Delhi High Court Sets Aside Arbitrator's Dismissal of Counterclaim as Interim Award in Eureka Forbes v IRCTC
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TL;DR
- Delhi High Court considered challenge under Section 34 of the Arbitration and Conciliation Act.
- Case involved arbitral dismissal of Eureka Forbes' counterclaim after it was proceeded ex parte.
- Court held that rejection of the counterclaim amounted to an interim award, not a mere procedural order.
- The arbitrator's order was set aside due to violation of equal treatment and opportunity requirements.
Overview
On 12 May 2026, the Delhi High Court ruled in Eureka Forbes Ltd v Indian Railway Catering and Tourism Corporation (IRCTC) on whether an arbitrator's rejection of a counterclaim-while proceeding ex parte-constituted an interim award or a procedural order. The Court set aside the arbitrator's dismissal of the counterclaim, finding it to be an improper interim award subject to challenge under Section 34 of the Arbitration and Conciliation Act, 1996.
What Happened
Disputes arose from a licence agreement for water vending machines at railway stations between IRCTC and Eureka Forbes.
IRCTC initiated arbitration after alleging non-payment of licence fees. Eureka Forbes filed a counterclaim with the arbitrator's permission.
On a date when Eureka Forbes failed to appear, the arbitrator proceeded ex parte and dismissed Eureka Forbes' counterclaim.
Eureka Forbes sought recall of this order, but the arbitrator ruled that he was functus officio as to the counterclaim, treating its dismissal as an interim award.
Eureka Forbes challenged both the ex parte proceedings and dismissal of its counterclaim before the Delhi High Court.
Context
The dispute centers on the treatment of procedural versus substantive arbitral orders under the Arbitration and Conciliation Act, particularly the distinction between a procedural order and an interim award.
Section 18 of the Act requires equal treatment of parties and a full opportunity to present their case. Section 25 provides procedural directives when parties default.
The Delhi High Court applied its previously established three-part test for an 'interim award,' focusing on final adjudication of substantive rights.
Why It Matters
- The ruling clarifies that dismissal of a duly filed counterclaim-while proceeding ex parte-qualifies as an interim award, making it challengeable under Section 34.
- The decision restricts arbitrators' discretion to extinguish claims on procedural grounds without merit-based adjudication, reinforcing procedural fairness and party equality.
- The judgment refines doctrinal lines between procedural orders and interim awards within Indian arbitration law.