Full Judgment Text
REPORTABLE
2025 INSC 1400
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 14630 OF 2025
[Arising out of Special Leave Petition (Civil) No. 10389 of 2025]
HARSHBIR SINGH PANNU AND ANR. …APPELLANT(S)
VERSUS
JASWINDER SINGH …RESPONDENT(S)
J U D G M E N T
Signature Not Verified
Digitally signed by
VISHAL ANAND
Date: 2025.12.09
10:19:12 IST
Reason:
J.B. PARDIWALA, J.:
For the convenience of exposition, this judgment is divided into the
following parts: -
INDEX
I. FACTUAL MATRIX ................................................................................. 6
A. Proceedings before the Sole Arbitrator. ............................................. 9
B. Proceedings before the High Court. .................................................. 18
II. IMPUGNED ORDER ............................................................................. 19
III. SUBMISSIONS ON BEHALF OF THE APPELLANTS ................... 24
IV. ISSUES FOR DETERMINATION ....................................................... 31
V. ANALYSIS................................................................................................ 31
A. Termination of Arbitral Proceedings under the Act, 1996. ........... 37
i. Statutory Provisions pertaining to Termination of Proceedings. . 37
ii. What is the source of the Arbitral Tribunal’s power to terminate the
proceedings under the Scheme of the Act, 1996? ........................... 55
a. Contradictory Views on the subject. ....................................... 56
I . Decisions reading Termination under Section(s) 25, 30 or 38
respectively with Section 32 sub-section (2) of the Act, 1996. .. 57
II . Decisions reading Termination under Section(s) 25, 30 or 38
respectively, to be independent from that under Section 32 sub-
section (2) of the Act, 1996. ............................................................ 82
b. Interplay between Section(s) 25, 30 38 and the termination of
proceedings under Section 32 of the Act, 1996. ................... 107
Special Leave Petition (C) No. 10389 of 2025 Page 2 of 269
I . History of the Working Group on the UNCITRAL Model Law
on International Commercial Arbitration. ................................ 112
II . Section 32 of the Act, 1996 and the import of the expression
“Mandate of Arbitral Tribunal”.................................................. 150
B. Remedy under the Act, 1996 against an order terminating the
arbitral proceedings. ........................................................................... 172
a. Contradictory Views on the subject. ..................................... 177
C. Whether the order for termination of proceedings passed by the
Sole Arbitrator could be said to be contrary to the decision of this
Court in Afcons (supra). ..................................................................... 214
VI. FEW MEANINGFUL SUGGESTIONS ........................................... 229
A. International Perspective on the Framework on Termination of
Arbitral Proceedings. .......................................................................... 229
i. Singapore International Arbitration Centre Rules, 2025 (SIAC
Rules). .............................................................................................. 229
ii. London Court of International Arbitration Rules, 2020 (LCIA
Rules). .............................................................................................. 238
iii. Hong Kong International Arbitration Centre Rules, 2024 (HKIAC
Rules). .............................................................................................. 246
B. Suggestions for the Arbitration and Conciliation Bill, 2024. ..... 254
VII. CONCLUSION AND THE FINAL ORDER ................................. 260
A. Summary of our conclusion. ............................................................. 260
B. Final Order. .......................................................................................... 263
Special Leave Petition (C) No. 10389 of 2025 Page 3 of 269
1. Leave granted.
“ Arbitration is often a friend in conferences but a foe in
practice. Its raison d’etre has always been to ease the burden
on courts and to ensure the expeditious resolution of
commercial disputes. Yet, this is not its only virtue. The true
advantage of arbitration lies in its freedom and flexibility,
with party autonomy as the cornerstone of the arbitral
process.
Parties enjoy the liberty to determine the strength and
composition of the tribunal, to appoint domain experts as
arbitrators, and to design procedures suited to the nature and
complexity of their disputes. This freedom allows them to
bring to the table expertise and insight that even a judge may
not be able to contribute.
However, parties often embrace arbitration in good times,
only to resist or manipulate it when disputes actually arise –
seeking either to wiggle out of arbitration altogether or to tilt
the process unfairly in their favour. In such situations,
judicial intervention becomes inevitable and rightly so to
safeguard fairness and the integrity of the arbitral process.
The evolution of the judicial role from that of a helicopter
parent to that of a guardian angel of arbitration has been
neither smooth nor uniform. Successive legislative
amendments, most notably those of 2015, 2019, and 2021,
have sought to curtail judicial interference and recalibrate the
delicate balance between autonomy and oversight. Yet, in
practice, arbitration has at times become more cumbersome
than civil litigation. Parties continue to exploit every
procedural avenue to delay proceedings, i.e., filing a maze of
applications before the arbitral tribunal, the High Court, and
even this Court, often on technical or jurisdictional
objections.
The present case is yet another instance where the fine
boundary between judicial oversight and arbitral
independence is tested. At its core, arbitration remains a
Special Leave Petition (C) No. 10389 of 2025 Page 4 of 269
creature of contract, founded on the twin pillars of party
autonomy and impartiality. Every act of interpretation
whether of the statute or of the contract must therefore be
guided by these two foundational principles.”
Hindustan Construction Company Ltd. v. Bihar Rajya
Pul Nirman Nigam Ltd. & Ors. 2025 INSC 1365
2. We are tempted to preface our judgment with the above quoted
observations of this Court made by one of us, R. Mahadevan J., as
the situation remains the same. The concerns articulated above
continue to resonate with an undiminishing force in the present
litigation as-well. The issues that have unfolded before us echo the
very same judicial disquiet. Even with the passage of time, the
challenges that beset the arbitral process persist in much the same
form and complexity.
3. The respondent although served with the notice issued by this
Court yet, has chosen not to remain present before this Court
either in person or through an advocate and oppose this appeal.
4.
This appeal arises from the judgment and order passed by the
High Court of Punjab and Haryana dated 07.01.2025 in ARB No.
357 of 2023 (O&M) (for short, the “ Impugned Judgment and
Order ”) by which the petition filed by the appellants herein for
Special Leave Petition (C) No. 10389 of 2025 Page 5 of 269
appointment of an arbitrator under Section(s) 11(5) and (6) of the
Arbitration and Conciliation Act, 1996 (for short, the “ Act, 1996 ”)
came to be rejected.
I. FACTUAL MATRIX
5. It appears from the materials on record that the appellant no. 2 and
the respondent herein, had entered into a partnership agreement
to form a partnership firm running in the name and style of ‘M/s
Amritsar Health & Hospitality Services’ vide a partnership deed
dated 31.03.2013. The said firm was engaged in the business of
providing health care and hospitality services as-well as the
operation of specialty care hospitals in Amritsar. Sometime
thereafter, the appellant no. 1 herein also came to be inducted as a
partner into the said firm by way of a fresh partnership agreement
entered between the parties vide a partnership deed dated
12.03.2014.
6. The aforesaid partnership deed, more particularly, Clause 13
provided that in the event of any dispute or difference arising out
of the said partnership agreement the same would have to be
resolved through arbitration alone. The said clause reads as under:
Special Leave Petition (C) No. 10389 of 2025 Page 6 of 269
“13. That in case of any misunderstanding, disagreement,
differences controversy, disputes or claim, if any arising out
of this Deed or relating to this contract or breach thereof, if
not settled mutually between the parties, the same shall be
referred to two arbitrators to be nominated mutually by all
the parties. The decision given by such arbitrators,
unanimously shall be binding on parties concerned. In case
of any disagreement between the said arbitrators, the natter
will be referred to any other Umpire, whose award given shall
be final and binding on all the parties.”
7. Sometime, in the year 2017, various disputes cropped up between
the appellants herein and the respondents in respect of the capital
contributions and the day-to-day management of the partnership
firm.
