India: Arbitration And Conciliation Act, 1996: Amendment To Statement Of Claim In Arbitration Proceedings – Whether To Be Considered As An Additional Claim And Time Barred Or Not? Whether An Interim Award Can Also Bear The Characteristics Of An Award?

Last Updated: 19 March 2019
Article by AMLEGALS  

IN THE HIGH COURT OF DELHI AT NEW DELHI
M/s Cinevistaas Limited V. M/s Prasar Bharti
[o.m.p. (comm.) 31/2017 & i.a. 13479/2018] dated: 12.02.2019

FACTS

In the present case, M/s Cinevistaas Ltd. (hereinafter referred to as "the Petitioner") undertook the production of a game show named "Knock Out". The same was duly approved by M/s Prasar Bharati (hereinafter referred to as "the Respondent").

Thereafter, the parties exchanged the commercial terms of contract and on 15.11.2000; 26 episodes of the game show were approved by the Respondent.

Later on, the Respondent asked the Petitioner to submit bank guarantees and the Petitioner complied with the same.

In pursuant to this, negotiations were carried out between the parties and the Respondent further approved to telecast 52 episodes of the game show. Also, the advertisements and the television promos were published for the said game show.

Just three weeks before the telecast had to be aired, the Respondent raised some queries and further on 27.12.2000, the Respondent informed the Petitioner that the show would not be aired.

Writ filed - This led to filing of a writ petition by the Petitioner to challenge the decision of the Respondent.

Arbitration invoked & writ withdrawn- However, on 31.10.2003, the Petitioner invoked arbitration and issued a notice of Arbitration to the Respondent. Thereafter, the Petitioner withdrew the writ petition on 24.11.2003.

Application under Section 11- The Petitioner had to file an application under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") for an appointment of a sole Arbitrator. Finally, on 07.05.2004, a sole arbitrator was appointed for the said matter.

Claims filed - The statement of claims were filed by the Petitioner with the Arbitral Tribunal.

Whereas, during the pendency of the proceedings, the Petitioner realized that there were substantial errors in the quantification and details in their two claims i.e. claim nos. V and VI.

Application made for rectification of claims- In order to rectify the same, the Petitioner filed an application before the Arbitral Tribunal seeking permission to correct the said claims.

But, the said application was dismissed on 08.08.2009.

Petition in HC -Thereafter, the Petitioner filed the present petition before the Hon'ble Delhi High Court challenging the order of dismissal of the application to correct the claims.

The changes sought to be made via application were:

  1. Claim No. V – Rs. 8,40,000/- with Rs. 13,56,000/- interest @ 18% p.a. to be changed to Rs. 65, 01, 518/- and interest Rs. 39,98,433/-.
  2. Claim No. VI – Rs. 15,50,000/- with Rs. 9,53,250/- interest @ 18% p.a. to be changed to Rs. 34, 47,000/-  with Rs. 21,19,905/- as interest.

The application of correcting the claims was rejected by the Ld. Sole Arbitrator on the ground that the said claims are time-barred and hence, barred by limitation.

The Ld. Sole Arbitrator held that the claims made under the guise of correction will result into a new additional claim. Further, the same shall be barred by the limitation as the application to introduce such changes was filed on 25.05.2008, which itself is filed long after the expiry of period of limitation of 3 years calculated from the date of invocation of Arbitration.

ISSUES BEFORE THE HC

The issues that came for consideration before the Hon'ble Court were:

  1. Whether the application for the correction of Statement of Claim filed by the Petitioner will be considered as additional claims and time barred or not.
  2. Whether the order given by the Ld. Arbitrator dismissing the application to correct the claim will be considered as an 'award' under Section 34 of the Arbitration and Conciliation Act, 1996 or not.

OBSERVATION

FIRST ISSUE

It was observed by the Court that the letter invoking arbitration and the writ petition filed by the Petitioner included all the claims comprising of the said additional claims in question as well.

Therefore, the application filed by the Petitioner seeking correction of claims shall not be considered as additional claims.

Also, the application seeking amendment of statement of claim for rectifying the claim amount is accepted and hence, stands allowed.

Furthermore, the Court observed that the approach of courts in case of arbitration matters shall not be a narrow approach, therefore, the amendments and rectifications shall be permitted to the parties.

