Arbitral Tribunal Can Pass Interim Award Without Framing Issues Or Separate Plea: Bombay High Court

The Bombay High Court has ruled that an arbitral tribunal can pass an interim award at any stage of the proceedings on any matter it is empowered to finally decide, even if no formal issue has been framed or a separate application seeking such an award has been filed.

Justice N.J. Jamadar observed that the decisive question is whether the parties are in dispute over a matter that the arbitral tribunal is required to finally determine, and not whether a formal issue has been settled for adjudication.

“On a bare textual reading of Section 31(6), and the use of expressions 'at any time' and 'on any matter' which do not seem to limit the arbitral Tribunal's power to pass an interim award, save and except that such an award must relate to any matter with respect to which the Arbitral Tribunal may make a final arbitral award, the aforesaid submission premised on the determination of an issue that has been framed or arises for consideration, cannot be acceded to. The true test would be, whether the parties are at issue over a particular matter in respect of which the Arbitral Tribunal is called upon to make a final arbitral award? If the answer is in the affirmative, then the aspect as to whether an issue is settled for determination or not, pales in significance.”, the court ruled.

Dismissing a petition filed by the Municipal Corporation of Greater Mumbai, the court upheld an interim arbitral award directing it to pay ₹14.15 crore, along with further interest, to Kekobad Dossabhoy Doongriwalla and Khorshed Navzar Wadia, successors-in-interest of the original owner of the acquired land at Majiwada in Thane.

The dispute relates to land at Majiwada that was acquired by the Corporation for constructing the Tansa Lake pipeline protective wall. An acquisition award was passed on November 16, 1951.

The parties remained in litigation for decades. An earlier arbitral award was eventually set aside by the high court, following which a sole arbitrator was appointed on August 24, 2018, to determine compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

In its second statement of defence filed in April 2021, the Corporation disputed the landowners' claim that the applicable Ready Reckoner rate was ₹35,500 per square metre. Instead, it said the land fell in Zone 6/26, where the applicable rate was ₹28,500 per square metre, and attached a calculation sheet based on that rate.

The arbitrator treated those pleadings as an admission and passed an interim award on February 15, 2023, holding that ₹28,500 per square metre was the minimum market value payable under the 2013 Act.

Challenging the award under Section 34 of the Arbitration and Conciliation Act, the Corporation argued that the arbitrator had passed the interim award on his own, without any application, without framing an issue for determination, and without putting the parties on notice that such an award was being considered.

It also argued that it had only disputed the landowners' valuation and that its pleadings could not be treated as a clear or unequivocal admission.

The court was not persuaded. It held that Section 31(6) gives an arbitral tribunal wide powers to pass an interim award on any matter that it is competent to finally decide.

The court also found that the Corporation had gone beyond merely disputing the landowners' claim. It had positively asserted that the applicable Ready Reckoner rate was ₹28,500 per square metre and backed that assertion with a calculation sheet. Those pleadings, the court held, amounted to a clear admission that could legitimately form the basis of an interim award.

Referring to the principles governing judgments on admission under Order XII Rule 6 of the Code of Civil Procedure, the court observed,

“The legal proposition which thus emerges is that, the provisions contained in Order XII Rule 6 need not receive unduly restricted interpretation. Undoubtedly, the power to pass a decree on admission is discretionary. However, where the Court finds that the admission is clear and unequivocal, the Court would not be justified in declining to pass the decree on admission as that would defeat the object of Order XII Rule 6 of the Code, 1908.”

The court further noted that Section 26 of the 2013 Act requires compensation to be determined on the basis of the highest of the prescribed statutory benchmarks.

Since the applicable Ready Reckoner rate was ₹28,500 per square meter, compensation could not be fixed below that figure.

Finding no patent illegality in the interim award, the court dismissed MCGM's petition and declined its request to stay the operation and execution of the interim award for six weeks.

For Petitioner (Municipal Corporation of Greater Mumbai): Advocates Yashodeep Deshmukh, Pooja Yadav and Shivprasad Borade.

For Respondents (Kekobad Dossabhoy Doongriwalla and Khorshed Navzar Wadia): Advocates Rashmin Khandekar, Dhawani Bokaria, Akshata Modi, Praharshi Saxena and Rahul Agrawal, instructed by M/s. Purnanand & Co.