8. Accordingly, the appellants issued a legal notice dated 13.06.2018
to the respondent inter-alia for dissolution of the partnership firm
with immediate effect and to refer the disputes to arbitration, by
calling upon the respondent to mutually appoint an arbitrator in
terms of Clause 13 of the aforesaid partnership deed.
9. Since no reply was received from the respondent to the aforesaid
notice of invoking arbitration, the appellants herein filed a petition
being ARB No. 180 of 2019, for seeking appointment of an
arbitrator under Section 11 of the Act, 1996 before the High Court.
Special Leave Petition (C) No. 10389 of 2025 Page 7 of 269
10. The High Court vide its order dated 02.03.2020 passed in ARB No.
180 of 2019, allowed the aforesaid petition filed by the appellants
and thereby appointed a Sole Arbitrator to adjudicate the disputes
between the parties. Whilst passing the said order, the High Court
further directed that the fees payable to the Sole Arbitrator shall
be determined either in accordance with the Fourth Schedule of
the Act, 1996 or as may be mutually agreed upon by the parties.
The said order reads as under: -
“After hearing learned counsel for the parties and leaving
them to raise all their claims/defences/counter-claims which
may be available to them in law to be raised before the
arbitrator, Justice Ram Chand Gupta, a former Judge of this
Court is appointed as the sole Arbitrator. However, such
appointment would be subject to the declaration to be made
by Justice Ram Chand Gupta under Section 12 of the Act
with regard to his independence and impartiality to settle the
dispute between the parties.
The Arbitrator is requested to complete the proceedings
within the time limit specified under Section 29A of the Act.
The Arbitrator shall be paid fee in accordance with the Fourth
Schedule of the Act, as amended or as may be mutually settled
by the parties and the Arbitrator.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 8 of 269
A. Proceedings before the Sole Arbitrator.
11. Pursuant to the above, the arbitration proceedings were
commenced and the appellants herein filed their Statement of
Claim before the arbitral tribunal to the tune of Rs. 13,65,09,906/-.
12. Thereafter, vide the order dated 05.01.2021 passed by the Sole
Arbitrator, the Statement of Claim filed by the appellants herein
was taken on record. It further appears that the Sole Arbitrator on
the basis of the said Statement of Claim, determined the fees
payable in accordance with the Fourth Schedule to a sum of Rs.
17,01,655/- which was to be borne equally by both the parties i.e.,
Rs. 8,50,827/- by the appellants and respondent, respectively. The
said order reads as under: -
“ ORDER
Vide order dated 14.10.2020, parties were directed to
complete the pleading part through email as well as by filing
hard copies of the pleadings by post. In compliance of the said
order claim petition has been filed by the claimant.
Respondent has also confirmed on telephone that hardcopy of
the claim petition had been received by them. In view of the
same, respondent is directed to file written statement/counter
claim if any on or before 25.01.2021.
After going through the claim petition, the total claim
amount is Rs. 13,65,09,906/-. According to 4th Schedule of
Arbitration and Conciliation Act, 1996, tentative fee to be
paid to the Arbitrator comes to Rs. 17,01,655/- to be shared
equally by both the parties. Hence, both the parties are
Special Leave Petition (C) No. 10389 of 2025 Page 9 of 269
directed to pay Rs. Rs.8,50,827/- each in the Bank Account of
the undersigned on or before the next date of hearing. [...]”
(Emphasis supplied)
13. Although it is not forthcoming from the record whether the
consent of the parties was obtained whilst fixing the fees payable
to the arbitrator as per the Fourth Schedule of the Act, 1996, yet as
there was no objection from either party, we need not dwell any
further on this aspect.
14. Thereafter, the respondents filed their counter-claim to the tune of
Rs. 82,78,54,166/- and the total sum in dispute, together with the
claim and the counter-claim came to a sum of Rs. 96,43,64,072/-.
In view of the same, the Sole Arbitrator vide its order dated
23.04.2021 again revised the fees payable in terms of the Fourth
Schedule of the Act, 1996 to a sum of Rs, 37,50,000/-, to be borne
equally by both the parties. The said order reads as under: -
“ ORDER
[...] So far as fee payable to the Arbitrator is concerned,
tentative fee after going through the claim petition was
assessed vide order dated 05.01.2021. Total claim of the
claimants is Rs. 13,65,09,906/-. However, respondent has
also filed counter-claim claiming a total sum of Rs.
82,78,54,166/-. Hence, total sum in dispute comes to Rs.
96,43,64,072/-. The fee as calculated on the sum in dispute as
per IVth Schedule of the Arbitration and Conciliation Act,
1996 comes to much more and however in view of ceiling
Special Leave Petition (C) No. 10389 of 2025 Page 10 of 269
fixed under the said Schedule, fee payable to the Arbitrator is
fixed at Rs. 37,50,000/-. On the request of the parties, they
were permitted to pay the fee in installments vide order dated
02.02.2021. Parties were permitted to pay 50% of the fee
before completion of pleadings. However, despite repeated
orders, parties had paid only a part of first installment of even
the tentative fee as assessed vide order dated 05.01.2021.
However, as the fee has now been revised in view of the
counter-claim filed by the respondent, parties are again
directed to pay first installment of the fee so reassessed on or
before the next date of hearing.
[...] However, there is no dispute that claimants are liable to
pay their 50% share of fee of Arbitrator and however even
claimants have not paid first installment of the fee. It is
clarified that subject to decision on the application moved by
respondent, both the parties are now liable to pay Rs.
18,75,000/- each. 50% of the same is to be paid by both the
parties before completion of pleadings. Hence, both the parties
are directed to pay the same on or before the next date of
hearing.”
(Emphasis supplied)
15. Pursuant to the same, both the appellants and the respondent
herein, preferred an application raising certain objections to the
determination of fees by the Sole Arbitrator vide its order dated
23.04.2021.
16. The appellants inter-alia contended that the counter-claim filed by
the respondents was not only frivolous but was also an
exaggerated estimation of the amount claimed, and that the
appellants were not in a financial position to bear the arbitral fees
for the total amount in dispute.
Special Leave Petition (C) No. 10389 of 2025 Page 11 of 269
17. The respondent on the other hand, contended that he was liable to
pay only 25% of the total fees of arbitration as his share in the
partnership firm was only 25%.
18. In view of the aforesaid, the Sole Arbitrator adjourned the
proceedings for further hearing on the aspect of fees payable, and
directed the counsel appearing for the appellants and the
respondent to seek further instructions in this regard.
19. On the next date of hearing, the Sole Arbitrator vide its order dated
17.07.2021, dismissed the application filed by the respondents
contending that he was liable to pay only 25% of the total fees of
arbitration in view of his share in the partnership firm. The Sole
Arbitrator held that as per Section 38 of the Act, 1996, both the
contesting parties, namely, the claimant and the respondent, are
liable to bear the fees of arbitration in equal proportion i.e., both
the claimant and the respondent are liable to pay 50% of the total
fees assessed, respectively. The Sole Arbitrator further held that
the total sum of Rs. 37,50,000/-, payable towards the fees of
arbitration had been determined in accordance with the Fourth
Special Leave Petition (C) No. 10389 of 2025 Page 12 of 269
Schedule of the Act, 1996 and with the consent of both the parties.
The relevant observations read as under: -
“Second sitting by video-conference was conducted by
the Tribunal and the senior counsel for the claimant as well
as counsel for the respondent were duly heard. Detailed order
was passed fixing Arbitrator's fee as Rs. 37,50,000/-. It may
be mentioned here that the said order was passed with the
consent of counsel for both the parties.
