Section 31 (1) and (2) of the Arbitration & Conciliation Act 1996 ("Act") mandates an arbitral award to be signed by all the members of the arbitral tribunal or at the very least be signed by the majority of the members of the arbitral tribunal while providing reasons for any omitted signature.
Recently1 the Hon'ble High Court of Delhi dealt with the issue whether an Arbitral Award is liable to be set aside if it is signed by two out of three arbitrators in the absence of any explanation in the Award regarding the missing signature of the third arbitrator. By setting aside the award, the Court reaffirmed that procedural safeguards under the Act are not expendable in the name of expediency. It affirms that even within the flexible contours of arbitral autonomy, the criterion of procedural legitimacy must be maintained.
Facts in brief
Disputes arose between the parties regarding execution of work related to railway track work at the Bhilai Steel Plant. In terms of the Agreement, the disputes were referred to arbitration governed by the Act. The arbitration was referred to a three-member arbitral tribunal. The arbitral proceedings culminated into an Award comprising of two parts. The first part of the Award, comprising of 50 pages, was signed by Arbitrator B, the second part of the Award, comprising of a single page, was signed by the Presiding Arbitrator with an endorsement that he was in agreement with the findings recorded by Arbitrator B. Arbitrator A neither signed the Award nor issued a formal dissent.
Upon receipt of the Award, the Petitioner challenged the same inter alia on the ground that the Arbitral Award failed to meet the statutory mandate provided under Section 31 (1) and (2) of the Act thereby rendering the said Award invalid.
Petitioner's contentions
- The Petitioner argued that the Arbitral Award provided no explanation for the missing signature of Arbitrator A and as such in view of the mandate provided under Section 31 (1) and (2) of the Act, the Award was invalid.
- It was further argued that a perusal of the communications between the members of the Tribunal showed that Arbitrator A was excluded from the deliberations that took place between the arbitrators at the stage of finalising the Award. This amounted to an abuse of the arbitral procedure.
- Arbitrator A's request for seeking further extension of the mandate of the Tribunal was declined and the proposed award was communicated to Arbitrator A only on the day before the mandate of the Tribunal was set to expire. As such, Arbitrator A was not given the opportunity to even draft his dissent.
Respondent's contentions
- The Respondent defended the Award submitting that the Arbitration proceedings had spanned over three years, with multiple hearings, where all the three members of the Tribunal had fully participated, culminating into a majority award.
- The Act recognises the sanctity of an Award passed by the majority members of a Tribunal.
- Perusal of the communications on record shows that the reason Arbitrator A did not sign the Award was because he did not agree with it. It was argued that there is no requirement of a detailed dissent and the absence of one does not affect the validity of an Award duly signed by the majority members of the Tribunal.
- Arbitrator A had sufficient time to write his dissent award. No explanation whatsoever was provided by the said Arbitrator as to why he failed to draft and publish a reasoned dissent.
- An award signed by the majority members of the Tribunal should not be set aside on a minor technicality. The defect was merely a procedural and curable defect.
- Setting aside an award due to a mere procedural defect would give rise to unnecessary litigation.
Court's analysis and reasoning
Upon examining several precedents2, the Court culled out the following principles governing the form and validity of an arbitral award:
- Binding nature of Majority awards – In a multi-member arbitral tribunal, it is only the opinion of the majority members that constitute an arbitral award. A dissenting arbitrator's opinion does not constitute an award under the Act.
- Statutory requirement of signatures – an arbitral award must be signed by all the members of the arbitral tribunal. Signing an award is not just a formality.
- Explanation for missing signature – where an arbitrator's signature is missing from the arbitral award, the reason for omission must be recorded.
- Objective - the core purpose behind Section 31 (2) of the Act is to ensure that every member of the arbitral tribunal has been afforded the opportunity to engage in the decision-making process. Consequently, in a case where an arbitrator's signature is missing, it becomes incumbent upon the Court to assess the reasons for the same.
- Relevance of dissenting opinion – although a dissenting opinion has no direct legal effect, however the same is far from being irrelevant. Dissent is part of an arbitrator's mandate to render a reasoned award. Such opinions serve as a safeguard against arbitral excesses.
Ruling of the Court
Applying the afore stated principles to the case at hand, the Court found compelling evidence on Arbitrator A's exclusion. The arbitral award was bereft of any reasoning for the missing signature of Arbitrator A. The communications on record revealed that Arbitrator A had been excluded from the final deliberations and was not provided with a fair opportunity to give his dissent opinion. Arbitrator A's concerns, which were raised before the dispatch of the Award, was ignored by the other two members of the Tribunal. The Court observed that this exclusion undermined the integrity of the arbitration process. The Award was accordingly set aside.
This decision is a cautionary tale for arbitrators and parties alike. It reinforces procedural rigors in arbitration while affirming that expediency must never come at the cost of due process and fairness. It signals to the community that procedural rigor ought to be maintained not only to satisfy the statutory mandate but also to instil party confidence in the system.
Footnotes
1. Judgement dated 21.02.2205 passed in M/s ISC Projects Private Limited vs Steel Authority of India Limited, OMP (Comm) 370/2021 [2025 SCC Online Del 1133].
2. Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies Pvt. Ltd. [(2021) 7 SCC 657], Mahanagar Telephone Nigam Ltd. v. Acome [2008 SCC OnLine Del 808 (DB)], Chandok Machineries v. S.N. Sunderson & Co. [(2018) SCC OnLine Del 12782 (DB)], Medeor Hospital Ltd. v. Ernst & Young LLP [(2023) SCC OnLine Del 2477], Deltron Electronics Case [2016 SCC OnLine Bom 9521].
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