This article has been published by Mondaq at: Adjudication Of Issue(s) In Dispute Under The Guise Of Discovery Application – Recourse Under Indian Law – Arbitration & Dispute Resolution – India

The Delhi High Court’s recent decision in APTEC Advanced Protective Technologies AG v. Union of India^[1] (“APTEC Decision”) delves deep into the question of what constitutes an interim award under the Arbitration and Conciliation Act, 1996 (“Act”). The APTEC Decision is significant as it considers when procedural orders may transcend their apparent nature to become challengeable interim awards.

Evolution of the Interpretation of Interim Awards

The landscape of interim awards in India seated arbitrations has been shaped by several landmark judgments that have provided guidance on the nature of an interim award under the Act. Through these decisions, Indian Courts have established clear parameters for distinguishing between procedural orders and interim awards in arbitration proceedings.

In Satwant Singh Sodhi v. State of Punjab^[2], the Supreme Court distinguished between interim awards and interim/procedural orders based on the intended effect, i.e., those meant to have temporary effect until the final award would be interim/procedural orders; and those intended to finally determine specific rights would constitute an arbitral award. This distinction became fundamental in subsequent jurisprudence on the subject.

Building on this foundation, the Supreme Court’s judgment in IFFCO Ltd. v. Bhadra Products^[3] (“IFFCO Decision”) laid the cornerstone for understanding interim awards. The Supreme Court emphasized that while the Act included interim awards within its scope, it did not provide an explicit definition. The IFFCO Decision clarified that an arbitral tribunal could make an interim award on any matter where it could make a final award, with the term “matter” encompassing any disputed point requiring the tribunal’s determination.

In Rhiti Sports Management Pvt. Ltd. vs Power Play Sports & Events Ltd.,^[4] the Delhi High Court held that any procedural order or an order that did not finally settle a matter at which the parties are at issue, would not qualify to be termed as an award. The court emphasised that while there could be several procedural orders that may be passed by an arbitral tribunal, none of those orders would qualify to be an award unless they decided any matter at issue in the arbitration. This was further elaborated in Goyal MG Gases Pvt. Ltd.,^[5] where the Delhi High Court established a comprehensive framework requiring that an interim award must decide substantive disputes, conclusively settle core issues, and address vital aspects of the dispute to be said to be an award or interim award.

In Cinevistaas Ltd. v. Prasar Bharti,^[6] the Delhi High Court held that arbitral proceedings should not be confined to a rigid framework, and when an order conclusively determined substantial rights, it qualified as an interim award. This approach provided a practical test for distinguishing between procedural orders and interim awards.

A recent judgment of MBL Infrastructure Ltd. v. Rites Limited & Anr.,^[7] reinforced these principles as the Delhi High Court emphasized that decisions bringing finality to an issue and falling within the tribunal’s power to make final determinations constitute interim awards. The Delhi High Court categorically held that “A decision of an Arbitral Tribunal which brings a quietus to an issue before it and is an order which the Arbitral Tribunal is empowered to pass at the final stage would constitute an interim award within the meaning of Section 31(6) as also Section 34 of the Act.”

Procedural v. Substantive: Lifting the Veil in the APTEC Decision

At the heart of the APTEC Decision were four applications filed by APTEC against the Government of India seeking discovery of documents. The arbitration proceedings had arisen out of a contract executed between APTEC and the Ministry of Defence, Government of India,  under which APTEC was to supply boots to the Ministry of Defence, Government of India.

APTEC’s applications for discovery specifically sought documents related to field trials for boot crampons and purchase contracts. The arbitrator’s handling of these applications became a pivotal point in the proceedings when, on November 18, 2010, they were dismissed along with substantive findings about the boot crampon’s compatibility (“Discovery Order”). While observing that his observations were prima facie, the arbitrator made definitive conclusions about the satisfactory nature of the boot crampons which was a matter at issue in the arbitration.

APTEC challenged the Discovery Order by filing a petition under Section 34 of the Act, arguing that it constituted an interim award that conclusively determined substantive rights. The Single Judge’s findings in this case were based on determinations regarding the nature of the Discovery Order. While dismissing APTEC’s Section 34 petition, the Single Judge emphasized that despite the arbitrator’s detailed discussion and drawn inferences, the Discovery Order was procedural rather than substantive in nature. The Single Judge noted that the arbitrator had explicitly stated that the Discovery Order was not intended to address the merits of the pending disputes in arbitration.

The Division Bench carefully examined whether the arbitrator’s Discovery Order constituted an interim award that could be challenged under Section 34 of the Act. The Division Bench noted that the key consideration in this determination would be whether the decision adjudicates substantial rights of the parties and conclusively determines certain issues between them.

In analysing the arbitrator’s decision, the Division Bench found that beyond merely dismissing the appellant’s applications for discovery of certain documents, the arbitrator had made definitive findings regarding the compatibility of crampons with the boots. The arbitrator had examined the Directorate General of Quality Assurance’s reports and other materials to conclusively determine that the crampons supplied were satisfactory and there was no evidence of incompatibility. The Division Bench determined that these were substantial and final findings on facts that determined a dispute and substantive rights of the parties. Therefore, the decision amounted to an interim arbitral award on the crampon compatibility issue and was amenable to challenge under Section 34.

Conclusion:

The APTEC Decision is a cautionary tale on how a seemingly innocuous decision on a procedural matter may determine substantive rights and thus gravely prejudice a party if a recourse under Section 34 was not available. The Division Bench correctly notes that the nomenclature given to procedural orders may not be relevant and ultimately, the Courts would have to consider the effect of such decisions to determine whether they constitute arbitral wards. The APTEC Decision thus ensures that parties have immediate recourse against decisions that substantially affect their rights, preventing the potential injustice of having to wait until the final award to challenge crucial determinations. This approach aligns with the fundamental principle of efficient dispute resolution while maintaining necessary safeguards.

Footnotes:

[1] 2025:DHC:111-DB.

[2] (1999) 3 SCC 487

[3] (2018) 2 SCC 534.

[4] 2018 SCC OnLine Del 8678.

[5] 2023 SCC OnLine Del 1894.

[6] 2019 SCC OnLine Del 7071.

[7] 2023 SCC OnLine Del 2736.