An application filed by respondent that he is liable to
pay only 25% of the fee on the plea that his share in the
partnership firm concerned is only 25% was also decided
after hearing counsel for both the parties and it was held that
at this stage under Section 38 of the Act both the contesting
parties i.e., claimants and respondent are liable to pay 50%
each of the fee assessed. Both the counsel had agreed that both
the parties would pay Rs. l,00,000/- each by the next date of
hearing and regarding mode of payment of respective share of
fee of Arbitrator, they would seek instruction from their
respective clif.us and hence the matter was adjourned. ”
(Emphasis supplied)
20. Thereafter, it appears from the material on record that a total of six
hearings were conducted by the Sole Arbitrator. In all the said six
hearings, the learned counsel for the appellants remained absent,
as a result of which the matter had to be adjourned.
21. In the meantime, the appellants herein filed one affidavit before
the Sole Arbitrator expressing their inability to pay their share of
the arbitral fees, as determined earlier with the consent of the
Special Leave Petition (C) No. 10389 of 2025 Page 13 of 269
parties. Accordingly, the Sole Arbitrator in view of Section 38 of
the Act, 1996, enquired from the respondent, if he would be
willing to bear the claimant’s share of the arbitral fees, and
accordingly adjourned the matter for further hearing. The relevant
observations read as under: -
“Fourth physical hearing was conducted by the Tribunal on
25.02.3022 in Chandigarh Arbitration Centre. However on
that date as well though respondent was present, clerk of Mr.
Ripudaman Sidhu, Advocate appeared and sought
adjournment on the plea that the counsel could not, be
present due to prior engagement. However on that date
affidavit regarding admission/denial of documents in
compliance with order dated 12.09.2021 was filed by clerk of
Mr. Ripudaman Sidhu, Advocate. Another affidavit of
claimant was filed that claimant is not in a position to pay
his share of pay of Arbitrator as assessed vide order dated
17.07.2021 with the consent of counsel for the parties.
However in view of Section 38 of the Act, respondent was
given an opportunity, as to whether he was ready to pay
arbitrator's fee of the share of the claimant as well. As neither
claimant nor counsel for the respondent was present on that
date, in the interest of justice, matter was adjourned to
17.03.2022.”
(Emphasis supplied)
22. On 28.03.2022, the matter was again taken up by the Sole
Arbitrator on the issue of termination of arbitral proceedings for
non-payment of fees of arbitration in terms of Section 38 of the Act,
1996. The appellants herein once again reiterated their stance that
they were not in a position to pay the arbitral fees for both the
Special Leave Petition (C) No. 10389 of 2025 Page 14 of 269
claim and the counter-claim, and could pay only their share of the
fees in respect of the claim. The respondent on the other hand,
submitted that although he was willing to pay the arbitral fees for
both the claim and the counter-claim, yet he was not ready to bear
the claimant’s share of the fees payable.
23. In such circumstances referred to above, the Sole Arbitrator vide
its order dated 28.03.2022 terminated the arbitral proceedings. The
Sole Arbitrator observed that as per Section 38 of the Act, 1996,
where one party fails to pay his share of the arbitral fees, the other
party may pay that share. However, in the event the other party
also declines to pay the said share of the arbitral fees, the arbitral
tribunal may suspend or terminate the arbitral proceedings.
Accordingly, since neither party was willing to pay the arbitral
fees in respect of either the claim or the counter-claim, the arbitral
proceedings came to be terminated by the Sole Arbitrator. The
relevant observations read as under: -
“[...] the matter was adjourned for today for hearing the
parties regarding termination of proceedings under Section
38 of the Act.
Special Leave Petition (C) No. 10389 of 2025 Page 15 of 269
15. It has been stated by learned counsel for the claimant that
claimant is not in a position to pay his share of Arbitrator's
fee as assessed vide order dated 17.07.2021 as he has suffered
losses in the businesss and he is not in a position to pay the
said fees. He has further stated that claimant is ready to pay
only 50% of the fee of his claim i.e. 50% of Rs. 17,01,855/-
i.e. Rs. 8,50,827/-. However when query was put to him by
the Tribunal as to when he would pay the said amount, he
stated that he would pay the same as and when his business
earning would improve and he receives the possession of the
hospital.
16. It has been stated by learned counsel for the respondent
as well as respondent who is also present in person that he is
ready to pay his share of the fee as assessed vide order dated
17.07.2021 and he is not ready to pay the share of claimant
as well.
17. Parties were directed to pay their respective share of
Arbitrator's fee as assessed vide order dated 17.07.2021 as
provided under Section 38 of the Act which is reproduced as
under:
“38. Deposits.—
(1) The arbitral tribunal may fix the amount of the
deposit or supplementary deposit, as the case may
be, as an advance for the costs referred to in sub-
section (8) of section 31, which it expects will be
incurred in respect of the claim submitted to it:
Provided that where, apart from the claim, a
counter-claim has been submitted to the arbitral
tribunal, it may fix separate amount of deposit for
the claim and counter-claim.
(2) The deposit referred to in sub-section (1) shall
be payable in equal shares by the parties: Provided
that where one party fails to pay his share of the
deposit, the other party may pay that share:
Special Leave Petition (C) No. 10389 of 2025 Page 16 of 269
Provided further that where the other party also
does not pay the aforesaid share in respect of the
claim or the counter-claim, the arbitral tribunal
may suspend or terminate the arbitral proceedings
in respect of such claim or counter-claim, as the
case may be.
(3) Upon termination of the arbitral proceedings,
the arbitral tribunal shall render an accounting to
the parties of the deposits received and shall return
any unexpended balance to the party or parties, as
the case may be.”
18. As is dear from the aforementioned provision of the Act,
where one party fails to pay his share of the fee, the other party
may pay that, share and however if other party also does not
pay the aforesaid share in respect of claim or the counter-
claim, the Arbitral Tribunal may suspend or terminate the
Arbitral proceedings in respect of such claim or counter-
claim as the case may be. As is clear from the aforementioned
facts, I had been conducting proceedings in this matter for the
last about two years and had been making efforts to decide the
same expeditiously even during COVID-19 pandemic. Four
hearings by video-conference were also conducted at my
residence. Five physical hearings were also conducted at
Chandigarh Arbitration Centre. However claimant was not
interested in getting this matter decided expeditiously as is
clear by various orders passed by the Tribunal. He is not
ready to pay his share of the Arbitrator's fee on the plea that
he is not in position to pay the same as he suffered losses in
the business and possession of the hospital has also been taken
away. Hence in view of these facts, I have no other alternative
but to terminate the further proceedings of the Tribunal in
this matter. I hereby order for termination of the present
proceedings under Section 38 of the Act.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 17 of 269
B. Proceedings before the High Court.
24. Aggrieved by the aforesaid, the appellants preferred a petition
under Article 227 of the Constitution being CWP No. 6182 of 2022
before the High Court of Punjab and Haryana inter-alia assailing,
first , the order dated 28.03.2022 passed by the Sole Arbitrator
terminating the arbitral proceedings, secondly , the constitutional
vires of the Fourth Schedule of the Act, 1996 and lastly , the
determination of fees by the Sole Arbitrator in consequence
thereof.
25. During the pendency of the aforesaid proceedings, this Court in
its decision in Oil and Natural Gas Corporation Ltd. v. Afcons
Gunanusa JV reported in 2022 SCC OnLine SC 1122 , upheld the
constitutional validity of the Fourth Schedule of the Act, 1996.
