The High Court of Delhi has delivered a compelling ruling in the composite matter of HPCL-Mittal Pipeline Ltd. v. Coastal Marine Construction and Engineering Ltd., setting aside a majority arbitral award that deemed an entire defense “admitted” due to technical defects in pleading format. This decision, issued by Justice Prateek Jalan on May 5, 2025, serves as a decisive clarification regarding the limitations of procedural flexibility in arbitration, affirming that the principle of natural justice remains paramount.
The Procedural Flaw Vitiating the Award
The core dispute originated in an arbitration over a complex O&M contract that was terminated early. After years of proceedings, the majority of the Arbitral Tribunal held that Coastal Marine Construction and Engineering Limited (CMCEL) had failed to file a paragraph-wise denial to the claims asserted by HPCL-Mittal Pipeline Limited (HMPL). Consequently, and relying strictly on principles analogous to Order VIII Rules 3 and 5 of the Code of Civil Procedure (CPC), the majority ruled that all facts underpinning HMPL’s ₹19 crore claim stood admitted by default.
The High Court meticulously scrutinized this approach. Crucially, the bench noted that while Arbitral Tribunals are not bound by the CPC, they must conduct proceedings fairly, granting each party a “full opportunity to present its case” as mandated by Section 18 of the Arbitration and Conciliation Act, 1996.
High Court’s Authoritative Stance
The Court concluded that the Tribunal’s decision to render the substantive, 49-page Statement of Defence (SOD) “non-est” constituted a breach of natural justice, a clear ground for setting aside the award under Section 34 of the Act. Justice Jalan highlighted several critical inconsistencies in the Tribunal’s actions:
1. Inadequate Notice: The Tribunal never clearly mandated a CPC-style, paragraph-wise reply; its initial concern related solely to the lack of a proper supporting affidavit.
2. Conduct Estoppel: By subsequently framing detailed issues covering both claims and counter-claims, permitting extensive evidence, and allowing amendments, the Tribunal implicitly accepted the SOD as valid for adjudication.
3. Form vs. Substance: The Court emphasized that treating the entire defense as admitted purely due to a technical failure of form, rather than assessing the substance of the defense advanced, amounted to unsustainable “procedural pedantry”.
Furthermore, the Court flatly rejected HMPL’s attempt to remit the matter back to the Tribunal under Section 34(4) for reconsideration. Remand is reserved for curable lacunae; setting aside an award based on a fundamental natural justice violation, which would require the Tribunal to overturn its core findings and potentially change the outcome entirely, falls outside the scope of Section 34(4).
AMLEGALS Remarks and Observations
The judgment decisively reinforces that arbitral efficiency must not come at the cost of fairness. Where a party has actively participated and articulated its defense, even if imperfectly formatted, an Arbitral Tribunal cannot, at the final stage, invoke highly technical procedural rules to exclude that defense entirely, especially without prior, clear directive. This ruling serves as a vital safeguard for parties against unforeseen procedural traps in arbitration.
Here are the key pointers regarding how the High Court agreed with and used the minority view:
• Dissenting Opinion as a “Clue” for Procedure: The High Court cited Supreme Court precedent, noting that while a dissenting opinion has no legal effect as an award itself, it can provide “useful clues” regarding procedural issues that become critical during the challenge hearings, which was relevant to the challenge based on natural justice.
• Absence of Notified Procedure: The dissenting arbitrator specifically recorded that there was no agreement among the parties regarding the procedure, and crucially, the Tribunal members never discussed or notified the parties of an intention to strictly follow the Code of Civil Procedure (CPC). This procedural observation aligned directly with the High Court’s finding that CMCEL was never clearly instructed on the need for a para-wise reply.
• Inconsistency of Tribunal’s Conduct: The dissenting arbitrator pointed out the procedural inconsistency, noting that the Tribunal had allowed an amendment to the Statement of Defence (SOD) and framed issues covering both HMPL’s claims and CMCEL’s counter-claims, actions which should not have been taken if the defense was considered non-est or fatally flawed from the start. The High Court’s subsequent analysis echoed these exact procedural contradictions, stating that framing issues on HMPL’s claims would have been “entirely superfluous” if the SOD was taken as deficient.
• Substance Over Form (Pedantry): The dissenting opinion argued that the purpose of arbitration is to “do away with the technicalities” and that the defense contained “specific denials and denials by implication,” qualifying it as sufficient under the rules of specific denial. The minority arbitrator explicitly disagreed with the majority that the SOD was “completely silent” and found that requiring a “pedantic or formal line denial in an arbitration is not necessary”. The High Court agreed that the majority placed a “premium upon form rather than substance” and utilized “procedural pedantry”.
• Failure to Consider Arguments on Merits: The minority opinion highlighted that both parties extensively argued on the merits, and the Tribunal’s minutes consistently recorded that the arguments, including those on merits, would be considered in the final award. The minority viewed disregarding these raised defenses as leading to injustice. The High Court confirmed that the majority award largely failed to advert to the defenses on liability as articulated in the SOD, in contrast to the dissenting opinion which provided detailed issue-wise discussion.
Case Details:
HPCL-MITTAL PIPELINE LIMITED v. COASTAL MARINE CONSTRUCTION AND ENGINEERING
Citation – O.M.P. (COMM) 538/2020
Court – Delhi High Court
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