Order terminating arbitration due to non-filing of claim is not an 'arbitral award': Delhi High Court

The Delhi High Court recently held that an order under Section 25(a) of the Arbitration and Conciliation Act, 1996, which terminates arbitral proceedings due to non-filing of a statement of claim by a party, does not constitute an arbitral award [Mecwel Constructions Pvt Ltd v GE Power Systems India Pvt Ltd]. .Justice Jasmeet Singh observed that the order cannot be treated as an award because it does not deal with the rights of the parties before the arbitrator. “Such an order merely terminates the arbitral proceedings on account of the claimant’s default in filing the statement of claim and does not involve any adjudication or determination of the rights or obligations of the parties,” the Court said. The judge explained that for an order to qualify as an arbitral award, it must decide, either finally or on an interim basis, an issue forming part of the dispute referred to arbitration. “An order under Section 25(a), being procedural in nature and not addressing the substantive lis between the parties, lacks the essential attributes of an Arbitral Award… The Award can only be considered to be an award once it adjudicates the rights of the parties. The order terminating the proceedings for non-filing of a statement of claim cannot be considered an award under Sub-section 2 of Section 32,” the Bench stressed. .The High Court rendered these findings while rejecting GE Power Systems India’s argument that the arbitral tribunal’s order closing the proceedings should be treated as a final award challengeable only under Section 34 of the Arbitration and Conciliation Act. GE Power and Mecwel Construction had entered into an agreement related to thermal power projects. Soon, disputes arose between the two parties and the case was referred to arbitration. However, the arbitrator appointed by the court terminated proceedings in November 2024, citing Mecwel’s failure to file its statement of claims and to pay its share of the arbitral fees. Mecwel challenged the order before the High Court under Sections 14 and 15 of the Arbitration and Conciliation Act (the provisions related to termination of an arbitrator's mandate and appointment of a substitute arbitrator)..After considering the case, the High Court rejected GE Power’s argument. It allowed Mecwel’s plea and said the arbitration shall continue before the arbitrator. .Advocates Amit George, Shashwat Kabi, Ibansara Syiemlieh, Adhishwar Suri, Vaibhav Gandhi and Kartikay Puneesh appeared for Mecwel Constructions. GE Power was represented by advocates Akshay Sapre, Abhijeet Swaroop, Vinam Gupta and Shivani Karmakar. .[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.