26. Since the principal contention advanced by the appellants in the
aforesaid writ petition for assailing the termination of the arbitral
proceedings was on the ground that the Fourth Schedule of the
Act, 1996 was arbitrary and thus, the Sole Arbitrator could not
have determined the fees in accordance thereof. High Court vide
its order dated 15.02.2023, dismissed the writ petition in view of
the ratio laid down by this Court in Afcons (supra). However, the
Special Leave Petition (C) No. 10389 of 2025 Page 18 of 269
High Court left it open for the appellants to avail any other remedy
that may be available to them in law, against the termination of
arbitral proceedings. The relevant observations read as under: -
“ The issue(s) raised in this petition has already been decided
by the Supreme Court in the case of Oil and Natural Gas
Corporation Ltd. Vs. Afcons Gunanusa JV, 2022 SCC
OnLine SC 1122. Therefore, the petition is disposed of, in
terms of the said decision. However, the petitioner would be
at liberty to avail the remedies, if any, available in law. ”
II. IMPUGNED ORDER
27. Pursuant to the aforesaid, the appellants filed one another petition
under Section 11 sub-section(s) (5) and (6) of the Act, 1996 before
the High Court of Punjab and Haryana, being ARB No. 357 of 2023
(O&M), seeking appointment of an arbitrator afresh.
28. The High Court vide its impugned judgment and order dated
07.01.2025 declined to entertain the second petition filed by the
appellants under Section 11 of the Act, 1996 on the ground that the
same was not maintainable. The said decision is in three parts: -
(i)
First, the High Court placing reliance on the decision of the
High Court of Delhi in M/s Chemical Sales Cooperation &
Ors. v. M/s A Laxmi Sales and Services Pvt. Ltd. & Ors.
reported in 2011 SCC OnLine Del 3487 held that there lies
Special Leave Petition (C) No. 10389 of 2025 Page 19 of 269
a distinction between termination of arbitral proceedings
and termination of mandate of the arbitral tribunal.
Termination of proceedings simpliciter under Section 38 of
the Act, 1996 does not automatically mean the termination
of the mandate of the arbitrator in terms of Section 32 sub-
section (2)(c) of the Act. The relevant observations read as
under: -
“13. Section 32 of the Arbitration Act provides for the
termination of the proceedings. This provision came
up for interpretation before the Delhi High Court in
M/s. Chemical Sales Corporation and others Versus
M/s. A & A Laxmi Sales and Service Private Limited
and others. 20} J SCC OnLine Delhi 3847. The Court
proceeded to notice the statutory provision and
observed as under:
xxx xxx xxx
11. The aforesaid provision specified the
circumstances under which arbitral
proceedings shall be terminated. It provides
that arbitral proceedings shall stand
terminated on Arbitral Tribunal making an
award. Besides that, arbitral proceedings can
also be terminated in case (a) claimant
withdraws his claim (b) parties agree on the
termination of the proceedings. For example, if
parties arrive at a settlement and agree for
termination of proceedings, in such an
eventuality also, arbitral proceedings shall
stand terminated (c) if Arbitral Tribunal finds
that continuation of the proceedings have
become unnecessary or impossible for any other
reason. In other words, if the arbitral tribunal
finds, for any reason which includes non-
Special Leave Petition (C) No. 10389 of 2025 Page 20 of 269
cooperation of the parties, making the
continuation of the proceedings impossible,
then it can make an order for termination of the
arbitral proceedings. In case of termination of
the proceedings, the mandate of Arbitral
Tribunal shall also stand terminated as
envisaged under Sub-Section 3 of Section 32 of
the Act except in cases where Section 33 and
Section 34(4) of the Act are attracted. Arbitral
Tribunal has power to terminate the arbitral
proceedings under Section 25(a) upon default
of the claimant to communicate his statement
of claim; under Section 30(2) upon settlement
of dispute by the parties and under Section
38(2) upon failure of the parties to pay the
amount of deposit fixed by the Arbitral
Tribunal. The termination of arbitral
proceedings is different from termination of the
mandate of arbitrator. The mandate of
arbitrator, depending upon the facts and
circumstances of a case, may come to an end
but not the arbitral proceedings. For example,
if the parties to the arbitration agreement had
fixed a period of six months for completion of
arbitral proceedings and making of an award
by the Arbitral Tribunal and the Arbitral
Tribunal fails to do so on or before expiry of six
months, the mandate of Arbitral Tribunal shall
come to an end but not the arbitration
proceedings and in such an eventuality, if a
substitute arbitrator is appointed than he shall
have to continue with the arbitration
proceedings from the stage the same had been
left by the earlier arbitrator. However, in case
arbitration proceedings are terminated within
the meaning of Section 32 of the Act resulting
in termination of mandate of arbitrator, the
same cannot continue merely by appointing
another arbitrator. In such a scenario, first of
all, the arbitration proceedings have to be
Special Leave Petition (C) No. 10389 of 2025 Page 21 of 269
revived after setting aside the order of Arbitral
Tribunal terminating the arbitral proceedings.
12. In view of the above discussions, I do not
find any force in the contention of learned
senior counsel for the petitioner that the
termination of arbitral proceedings, in this case
on the ground of alleged non-cooperation of the
claimant including the ground of non-payment
of fee, tantamount to withdrawal by the
arbitrators resulting in termination of mandate
of Arbitral Tribunal, within the meaning of
Section 15(1)(a) of the Act thereby attracting
sub-Section 2 of Section 15 of the Act. In this
case, arbitrators have not withdrawn from
office for any reason as stipulated in Section 14
or 15 of the Act but have, in fact, terminated
the arbitral proceedings under Section 32
(2)(c). Thus, in my view, sub Section 2 of
Section 15 of the Act is not attracted in the facts
of this case.”
14. The above reproduced observaiions of the Delhi
High Court clearly amplify that the termination of the
arbitral proceedings is different from the termination
of the mandate of the Arbitrator. [...]”
(ii) Secondly, the High Court observed that, the Sole Arbitrator
in the present case had terminated the arbitral proceedings
on account of the failure of the parties to pay the arbitral
fees. Since under Section 38, the Sole Arbitrator is
empowered to do so, he can neither be said to have
withdrawn from office nor otherwise rendered incapable of
Special Leave Petition (C) No. 10389 of 2025 Page 22 of 269
acting as an arbitrator. As such there was no occasion for
seeking substitution of the arbitrator in terms of Section 11
read with Section 15 sub-section (2) of the Act, 1996. The
relevant observations read as under: -
“12. It is evident from the perusal of the above
reproduced order that the Arbitrator had proceeded to
terminate the proceedings on account of the attitude of
the parties, who failed to fulfil their commitment and
pay the arbitral fee. The order passed by the learned
Arbitrator fell within the four corners of Section 38(2)
of the Arbitration Act, which he was fully empowered
to pass. Petitioners remained unsuccessful in a
challenge to the said order when a writ petition filed
by them was disposed off by this Court on 15.02.2023
[...]
xxx xxx xxx
14. [...] The termination of the arbitral proceedings can
be on account of the non-cooperative attitude of the
parties, including the non-deposit of the arbitral fee, as
is this situation in the present case. In such
circumstances, there is no occasion for filing of a fresh
petition for appointment of an Arbitrator [...] The
judgments relied upon by the counsel for the petitioner
are not attracted lo the facts of the present case and in
both the cases a substitute arbitrator was appointed
under Section 15 of the Arbitration Act as the previous
arbitrator had resigned/withdrawn from the
proceedings.”
(iii) Thirdly, according to the High Court the appropriate
remedy against such order of termination of proceedings
under Section 38 of the Act, 1996 ought to have been either
Special Leave Petition (C) No. 10389 of 2025 Page 23 of 269
by way of filing an application for recall of the order of
termination before the Sole Arbitrator or by challenging the
legality of the termination under Section 14(2) of the said
Act. In this regard reliance was placed on the decisions of
this Court in SREI Infrastructure Finance Ltd. v. Tuff
Drilling reported in (2018) 11 SCC 470 and Lalitkumar
Sanghavi v. Dharmdas Sanghvi reported in (2014) 7 SCC
255
, respectively. The relevant observations read as under:
-
“14. [...] rather the remedy for the party concerned is
either to file an application for recall of the order as has
been held by the Supreme Court in Srei Infrastructure
Finance Limited's case (supra) or lo challenge the
legality of the order under Section 14(2) as observed by
the Apex Court in Lalitkumar's case (supra). [...]”