SECOND ISSUE

To determine the second issue in question, the Court resorted to Section 2(1)(c) of the said Act that defines the term "arbitral award" which includes an interim award.

Further, the Court observed that it totally depends on the nature of the order i.e. whether an order is an interim award or not. The title of the application is not taken into consideration while deciding the same.

With regard to the issue of Arbitrator dismissing the application of additional claims, the Court observed that there was finality attached to the order of the Ld. Arbitrator.

Therefore, the Court held that the dismissal of the application was a final rejection of claims and the impugned order being an interim order is to be considered as an award.

CONCLUDING VIEW

In the present case the Court held that the quantification of claims done in the writ petition and notice invoking Arbitration filed by the Petitioner were correct.

Therefore, the Court further held that the order given by the Ld. Arbitrator is an award and the challenge to it is maintainable under Section 34 of the Act.

Relying upon landmark decisions, the Court concluded that "there was no formal adjudication of the claims in fact it was the final rejection of the claims."

"37. It is, accordingly, held that the present petition is maintainable. Additional claims having been raised in the first place in the notice invoking arbitration, the claims are not time barred by limitation as the commencement of arbitral proceedings is governed by Section 21 of the Act which stipulates that the notice invoking arbitration constitutes commencement. Amended claim petition is, therefore, directed to be taken on record. This Court has not gone into the merits of the amendments made or sought. All the claims would have to be adjudicated by the Ld. Arbitrator in accordance with law, after affording adequate opportunity to the Respondent.

REASON OF JURISPRUDENCE

The Court reasoned by reiterating the principle propounded in Shah Babulal Khimji v. Jayaben D. Kania & Anr. [(1981) 4 SCC 8] wherein it was held that that the order of the Ld. Arbitrator is not to be taken into consideration as any procedural order or a type of order which is rejecting an amendment, but it shall be construed as the rejection of the substantive claims.

Further, it was held that as to what needs to be considered while giving a judgment. It shall constitute reasons for the decree and there shall be formal adjudication in order to determine the rights of the parties.

The Court also reasoned by reiterating the principle propounded in Indian Farmers Fertilizers Cooperative Ltd. V. Bhadra Products [2018 (1) ArbLR 271] wherein the issue before the Court was to determine as to what is an Interim award.

The Court reiterated the principle that if there is an issue in a matter and the same is adjudicated by the Court before the final award is passed, the same shall be considered as an 'interim award'.

The Court also reasoned by reiterating the principle propounded in Punj Lloyd Limited V. ONGC [Arb. P. 1737 of 2015]: wherein it was held that there can be amendments which shall be allowed in the Arbitration proceedings and also a narrow approach cannot be adopted for the same.

AMLEGALS REMARKS

In the present case, the Court has emphasized on two aspects for amendments:

One - The Court have to very liberal while considering amendments. This would equally apply to arbitral proceedings, which are not bound by the strict provisions of CPC to lament it time barred.

Second If amendment sought during proceedings was already in notice of invocation of arbitration and in writ for appointment of an arbitrator then it should be allowed at first place.

As regards to differentiating an interlocutory order with a judgment, the Court was concerned with the nature of an order and to see whether it is going to effect the substantive claim in essence or otherwise.

It must be also realized that the demarcation line between the orders is very thing however even though an order seems to be interlocutory in nature but may contain the attributes and characteristics of finality and must be treated as a judgment within the meaning of the letters patent.

The golden rule to differentiate between a final judgment, preliminary judgment and an intermediary or interlocutory judgment can be as below:

  1. Final judgment - A final judgment would either `dismiss or decree in part or in full'. Allowing an amendment which takes away a vested right of any Defendant, would also constitute a judgment.

    Even a judgment which conclusively determines and has characteristics and trapping of finality would be fit to be called as a final judgment.
  2. Preliminary judgments – The judgments which decide finally, preliminary issues such as jurisdiction, res judicata, etc.
  3. Interlocutory judgments- The judgments are enumerated in Order XLIII Rule 1. If a valuable right is lost, it would be an interlocutory judgment.

While parting, it will be equally worth to refer to The principles as laid down by Apex Court in Shah Babulal Khimji (1981)4 SSC 8 to conclude as to what kind of orders are challengeable especially for dismissal of claims under the purview of Section 2(1)(c) of the Act.

This content is purely an academic analysis under "Legal intelligence series".

© Copyright AMLEGALS.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

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