Arbitration and Conciliation Act, 1996 – ss. 2(c), 31(6), 32 and 34 – Interim Arbitral Award – Whether an award delivered by an Arbitrator, which decides the issue of limitation, can be said to be an interim award and whether such interim award can then be set aside u/s.34 of the Act – Held: Insofar as first question is concerned, yes, the language of s.31(6) is advisedly wide in nature – A reading of the said sub-section makes it clear that the jurisdiction to make an interim arbitral award is left to the good sense of the arbitral tribunal and that it extends to “any matter” with respect to which it may make a final arbitral award – The expression “matter” is wide in nature and subsumes issues at which the parties are in dispute – It is clear, therefore, that any point of dispute between the parties which has to be answered by the arbitral tribunal can be the subject matter of interim arbitral award – Insofar as second question is concerned, yes, such an “interim award” is within the meaning of s.2(1)(c) of the Act and being subsumed within the expression “arbitral award”, therefore, can be challenged u/s.34 of the Act – English Arbitration Act, 1996 – s. 47. Arbitration and Conciliation Act, 1996 – s.16 – Appellant issued a tender enquiry for supply of Defoamers – Respondent successfully submitted its bid, pursuant to which respondent supplied the Defoamers – Respondent demanded payment – However, appellant took the stand that nothing was due and payable to respondent – Since, dispute arose between the parties, respondent invoked arbitration – Issue of limitation was taken first by the Arbitrator and vide an award the said issue was decided in favour of respondent-claimant stating that their claim had not become time barred – Whether a decision on a point of limitation would go to jurisdiction and, therefore, be covered by s.16 of the Act, in which case all other issues have to be decided first, and it is only after such issues are decided that such an award can be challenged u/s.
34 of the Act – Held: In the instant case, the award passed by the Arbitrator is an interim award, which being an arbitral award, can be challenged separately and independently u/s.34 of the Act – Such an award, which does not relate to the arbitral tribunal’s own jurisdiction u/s.16, does not have to follow the drill of s.16(5) and
(6) of the Act – In the light of this, Parliament may consider amending s.34 of the Act so as to consolidate all interim awards together with the final arbitral award, so that one challenge u/s. 34 can be made after delivery of the final arbitral award – Piecemeal challenges like piecemeal awards lead to unnecessary delay and additional expense.
Words and Phrases – “Jurisdiction” – The sense of term “jurisdiction” used in s.16 of the Arbitration and Conciliation Act, 1996 – Discussed.
Doctrines/Principles – Kompetenz - kompetenz principle – Discussed – English Arbitration Act, 1996 – ss. 30, 31 – UNCITRAL Model Law – Art. 16.
Allowing the appeal, the Court
HELD: Whether an award on the issue of limitation can first be said to be an interim award?
1.1 As can be seen from Section 2(c) and Section 31(6) of Arbitration and Conciliation Act, 1996, except for stating that an arbitral award includes an interim award, the Act is silent and does not define what an interim award is. Section 31(6) which delineates the scope of interim arbitral awards and states that the arbitral tribunal may make an interim arbitral award on any matter with respect to which it may make a final arbitral award. [Para 8] [856-F-G]
1.2 The language of Section 31(6) is advisedly wide in nature. A reading of the said sub-section makes it clear that the jurisdiction to make an interim arbitral award is left to the good sense of the arbitral tribunal, and that it extends to “any matter” with respect to which it may make a final arbitral award. The expression “matter” is wide in nature, and subsumes issues at which the parties are in dispute. It is clear, therefore, that any point of dispute between the parties which has to be answered by the arbitral tribunal can be the subject matter of an interim arbitral award. However, in an appropriate case, the issue of more than one award may be necessitated on the facts of that case. However, by dealing with the matter in a piecemeal fashion, what must be borne in mind is that the resolution of the dispute as a whole will be delayed and parties will be put to additional expense. The arbitral tribunal should, therefore, consider whether there is any real advantage in delivering interim awards or in proceeding with the matter as a whole and delivering one final award, bearing in mind the avoidance of delay and additional expense. Ultimately, a fair means for resolution of all disputes should be uppermost in the mind of the arbitral tribunal. [Para 9] [856-G-H; 857-A-C]
1.3 To complete the scheme of the Act, Section 32(1) is also material. This section goes on to state that the arbitral proceedings would be terminated only by the final arbitral award, as opposed to an interim award, thus making it clear that there can be one or more interim awards, prior to a final award, which conclusively determine some of the issues between the parties, culminating in a final arbitral award which ultimately decides all remaining issues between the parties. [Para 10] [857-D]
1.4 Tested in the light of the statutory provisions and the case laws cited, it is clear that as the Arbitrator has disposed of one matter between the parties i.e. the issue of limitation finally, the award in the instant case is an “interim award” within the meaning of Section 2(1)(c) of the Act and being subsumed within the expression “arbitral award” could, therefore, have been challenged under Section 34 of the Act. [Para 16] [860-G-H; 861A] Satwant Singh Sodhi v. State of Punjab (1999) 3 SCC
487 : [1999] 2 SCR 230; McDermott International Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC 181: [2006]
