Order terminating arbitration proceedings under Section 32(2)(c) Arbitration Act not an award: Delhi High Court

The Delhi High Court has ruled that an order terminating arbitration proceedings under Section 32(2)(c) of the Arbitration & Conciliation Act, 1996 is not an award, and can be challenged under Section 14(2) of the Act (PCL Suncon v. NHAI)..The judgment was passed by a single-judge Bench of Justice Vibhu Bakhru in a plea filed by PCL Suncon (petitioner) under Section 14(1)(a) read with Section 15 of the Arbitration Act for substitution of the arbitrator with an independent arbitrator. .The plea stemmed from an order passed by two arbitrators terminating the arbitral proceedings between the two parties, under Section 32(2)(c) of the Act. .The arbitral proceedings were terminated because the arbitrator nominated by the petitioner had resigned and the petitioner had not taken steps to nominate another arbitrator in his place. .National Highways Authority of India (NHAI/ respondent) argued that the present plea under Sections 14 and 15 was not maintainable as the entire arbitral proceedings had been terminated in terms of Section 32(2)(c). .Relying on decision by a Division Bench of the Calcutta High Court in The India Trading Company v. Hindustan Petroleum Corporation Limited, the respondent argued that the decision of the arbitral tribunal to put an end to the proceedings was a final award which could only be challenged under Section 34(2) of the Arbitration Act..Reliance was also placed on the decision of the Delhi High Court in Angelique International Limited v. SSJV Projects Private Limited, wherein it was held that the termination of proceedings could be challenged only by a petition under Section 34. .The petitioner, on the other hand, defended the maintainability of the plea on the ground that the Supreme Court in Lalitkumar V Sanghavi (Dead) through LRs and Anr. v. Dharamdas V Sanghavi had settled that an order terminating the proceedings under Section 32(2) could not be considered an award..It was contended that the decision in Angelique International Limited was per incuriam as it ignored the binding decisions of the Supreme Court as well as the High Court itself. .It was further argued by the petitioners that the impugned order was liable to be set aside as no pre-emptory notice was issued by the arbitrators before proceeding to terminate the arbitral proceedings. .After hearing the parties, the Court held that termination of arbitral proceedings under Section 32(2)(c) in the present case was not an award under the Act..In view of the Supreme Court's decision in Lalitkumar V Sanghavi and other case laws, the Court held that it was settled that an award constituted a final determination of a particular issue or a claim in arbitration.."In order for a decision of the Arbitral Tribunal to qualify as an award, the same must finally decide a point at which the parties are at issue...an order which terminates the arbitral proceedings as the Arbitral Tribunal finds it impossible or unnecessary to continue the arbitral proceedings, would not be an award. This is so because it does not answer any issue in dispute in arbitration between the parties; but is an expression of the decision of the Arbitral Tribunal not to proceed with the proceedings," the Court said. .The Court observed that a finding to the contrary would be difficult to reconcile with the decisions of the Supreme Court. "The decision in case of Joginder Singh Dhaiya (supra) is contrary to the decision of the Supreme Court in Lalitkumar V. Sanghavi...in Angelique International Limited (supra), the court referred to the decision in The India Trading (supra)...The said decision holding that an order terminating the arbitral proceedings under Section 25(a) of the A&C Act is an award, is also contrary to several decisions of this Court as noted hereinafter," the judgment stated. .The Court also noted that Section 32 itself drew a clear distinction between a final arbitral award under Sub-section (1) of Section 32 and orders under sub-section (2) of the Act..Ultimately, the Court concluded that an order terminating the proceedings under Section 32(2)(c) could be impugned under Section 14(2) of Arbitration Act. ."A plain reading of Sub-section (2) of Section 14 of the A&C Act indicates that unless otherwise agreed by parties, a party could apply to a court to decide on the question of termination of the mandate, if a controversy remains concerning any of the grounds referred to in Sub-section 14(1)(a) of the A&C Act," it added. .As far as the merits of the case were concerned, the Court noted that no notice was given to the petitioner as regards the termination of the proceedings, prior to passing of the impugned order..At the same time, it could not be denied that the petitioner was responsible for the delay in the proceedings as it had inordinately delayed the appointment of an arbitrator, the Court added. .It thus set aside the impugned order subject to payment of costs of ₹25,000. .Advocates Dr. Amit George, Swaroop George, Amol Acharya, and Rayadurgam Bharat appeared for the petitioner. Advocate Madhu Sweta appeared for the respondent. .[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.