. In the event every order of an Arbitral Tribunal is challenged as an Interim Award, every such challenge may result in undue delay in the resolution of disputes. It is also to be noted that Courts often take a stricter approach towards limiting the scope of interference against procedural and interlocutory orders passed by Arbitral Tribunals, and have also observed that any party which may be aggrieved by the final award will be at liberty to file an application to set aside the award and take all the grounds of challenge as available in law, including a challenge to any procedural or interlocutory order.

Footnotes

1. Cinevistaas Ltd. v. Parsar Bharti, 2019 SCC OnLine Del 7071.

2. Shah Babulal Khimji v. Jayaben D. Kania (1981) 4 SCC 8.

3. Order XLIII Rule 1 - Appeals from Order - The Code of Civil Procedure, 1908.

4. ONGC Petro Additions v. Tecnimont S.P.A and Anr., 2019 SCC OnLine Del 8976.

5. Vil Rohtak Jind Highway Pvt. Ltd. v. National Highways Authority of India, 2022 SCC OnLine Del 4670.

6. Indian Farmers Fertilizer Co-operative Limited v. Bhadra Products, (2018) 2 SCC 534.

7. Punj Lloyd Ltd. v. Oil and Natural Gas Corporation Ltd., 2016 SCC OnLine Bom 3749.

8. Punit A. Bhardwaj v. Rashmi Juneja, 2022 SCC OnLine Del 2691.

9. NTPC v. L&T Limited.,2023 SCC OnLine Del 1812.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.