India: Power Of Arbitral Tribunal To Grant Declaratory Relief

Introduction:

Declaratory relief, also known as declaratory award or declaration, is one of the remedies available to the parties, essentially of the nature of a statement made by the court/tribunal at the prayer of a party. This form of remedy neither directs a party to perform/omit certain acts nor does it create/ends any party's rights or legal relationships. Declaratory relief is a form of specific relief which does not confer any new right but rather establishes a legal position definitively and has a binding effect on the parties.

Chapter VI of the Specific Relief Act, 1963, under section 34, contains a provision regarding declaration. The scope of this section is to provide a perpetual relief against the adverse strikes on the rights and title of the claimant. This legal relief is granted in order to circumvent the multiplicity of disputes and to steer clear of the clouds over the legal rights of a licit party.

Power of Arbitral Tribunal to Pass Declaratory Award in Indian Jurisdiction:

The question arises about the existence of the Arbitral Tribunal's jurisdiction to pass declaratory awards as per Section 34 of the Specific Relief Act, 1963. The Delhi High Court, in the case of National Thermal Power Corporation Ltd. vs. Wig Brothers Builders and Engineers Ltd., gave an affirmative answer and stated that "There is no prohibition in the Arbitration Act, prohibiting the Arbitral Tribunal from making a declaratory award."¹

Bombay High Court, in the case of Gangadhar Laxman Deshpande vs. Dattatraya Laxman Deshpande, held that the even if the award is only declaratory it "does not mean however that it is void for indefiniteness"² and thus, incapable of execution.³ Further, in the case of Unitech Limited Vs. Housing and Urban Development Corporation⁴, a declaratory relief granted by the arbitrator, that amounts could not be withheld from running account bills on account of Liquidated Damages, was upheld by the High Court of Delhi.

An Arbitral Tribunal has similar powers under the Specific Relief Act like that of a Civil Court. It has been held by the several judicial pronouncements, both in England and India, that an Arbitral Tribunal has powers analogous to the powers conferred upon the Civil Court with respect to the proceedings before it for arbitration of the disputes referred to him. The Bombay High Court, in the case of The Union of India and Ors. vs. D.P. Wadia and Sons,⁵ observed that "There, is nothing in the provisions of the Arbitration Act, 1940, which goes to suggest that a relief which may be granted by the Court under the Specific Relief Act cannot be granted by the arbitrator if the parties decide to have the dispute relating to such relief referred to arbitration."

Ambiguous Declaratory Award:

The Arbitral Tribunal, sometimes, does not specifically grant a declaratory relief, however, from the facts and circumstances of the case and the award passed, it can be gathered that a declaration has been made indirectly. In the case of North Eastern Electric Power Corporation Ltd. vs. Patel Engineering Ltd. and Ors.⁶I have no hesitation in holding that the payment of extra lead is to be determined in accordance with Clause 33(ii)(a) for the item which has deviated being already available in the contract." No definite compensation was awarded in the said award and the award was only declaratory in nature. The High Court of Meghalaya took note of it and set aside the award as the award was devoid of any precise declaration as to what is to be awarded and it was simply stated that the "payment of extra lead is to be determined in accordance with" the clauses of the contract. The declaratory award must, therefore, be backed by proper reasoning and should be unambiguous to be held enforceable.

Declaration beyond the Scope of Reference:

As the genesis of the Arbitral Tribunal's powers to award any relief lies in the principle of party autonomy, the arbitrator cannot award anything beyond its scope of reference. Consequentially, any declaratory award passed in excess of its scope of authority shall be deemed to be untenable and shall fall prey to one of the grounds to set aside the award by the Court if challenge is made under Section 34 of the Arbitration Act.

Any declaratory relief given without just and bona fide interpretation of either terms of the agreement or the fundamental policy of Indian law, can also proclaim such an award to be unenforceable as being passed against the public policy of Indian laws. The Arbitral Tribunal must, therefore, be conscious of the precise scope of its reference to ascertain that the award made does not go beyond the scope of authority or jurisdiction of what has been referred to the Tribunal. The Delhi High Court, in the case of Padam Chand Jain vs. Hukam Chand Jain⁷, set aside the declaratory award passed by the Arbitral Tribunal dealing with the partition in a family dispute, as the said award was in favour of parties outside the scope of reference of the dispute.

Conclusion:

Prima facie, be gathered that a sine qua non exists that declaratory relief can be rendered by the Arbitral Tribunal, provided that the declaration ought to be within the ambit of powers conferred upon the Tribunal by the parties to the agreement. The award should, therefore, fulfill two conditions to be valid, first, it must be definite and unambiguous; and second, it should not be beyond the scope of reference to the Arbitral Tribunal. Anything declared or awarded beyond the specific agreement between the parties may fall foul of Section 34(2)(a)(iv) of the Arbitration Act i.e., matters outside the scope of the submission to arbitration by the parties.

Footnotes

1 National Thermal Power Corporation Ltd. vs. Wig Brothers Builders and Engineers Ltd.; 2009 (2) ARBLR 238 (Delhi).

2 Gangadhar Laxman Deshpande vs. Dattatraya Laxman Deshpande; 1937(39) BomLR159.

3 Raghavendra Ayyaji Desai vs. Gururao Raghavendra Desai; I.L.R. (1913) 37 Bom. 442

4 Unitech Limited Vs. Housing and Urban Development Corporation, 194(2012)DLT481

5 The Union of India and Ors. vs. D.P. Wadia and Sons; AIR 1977 Bom 10.

6 North Eastern Electric Power Corporation Ltd. vs. Patel Engineering Ltd. and Ors.; 2020 (1) GLT 482.

7 Padam Chand Jain vs. Hukam Chand Jain; 1998 (47) DRJ 802.

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