Limitation on amendment of Statement of Claim in Arbitration: What Delhi HC ruled

The Delhi High Court has held that claims which are raised at the time of invoking arbitration but are not part of Statement of Claim, are not time-barred by limitation.

The judgment was passed by a Single Judge Bench of Justice Prathiba M Singh in a petition by M/S Cinevistaas Ltd. under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an order passed by the Arbitrator. The said order had rejected the Petitioner’s prayer for amendment of the Statement of claim in the arbitration proceedings against Prasar Bharati.

The facts of the case are as follows. The Petitioner had undertaken production of a game show titled ‘Knock Out’. After negotiations, the Respondent approved telecast of 52 episodes of the programme and the final telecast date was decided as January 28, 2001. Subsequently, television promos were aired and advertisements were also published. However, on December 27, 2000, the Respondent informed the Petitioner that the show would not be aired.

The Petitioner then sought appointment of an independent Arbitrator by filing a Section 11 petition to resolve the dispute and in May, 2004, an Arbitrator was appointed.

While the arbitral proceedings were pending, the Petitioner realised that there were substantial errors in the quantification and details of two claims. It, therefore, moved an application seeking permission to correct the said claims.

The first claim referred to the amount paid to the Art Director, Creative Director, Research Head and Coordinator, Marketing Head, Development Head, Writer and Research Consultant as well as transportation charges, equipment hire charges and various other charges. The second claim referred to the expenses incurred towards technicians including Cameraman, Editor etc.

The application was dismissed in August 2009. The Arbitrator held that the changes sought to be made constituted ‘additional claims’. Since the notice invoking arbitration was issued in November 2003 and the incorporation of these additional claims was being sought in 2008, the application was barred by limitation.

The Petitioner submitted before the High Court that the notice invoking arbitration gave the correct claims and quantification, and it was only due to an inadvertent error that the claim petition had given the wrong quantification. It was further submitted that the application was moved merely for correction of the errors, and the same ought to have been allowed.

On the other hand, the Respondent argued that the Petition under Section 34 ought to be rejected as the rejection of amendment of the claim petition did not constitute an award. It further stated that the application moved by the Petitioner was in the nature of an amendment to the claim statement. Since the claim petition had sought a lesser amount than what was stated in the invocation letter, it ought to be held that the Petitioner had, in fact, given up other claims, it said.

After perusing the letter invoking arbitration issued in October 2003 and the application seeking appointment of an Arbitrator, the Court recorded that the claims were “raised, invoked and referred” to arbitration.

It thus opined that since the claims in respect of the expenses had been quantified and raised at the earliest point of time in the letter invoking arbitration, the same could not be held to be barred by limitation.

Therefore, the finding of the Arbitrator that these were additional claims, was not tenable, the Court stated.

Further observing that the Court has to be very liberal while considering amendments, even in arbitral proceedings which are not bound by the strict provisions of Civil Procedure Code, the Court stated,

“After having noticed the fact that the additional claims now raised, were contained in the invocation letter, as also in the Section 11 petition, there was no reason why the same ought not to have been allowed, by the Ld. Arbitrator.”

While deciding whether the order of the Arbitrator constituted an ‘Award‘ for the purpose of a petition under Section 34, the Court said that the issue had to be examined after considering the nature of the order and not the title of the application.

It thus held that the since decision of the Arbitrator was in the nature of a final adjudication, it was ‘an award’, against which a Section 34 petition was maintainable.

“There is a finality attached to the award and there is nothing in the final award that would be dealing with these claims. It is not just an interim award, but a rejection of the additional claims/amounts finally.

The order is not to be construed as a mere procedural order or an order rejecting a technical amendment, but in fact a rejection of substantive claims. Amendments can be of several kinds. They can range from mere amendment of cause title, addition/deletion of few paragraphs, correction of errors, addition of new claims, correction of existing claims, etc. Every amendment is not to be treated in the same manner. The question in every case of amendment is as to whether it decides a substantive issue. “

It further clarified that the question as to whether these expenses were actually incurred or not, was not to be tested at the stage of considering the application for correction/amendment. The proof of these expenses would have to be adduced by the Petitioner in the arbitral proceedings, it said.

While allowing the petition, the Court directed the Arbitrator to adjudicate the disputes between the parties, in a time bound manner, preferably within a period of one year from the date of first appearance before him.

It thus decreed,

“This Court has not gone into the merits of the amendments made or sought. All the claims would have to be adjudicated by the Ld. Arbitrator in accordance with law, after affording adequate opportunity to the Respondent.”

The Petitioner was represented by Senior Advocate Dinesh Agnani and advocate PK Bansal. The Respondent was represented by advocates Rajeev Sharma, Saket Chandra and T Rajat Krishna.

Read the Judgement: