The Indian government, dissatisfied with an arbitral tribunal's final award, applied to the Malaysian High Court to set it aside under Sections 37(1)(a)(iv),(v) and (vi), 37(1)(b)(ii), 37(2)(b) and 37(3) and (4) of the Arbitration Act 2005.
On 12 October 2004 the arbitral tribunal issued a partial award which left the parties to agree on the quantification of the amount owed between them, failing which either party could request the arbitral tribunal to reconvene and issue a final award.
In January 2005 the Indian government unsuccessfully applied to the Malaysian courts to set aside the partial award. In July 2014 the Indian government issued the defendants with a notice to show cause. This event prompted the defendants to request the tribunal to be reconvened on the basis that there was a dispute on the quantification of sums payable.
The arbitral tribunal resumed proceedings. One of the nominated arbitrators resigned and was replaced by another arbitrator. The Indian government objected to the tribunal hearing the dispute on the grounds that it did not have jurisdiction to hear the issues, as they related to a show cause notice that the Indian government had issued, which constituted a fresh dispute.
However, the tribunal granted the final award, agreeing with the defendants that:
- the quantification of the partial award had been fully settled and adjusted between the parties; and
- there was no further amount due by either side to the other.
Malaysian High Court proceedings
Dissatisfied with the final award, the Indian government applied to the Malaysian High Court to set it aside on various grounds, including:
- that the initial arbitral tribunal was still subsisting;
- a lack of quantum dispute between the parties;
- that a fresh dispute should have been referred to a separate tribunal;
- excess of jurisdiction;
- that it was contrary to public policy; and
- that the arbitral tribunal was functus officio.
The High Court rejected the Indian government's contentions.
While the court recognised that the Indian government was at liberty to proceed with a separate, new arbitration for what it perceived to be a new issue, this did not prevent the defendants from requesting the arbitral tribunal to be reconvened to render its final award, even if it were to confirm a zero-sum owing between the parties. As such, the tribunal had jurisdiction to do so. The reconstituted arbitral tribunal did not seek to exercise jurisdiction over the merits of the show cause notice, which would have fallen outside the scope of its jurisdiction.
The court also held that the law does not allow an arbitral tribunal to fall apart merely because a member resigns their place on the tribunal. Further, the court considered the Indian government's participation in the arbitral proceedings and therefore dismissed as being without basis its contention that there had been a breach of natural justice.
The court held that there was no reason to interfere with the final award, as the tribunal:
- was not functus;
- was properly reconstituted; and
- had not exceeded its jurisdiction or breached natural justice.
At the time of writing, the Court of Appeal has dismissed the Indian government's appeal. It remains to be seen whether the Indian government will seek leave to pursue the matter in the Federal Court.
For further information on this topic please contact K Shanti Mogan at Shearn Delamore & Co by telephone (+60 320 272 727) or email ([email protected]). The Shearn Delamore & Co website can be accessed at www.shearndelamore.com.
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