Delhi High Court: In petitions filed under Section 14 and 15 of the Arbitration and Conciliation Act, 1996 (‘the Act’), seeking substitution or appointment of an arbitrator and/ or to pass an order enabling the arbitrator to continue proceedings, the Single Judge Bench of Jasmeet Arora, J, allowed the petitions.
The Court further held that an order passed under Section 25(a) of the Act would not qualify as an ‘arbitral award’ and therefore the parties would not be required to challenge the same under Section 34 of the Act.
Background
The respondent company had been awarded the tender for projects relating to erection, testing, commissioning and handover of steam turbine and generator auxiliaries for various thermal power projects. Subsequently, the respondent subcontracted the work of erection and commissioning of mechanical and erection packages of the projects to the petitioner.
Due to delays in completion of the work, the respondent had issued a notice of termination. The petitioner had filed petitions under Section 9 of the Act and the Court, vide order dated 8-1-2024, had appointed an arbitrator to adjudicate the dispute between the parties.
Vide order dated 18-11-2024 (‘impugned order’), the arbitrator closed the arbitration proceedings since the petitioner had not filed his statement of claims and not paid a portion of the arbitral fee under Section 25(a) of the Act.
The respondent had contended that the impugned order was an arbitral award and therefore the only remedy available to the petitioner would be to challenge the same under Section 34 of the Act.
Analysis, Law and Decision
The Court observed that in the case of PCL Suncon v. National Highway Authority of India, (2021) SCC OnLine Del 313, the Court had referred to the case of Indian Farmers Fertilizer Cooperative Ltd. v. Bhadra Products, (2018) 2 SCC 534 wherein the Supreme Court had held that an arbitral award must finally decide an issue or a point at which the parties are in issue in the arbitration. Relying on this, the Court in PCL Suncon (supra) had held that holding that an order terminating the arbitral proceedings under Section 25(a) of the Act was an award was contrary to several decisions of the Court.
Thus, the court opined that an order of the arbitrator could be considered an award only when it adjudicates upon the rights of the parties. An order terminating the proceedings for non-filing of a statement of claim could not be considered an arbitral award.
The Court also referred to the case of Gangotri Enterprises Ltd. v. NTPC Tamil Nadu Energy Company Ltd., (2017) SCC OnLine Del 6560, wherein the Court had examined the scope of Section 25(a) of the Act and stated that once the arbitral proceedings were terminated and the arbitrator’s mandate was terminated, it could be challenged under Section 14 of the Act but not Section 34 of the Act.
The Court, therefore, held that an order under Section 25(a) could not amount to an arbitral award since it did not deal with the rights of parties before the arbitrator. For an order to qualify as an award, it must decide, either finally or on an interim, an issue forming part of the dispute referred to arbitration. An order under Section 25(a) of the Act, being procedural in nature and not addressing the substantive lis between the parties, lacks the essential attributes of an arbitral award.
Hence, the Court allowed the instant petitions and directed that the arbitration shall continue before the arbitrator appointed by the Court vide order dated 8-1-2024.
[Mecwel Construction Pvt. Ltd. v. G.E. Power Systems India Pvt. Ltd., O.M.P. (T) (COMM.) No. 38 of 2025, decided on 14-10-2025]
Advocates who appeared in this case:
For the Petitioner: Dr. Amit George, Shashwat Kabi, Ibansara Syiemlieh, Adhishwar Suri, Vaibhav Gandhi, Kartikay Puneesh, Advocates
For the Respondent: Akshay Sapre, Abhijeet Swaroop, Vinam Gupta, Shivani Karmakar, Advocates
Buy Arbitration and Conciliation Act, 1996 HERE
