Termination of arbitration for default not an 'award': Delhi HC

New Delhi, Oct 24 (IANS) The Delhi High Court has ruled that an order closing arbitral proceedings due to a claimant’s default “does not and cannot amount to an award,” since it does not determine the rights or obligations of the parties.

A single-judge Bench of Justice Jasmeet Singh observed while allowing petitions filed by Mecwel Constructions Pvt. Ltd. against GE Power Systems India Pvt. Ltd., seeking continuation of arbitration proceedings that had been terminated for non-filing of claims and non-payment of arbitral fees.

The dispute arose from subcontracting agreements for the erection, testing, and commissioning of turbine and generator auxiliaries at multiple thermal power projects.

GE Power had terminated Mecwel’s contracts in 2022 and 2023, following which the matter was referred to arbitration pursuant to a prior Delhi High Court order. However, the arbitrator had closed the proceedings under Section 25(a) of the Arbitration and Conciliation Act after Mecwel failed to submit its statement of claims and pay its share of fees.

Although the arbitrator left a “window of opportunity” for compliance, the proceedings were later deemed terminated. GE Power argued that the termination order amounted to an arbitral award, which could be challenged only under Section 34 of the Act.

Rejecting that contention, Justice Singh observed: “An order closing the proceedings for default does not and cannot amount to an award as 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 Delhi High Court added that for an order to qualify as an award, it must adjudicate an issue forming part of the substantive dispute between the parties — either finally or on an interim basis.

It said, “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.” While allowing the petitions, the Justice directed that arbitration proceedings between Mecwel and GE Power “shall continue before the Arbitrator appointed by this Court vide order dated 08.01.2024.”

--IANS

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