Limitation Period for Interim Awards: When Does Clock Start Ticking?
Nihareeka Ghadage
5th year B.A.LL.B.,
ILS Law College, Pune
&
Soham Bhagwat
5th year B.A.LL.B.,
Shankarrao Chavan Law College, Pune.
Understanding Interim and Final Awards in Arbitration
The term Arbitral Award has been defined under Section 2(1)(c) of the Arbitration and Conciliation Act, 1996 which provides for Arbitral Award to include Interim Award. The Act empowers Arbitral Tribunal during the course of Arbitral Proceedings to make an Interim Arbitral Award on any matter with respect to which it may make a Final Arbitral Award as provided under Section 31(6) of the Act. An Interim Award can be passed by the Arbitral Tribunal at any stage of the Arbitral proceeding, provided that the Award conclusively decides upon the specific issue(s) as drawn between the parties. An Interim Award, on the other hand, refers to a determination of some part of the dispute referred to Arbitration. Interim Awards are to be made in the same manner as a Final Award, as held in Tamil Nadu Water Supply and Drainage Board, Chennai v. Abhan Constructions[1]
Unlike the Final Award passed at the end of the proceeding, an Interim Award can be passed by the Arbitrator at any stage of the proceeding, precondition being that it must conclusively decide the specific issues that have arisen between the parties. However, judicial interpretations of Interim Awards and the confusion with it being a part of Interim Relief or a Final Award have led to the discrepancy of the limitation period of applicable to Interim and Final Award. This article aims to analyse this discrepancy and provide potential solutions to address these discrepancies.
Discrepancy Leading to Confusion
Uncertainties and discrepancies may arise over the inconclusive interpretation of the word ‘finality’. The act in section 42 states that the Limitation Act shall be applicable to Arbitration. Section 34(3) of the Arbitration Act prescribes a three-month limitation period for challenging an Arbitral Award with a further period of 30 days if sufficient cause for delay shown.
It can be argued that since a Final Award gives the ultimate conclusion to the entire dispute between the parties, a particular issue decided by an Interim Award being a part of the entire dispute between the parties, triggers the limitation period from the date when the Final Award is passed. On the other-hand an alternate view can be taken that since an Interim Award is final in itself regarding the particular issue it deals with, it should trigger a limitation period from the date of passing of the Interim Award. Hence, the limitation period for Interim Awards could be linked to the overall duration of the Arbitration Proceedings, rather than being treated as a standalone issue. In this approach, the limitation period for challenging Interim Awards would be tied to the Final resolution of the dispute. The reason for such unusual interpretation can be for harmonizing limitation periods in order to challenge both Awards or linking the limitation period for Interim Awards to the overall Arbitration duration could offer more clarity and consistency.
The distinction between Interim and Final Awards in Arbitration has created a significant legal uncertainty, especially when it comes to determining the application of the principle of Res Judicata, which bars re-litigation of issues that have already been decided. After an Interim Award conclusively adjudicates the matter, courts are often tasked with deciding whether this Award should be considered final for purposes of precluding further challenges or re-litigation on those issues in subsequent proceedings. The issue here arises owing to the ambiguity related to the Interim Award. If this Interim Award is deemed to be Final on the particular points in the Interim Award, res judicata would apply hence effectively barring the parties from re-arguing those same issues in either the remainder of proceedings or any future court actions.
However, the legal notion has unnecessarily become even more complex due to the ambiguity wherein the Interim Award is viewed only as a provisional or a or an interlocutory relief. This scenario could arise when the form of the Award is not as per prescribed format under Section 31 of the Act. In such situations, the Interim Award may not fully settle the legal rights and obligations of the parties, which will further raise the question as to whether the matters addressed in the Interim Award can be revisited at the final stages of the Arbitration process or in subsequent legal challenges to such Award.
While deciding on whether an Interim Award can be subjected to the bar of limitation, the Bombay High Court in Aero Club v. Solar Creations[2] it held that the finality of an Interim Award depends on its intent and form. It was also held that an Interim Award has to ‘assume the status’ of an Arbitral Award to attract the bar of limitation.
In Satwant Singh Sodhi v State of Punjab [3] the question whether Interim Award is final to the extent it goes or has effect till the Final Award is delivered was held to depend upon the form of the Award. The only way an Award can be interfered with would be by challenging it or by making corrections in accordance with Section 33.
Whether an Interim Award will be considered final up to the point of the Final Award will be determined by the form of the Award. If the Interim Award is meant to be valid until the Final Award is issued, it will carry the same weight as the Interim Award and will expire once the Final Award is given. However, if the temporary Award is meant to ultimately establish the rights of the parties, it will be considered a full Award and will remain valid even after the Final Award is issued.
How Arbitral Tribunal can solve the problem of limitation for Interim Awards?
Given the ambiguity regarding the limitation period for Interim Awards, the Arbitral Tribunals must adopt a diligent approach in order to comply with the provisions prescribed while respecting the finality of their decisions. It becomes evident that it is the responsibility of the Arbitral Tribunal to give an Award in accordance with the form prescribed under Section 31 of the Act. If this problem gets addressed at the level of the Tribunal while giving the Award, it would not involve the courts to further investigate into the validity and standing of the Interim Award, thereby meaning that there would be no added pressure on the judiciary to deal with the issues that the Arbitral Tribunal is given jurisdiction. This would mean there will not be any disputes relating to the discrepancy in calculating the period of limitation for Awards Interim or Final. The Arbitral Tribunal can address this issue by clearly specifying the nature of the Award, whether Interim or Final, and explicitly stating the intended timeline for enforcement. Additionally, Tribunals may consider incorporating safeguards within the Award itself, such as stipulating a specific limitation period or providing guidance on when the limitation period should commence. This approach would ensure that all parties involved have a clear understanding of the Award’s status. By providing explicit details about the Award’s nature, the Tribunal can prevent misunderstandings and potential disputes that may arise from ambiguity.
Furthermore, Tribunals can enhance the effectiveness of these measures by including detailed reasoning for their decisions regarding the nature of the Award and any associated timelines. The SC in Dyna Technologies Private Limited v. Crompton Greaves Limited[4] set aside an Arbitral Award on the ground that the award was unintelligible as the award suffered from inadequate reasoning. This reasoning can provide valuable context for the parties and any subsequent Enforcement Authorities, helping to ensure that the Tribunal’s intentions are fully understood. In cases where the Award involves complex or multi-faceted issues, the Tribunals may also consider breaking down the Award into distinct components, each with its own specified nature and Enforcement timeline which can facilitate a more targeted enforcement process, particularly in situations where different aspects of the Award may require varying levels of urgency. This approach not only enhances the efficiency and effectiveness of the process but also contributes to the overall integrity and reliability of Arbitration as a dispute resolution mechanism.
To conclude, the ambiguity surrounding the limitation period for Interim Awards presents a significant challenge in Arbitration Proceedings. It is crucial for Arbitral Tribunals to distinguish clearly between Interim and Final Awards, specifying the nature and intended timeline for enforcement to avoid misunderstandings and potential disputes. Ultimately, addressing this discrepancy through legislative clarification or by the Supreme Court would provide much-needed certainty and streamline the Arbitration Process.
References:
[2] https://indiankanoon.org/doc/21095811/