29. In such circumstances referred to above, the appellants are here
before this Court with the present appeal.
III. SUBMISSIONS ON BEHALF OF THE APPELLANTS
30. Mr. Nakul Dewan, the learned Senior counsel and Mr. Samarth
Sagar, the learned counsel, appearing for the appellants, in their
written submissions have stated thus: -
“The Hon’ble High Court while dismissing the application of
the Petitioners has passed the impugned order on 3 principal
Special Leave Petition (C) No. 10389 of 2025 Page 24 of 269
premises: 1. That an order terminating arbitral proceedings
on the ground of non payment of Arbitrator’s fees falls within
the parameters of Section 38(2) and the Arbitrator is fully
empowered to pass such an order. 2. The only remedy
available to an aggrieved party is to either file an application
for recall before the same Arbitrator. 3. The other remedy is
to challenge the order terminating the arbitral proceedings
under Section 14(2). It is submitted that all the 3 premises on
which the impugned judgment is based are wholly erroneous
and in ignorance of the settled jurisprudence on this issue.
I. Termination of Arbitral Proceedings on ground of
non-payment of fees can be passed by the
Arbitrator under Section 38(2)
The finding of the arbitrator on this aspect is absolutely
erroneous, both legally and factually. It is contrary to settled
jurisprudence on this issue. The Supreme Court in the case
of Laliltkumar Sanghavi v. Dharamdas Sanghvi, (2014) 7
SCC 255 has clearly traced the source of this power to only
Section 32(2)(c). The ratio is extremely specific and clear.
Therefore, the finding of the High Court is totally contrary to
judgment in Lalitkumar Sanghavi’s case (supra), which has
consistently been followed by High Courts also.
Secondly, the recent judgment of this Hon’ble Court
judgment in the case of ONGC Ltd. v. Afcons Gunanusa JV,
(2024) 4 SCC 481 also vitiates the finding of the Hon’ble
High Court as perverse and unsustainable. This Hon’ble
Court in the Afcons Gunanusa JV case (supra) while
examining the provisions of Sections 31, 31A, 38 and 39 has
clearly held that the power of the Arbitral Tribunal to fix its
own fees is subject to the consent of the parties. It has further
been held that an Arbitral Tribunal does not have the power
or jurisdiction to pass any binding direction to the parties on
the aspect of its fees.
This ratio assumes importance as in the present case, the Sole
Arbitrator, vide its procedural order dated 23.04.2021
(Annexure P-13) had enhanced its fees in accordance with the
Fourth Schedule without taking the consent of the parties.
Special Leave Petition (C) No. 10389 of 2025 Page 25 of 269
This is also evident from the procedural order 24.05.2021
(Annexure P-14) wherein the Petitioners’ raise their
objection to the said enhancement, which the Petitioners
further strengthened by filing a writ petition (Annexure P-
15) in the High Court against the determination of fees by the
Sole Arbitrator.
It is submitted that the order dated 28.03.2022 (Annexure P-
9, Pg. 61 of SLP) terminating the arbitral proceedings on
ground of non-payment of fees has the effect of binding the
parties to the arbitration to the determination of fees made by
the Arbitrator, while the issue was pending before the High
Court. Furthermore, this order also imposes the unfortunate
consequence of extinguishing the lis between the parties,
which is completely disproportionate and unwarranted.
According to the judgment in Afcons Gunanusa JV case
(supra) the Arbitral Tribunal clearly did not have the power
or jurisdiction to do so.
II. Power of recall of an Arbitrator of an order
passed under Section 32(2)
The High Court fell into a grievous and manifest error of law
in holding that first remedy available to the petitioners is to
file an application for recall of the order of termination of
proceedings before the Sole Arbitrator. The High Court relied
on the case of SREI Infrastructure Finance Ltd. v. Tuff
Drilling Pvt. Ltd., (2018) 11 SCC 470 to come to the said
conclusion.
It is submitted that the High Court has completely misread
and misunderstood the judgment in the case of SREI
Infrastructure Finance Ltd. (supra). The Hon’ble Supreme
Court has read the power of recall and review on procedural
aspects into Section 25 only and not Section 32. Infact, this
Hon’ble Court had specifically noticed the differences in the
language of Section 25 and 32 and while distinguishing the
scope of the two provisions, refrained from reading the said
power into Section 32.
Special Leave Petition (C) No. 10389 of 2025 Page 26 of 269
It is submitted that the entire premise of the finding arrived
at by the Hon’ble High Court is based on a complete
misreading and misappreciation of the actual ratio decidendi
of the judgment in the case of SREI Infrastructure Finance
Ltd. (supra) and such liable to be set aside and rejected.
III. Challenge to order terminating arbitral
proceedings under Section 14(2).
It is submitted that the finding of the High Court that the
other option available to the petitioners is to challenge the
termination of mandate under Section 14(2) is again based
on a complete misreading of the provisions of the Arbitration
and Conciliation Act, 1996, as well as the law on the said
issue.
In the facts of the present case, the question of challenging the
termination of mandate would arises when a party wants to
dispute the facts leading to the termination of mandate and
the termination of mandate. In the present case, the
petitioners are not disputing the termination of the mandate.
They are rather challenging the termination of proceedings.
According to petitioners, this present case concededly results
in termination of mandate of the Sole Arbitrator, but not the
termination of proceedings.
In such a case, the appropriate remedy is Section 15(2) and
not Section 14(2). Reference is invited to the judgment in the
case of Swadesh Kumar Goyal v. Dinesh Kumar Agarwal &
ors., (2018) 11 SCC 470.
Furthermore, Section 15(2) is an enabling provision, which
enables a party to seek the appointment of a substitute
arbitrator in accordance with the ‘rules applicable to the
appointment of the arbitrator being replaced’, which this
court has held to include the arbitration agreement and
statutory provisions applicable when the mandate of
arbitration agreement is not fulfilled, i.e. Section 11(6).
Section 15(2) is merely a substantive provision, which gets
implemented through the machinery and procedural
provision of Section 11(6). Therefore, the Petitioners’
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application under Section 11(6) was fully maintainable.
Reference is invited to the judgment in the cases of:
▪ Yashwith Constructions (P) Ltd. v. Simplex Concrete
Piles India Ltd., (2006) 6 SCC 204;
▪
Shailesh Dhairyawan v. Mohan Balakrishna Lulla,
(2016) 3 SCC 619
▪
C.G. Govardhan v. R.K. Estates & ors., 2019 SCC Online
Kar. 4293
And all other judgments in Compilation Vol.2 submitted by
the Petitioners.
IV. Submissions on reconsideration of the law in
relation to power to terminate arbitral
proceedings for non-payment of fees
It is humbly submitted that the principal basis for rooting the
power of the Arbitrator to terminate the arbitral proceedings
on account of non payment of fees is a result of the nebulous
provisions of Sections 32(2)(c) and 38(2).
Section 38 relates to deposits, which the arbitral tribunal may
demand as an advance for the costs referred to in Section
31(8). Costs, as defined and explained in Section 31(8) indeed
include the fees of the arbitrator. However, as explained and
held by the Supreme Court in ONGC Ltd. v. Afcons
Gunanusa JV, (2024) 4 SCC 481, the provisions of Section
31 and 32 and 38 cannot clothe the Arbitral Tribunal with
the power to bind the parties to a unilateral determination of
fees by the Arbitral Tribunal. Determination of fees has to
always be subject to the consent of the parties.
It is submitted that the Supreme Court in the case of
Laliltkumar Sanghavi v. Dharamdas Sanghvi, (2014) 7 SCC
255 had traced the power to terminate the arbitral
proceedings under this ground to Section 32(2)(c) alone.
