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Judgment
Indira Banerjee, J.—1. This appeal is against an Order No. 10 dated 30th September, 2015 passed by the learned Judge, 4th Bench, City Civil Court at Calcutta dismissing an application filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the 1996 Act, for setting aside of an arbitral award.
The relevant part of the impugned order is set out hereinbelow for convenience.
"Accordingly, the Ld. Arbitrator conclude the proceeding on 6.1.2004 under the following observations:-
I) The claimant did not produce any order of stay or arbitration proceeding. The claimant did not produce any statement of claim. There was no agreement between the parties that the arbitration should be kept on being delayed further. The act of sole arbitrator is a time-bound manner and nearly two years were passed from the date of appointment of the arbitrator but the proceeding did not progress at all and as such, the arbitration proceeding was terminated as per provision u/s. 25(a) of the Arbitration and Conciliation Act, 1996.
II) As per Section 34 of Arbitration and Conciliation Act, 1996, the order had passed by the arbitrator is not award at all. Moreover, the petitioner was given several opportunities to file his statement of claim and to proceed with the arbitration proceeding but the petitioner taking advantage of the contempt proceeding, took several attempts to conclude the proceeding and the proceeding was delayed due to Act of the petitioner. The arbitration proceeding is a time-bound factor.
Therefore, in view of the above observation, I do not find any illegality or irregularity in the observation of the Ld. Arbitrator. Moreover, the order passed by the arbitrator is not an award and no Misc. Case lies u/s. 34 of Arbitration and Conciliation Act.
Accordingly, this Misc. Case is not maintainable at all."
The learned Court has held that since the order passed by the learned arbitrator was not an award, the same cannot be set aside in an application under Section 34 of the 1996 Act. Therefore, the short question in this appeal is, whether an order under Section 25(a) of the 1996 Act is an award or not.
Arbitral award has been defined in Section 2(1)(e) of the 1996 Act to include an interim award. The definition of arbitral award is therefore extensive and not exhaustive. The expression arbitral award, is of the widest amplitude and covers all decisions of the arbitral tribunal, including any interim decision save and except those decisions and/or orders which cannot be construed to be an award in the context of any specific provision of the 1996 Act.
Section 25 of the 1996 Act provides as follows:-
"25. Default of a party.--Unless otherwise agreed by the parties, where, without showing sufficient cause,--
(a) the claimant fails to communicate his statement of claim in accordance with sub-section (1) of section 23, the arbitral tribunal shall terminate the proceedings;
(b) the respondent fails to communicate his statement of defence in accordance with sub-section (1) of section 23, the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant;
(c) a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it."
Under Section 25(a) of the 1996 Act, the Arbitral Tribunal is required to terminate the arbitration proceeding, where the claimant, without showing sufficient cause, fails to communicate his statement, in accordance with Sub-section 1 of Section 23 of the said Act, that is the within the period of time agreed upon by the parties or within the time determined by the Arbitral Tribunal.
Section 32 of the 1996 Act, which deals with the termination of proceedings provides:-
"32. Termination of proceedings.--
(1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2).
(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where--
(a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute,
(b) the parties agree on the termination of the proceedings, or
(c) the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible.
(3) Subject to section 33 and sub-section (4) of section 34, the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings."
Section 32 provides that the Arbitral proceedings are to be terminated by the final award or by an order of the Arbitral Tribunal, under sub-section 2 of Section 32. An order under sub-section 2 of Section 32 might be issued in the circumstances specified in Clauses (a) to (c) of Sub-section (2) of Section 32, that is, where the claimant withdraws his claim, or where the parties agree on the termination of the proceedings, or where the Arbitral Tribunal finds that the continuation of the proceedings has, for any other reason, become unnecessary or impossible. An order under Section 32(2) would not be an award.
Once the arbitral proceedings are terminated, whether by a final award, or by an order of the Arbitral Tribunal under Sub-section (2), the mandate of the arbitral tribunal also terminates in view of Section 32(3) of the 1996 Act, subject, however, to Section 33 and Section 34(4), that is, subject to the power of the arbitral tribunal to correct any error of computation or any clerical or typographical errors or any other errors of a similar nature occurring in the award, within the time stipulated and subject to the power of the Court under Section 34(4) to adjourn proceedings for setting aside of an award under Section 34 for a limited period of time determined by the Court in its order, to give the Tribunal an opportunity to resume arbitral proceedings or to take such other action, as in the opinion of the arbitral tribunal would eliminate the grounds for setting aside the arbitral award.
On a conjoint reading of Section 25A with Section 32 and the definition of arbitral award in Section 2(1)(c), it is patently clear that, except for an order for the termination of the arbitration proceedings on grounds stipulated in Section 32(2) of the 1996 Act, and save and except ministerial directions, any other decision of the Arbitral Tribunal is an award.
Arbitral proceedings are terminated by the final arbitral award or by an order of the arbitral tribunal under Sub-section (2) i.e. an order of termination, where the claimant withdraws his claim, where the parties agree on the termination of the proceedings or the tribunal finds the continuation of the proceedings has, for any reason, become unnecessary or impossible.
Termination of proceedings under Section 25(a) is a final decision which puts an end to the arbitral proceedings. The decision amounts to rejection of the claim, even though there is no adjudication on merits. It is, akin to dismissal of a suit on a technical ground, may be, non prosecution.
There is a difference between a decision which puts an end to the arbitral proceedings and a decision whereby the arbitrator withdraws from the proceedings. Where the arbitrator withdraws from the proceedings, a substitute arbitrator may be appointed in accordance with the procedure, applicable to the appointment of the arbitrator who is replaced, but where the arbitrator puts an end to the arbitral proceedings, the claimant cannot pursue his claim.
The decision of the arbitral tribunal to put an end to the proceedings is a final award which can only challenged by way of an application for setting aside under Section 34 Sub-section (2) of the 1996 Act. Once the arbitral proceedings are terminated, the claimant cannot re-agitate the same claim by initiation of fresh proceedings since the claim would be hit by principles of constructive res judicata.
Section 34 provides for setting aside of an arbitral award inter alia on the ground of proof that�
(i) a party was under some incapacity,
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force;
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part;
There is no reason why a final decision of the arbitral tribunal terminating the arbitral proceedings under Section 25(a) of the 1996 Act should be immune from challenge under Section 34, irrespective of whether any party was under some incapacity, irrespective of whether the defaulting party had notice of the Constitution of the Arbitral Tribunal of the arbitral proceedings, irrespective of whether the claimant was otherwise unable to present his case and irrespective of whether the arbitral procedure was in accordance with the agreement of the parties.
We, therefore hold that an order under Section 25(a) terminating the arbitral proceedings for default of the claimant to communicate his statement of claim in accordance with Sub-section (1) of Section 23 i.e. within the period of time agreed upon by the parties, or determined by the arbitral tribunal, is an award within the meaning of Section 2(1)(c) of the 1996 Act and an application lies for setting aside such award.
The order under appeal is set aside. The Court below is directed to hear and dispose of the application for setting aside of the award under Section 34 of the 1996 Act filed by the appellant within 3 months from the date of communication of this order. It is made clear that this Court has not gone into the merits of the application for setting aside of the award.
I agree.