"Interim Award Is A Stopover En-Route To The Destination To Final Adjudication Of The Dispute": Calcutta High Court Explains

Single judge bench of Justice Moushumi Bhattacharya held that the impugned decision dated 24th August 2019 does not qualify to be nor does it have the trappings of an interim award under section 2(1)(c) or section 31(6) of the 1996 Act. Hence, the impugned order cannot be challenged under section 34 14 of the Act.

In doing so, the court discussed the 'definition' of interim and partial award under the Arbitration Act.

"An interim award, by definition, is a stopover en-route to the destination to final adjudication of the dispute. An interim award is a part-pronouncement on the merits of the dispute as urged by and considered by the arbitral tribunal. The parties are hence already on the road to the final award and well past the rough (and tumble of the) terrain of the jurisdictional toll-gates. Being firmly ensconced within the outer periphery of the final award (as 2(1)(c) suggests), an interim award is a decision on the merits of the dispute and not a decision on the jurisdiction of the tribunal. The interim award must take within its fold the claim and the counter-claim or set-off of the claimant and the respondent respectively and contain a decision on the same." the court observed

The court while dismantling petitioner's claim that the legislative intent of fortifying the jurisdiction merits division between a section 16 and a section 31/31(6), the avenues of challenges provided under the Act are also distinct. While a refusal to "exercise jurisdiction is an appealable order under section 37, an award/interim award has to climb two levels through the section 34 step before it can be challenged under section 37." the court added

The court also referred to Harinarayan G. Bajaj vs. Sharedeal Financial Consultants Pvt. Ltd, where a Single Bench of the Bombay High Court held that issues pertaining to jurisdiction will be the subject matter of an order under section 16 of the Act. Further, it relied on a Single Bench of the Delhi High Court that also came to the same conclusion in Union of India vs. East Coast Boat Builders & Engineers Ltd, namely, that order on the point of the jurisdiction of the arbitral tribunal would not be an interim award.

No expressed definition of the partial award

The court emphasised on the expression "Partial Award" and said that it does not find place in the 1996 Act. Section 2(1)(c) defines "arbitral award" to include an interim award.

"Section 31(6) empowers the arbitral tribunal to make an interim arbitral award at any time during the arbitral proceedings on any matter with respect to which a final arbitral award may be made. Read together, an interim award is a sub-set of the super-set arbitral award and one which is given in aid of the final arbitral award. In other words, the interim award must snugly fit into and within the contours of the final award and form a part thereof."

Hence, it meant that an interim award must be an adjudication in respect of the dispute which the parties to the arbitration have brought before the tribunal in the form of a statement of claim and defence/counterclaim (refer section 23).

Petitioner's claim

In this case, the petitioner (Lindsay) contends that the Arbitrator could not have decided on the novation/supersession issue since this amounted to a decision on the merits of the case. In referring to merits, Lindsay urged that in rejecting the argument of the arbitration agreement being superseded by the MOU, the Arbitrator has given a finding on one of the primary disputes between the parties.

To put it simply, Lindsay's case is that the arbitration agreement was novated while IFGL contends that the arbitration agreement remained intact; IFGL referred the dispute to 4 arbitration on the strength of the arbitration agreement. The other

Petitioner's submission

The counsel for petitioner, Sakya Sen, submitted that iit is the pith and substance of the award rather than the nomenclature which determines the nature and character of the award. The counsel also relied on several decisions to submit that any order passed by an arbitral tribunal in an application under section 16 would qualify as an award if it decides on the merits of the dispute. Counsel submits that the learned Arbitrator while considering the scope of the existence of the arbitration agreement between the parties made a categorical finding that there has been no novation of the earlier contract between the parties by virtue of the subsequent Memorandum of Understanding (MOU).

Respondent's submission

While, on the other hand, the counsel for the respondent, Senior Advocate Anindya Mitra, appearing for IFGL, opposed the relief prayed for by Lindsay and submitted that to be categorized as an award, the decision has to determine a claim which has been referred to in the arbitration on merits.

According to counsel, the impugned order was "passed by the Arbitrator under section 16 of the Act and only decides the jurisdictional issue of whether the Arbitrator can entertain any claim referred for adjudication on the merits of the claim. Counsel submits that IFGL did not make any claim on the alleged novation/supersession of the agreement by the subsequent MOU."

Accordingly, the issue of maintainability of the application was decided against the petitioner, and the question of the said decision being set aside under section 34 of the Act did not arise.

Case Title: Lindsay International Private Limited v. IFGL Refractories Limited

Case No: A.P. 625 of 2019 and A.P. 627 of 2019

Citation: 2022 LiveLaw (Cal) 266 

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