Arbitral Tribunal's procedural closure for non-payment of fees does not warrant appeal under Section 37(2)(b), High Court rules.
In a significant ruling, the Delhi High Court, presided over by Justice Om Prakash Shukla, has dismissed an appeal by Orbit In-Te-Rio against the procedural closure of their Section 17 applications and counterclaim due to non-payment of arbitral fees. The court held that such procedural closures do not constitute adjudicatory orders under Section 17 of the Arbitration and Conciliation Act, 1996, and thus, are not appealable under Section 37(2)(b).
The dispute arose from a Fit-Out agreement dated November 28, 2023, between Orbit In-Te-Rio and American Epay Services Pvt. Ltd. Disagreements over performance and additional work modifications led to the termination of the agreement by the respondent on February 15, 2024. Orbit In-Te-Rio then faced procedural hurdles when they failed to deposit the full arbitral fees as directed by the tribunal, leading to the closure of their applications and counterclaim.
Justice Shukla emphasized that the order in question was procedural, aimed at securing the payment of future arbitration expenses, and did not involve a substantive adjudication of the parties' rights. He clarified that the remedy for the appellant lies in seeking a recall or modification of the procedural order before the Arbitral Tribunal, rather than filing an appeal.
The court referred to various precedents, including judgments from the Supreme Court, which established that procedural defaults, such as fee-related closures, should first be addressed internally within the arbitral process through recall applications. The High Court reiterated that an appeal under Section 37(2)(b) is not maintainable as the procedural closure does not amount to granting or refusing interim measures.
This decision underscores the importance of distinguishing between procedural and substantive orders in arbitration proceedings and reaffirms the tribunal's inherent power to manage procedural defaults internally.
Bottom Line :
Procedural closure of Section 17 applications and counterclaim due to non-payment of arbitral fees does not constitute an adjudicatory order under Section 17 of the Arbitration and Conciliation Act, 1996. Remedy lies in seeking recall before the Arbitral Tribunal rather than filing an appeal under Section 37(2)(b).
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Sections 17, 37(2)(b), 38, 39
Orbit In-Te-Rio v. American Epay Services Pvt. Ltd., (Delhi) : Law Finder Doc id # 2963717