2 Suppl. SCR 409 – relied on.
Exmar BV v. National Iranian Tanker Co. [1992] 1 Lloyd’s Rep. 169 – referred to.
Whether a decision on a point of limitation would go to jurisdiction and, therefore, be covered by Section 16 of the Act?
2.1 Section 16 of the Arbitration and Conciliation Act, 1996 lays down what, in arbitration law, is stated to be the Kompetenzkompetenz principle, viz. that an arbitral tribunal may rule on its own jurisdiction. At one time, the law was that the arbitrator, being a creature of the contract, could not rule on the existence or validity of the arbitration clause contained in the contract. This, however, gave way to the Kompetenz principle which was adopted by the UNCITRAL Model Law. [Para 17] [861-C]
2.2 It may be noticed that Section 16(1) to (4) of the Act are based on Article 16 of the UNCITRAL Model Law. The Kompetenz principle deals with the arbitral tribunal’s jurisdiction in the narrow sense of ruling on objections with respect to the existence or validity of the arbitration agreement. What is important to notice in the language of Section 16(1) is the fact that the arbitral tribunal may rule on its own jurisdiction, which makes it clear that it refers to whether the arbitral tribunal may embark upon an inquiry into the issues raised by parties to the dispute. [Para 19] [862-E]
2.3 The “jurisdiction” mentioned in Section 16 of the Act has reference to three things: (1) as to whether there is the existence of a valid arbitration agreement; (2) whether the arbitral tribunal is properly constituted; and (3) matters submitted to arbitration should be in accordance with the arbitration agreement. [Para 20] [863-G-H]
2.4 It is clear that the award passed in the instant case is an interim award, which being an arbitral award, can be challenged separately and independently under Section 34 of the Act. Such an award, which does not relate to the arbitral tribunal’s own jurisdiction under Section 16, does not have to follow the drill of Section 16(5) and (6) of the Act. The Parliament may consider amending Section 34 of the Act so as to consolidate all interim awards together with the final arbitral award, so that one challenge under Section 34 can be made after delivery of the final arbitral award. Piecemeal challenges like piecemeal awards lead to unnecessary delay and additional expense. [Para 29] [871-F-H]
National Thermal Power Corpn. Ltd. v. Siemens
Atkeingesellschaft (2007) 4 SCC 451; Ittavira Mathai v. Varkey Varkey [1964] 1 SCR 495 – relied on. Official Trustee v. Sachindra Nath Chatterjee (1969) 3 SCR 92; Pandurang Dhoni Chougule v. Maruti Hari Jadhav [1966] 1 SCR 102; Anisminic v. Foreign
Compensation Commission (1969) 2 AC 147; M.L. Sethi v. R.P. Kapur (1972) 2 SCC 427: [1973] 1 SCR 697; Hari Prasad Mulshanker Trivedi v. V.B. Raju (1974) 3 SCC 415 : [1974] 1 SCR 548; ITW Signode India Ltd. v. CCE (2004) 3 SCC 48 : [2003] 5 Suppl. SCR 751; Foreshore Coop. Housing Society Ltd. v. Praveen D. Desai (2015) 6 SCC 412 : [2015] 5 SCR 1075 –
referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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