Sanchayita Lahkar

The High Court of Bombay Single Bench of Justice Manish Pitale held that an order passed by an Arbitrator under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996 does not constitute an arbitral award and therefore cannot be challenged under Section 34 of the Act. The Court dismissed the arbitration petition filed under Sections 14, 15, and 34 of the Arbitration Act, declaring it non-maintainable. It was further held that parties remain entitled to raise appropriate grounds in a future challenge to the final arbitral award. The decision clarified that an order rejecting an application seeking termination of arbitral proceedings for alleged impossibility of continuation falls squarely under Section 32(2)(c) and does not finally decide any issue arising from the underlying dispute.

The matter arose from a commercial arbitration proceeding where the petitioners had filed an application under Section 32(2)(c) of the Arbitration Act, contending that due to developments during the arbitration, it had become impossible to continue the proceedings. The application was dismissed by the learned Arbitrator through an order dated 07th May 2024.

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In response, the petitioners approached the High Court challenging the said order under Sections 14, 15, and 34 of the Arbitration Act, 1996. The application sought to label the impugned order as an "interim award" or a "partial final award" susceptible to challenge under Section 34.

The respondent (original claimant) opposed the maintainability of the petition, asserting that the impugned order was not an arbitral award but merely an order under Section 32(2)(c), and thus not amenable to challenge under Section 34. It was further argued that the petitioners were attempting to derail the arbitration, which had been pending for nearly a decade and was at the stage of final hearing.

Senior Counsel Mr. Navroz Seervai, representing the respondent, argued that Section 32 of the Arbitration Act distinguishes clearly between an "award" and an "order". He stated that an order under Section 32(2)(c) can never be treated as an award, as it does not relate to the substantive issues in dispute. Relying on precedents such as Future Coupons Private Limited & Ors. Vs. Amazon.Com & Anr., M/s. Anuptech Equipments Private Limited Vs. Ganpati Co-Operative Housing Society, and Ramchandra Udaysinh Jadhavrao Vs. Girishnavnathrao Avhad, he submitted that the only remedy against such an order is by raising it as a ground in a future Section 34 petition against the final award.

On the other hand, Senior Counsel Mr. Janak Dwarkadas for the petitioners submitted that the substance of the order, rather than its form, should determine whether it constitutes an award. He referred to Sections 2(1)(c), 31(6), and 32 of the Arbitration Act, arguing that since the order conclusively determined a critical issue between the parties, it should be classified as an interim award. He cited the judgment in Aero Club Vs. Solar Creations Private Limited, which provided a three-fold test to determine if an interim decision qualifies as an arbitral award.

The petitioners contended that the Arbitrator's findings would operate as res judicata and would bar re-agitation in subsequent proceedings. They proposed that a fourth test be applied—whether the order has a binding effect on the substantive dispute—claiming that this too was satisfied in the present case.

The Court recorded "There can be no doubt about the fact that substance would prevail over form. Yet, it would be necessary to consider the documents on record to examine as to in what manner did the petitioners invoke the jurisdiction of the learned Arbitrator..."

The Court observed that the petitioners had specifically invoked Section 32(2)(c), seeking a finding on the impossibility of continuing with arbitration, and that the Arbitrator’s order dealt exclusively with that aspect. It stated "The learned Arbitrator considered the rival submissions... and thereupon, rendered a finding that the claim regarding impossibility of further continuance of the arbitration proceedings was without any merit."

Justice Pitale stated the statutory scheme of Section 32, noting: "It is clear that if an order is passed by the Arbitral Tribunal under Section 32(2) of the Arbitration Act, as per the legislative scheme, it can never be an arbitral award."

The Court referred to precedent, quoting: "This Court in the case of Ramchandra Udaysinh Jadhavrao... held that an order passed under Section 32(2)(c) ... is not an arbitral award and in such a situation, the remedy of Section 34... is not available."

In rejecting the argument that the order should be treated as an award based on content, the Court noted: "The issue sought to be raised... had nothing to do with the issues for consideration in the arbitration proceedings... [and] the contents of the impugned order in no manner qualify to be an award."

The Court also considered the tests laid out in Aero Club, stating: "The impugned order... does not amount to either an interim award or partial final award under Section 31(6) and 2(1)(c) ... it is not in relation to any matter in respect of which a final award can be made."

Addressing the petitioners' concern of being left remediless, the Court remarked: "It would always be open for the petitioners to raise appropriate challenge to the findings... in the event the arbitral award goes against them."

The Court concluded that the arbitration petition under Sections 14, 15, and 34 of the Arbitration Act was not maintainable.

It held: "The instant application is allowed. It is held that the accompanying petition filed by the petitioners under Sections 14, 15 and 34 of the Arbitration Act is not maintainable against the order of the learned Arbitrator dated 07th May 2024."

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It further directed: "Consequently, the arbitration petition itself is dismissed as not maintainable. Any pending interlocutory applications in the arbitration petition also stand disposed of."

It clarified: "It is made clear that the petitioners would be at liberty to raise appropriate grounds of challenge concerning the said order dated 07th May 2024... in the event the arbitral award goes against them..."

Advocates Representing the Parties:

For the Petitioners: Mr. Janak Dwarkadas, Senior Advocate with Mr. Gaurav Joshi, Senior Advocate, Mr. Kazan Shroff, Mr. M. S. Federal, Mr. Murtuza Federal, Ms. Rashne Mulla-Feroze, Mr. Aaroha Kulkarni, and Mr. Nikhil Jalan instructed by Federal & Company.

For the Respondents: Mr. Navroz Seervai, Senior Advocate with Mr. Aditya Bapat, Mr. Arup Pereira, Ms. Mumtaz Bandukwala, Mr. Sandeep Junnarkar, and Mr. H. Bhati instructed by Junnarkar and Associates.

Case Title: Neelkanth Mansions and Infrastructure Pvt. Ltd. & Anr. v. Urban Infrastructure Trustees Ltd. & Anr.

Neutral Citation: 2025: BHC-OS:9195

Case Number: Commercial Arbitration Petition No. 389 of 2024 with Interim Application (Lodging) No. 24652 of 2024

Bench:  Justice Manish Pitale