Authored By: Dewanshi Bhatt
Bennett University
INTRODUCTION
In ISC Projects Private Limited v. Steel Authority of India Limited, the Delhi High Court decided that all tribunal members must sign the arbitral award or that if they do not, a good reason must be given. The Court determined that a dissenting arbitrator plays a vital role in maintaining procedural justice even if they are not involved in the majority decision. The award was overturned for breaching basic arbitration law principles since one arbitrator was not allowed to participate in the final discussions and was not given enough opportunity to offer a dissenting opinion.
It focuses on the crucial procedural necessity that each member of an arbitral tribunal signs the arbitral award or, in the event that it is not signed, give a good and reasonable explanation. The conflict stemmed from a contractual disagreement between SAIL and ISC Projects regarding railway line construction at the Bhilai Steel Plant. The ruling of the arbitral tribunal, which favoured SAIL, was signed by only two of the three arbitrators. The third arbitrator was not given the chance to voice a dissenting opinion or take part in the final discussions.
This sparked serious questions regarding the honesty of the arbitral procedure, procedural fairness, and transparency. ISC Projects contested the verdict under Section 34 of the 1996 Arbitration and Conciliation Act, claiming that the award was unconstitutional due to the third arbitrator’s exclusion. Thus, the case emphasizes the function of dissident arbitrators and the significance of following procedural rules during arbitration.
BACKGROUND
For railway track work at Bhilai Steel Plant, ISC Projects Private Limited and Steel Authority of India Limited (SAIL) had signed a contract. Conflicts over the work’s completion led to arbitration under the contract’s dispute resolution provision. The Standing Conference of Public Enterprises Forum for Conciliation and Arbitration (SCOPE) designated the presiding arbitrator, and each side nominated one arbitrator to the three-member bench. The tribunal rejected ISC’s arguments and accepted SAIL’s rebuttals in its award, which was issued on March 12, 2020. However, just two arbitrators signed the award. The third arbitrator was not allowed to participate in the final discussions or offer a dissenting opinion. ISC filed a challenge to the award under Section 34 of the Arbitration and Conciliation Act, 1996, requesting its annulment because it was offended by this procedural error.
ISSUES BEFORE THE COURT
- Whether one of the three arbitrators did not sign the arbitral award, it was still enforceable under Section 31 of the Arbitration and Conciliation Act, 1996.
- Whether Arbitrator A’s absence from the discussions amounted to a procedural injustice.
- Whether one of the arbitrators fails to sign an arbitral award and no justification is given, is the award still enforceable.
- Whether the legitimacy of the arbitral award is impacted when an arbitrator is not included in the final discussions.
- Whether the view of a dissenting arbitrator needs to be documented and released at the same time as the majority award.
STATUTORY PROVISIONS
According to Section 31 of the Arbitration and Conciliation Act, 1996, which requires all arbitrators to sign the award unless an explanation is provided, the petitioner contended that the award was unlawful. Additionally, they argued that Arbitrator A was not given a fair chance to voice an opposing opinion and was not included in the discussions.
RELEVANT PRECEDENTS
- Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies Pvt. Ltd. (2021)[1]
The Court reaffirmed that all tribunal members must sign arbitral awards unless there is a valid reason. Additionally, the Court noted: “Signing of an award is not a ministerial act but a substantive requirement. If the signature of any member is omitted, the reasons must be explicitly stated to uphold the procedural fairness of arbitration.” The Court determined that the omission initiated the award and violated basic principles of arbitration fairness since the contested award lacked the signature of one arbitrator without providing an explanation.
- Ssangyong Engg. & Construction Co. Ltd. v. NHAI (2019)[2]
The Court reiterated that the majority’s reasoning must be reviewed before a dissenting opinion may be formed, and that dissenting arbitrators must be given a fair chance to voice their opinions. The Court declared: “A dissenting opinion has no direct legal effect, but it serves as a safeguard against arbitrary and unchecked decision-making. The exclusion of Arbitrator A from the deliberations deprived him of the opportunity to record his opinion, which violates the principles of natural justice.” Therefore, it was decided that the exclusion of Arbitrator A from the final discussions constituted a serious procedural error that called for the decision to be revoked.
