Recently, the High Court of Delhi, while deciding a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 ("Act") challenging an order passed by an arbitrator, held that claims that have already been raised in the notice of arbitration are not barred by limitation even if they are not part of the statement of claim. The judgment is also important in that it analyses the law on arbitral orders that are challengeable under Section 34 of the Act which deals with applications for setting aside arbitral awards.
The Delhi High Court's decision was in the matter of M/s. Cinevistaas Ltd. V. M/s. Prasar Bharti, O.M.P. (COMM) 31/2017. The Petitioner, Cinevistaas Ltd., had undertaken production of a game show the telecast of which was approved by Prasar Bharti, which is the public service broadcaster established under a statute. When Prasar Bharti informed Cinevistaas that the show would not be aired, the latter triggered arbitration and a sole arbitrator was also appointed by the High Court of Delhi upon an application made by Cinevistaas.
During the pendency of the arbitration, Cinevistaas moved an application before the arbitrator seeking permission to correct two claims in its statement of claims. Through the correction, Cinevistaas sought to increase the claims regarding losses incurred on account of concept development, research scripting and appointing technicians. This application was dismissed by the arbitrator on 08.08.2009 on the ground of limitation. The arbitrator held that the changes sought to be made by the application constituted additional claims and that the application for incorporating such additional claims, that was filed as late as 25.05.2008, after issuing the notice for arbitration on 31.10.2003 and filing of statement of claims on 31.08.2004, was barred by limitation. It was this order of the arbitrator dated 08.08.2009 that was challenged before the High Court.
It is important to note the amounts sought to be added to the claim through the amendment were incorporated in both the letter dated 31.10.2003 invoking arbitration and the S.11 application filed by Cinevistaas. In fact, a writ petition that was filed by Cinevistaas challenging the decision of Prasar Bharti, which was subsequently withdrawn, also included these amounts.
In its appeal before the High Court, Cinevistaas argued that the non- inclusion of these amounts in the claim petition was a case of wrong quantification of claims and that the application that merely sought correction of those errors ought to have been allowed. It was also argued that there was a final rejection of the additional claims by the arbitrator and thus the impugned order was in the nature of an award that could be challenged under S. 34 of the Act.
Prasar Bharti, on the other hand, argued that the application moved by Cinevistaas was in the nature of an amendment to the claim statement. Since the claim petition had sought a lesser amount than what was stated in the letter invoking arbitration, it ought to be held that the Petitioner had, in fact, given up other claims. It was also argued that the rejection of amendment does not constitute an award challengeable under Section 34 of the Act. Even if the order is considered to be an award, it does not warrant any interference, as the additional claims were barred by limitation.
Consideration of amendments to the Statement of Claim
One question that arose for consideration of the High Court was whether the amendments constituted additional claims and were thus barred by limitation. On this issue, the Court noted that the letter invoking arbitration issued on 31.10.2003 and application under S. 11 of the Act had quantified all the claims including the claims sought to be added by the amendment. The claims were raised, invoked and referred to arbitration. Even the writ petition included these amounts. In view of these developments, the High Court held that the claims sought to be added by the amendment application had been raised at the earliest point of time and that the finding of the arbitrator, that these were additional claims, was thus not tenable.
The Delhi High Court also noted that so long as the disputes fall broadly within the reference to arbitration, correction and amendments ought to be permitted and a narrow approach cannot be adopted.
Scope of challenges under section 34 of the Arbitration Act
Another question that was considered was whether the order of the Arbitrator constituted an 'award' that could be challenged under S. 34 of the Act which deals with applications for setting aside arbitral awards.
Under S. 2(1)(c) of the Act, an award includes an interim award. The Delhi High Court held that the decision as to whether an order constitutes an interim award or not is to be made based on the nature of order and not the title of the application. The Court ruled that the Arbitrator's rejection of the proposed amendments by holding that the same were barred by limitation, amounted to a final adjudication insofar as additional amounts that were sought to be claimed were concerned. Thus, there is a finality attached to the award and there is nothing in the final award that would be dealing with these claims. For this reason, the Court held that the impugned order is not just an interim award, but also rejection of certain substantive claims finally.
Accordingly, it was held that the petition under S. 34 was maintainable and the claims sought to be added by the Petitioner to its statement of claims were not barred by limitation. The Court directed the arbitral tribunal to take the amended claims petition on record and adjudicate the claims in accordance with law in a time bound manner.
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