September 12, 2018
Arbitration Appeal by Third Party– In this recent case, the Bombay High Court made a remarkable holding by ruling that there is no total bar for the maintainability of an arbitral appeal by a third party and it had to be decided in the facts of each case.
Case name: Prabhat Steel Traders Pvt. Ltd. v. Excel Metal Processors Pvt. Ltd. & ors.
The seminal issue that was raised in the case was whether a third party who is aggrieved by an order of interim measures granted by the arbitral tribunal can file an appeal under section 37 of the Arbitration & Conciliation Act, 1996?
The Bombay High Court made reference to plethora of judgments on the issue and made the following observations in the case:
- That in a series of judgments, various Courts have held that a third party who is likely to be affected by any order in proceedings under Section 9 may intervene in those proceedings and oppose the grant of reliefs and/or apply for vacating of any orders passed therein.
- That there is no total bar for the maintainability of an arbitral appeal by a third party and it had to be decided in the facts of each case.
- That in view of the fact that powers of Court under section 9 to grant interim measures and powers of the arbitral tribunal under section 17 of the Arbitration Act are identical in view of the amendment to section 17 with effect from 23rd October 2015, even a third party who is directly or indirectly affected by interim measures granted by the arbitral tribunal will have a remedy of an appeal under section 37 of the Arbitration Act.
- That a person having vital interest in the subject matter of arbitration agreement cannot be asked to watch proceedings from the fence and leave the arena for the parties to the arbitration agreement to cut swords, when the victim of the outcome of the dispute is non else but the person pushed to the fence.
- That though a stranger to an agreement cannot be allowed to be impleaded as party to the arbitral proceedings before the arbitral tribunal nor can such third party seek impleadment to the proceedings before the arbitral tribunal, he is however not precluded from challenging the said order before the arbitral tribunal under section 17 if he so aggrieved by such order by invoking the remedy of an appeal under section 37 of the Arbitration Act.
- In my view, with a view to avoid any absurd and unjust result, a third party has to be permitted to file an appeal if he is aggrieved by an order passed by the learned arbitrator under section 17 of the Arbitration Act. The remedy of an appeal to a third party will have to be read in section 37 of the Arbitration Act with leave of the Court.
The entire case can be accessed here.