Delhi High Court Revives Arbitration Proceedings Between Mecwel Constructions and GE Power Systems

Court rules termination of arbitration due to procedural default is not an arbitral award, allowing proceedings to continue

In a significant ruling, the Delhi High Court, presided over by Justice Jasmeet Singh, has allowed the continuation of arbitration proceedings between Mecwel Constructions Pvt. Ltd. and GE Power Systems India Pvt. Ltd. The court determined that the previous termination of proceedings by the arbitrator due to procedural defaults did not constitute an arbitral award, thus enabling the arbitration to proceed.

The dispute arose from contracts related to the erection, testing, commissioning, and handover of steam turbine and generator auxiliaries for thermal power projects. GE Power Systems, after subcontracting part of the project to Mecwel Constructions, faced delays and subsequently issued termination notices. Arbitration was initiated, but due to Mecwel's failure to file statements of claims and pay arbitral fees, the arbitrator terminated the proceedings under Section 25(a) of the Arbitration and Conciliation Act, 1996.

The court's decision hinged on the interpretation of what constitutes an arbitral award. Justice Singh noted that an order terminating proceedings for non-compliance does not adjudicate the rights or obligations of the parties and hence lacks the attributes of an arbitral award. The court emphasized the importance of allowing arbitration to continue, considering the substantial investment of time and resources by the parties.

Mecwel Constructions, represented by Dr. Amit George and his team of advocates, argued for the revival of arbitration, assuring compliance with the procedural directions. GE Power Systems, represented by Mr. Akshay Sapre and his team, contended that the termination order should be treated as an award, thus limiting Mecwel’s recourse to filing a challenge under Section 34 of the Act.

The court's ruling aligns with precedents that stress the procedural nature of termination orders under Section 25(a) and the necessity to treat such orders separately from arbitral awards. This decision allows Mecwel Constructions to continue pursuing its claims in arbitration, provided they fulfill the procedural requirements set forth by the arbitrator.

Bottom Line:

Arbitration and Conciliation Act, 1996 - Order terminating arbitral proceedings under Section 25(a) does not constitute an arbitral award as it does not adjudicate the rights or obligations of the parties. Such orders are procedural in nature and do not possess the essential attributes of an arbitral award.

Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 14, 15, 25(a), 32

Mecwel Constructions Pvt. Ltd. v. GE Power Systems India Pvt. Ltd., (Delhi) : Law Finder Doc Id # 2797559