However, there is cause to question the correctness of this
position of law. This is because of the following reasons:
1. The language of Section 32(2)(c) itself suggests that the
ground of non-payment of fees will not be covered by it.
Special Leave Petition (C) No. 10389 of 2025 Page 28 of 269
Section 32(2)(c) allows the arbitral tribunal to terminate
the arbitral proceedings if “the continuation of the
proceedings has for any reason become unnecessary or
impossible.” It is submitted that the phrase “unnecessary
or impossible” signifies circumstances that render the
performance of the adjudicatory function futile or
incapable of being performed. They relate to circumstances
which are involuntary and outside the control of the
Arbitral Tribunal, which the Arbitral Tribunal must yield
to. They do not relate to circumstances which the Arbitral
Tribunal can voluntarily waive, like agreeing to fees
acceptable to the parties. It is submitted that non-payment
of fees can never become a ground for termination of
proceedings itself, which is a very serious consequence
bringing an end to the life of the lis itself. This lacuna has
been noticed by the judgment of the Delhi High Court also
in the case of Shushila Kumari & anr. v. Bhayana Builders
Pvt. Ltd., 2019 SCC Online 7243.
2. The above lacuna has further been strengthened by a
recent judgement of this Hon’ble Court on the scope of
Section 32(2)(c) in the case of Dani Wooltex v. Sheil
Properties Ltd., (2024) 11 SCC 1. The Supreme Court
while examining the scope of Section 32(2)(c) has
underscored the peculiar characteristics of the phrase
“unnecessary or impossible” as relating to the futility of
performing the adjudicatory function in light of
abandonment of claim by the party. This judgment again
highlights the peculiar limitation of the circumstances in
which power under Section 32(2)(c) can be invoked, which
clearly shows that power to terminate proceedings on
ground of non-payment of fees cannot be related to Section
32(2)(c).
3. The doctrine of proportionality also occasions a rethink of
the present state of law on the ground that the inability of
the parties to pay the fees determined by the arbitral
tribunal, on grounds of economic capacity, ought not to
be used against the parties as a penal measure entailing
extinguishment of their dispute. This is especially so when
the Arbitration and Conciliation Act, 1996 provides
Special Leave Petition (C) No. 10389 of 2025 Page 29 of 269
sufficient mechanisms to the Arbitral tribunal to arrive at
a reasonable amount of fees and secure the same by:
a. Determining the reasonable amount of costs
(including fees) by disregarding frivolous claims made
to frustrate arbitral proceedings under Section
31A(3)(c),
b. Directing payment of the defaulting party’s share by
the first party under Section 31A(4),
c. Terminating the proceedings only qua the claim for
which fees have not been paid, and not the other claims
for which deposits have been paid, under the second
proviso to Section 38(2).
4. Section 39 of the Arbitration Act, which prescribes a lien
of the Arbitral Tribunal on the award till the time unpaid
costs of arbitration are paid also provides sufficient
security to the Arbitral Tribunal in case the fees agreed
between the Tribunal and parties is not paid.
All these circumstances show that the consequence of non-
payment of fees of the arbitral tribunal, ought not to be the
termination of proceedings, which is a disproportionately
prejudicial consequence being visited upon the parties to the
dispute.
It is submitted that in case, the Arbitral Tribunal is not
amenable to the fees agreed to upon by the parties, the
appropriate course of action is not to terminate the
proceedings under Section 32(2)(c) which will end up
extinguishing the lis between the parties, but rather to
terminate their mandate by withdraw under Section 15(2)(a),
which can then enable to parties to seek appointment of a
substitute arbitrator under Section 15(2).
It is submitted that the above interpretation provides a
reasonable solution to the lacunae present in the statute as of
now and renders unnecessary complications suitably
redressed.”
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IV. ISSUES FOR DETERMINATION
31. Having heard the learned counsel appearing for the appellants
and having gone through the materials on record, the following
questions fall for our consideration: -
I) What meaning should be ascribed to the words
“termination of the arbitral proceedings” figuring in the
different provisions of the Act, 1996? Is the phrase
susceptible to only one meaning?
II) What is the meaning and effect of the termination of arbitral
proceedings contemplated under Section 38 of the Act,
1996? Is it the same as the termination of arbitral
proceedings contemplated under Section 32?
III) What is the remedy available to a party aggrieved by an
order passed by an arbitral tribunal terminating the
proceedings?
V. ANALYSIS
32. Mr. Nakul Dewan, the learned Senior counsel appearing on behalf
of the appellants vehemently submitted that the order dated
28.03.2022 passed by the Sole Arbitrator terminating the arbitral
Special Leave Petition (C) No. 10389 of 2025 Page 31 of 269
proceedings could be said to be contrary to the scheme of the Act,
1996.
33. His submission is two-fold, which we shall try to understand.
34. He submitted that under the Act, 1996, the power of the arbitrator
to order the termination of arbitral proceedings is contained only
in Section 32 of the said Act. He would submit that, any order of
termination of arbitral proceedings, even on grounds of non-
payment of fees as stipulated in Section 38 of the Act, 1996, would
essentially be an order under Section 32 of the said Act.
35. To fortify his above noted submission, the learned Senior counsel
placed reliance on the decision of this Court in Lalitkumar V.
Sanghavi (supra), wherein, according to him, this Court “ traced the
source of this power to only Section 32(2)(c)” .
36. He further submitted that any order of termination of arbitral
proceedings under Section 32(2)(c), would automatically result in
the termination of the mandate of the arbitrator as-well, and that
the ratio of Lalitkumar V. Sanghavi (supra) “is extremely specific and
clear” in this regard.
Special Leave Petition (C) No. 10389 of 2025 Page 32 of 269
37. He would next submit that, although the Sole Arbitrator is well
within his powers empowered to terminate the arbitral
proceedings in terms of Section 32 of the Act, 1996, yet in the
present case, the Sole Arbitrator could not have terminated the
proceedings on the ground of non-payment of fees in view of the
decision of this Court in Afcons (supra).
38. Since, the Sole Arbitrator, whilst revising the fees of arbitration in
terms of the “ inflated” counter-claim of the respondents, failed to
obtain the consent of the parties for the same, any such
determination of the fees stood vitiated.
39. As a consequence, an order of termination of proceedings for the
non-payment of such fees would also stand vitiated. In this regard,
he once again drew our attention to Afcons (supra), which held
that “ that the power of the Arbitral Tribunal to fix its own fees is subject
to the consent of the parties ”.
40. He further submitted that, however, since an order of termination
of arbitral proceedings also results in the termination of the
mandate of the arbitrator, even if such termination is on any
Special Leave Petition (C) No. 10389 of 2025 Page 33 of 269
ground which is untenable in the eye of law, the same cannot be
challenged under Section 14 of the Act, 1996.
41. According to him, the High Court whilst passing the Impugned
Judgment and Order committed an egregious error in holding that
the appropriate remedy against an order of termination of arbitral
proceedings for non-payment of fees, would be to challenge the
termination of the mandate of the arbitrator under Section 14 of
the Act, 1996.
42. He would submit that Section 14 of the Act, 1996 only deals with
termination of the mandate of the arbitrator, and not termination
of arbitral proceedings under Section 32 of the said Act. Since, in
the present case the mandate of the arbitrator was terminated due
to the termination of the arbitral proceedings, Section 14 would
not be attracted.
43. According to him, “ the question of challenging the termination of the
mandate” would arise “ when a party wants to dispute the facts leading
to the termination of mandate” or “ the termination of the mandate”
itself . “ In the present case, the petitioners are not disputing the
Special Leave Petition (C) No. 10389 of 2025 Page 34 of 269
termination of the mandate. They are rather challenging the termination
of proceedings. ”
44. To put it simply, according to the learned Senior counsel, the
appellants herein are not aggrieved with the termination of the
mandate of the arbitrator, but the termination of the proceedings
itself. The termination of mandate of the arbitrator is only an
incidental consequence of the termination of the arbitral
proceedings.
