2022 (11) TMI 1539 - HC - Indian Laws

Arbitral tribunal interlocutory orders immune from challenge except under Section 37(2) specific circumstances

Future Coupons Private Limited & Ors. Versus Amazon. Com NV Investment Holdings LLC & Anr.

The Delhi HC held that interlocutory orders passed by arbitral tribunals are generally immune from challenge under the Arbitration and Conciliation Act, ... Maintainability of interlocutory orders passed by the Arbitral Tribunal under Article 227 of the Constitution of India - Rejection of application seeking termination of the arbitral proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996 - HELD THAT:- Section 37(2) permits challenges against orders passed at the interlocutory stage in the arbitral proceedings either where a plea under Section 16(2) or (3)25 of the 1996 Act is allowed or where a prayer for grant of interim measure under Section 17(1) is allowed or refused. In the first case, the appeal would lie under Section 37(2)(a), whereas in the second, the appeal would lie under Section 37(2)(b). An interlocutory order of an Arbitral Tribunal would also be susceptible to challenge, under the 1996 Act, where it is an “interim award”, as the definition of “arbitral award”, in Section 2(c) of the 1996 Act, includes an “interim award”. Interim awards of Arbitral Tribunals are, therefore, amenable to challenge under Section 34 of the 1996 Act, without waiting for the final award to be passed. Else, challenges to interlocutory orders have to be restricted to clauses (a) and (b) of Section 37(2); the former applying where the learned Arbitral Tribunal has allowed an application under Section 16(2) or (3) and the latter where it has refused to grant an interim measure of protection under Section 17. Interlocutory orders passed in arbitral proceedings are otherwise immune from challenge under the 1996 Act. Any reference to the merits of the impugned orders, would be both inapposite and inappropriate. 1. ISSUES PRESENTED and CONSIDEREDThe legal judgment revolves around two primary issues:Whether the petitions challenging the interlocutory orders passed by the Arbitral Tribunal under Article 227 of the Constitution of India are maintainable.Whether the Arbitral Tribunal exceeded its jurisdiction by allowing Amazon to amend its Statement of Claim (SOC) to include claims for repudiatory damages due to alleged breaches by the respondents.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Maintainability of Petitions under Article 227Relevant Legal Framework and Precedents: The court referred to the Arbitration and Conciliation Act, 1996 (the 1996 Act), specifically Sections 34 and 37, which outline the grounds and circumstances under which arbitral awards and orders can be challenged. The Supreme Court's judgments in SBP & Co. v. Patel Engineering Ltd. and Bhaven Constructions v. Executive Engineer, Sardar Sarovar Narmada Nigam Ltd. were pivotal in determining the limited scope of judicial intervention in arbitral proceedings.Court's Interpretation and Reasoning: The court emphasized that the 1996 Act aims to minimize judicial intervention in arbitral proceedings. Interlocutory orders by arbitral tribunals are generally not subject to challenge under Article 227 unless there is a lack of good faith or the party is otherwise remediless.Key Evidence and Findings: The court found that the petitions were not maintainable as the petitioners were not remediless; they could challenge the final award under Section 34 of the 1996 Act.Application of Law to Facts: The court applied the principles from SBP and Bhaven Constructions, concluding that the interlocutory orders did not terminate the arbitral proceedings and hence were not open to challenge under Article 227.Treatment of Competing Arguments: The court dismissed the petitioners' argument that they were remediless, stating that they could challenge the final award if it was adverse to them.Conclusions: The petitions under Article 227 were dismissed as not maintainable.Issue 2: Jurisdiction of the Arbitral Tribunal to Allow Amendment of SOCRelevant Legal Framework and Precedents: Section 23(3) of the 1996 Act allows parties to amend their claims unless the tribunal finds it inappropriate due to delay or prejudice. The court also referenced the SIAC Rules, which govern the arbitration proceedings.Court's Interpretation and Reasoning: The court found that the Arbitral Tribunal had the jurisdiction to allow amendments to the SOC, as the claims for damages were already included as an alternative in the original SOC.Key Evidence and Findings: The court noted that the tribunal had not made a final decision on the merits of the new claims but had merely allowed the amendment to be considered.Application of Law to Facts: The court held that the tribunal's decision to allow the amendment did not exceed its jurisdiction and was within the scope of the arbitration agreement.Treatment of Competing Arguments: The court addressed the petitioners' concerns about the tribunal's jurisdiction, stating that these could be raised in a challenge to the final award.Conclusions: The tribunal's decision to allow the amendment was upheld, and the petitions challenging this decision were dismissed.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: 'The object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227... against every order made by the arbitral tribunal.'Core Principles Established: The court reaffirmed the principle that interlocutory orders in arbitration are not generally subject to judicial review under Article 227, except in cases of bad faith or where the party is left without any remedy.Final Determinations on Each Issue: The petitions were dismissed as not maintainable, with the court emphasizing that the petitioners have a remedy under Section 34 of the 1996 Act to challenge the final award.The judgment underscores the limited scope of judicial intervention in arbitral proceedings, reinforcing the autonomy and efficiency of arbitration as a dispute resolution mechanism.