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Order of termination of arbitration under S. 32 (2) (c), A&C Act is not an award.
The Delhi High Court, in the case of PCL Suncom v. NHAI[1], held that an order of the arbitrators terminating the arbitral proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996 (“A&C Act”) is NOT an “award.” Therefore a challenge to such order under Section 14(1)(a) is maintainable.
The petitioner, a Joint Venture constituted by Progressive Construction Ltd. and SUNCOM Construction Berhard, Malaysia, filed the present petition, among other things, impugning an order passed by the two arbitrators terminating the arbitral proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996. The present application was filed under Section 14(1)(a) read with Section 15 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 appoint another arbitrator in his place. Consequently, the arbitral proceedings could not proceed, and the remaining two arbitrators constituting the Arbitral Tribunal concluded that it was impossible to continue the proceedings and, accordingly, terminated the same. The petitioner claimed a communication gap, and the petitioner was not aware that the arbitrator appointed by it had resigned. The Arbitral Tribunal had not issued any notice to the petitioner in this regard before terminating the arbitral proceedings.
The respondent, the National Highways Authority of India (“NHAI”), contests the present petition's maintainability and contends that the impugned order cannot be faulted.
In the present case, the impugned order passed by the arbitrators expressly stated that the arbitral proceedings were terminated under Section 32(2)(c) as, in their view, it had become impossible to continue the said proceedings. Indisputably, an order terminating the proceedings under Section 32(2)(c) can be impugned under Section 14(2) of the A&C Act.
It was contended on behalf of NHAI that even though an application under Section 14(2) may be filed, the present application, which was under Section 14(1) (a) and Section 15, was not maintainable. This contention, according to the High Court, was unpersuasive:
“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 was also noted that the impugned order was an expression of the view of the arbitrators that they were unable to continue with the proceedings on account of the default on the part of the petitioner to fill the vacancy caused by the resignation of their arbitrator. Even though NHAI had preferred certain counterclaims, it did not take steps to ensure that the said vacancy was filled. It was also open for NHAI to apply to the Court for the appointment of an arbitrator. However, NHAI also chose not to do so.
Further, although the arbitrators had passed the impugned order, it was not disputed that a notice that they were contemplating the termination of the proceedings was not issued to the petitioner before the passing of the impugned order.
However, the Court said that 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. While the Court believed that the petitioner ought not to be rendered remedied to urge its claims, NHAI‘s contention that the petitioner must be visited with costs was merited.
Accordingly, the High Court set aside the impugned order, albeit subject to payment of costs of Rs 25000 by the petitioner.
Further, now the petitioner had already nominated an arbitrator. It was directed that the Arbitral Tribunal will resume the arbitration proceedings at the stage obtaining on the date on which the arbitral proceedings were terminated.
[1] 2021 SCC OnLine Del 313.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre shall not be responsible for any errors caused due to human error or otherwise.
- Validity of an arbitral award
- appointment of an arbitrator
- section 32 of the A & C Act