45. However, since under the Act, 1996, there is no provision for
challenging an order of termination of the arbitral proceedings
under Section 32, the only available remedy is by way of
appointment of a substitute arbitrator. In this regard, reliance was
once again placed on the decisions of this Court in Lalitkumar V.
Sanghavi (supra), which held that in case of termination of the
arbitral proceedings “ the appropriate remedy is Section 15(2) and not
Section 14(2) ” .
46. In the last, he would submit that since consent of the parties was
sine qua non for determining the fees of arbitration, the termination
of the proceedings on non-payment thereof was bad in law, and
Special Leave Petition (C) No. 10389 of 2025 Page 35 of 269
thus, a substitute arbitrator could have been appointed in terms of
Section 11 read with Section 15(2) of the Act, 1996.
47. What we have been able to discern from the above, is that the
appellants want to put forward the following proposition of law:
(i) First, an arbitral tribunal is empowered under the Act, 1996
to terminate the arbitration proceedings for non-payment of
fees, and the source of such power is Section 32 as per
Lalitkumar V. Sanghavi
(supra).
(ii) Secondly, where such termination of proceedings is
erroneous or contrary to law, the remedy to challenge the
same, in the absence of any specific provision under the Act,
1996, would invariably lie under Section 15, more
particularly by appointment of a substitute arbitrator. It is
inconsequential that such termination of proceedings
automatically results in termination of the mandate of the
arbitrator, insofar as the question of the appropriate remedy
is concerned.
Special Leave Petition (C) No. 10389 of 2025 Page 36 of 269
A. Termination of Arbitral Proceedings under the Act, 1996.
i. Statutory Provisions pertaining to Termination of Proceedings.
48. Before we proceed to consider whether the order of termination of
the arbitral proceedings for non-payment of fees passed by the
Sole Arbitrator could be said to be contrary to law, more
particularly, the decision of this Court in Afcons (supra), we must
first try to understand what is the meaning and effect of
“ termination of arbitral proceedings ” under the Act, 1996.
49. The Act, 1996 nowhere defines the expression “ termination ” or
“ termination of arbitral proceedings ”. However, these expressions
are referred to in numerous instances within the Act, which we
shall outline hereinafter.
50. Under the Act, 1996 there are only four provisions which speak of
termination of arbitral proceedings by an arbitrator, those being,
Section 25 sub-section (a), Section 30 sub-section (2), Section 32 and
Section 38, respectively.
51. We must first look into Section 25 of the Act, 1996. The same reads
as under: -
“ 25. Default of a party.—
Unless otherwise agreed by the parties, where, without
showing sufficient cause,—
Special Leave Petition (C) No. 10389 of 2025 Page 37 of 269
(a) the claimant fails to communicate his statement of claim
in accordance with sub-section (1) of section 23, the
arbitral tribunal shall terminate the proceedings;
(b) the respondent fails to communicate his statement of
defence in accordance with sub-section (1) of section 23,
the arbitral tribunal shall continue the proceedings
without treating that failure in itself as an admission of
the allegations by the claimant and shall have the
discretion to treat the right of the respondent to file such
statement of defence as having been forfeited.
(c) a party fails to appear at an oral hearing or to produce
documentary evidence, the arbitral tribunal may
continue the proceedings and make the arbitral award on
the evidence before it.”
52.
Section 25 sub-section (a) of the Act, 1996, provides for the
termination of arbitral proceedings by an arbitrator on the ground
of default on the part of the claimant. It stipulates that, where a
claimant fails to provide a statement of his claim(s) in terms of
Section 23, without showing any sufficient cause for such failure,
the arbitral tribunal shall terminate the proceedings.
53. Section 25 sub-section(s) (b) and (c) further clarify that, any default
in filing of the statement of defence by the respondent or a default
in appearance or production of any evidence, respectively, shall
not constitute a ground for termination of the arbitral proceedings.
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54. The expression “ the arbitral tribunal shall terminate the proceedings ”
used in sub-section (a) Section 25 indicates that in the absence of
any agreement to the contrary, it would be mandatory for the
arbitral tribunal to terminate the arbitral proceedings, where the
claimant defaults in either filing or communicating its statement
of claim(s) in the manner provided under Section 23 of the Act,
1996.
55.
On the other hand, the words “ the arbitral tribunal shall continue the
proceedings ” employed in sub-section (b) of Section 25 indicates
that, if the respondent fails to either file or communicate its
statement of defence, the same shall not be ground to terminate
the proceedings, and the arbitral tribunal would be mandatorily
required to continue the proceedings.
56. Whilst continuing with the proceedings, it would be within the
discretion of the arbitral tribunal to either forfeit the right of the
respondent to file its statement of defence, or to permit the filing
of the same by condoning the default, if sufficient cause is shown.
However, any failure in filing of the statement of defence, shall not
be treated as an admission of the allegations by the claimant.
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57. The purport behind requiring the arbitral tribunal to continue
with the proceedings, even when the respondent chooses to not
file its statement of defence, is to ensure that the arbitral
proceedings are not frustrated by any devious respondent, who
may not be inclined to have the adjudication reach its logical
conclusion. It is to prevent the arbitration process from being
abused and subverted by a party who, through deliberate inaction,
seeks to impede its culmination.
58. Lastly, Section 25 sub-section (c) deals with a situation, where any
party either fails to appear before the arbitral tribunal or produce
any documentary evidence, that may be required by the arbitral
tribunal. In such a scenario, the said provision empowers the
arbitral tribunal to continue with the proceeding, and pass an
award based on the evidence before it, irrespective of the non-
appearance of any party or the non-production of any evidence.
59. The use of the expression “ may continue the proceedings and make the
arbitral award ” in Section 25 sub-section (c) is particularly
noteworthy.
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60. Unlike sub-section(s) (a) and (b), which expressly provide the
consequence of any default by the parties in complying with the
requirements laid down therein, namely, that the arbitral
proceedings shall terminate and shall not terminate, respectively,
Section 25 sub-section (c) is conspicuously silent on any such
consequence.
61. Even though Section 25 sub-section (c), by use of the word “ may ”,
leaves it to the wisdom of the arbitral tribunal to continue the
proceedings and make an award, it nowhere empowers the
arbitral tribunal to terminate the proceedings, where it chooses to
not continue the proceedings and make an award.
62. This nuanced distinction between Section 25 sub-section(s) (a) and
(b) on one hand, and sub-section (c) on the other, is of vital
importance for the purpose of understanding the scope of Section
32 of the Act, 1996, more particularly, sub-section (2)(c), thereof.
63. How this plays out vis-á-vis the legislative scheme of Act, 1996,
particularly in respect of ‘termination of proceedings’ shall be
discussed in more detail, in the latter parts of this judgement.
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64. The substantive part of Section 25 stipulates that the rigours of the
said provision are subject to any agreement by the parties in this
regard, or the existence of any sufficient cause for a default in
either the filing of a statement of claim or defence, the production
of any evidence or in appearing before the arbitral tribunal.
65. In other words, under Section 25, it is open for the parties to agree
on the procedure or course of action which is to be followed by the
arbitral tribunal, in the event of any default on part of either
parties, in the filing, production or appearance before the arbitral
tribunal.
66. The parties, by an agreement in this regard, may choose that the
non-filing of a statement of claim shall not be a ground for
termination of arbitral proceedings, or vice-versa, that a default in
the same even if it has occasioned by a sufficient cause, shall be a
ground for termination of the proceedings.
67. However, in the absence of any such agreement, the rigours of
Section 25, in the even of any default by the parties in complying
with the requirements laid down therein, will only spring into
action where such default is “ without sufficient cause ”.
