Delhi HC: Ending Arbitration for Default Isn’t an Award

Delhi High Court Rules Termination of Arbitration for Default Is Not an Arbitral Award

Justice Jasmeet Singh clarifies Section 25(a) of Arbitration Act does not decide parties’ rights

Ruling restores Mecwel Constructions’ arbitration against GE Power Systems

By Our Legal Reporter

New Delhi: October 25, 2025: In a significant judgment that clarifies the scope of arbitration law in India, the Delhi High Court has ruled that an order terminating arbitral proceedings due to a claimant’s default in filing its statement of claim cannot be treated as an arbitral award. The Court emphasized that such an order does not determine the rights or obligations of the parties and therefore cannot be equated with an “award” under the Arbitration and Conciliation Act, 1996.

The ruling came in the case of Mecwel Constructions Pvt. Ltd. vs GE Power Systems India Pvt. Ltd., where the arbitral tribunal had terminated proceedings after Mecwel failed to file its claim and pay arbitral fees. Justice Jasmeet Singh of the Delhi High Court restored the arbitration, holding that the claimant should not be permanently barred from pursuing its case merely because of procedural lapses.

Background of the Dispute

The dispute arose from a contract between Mecwel Constructions, a private construction company, and GE Power Systems India, a multinational engineering firm. Differences between the parties led to arbitration proceedings being initiated under the Arbitration and Conciliation Act.

However, Mecwel failed to file its statement of claim within the stipulated time and defaulted in paying its share of arbitral fees. Invoking Section 25(a) of the Act, the arbitrator terminated the proceedings.

Mecwel challenged this termination before the Delhi High Court, arguing that the order was not an “award” and that it should be allowed to continue with arbitration. GE Power Systems, on the other hand, contended that the termination was final and binding, effectively closing the matter.

The Legal Question

The central issue before the Court was:

Does an order terminating arbitration under Section 25(a) of the Arbitration Act amount to an arbitral award?

If it were considered an award, Mecwel would have to challenge it under Section 34 of the Act (which provides for setting aside arbitral awards). If not, the arbitration could be revived without such a challenge.

Court’s Reasoning

Justice Jasmeet Singh delivered a detailed analysis of the law:

Nature of an Award
- For an order to qualify as an arbitral award, it must determine substantive rights and obligations of the parties.
- An order under Section 25(a), which merely terminates proceedings for default, does not decide any issue forming part of the dispute.
Section 25(a) Explained
- Section 25(a) allows an arbitrator to terminate proceedings if the claimant fails to file its statement of claim.
- However, this is a procedural termination, not a substantive adjudication.
No Res Judicata Effect
- Since the order does not decide the merits of the dispute, it cannot operate as res judicata (a bar on re-litigation).
- The claimant retains the right to pursue arbitration afresh.
Access to Justice
- The Court stressed that procedural defaults should not permanently deprive a party of its right to arbitration.
- Arbitration is meant to resolve disputes fairly, not to punish parties for technical lapses.

The Verdict

The Delhi High Court held that:

An order under Section 25(a) terminating arbitration for default is not an arbitral award.
Mecwel Constructions’ arbitration against GE Power Systems is restored.
The arbitral tribunal must continue proceedings and decide the dispute on merits.

This ruling ensures that parties are not unfairly barred from arbitration due to procedural lapses and reinforces the principle that arbitration should focus on substantive justice.

Broader Implications

The judgment has important consequences for arbitration law in India:

Clarity on Section 25(a):
- The ruling settles long-standing confusion about whether termination orders are awards.
- It confirms that such orders are procedural and not final determinations.
Protection for Claimants:
- Claimants who default in filing claims or paying fees will not lose their right to arbitration permanently.
- They can revive proceedings without having to challenge the termination as an award.
Encouragement for Arbitration:
- The decision strengthens confidence in arbitration as a fair dispute resolution mechanism.
- It prevents misuse of procedural defaults by respondents seeking to avoid adjudication.
Judicial Efficiency:
- By clarifying the law, the ruling will reduce unnecessary litigation over whether termination orders are awards.

Expert Reactions

Legal experts have welcomed the judgment as a progressive step.

Arbitration practitioners note that the ruling aligns with international arbitration principles, where procedural terminations are not treated as awards.
Corporate lawyers believe the decision will encourage businesses to pursue arbitration without fear of losing rights due to technical lapses.
Academics highlight that the judgment reinforces the pro-arbitration stance of Indian courts, consistent with recent Supreme Court rulings.

Comparative Perspective

In other jurisdictions, similar principles apply:

UNCITRAL Model Law, on which India’s Arbitration Act is based, distinguishes between procedural orders and awards.
Courts in Singapore and the UK have also held that termination for default does not amount to an award, since no substantive rights are decided.

The Delhi High Court’s ruling thus brings Indian law in line with global arbitration standards.

Conclusion

The Delhi High Court’s decision in Mecwel Constructions Pvt. Ltd. vs GE Power Systems India Pvt. Ltd. is a landmark ruling that clarifies the scope of arbitral awards under the Arbitration and Conciliation Act. By holding that termination of proceedings under Section 25(a) is not an award, the Court has ensured that arbitration remains a forum for substantive justice rather than procedural technicalities.

For businesses, lawyers, and arbitrators, the judgment provides much-needed clarity and reinforces India’s commitment to being an arbitration-friendly jurisdiction.