[Arbitration] Rejection of application for amendment of counter statement not "Interim Award": Calcutta High Court

While hearing an appeal against an impugned order, the Calcutta High Court expounded in detail on whether an interim relief granted by an Arbitrator constitutes an ‘interim award’, thereby allowing it to be set aside under Article 34 of the Arbitration and Conciliation Act, 1996.

“Under the 1996 Act, the delay is in relation to the making of the application for amendment of pleadings by a party during the course of the arbitral proceedings. The language of 23(3) must however be taken in an expansive context and not in a restrictive and narrow sense. While treating ‘delay’ as a ground for not allowing an application under 23(3), the words therein do not suggest that the tribunal would be precluded from considering the delay in the making of the application under the laws of limitation or confine itself only to the delay envisaged under section 23(4), which provides a time frame within which the pleadings have to be completed, bench of Justice Moushumi Bhattacharya observed.

The observations were made with regards to the plea filed before the Court for setting aside an alleged “interim award” dated 15th October, 2020 passed by a Sole Arbitrator wherein the Arbitrator vide the said award rejected the petitioner’s application to amend the counter-statement seeking introduction of counter-claims/equitable set-off by the petitioner.

Petitioner’s counsel argued that the impugned order of the Arbitrator constituted an ‘interim award’ on the ground that the Arbitrator had finally decided the counterclaim/ set-off and held that the claims made therein were barred by limitation. It was further contended that the Arbitrator in rejecting the aforementioned claims, had put an end to the lis between the parties.

On the other hand, the Respondent’s counsel submitted that the Memorandum of Understanding (MOU) dated 28^th October 2016 under dispute was an independent contract and that the arbitration was only confined to the twelve Purchase Orders (POs). The counsel further contended that the MOU did not have an arbitration clause and thus could not be interpreted to be a part of the original reference to the arbitral tribunal. Thereafter the impugned order does not constitute an ‘interim award’.

The court in this regards to the petition’s maintainability under section 34 of the Arbitration and Conciliation Act, 1996 observed that "Under section 31(6) of the Act, an ‘interim award’ is described as one which an Arbitrator has the option to give at ‘any time’ during the course of the arbitral proceedings before making the final award. Therefore, by definition an ‘interim award’ denotes a pronouncement in the interregnum similar to an interim order which proposes to settle a part of the claim pending final hearing of the action filed in the court."

The Court while observing that the present application was not maintainable under section 34 of the Act said that that “…an interim award cannot go beyond what the tribunal is empowered to grant by way of final relief on a complete consideration of the facts or upon trial. It is hence axiomatic that a decision which is intended as an interim measure, must be within the span and possibilities of the relief which can be granted by the Court/ Tribunal in the action filed.”

On the aspect of the relevance of Section 23 of The Arbitration and Conciliation Act, 1996, the Court while relying on Section 23(2A) of the Act said that such a statutory bar was operative in the present case by ruling,

“By Lindsay’s own showing, the MOU, the alleged breach of which by IFGL results in the claim for damages, does not contain an arbitration clause (at paragraph 29 of Lindsay’s set-off and counterclaim). Hence, the statutory bar under 23(2A) in the matter of adjudication by the arbitral tribunal on the proposed amendments becomes operative.”

The Court also noted that the Court noted that Section 23(3) of the Act while preserving the liberty given to the parties to amend or supplement the pleadings filed under Sections 23(1) and (2A), empowers the arbitral tribunal to curtail such liberty if the tribunal is of the opinion that there has been an inordinate delay in the making of such amended pleading.

Further, the Court further also took into consideration that the bar of limitation on which the petitioner’s application was rejected by the tribunal is different from the delay contemplated under section 23(3) and (4) of the 1996 Act.

The Court thereafter upheld the decision of the Arbitrator by acknowledging that there has indeed been a delay on the petitioner’s part with reference to the time frame provided under Section 23(4) of the Act and said that the impugned order not being an ‘Award’ was not amenable to challenge under Section 34 of the Act and therefore dismissed the petition.

Case Title: Lindsay International Private Limited v. IFGL Refractories Limited| IA No: GA 1 of 2021