Arbitrator Can’t Issue Further Directions In An Award Based On Settlement Without Proper ‘Adjudication’

In Surinder Kumar Beri vs. Deepak Beri, certain ‘directions’, which were not in the agreement between the parties, were issued by the arbitrator. The ‘directions’ included the appointment of a team to examine the stock and other records and also for auditing financial statements.

The Delhi High Court held that No doubt these directions can be said to be an attempt by the learned Arbitrator to try and execute/implement the terms and conditions agreed upon by the parties. However, such directions could be passed only by the process of adjudication after having concluded the mediation proceedings. It appears that the learned arbitrator has mixed up the mediation process and the adjudicatory process based on the hearings which have been conducted and the exchange of emails by the parties. He has recorded a settlement, passed an award based on the settlement and has also passed further directions which could only have been passed pursuant to adjudication.”

Held - An arbitrator cannot issue further ‘directions’ in an award based on settlement, without hearing both the parties in a process of adjudication and holding that such directions are contrary to the fundamental policy of Indian Law, the bench set those aside.