- Mahanagar Telephone Nigam Ltd. v. Siemens Public Communication Network Ltd. (2005)[3]
The Court ruled “While a dissenting opinion does not form part of the final award, it plays a critical role in ensuring transparency in decision-making. A dissenting arbitrator must be given adequate time and access to the majority’s reasoning to prepare a meaningful dissent.” The Court further supported the annulment of the ruling by concluding that Arbitrator A’s failure to prepare a dissent had undermined the arbitral process.
- Government of India v. Acome (2008)[4] and M/s Chandok Machineries v. M/s S.N. Sunderson & Co. (2018)[5]
In contrast to other cases where an arbitral decision was maintained notwithstanding a missing signature, the Court made a distinction in this case. The courts concluded that the absent arbitrator had either been given enough time to participate or had unofficially accepted the ruling. However, in this instance, the Court determined that the judgement was procedurally flawed since Arbitrator A was completely left out of the final consultation process. The Court noted: “In all the cited cases where a missing signature did not vitiate the award, the reasons for the omission were satisfactorily explained, or time was given to the dissenting arbitrator to prepare a dissenting opinion. However, in the present case, one arbitrator was excluded from the final consultation process, making the award procedurally unfair.” The Court decided that the award could not be upheld since there was no justification for the missing signature and Arbitrator A was not given a chance to comment.
- K. Modi v. K.N. Modi (1998)[6]
The Court ruled “While judicial interference in arbitration should be minimal, courts must ensure that procedural integrity and fundamental fairness are upheld. The exclusion of an arbitrator from deliberations strikes at the very core of arbitral fairness and warrants intervention.” Therefore, even while the Court acknowledged the value of maintaining arbitral autonomy, it determined that judicial review was required in this particular case in order to avoid a miscarriage of justice.
IMPACT OF THIS JUDGEMENT
By reiterating the necessity of rigorous procedural compliance, especially with regard to the obligatory requirement of signatures and stated reasons for any omissions under Section 31 of the Arbitration and Conciliation Act, 1996, this ruling will have a substantial and long-lasting effect on arbitration practice in India. It emphasises how important opposing opinions are as protections against capricious rulings and how important it is to provide arbitrators the time to develop such opinions. In order to maintain justice, the ruling advises tribunals to prepare and distribute draft awards far in advance of the end of their mandate.
It also reflects a trend towards increased judicial scrutiny, where courts are prepared to reverse awards for errors in procedure in order to improve accountability. The ruling contributes to the expanding body of knowledge regarding upholding the rule of law, procedural integrity, and transparency in India’s arbitral system.
CONCLUSION
The Delhi High Court ruled that the arbitral award was void since an arbitrator’s signature was missing and no justification was given. The verdict was also procedurally unjust because the dissenting arbitrator was not included in the final discussions. As a result, the Court revoked the judgement and ordered the parties to seek new arbitration in conformity with procedural integrity and fairness standards.
More importantly, the credibility of the arbitral process was undermined since it was determined that the dissenting arbitrator’s absence from the final talks constituted a blatant violation of natural justice norms. The ruling upholds the notion that all arbitrators, irrespective of whether they concur with the majority, should be given the chance to actively participate in the discussions and that dissenting viewpoints are essential protections against capricious decision-making. By requiring tribunals to guarantee increased procedural diligence, openness, and fairness, this decision is anticipated to have an impact on future arbitration practices. Additionally, it shows that Indian courts are prepared to step in when basic arbitration rules are broken, enhancing the legitimacy of the nation’s arbitral system as a whole.
REFERENCE(S):
[1] 2021 SCC OnLine SC 157.
[2] AIR 2019 SUPREME COURT 5041, AIRONLINE 2019 SC 329, (2019) 2 KER LT 679, (2019) 3 ARBILR 152, (2019) 4 CURCC 491, (2019) 5 MAD LJ 7, (2019) 8 SCALE 41
[3] 2005(1)ARBLR369(DELHI), 118(2005)DLT293, 2005(80)DRJ584
[4] AIR 2009 DELHI 102, 2009 (4) ALL LJ NOC 797 (2008) 4 ARBILR 418, (2008) 4 ARBILR 418
[5] FAO(OS) (COMM) 268/2018
[6] AIR 1998 SC 1297
