1999 (3) TMI 487 - SC - Companies Law

Arbitration: Final Award Trumps Interim Award, Emphasizing Legal Effect and Finality

The High Court overturned the Trial Court's decision regarding the finality of an interim award under the Arbitration Act, 1940. It held that a final ... Whether interim award final to the extent it goes or has effect till the final award is delivered will depend upon the form of the award? Held that:- Appeal allowed. The view taken by the Trial Court that the earlier award made and written though signed was not pronounced but nevertheless had become complete and final, therefore, should be made the rule of the Court appears to us to be correct with regard to item No. 1 inasmuch as the claim in relation to item No. 1 could not have been adjudicated by the arbitrator again and it has been rightly excluded from the second award made by the arbitrator on 28-1-1994. Thus, the view taken by the Trial Court on this aspect also appear to us to be correct. Therefore, the Trial Court has rightly ordered the award dated 28-1-1994 to be the rule of the Court except for item No. 1 and in respect of which the award dated 26-11-1992 was ordered to be the rule of the Court. Issues involved:1. Interpretation of the Arbitration Act, 1940 regarding the finality of an interim award.2. Determining the validity and finality of an award made by an arbitrator.3. Revisiting the judgment of the Trial Court in light of the High Court's decision.Detailed analysis:1. The judgment revolves around the interpretation of the Arbitration Act, 1940, specifically focusing on the finality of an interim award. The appellant sought an interim award for item No. 1 with compound interest, which was granted by the arbitrator. The Trial Court upheld the interim award as the rule of the Court, considering it final. However, the High Court overturned this decision, stating that the final award made later superseded the interim award. The appellant contended that the arbitrator, once making an award, becomes functus officio and cannot revise it. The High Court's view was challenged, emphasizing that the interim award should be binding unless altered as per the Act.2. The validity and finality of an award made by an arbitrator were extensively discussed in the judgment. The Court analyzed the requirements under Section 14 of the Act, emphasizing that an award is complete only when signed by the arbitrator. The judgment cited precedents to support the notion that signing the award is crucial for its legal effect and finality. The Court highlighted that the arbitrator becomes functus officio upon signing the award, barring any further modifications. The importance of notice to parties regarding the award-making process was also underscored, with the Court emphasizing that signing the award is pivotal for its validity.3. The judgment delves into the comparison between the Trial Court and High Court decisions, ultimately favoring the Trial Court's ruling. The Court reiterated that once an award is signed by the arbitrator, it attains finality, and the arbitrator cannot revisit the same claim. Therefore, the Trial Court's decision to uphold the interim award as final for item No. 1 was deemed appropriate. Consequently, the High Court's decision was overturned, and the Trial Court's judgment was reinstated. The appeals were allowed, emphasizing the significance of the finality of awards in arbitration proceedings.