Order U/S. 25(a) A&C Act Not An Arbitral Award As It Does Not Determine Rights Of Parties: Delhi High Court

The Court was hearing petitions filed under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996, seeking continuation of arbitration proceedings that had been terminated by the arbitrator on account of the claimant’s failure to file its statement of claim and to pay a portion of the arbitral fee.

A Bench comprising Justice Jasmeet Singh, while deciding the matter, observed that “an order under Section 25(a) does not and cannot amount to an Award as it does not deal with the rights of the parties before the Arbitrator” stating that “such an order merely terminates the arbitral proceedings on account of the claimant’s default in filing the statement of claim.”

The Bench clarified that “for an order to qualify as an Award, it must decide, either finally or on an interim, an issue forming part of the dispute referred to arbitration.”

Advocate Amit George represented the petitioner, while Advocate Akshay Sapre represented the respondent.

Background

The matter arose from contracts awarded to GE Power Systems India Pvt. Ltd. for the erection, testing, and commissioning of steam turbine and generator auxiliaries at various thermal power projects. GE, in turn, subcontracted portions of the mechanical erection and commissioning work to Mecwel Constructions Pvt. Ltd.

After project delays, GE issued termination notices. Mecwel filed petitions under Section 9 before the Delhi High Court seeking to restrain GE from encashing bank guarantees. The Court permitted the invocation but directed the amounts to be held in FDRs and appointed a sole arbitrator to adjudicate the disputes.

However, Mecwel failed to file its Statement of Claim and to pay its share of arbitral fees despite multiple opportunities. Consequently, the arbitrator closed the proceedings under Section 25(a), which allows termination where the claimant defaults in filing the claim statement.

The Petitioner argued that the termination order was an “award” within the meaning of Section 2(1)(c) of the Act, relying on Awasthi Construction Co. v. Govt. of NCT of Delhi and The India Trading Company v. Hindustan Petroleum Corp. Ltd..

Conversely, the respondent argued that the arbitrator’s order merely terminated proceedings for procedural default and did not adjudicate any substantive dispute. Thus, it could not be termed an award, and the arbitration could be revived through Section 14(2), which allows the Court to decide whether the arbitrator’s mandate has been wrongfully terminated.

Court’s Observations

The Delhi High Court, upon hearing the matter, noted that the question - whether an order under Section 25(a) amounts to an award - has produced divergent views among High Courts. While earlier judgments like Awasthi Construction and India Trading Company held such orders to be awards, later authorities, including PCL Suncon v. NHAI, relying on Lalitkumar Sanghavi v. Dharamdas Sanghavi and Indian Farmers Fertilizer Cooperative Ltd. v. Bhadra Products, took the opposite view.

The High Court held that the correct legal position is that articulated in PCL Suncon, which distinguished between orders that terminate proceedings for procedural defaults and awards that determine substantive rights.

The Bench further explained that an arbitral award, whether interim or final, must decide an issue forming part of the dispute referred to arbitration, and must finally determine the rights and obligations of the parties. However, the Bench observed that orders under Section 25(a), “being procedural in nature and not addressing the substantive lis between the parties, lacks the essential attributes of an Arbitral Award.”

The Court also cited Gangotri Enterprises Ltd. v. NTPC Tamil Nadu Energy Co. Ltd., which ruled that the arbitrator’s mandate terminates upon such an order and that the claimant may invoke Section 14(2) to seek revival.

Justice Singh also emphasised that courts should promote the continuation of arbitral proceedings whenever possible, especially when parties have already invested substantial time, cost, and effort.

The Court also recorded counsel’s assurance that Mecwel would promptly comply with fee payments and filing requirements.

Conclusion

Holding that the arbitrator’s termination order under Section 25(a) was not an award, the High Court allowed Mecwel’s petitions and directed that the arbitration proceedings continue before the same arbitrator appointed earlier by the Court’s order.

Cause Title: Mecwel Constructions Pvt. Ltd. v. GE Power Systems India Pvt. Ltd. (Neutral Citation: 2025:DHC:9326)

Appearances

Petitioner: Advocates Amit George, Shashwat Kabi, Ibansara Syiemlieh, Adhishwar Suri, Vaibhav Gandhi, Kartikay Puneesh

Respondent: Advocates Akshay Sapre, Abhijeet Swaroop, Vinam Gupta, Shivani Karmakar

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