INTRODUCTION
The recent judgment of the Delhi High Court in NTPC Ltd. v. Larsen & Toubro Ltd. & Anr. examines important questions relating to the scope and power of an arbitral tribunal to allow updation or revision of counterclaims during the pendency of arbitration proceedings. The case arose from a contract dispute between NTPC Ltd. and a joint venture of Larsen & Toubro Ltd. and Alpine Mayreder Bau GmbH (referred to as the 'JV') relating to an infrastructure project. Certain disputes arose between the parties leading to termination of the contract by NTPC and invocation of arbitration proceedings.
During the pendency of the arbitration, NTPC filed an application before the arbitral tribunal seeking permission to update/revise the amounts claimed in certain counterclaims to bring them up to date. However, the tribunal rejected the application holding that it was filed belatedly. Aggrieved, NTPC filed a petition under Section 34 of the Arbitration & Conciliation Act, 1996 challenging the tribunal's order. The key issues before the High Court pertained to the maintainability of the petition, scope of amendment/updation in arbitration and whether the tribunal exceeded its jurisdiction in rejecting NTPC's application.
This article analyses the various issues discussed and principles laid down by the High Court in this significant judgment, which offers useful guidance on an arbitrator's powers relating to amendment/updation of pleadings.
MAINTAINABILITY OF THE PETITION UNDER SECTION 34
One of the preliminary issues debated before the High Court was whether the impugned order of the tribunal rejecting NTPC's application for updation was an 'award' against which a challenge could lie under Section 34 of the Arbitration Act.
NTPC contended that the order had the trappings of finality as it conclusively determined that the updated claims could not be adjudicated. By rejecting the application, substantive rights of NTPC were decided, precluding it from claiming the relief sought in future. It was argued this amounted to dismissal of claims, making the order an 'award' under Section 2(1)(c) read with Section 31(6).
The High Court accepted NTPC's arguments and held the petition to be maintainable. It relied on precedents like Cinevistaas Ltd. v. Prasar Bharti and Farmers Fertilizer Co-operative Ltd. v. Bhadra Products which laid down that any point of dispute which has to be answered by the tribunal can be the subject matter of an interim award. By finally rejecting the updated claims, the tribunal had conclusively determined the lis, making the order challengeable under Section 34. This establishes the wide scope of interim awards under the Arbitration Act.
SCOPE OF AMENDMENT/UPDATION IN ARBITRATION
The next issue was whether the tribunal could have allowed amendment/updation of counterclaims. NTPC argued that its application sought mere updation of amounts without changing the cause of action or pleadings. Further, the counterclaims were filed reserving the right to revise them as the situation arises, and cause of action was still continuing due to non-completion of works.
The High Court accepted NTPC's submissions and held that where the amendment does not add new facts but is only a technical updation, it ought to be permitted broadly. It noted that amendment is considered liberally under Section 23 unlike suits governed by rigid CPC provisions. Reliance was placed on A.K. Gupta wherein amendment was allowed despite limitation having expired. The court further observed that no prejudice was caused to the other side due to mere updation.
On the question of delay, the High Court held that as per clauses 63.1 to 63.3 of the contract, cause of action would persist till 3 years after defect liability period. As the work was still incomplete, cause of action for counterclaims was continuing. Hence, there was no delay or limitation in seeking mere updation.
The judgment thus lays down the principle that where the amendment/updation is technical in nature without changing the cause of action or pleadings, and where cause of action is continuing, the arbitral tribunal should allow such updation/revision of claims to bring amounts up to date. A liberal approach is to be adopted in this regard keeping in mind the objectives of arbitration.
WHETHER TRIBUNAL EXCEEDED ITS JURISDICTION?
Finally, the High Court considered whether the tribunal exceeded its jurisdiction in rejecting the application. It noted that the rejection was solely based on delay under Section 23(3) of the Act ignoring the specific clauses of the contract fixing timelines.
Relying on ONGC v. Saw Pipes, the court held that an arbitral tribunal acts as a court as well as creature of the contract. It must remain faithful to the terms of reference and the contract. By rejecting the application solely on ground of delay without considering the contract, the tribunal had exceeded its jurisdiction and acted against the consent of parties.
The High Court thus set aside the tribunal's order, holding that it failed to properly appreciate the terms of contract and the facts of the case. The rejection of the application was unsustainable being contrary to principles of amendment and liberal approach in arbitration.
CONCLUSION
The NTPC v. L&T judgment provides valuable guidance on an arbitrator's powers regarding amendment/updation of pleadings and claims during arbitration proceedings. It establishes that arbitral tribunals must adopt a broad and flexible approach while dealing with such requests, keeping in mind objectives of speed and economy. Where the amendment is merely technical updating amounts without altering cause of action or prejudice to other side, it should be permitted. Most importantly, the terms of contract and facts of each case require careful examination before rejecting any such application. The ruling will ensure that substantive rights of parties are safeguarded and technicalities do not come in the way of full and final settlement of disputes in arbitration.
LINK to Judgment: https://www.livelaw.in/pdf_upload/ntpc-vs-lt-465754.pdf
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