Court Restores Counterclaims, Citing Violation of Natural Justice and Procedural Fairness
In a significant ruling, the Delhi High Court has set aside an interim award in the ongoing arbitration between Eureka Forbes Limited and Indian Railway Catering and Tourism Corporation (IRCTC). The court found that the arbitral tribunal's decision to reject Eureka Forbes' counterclaims, solely based on their absence in the proceedings, violated principles of natural justice and procedural fairness.
The dispute arose from a contract for managing Water Vending Machines at railway stations, with Eureka Forbes alleging non-payment of fees by IRCTC, leading to arbitration. During the arbitration, the tribunal proceeded ex parte against Eureka Forbes and rejected its counterclaims due to non-appearance on specified dates. However, the Delhi High Court noted that the rejection was unjustified given that the counterclaims were duly filed and procedural stages were incomplete.
Justice Harish Vaidyanathan Shankar emphasized that the rejection of counterclaims without adjudication on merits was unsustainable. The court recognized the rejection of counterclaims as an interim award, thereby amenable to challenge under Section 34 of the Arbitration and Conciliation Act, 1996. The decision underscores the necessity of procedural fairness and equal treatment in arbitration, reinforcing that ex parte orders should not extinguish substantive claims without proper adjudication.
Eureka Forbes, represented by Dr. Amit George, argued that the tribunal's actions were arbitrary, while IRCTC's counsel contended the tribunal acted within its jurisdiction. However, the court sided with Eureka Forbes, restoring the counterclaims for adjudication, while upholding the procedural nature of the ex parte order regarding IRCTC's claims.
This ruling highlights the judiciary's role in ensuring fairness in arbitration, reaffirming that tribunals must uphold natural justice principles, offering parties full opportunity to present their cases.
Bottom line:-
Arbitration - Rejection of counterclaims by arbitral tribunal as part of ex parte proceedings can amount to an interim award and is amenable to challenge under Section 34 of the Arbitration and Conciliation Act, 1996.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 2(1)(c), 18, 25, 31(6), 34
Eureka Forbes Limited v. Indian Railway Catering And Tourism, (Delhi) : Law Finder Doc id # 2898673