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68. We say so because, the substantive part of Section 25 opens with
the words “ where, without showing sufficient cause,— ". A plain
reading of the aforesaid expression indicates that it governs the
entire scheme of Section 25 of the Act, 1996.
69. There is nothing in the bare text of Section 25 to suggest that the
condition of an ‘absence of a sufficient cause’, stipulated in the
substantive portion is confined in its application to only some sub-
section(s) of Section 25 and not to the provision as a whole.
70. This requirement of first, ascertaining, whether a sufficient cause
exists for any default by a party in terms of Section 25, is
indispensable. It applies equally to all sub-section(s) of Section 25.
The arbitral tribunal is required to satisfy itself of the absence of a
sufficient cause, before it can proceed to take recourse under any
of the sub-section(s) of Section 25, as the case may be.
71. Thus, in the absence of any agreement, the yardstick or test for the
exercise of the limited discretion conferred upon the arbitral
tribunal under Section 25, would be to see, if any sufficient cause
existed for the default.
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72. An arbitral tribunal may exercise its power to either terminate the
proceedings, or forfeit the right to file a statement of defence or
pass an award ex-parte or sans the production of any piece of
evidence, under Section 25 sub-section(s) (a), (b) and (c),
respectively, upon its satisfaction that no sufficient cause existed
for such default.
73. We shall now look into Section 30 of the Act, 1996, which reads as
under: -
30. Settlement.—
“
(1) It is not incompatible with an arbitration agreement for
an arbitral tribunal to encourage settlement of the dispute
and, with the agreement of the parties, the arbitral tribunal
may use mediation, conciliation or other procedures at any
time during the arbitral proceedings to encourage settlement.
(2) If, during arbitral proceedings, the parties settle the
dispute, the arbitral tribunal shall terminate the proceedings
and, if requested by the parties and not objected to by the
arbitral tribunal, record the settlement in the form of an
arbitral award on agreed terms.
(3) An arbitral award on agreed terms shall be made in
accordance with section 31 and shall state that it is an arbitral
award.
(4) An arbitral award on agreed terms shall have the same
status and effect as any other arbitral award on the substance
of the dispute.”
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74. Section 30 of the Act, 1996, inter-alia provides the manner in which
the parties, after the commencement of the arbitral proceedings,
may arrive at a settlement in respect of the dispute between them.
75. The provision embodies the cardinal principle of consent being the
cornerstone of arbitration, by recognizing the autonomy of the
parties to settle their dispute at any point in time during the
arbitration proceedings. It fortifies that the commencement of
arbitration does not take away such autonomy, and the pendency
of proceedings, will not be fatal to any outside settlement.
76. The other foundational pillar of arbitration, namely, the resolution
of disputes, fairly and effectively, has been enshrined in sub-
section (1) of Section 30. Under this provision, a positive duty has
been cast upon the arbitral tribunal to encourage and facilitate a
settlement between the parties.
77. The provision elaborates, that this duty may be discharged by the
arbitral tribunal through mediation, conciliation or any other
process, that it considers expedient for meeting the ends of justice
and facilitating a settlement between the parties.
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78. Sub-section (2) of Section 30 is of particular importance for our
discussion. It provides that where the parties arrive at a settlement
in respect of the dispute, the arbitral tribunal shall terminate the
proceedings. It further states, that if the parties so request, the
arbitral tribunal, if it has no objection, shall record the terms of the
settlement in the form of an award.
79. What would be the form and manner in which the award
recording the settlement arrived at by the parties is to be made, as-
well as the effect of such an award, have been delineated in the
subsequent sub-sections.
80. Section 30 sub-section(s) (3) and (4), stipulates that the contents of
the award must conform to the parameters laid down in Section
31 and that it shall have the same status and effect as any other
award, under the Act, 1996, respectively.
81. As per Section 30 of the Act, 1996, more particularly sub-section
(2), the arbitral tribunal is required to terminate the proceedings,
upon the settlement of the dispute by the parties. This is because,
once the dispute between the parties stands settled, nothing
remains for the arbitral tribunal to adjudicate upon.
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82. Before we proceed to look into Section 32 of the Act, 1996, it would
be apposite to first understand when an arbitral tribunal would be
empowered to terminate the arbitral proceedings as per Section 38
of the said Act.
83. Section 38 of the Act, 1996 reads as under: -
“ 38. Deposits.—
(1) The arbitral tribunal may fix the amount of the deposit or
supplementary deposit, as the case may be, as an advance for
the costs referred to in sub-section (8) of section 31, which it
expects will be incurred in respect of the claim submitted to
it:
Provided that where, apart from the claim, a counter-
claim has been submitted to the arbitral tribunal, it may fix
separate amount of deposit for the claim and counter-claim.
(2) The deposit referred to in sub-section (1) shall be payable
in equal shares by the parties:
Provided that where one party fails to pay his share of
the deposit, the other party may pay that share:
Provided further that where the other party also does
not pay the aforesaid share in respect of the claim or the
counter-claim, the arbitral tribunal may suspend or
terminate the arbitral proceedings in respect of such claim or
counter-claim, as the case may be.
(3) Upon termination of the arbitral proceedings, the arbitral
tribunal shall render an accounting to the parties of the
deposits received and shall return any unexpended balance to
the party or parties, as the case may be.”
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84. The provision of Section 38 deals with deposit of “costs”. The term
“costs” refers to the expenses incurred in conducting and
facilitating the arbitral proceedings. Such costs are determined by
the arbitral tribunal in accordance with Section 31A of the Act,
1996. Sub-Section(s) (3) and (4) of Section 31A enumerate the
circumstances which may be taken into account by the arbitral
tribunal for determining such costs.
85.
The Explanation appended to Section 31A of the Act, 1996, further
states that the term “costs” means the reasonable costs relating to,
the fees of the arbitrators, the administrative outlays of the
tribunal, the legal fees and charges, and any other expenses
incurred in connection with the arbitral proceedings and the
Award.
86. Section 38 sub-section (1), empowers the arbitral tribunal to direct
the deposit of a certain portion of these “costs” by the parties, in
the form of an advance towards the immediate expenses, the
tribunal expects to likely incur for the continuation of the arbitral
proceedings in respect of the claim(s) before it.
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87. Where a counter-claim is also filed, the arbitral tribunal is further
empowered, under the Proviso to sub-section (1) of Section 38 to
fix separate amounts of deposit for the claim and the counter-
claim, as the case may be.
88. Section 38 sub-section (2) embodies the general rule, that any
deposit, which may be required by the arbitral tribunal, shall be
payable by the parties in equal proportions. In other words, both
the claimant and the respondent are ordinarily responsible to pay
50% of the deposit, respectively.
89. The First Proviso to Section 38 sub-section (2), further stipulates
that, where either party defaults paying his share of the deposit,
then the same may be paid by the other party.
90.
The Second Proviso to Section 38 sub-section (2) is of particular
importance. It provides that, in the event the other party also
declines to pay the aforesaid share of the deposit, the arbitral
tribunal may either suspend or terminate the proceedings in
respect of such claim or counter-claim, as the case may be.
91.
To put it simply, where both the parties fail to make the deposit as
required by the arbitral tribunal in respect of a claim or a counter-
Special Leave Petition (C) No. 10389 of 2025 Page 49 of 269
claim then in such a situation, the tribunal would be empowered
to either suspend or terminate the proceedings qua such claim or
counter-claim.
92. Lastly, Section 38 sub-section (3), provides that once the
proceedings stand terminated, the arbitral tribunal shall furnish
the account of all the deposits received by it, and return any
unexpended balance to the parties.
93. Both Section(s) 25 and 30 of the Act, 1996 respectively, insofar as
termination of arbitral proceeding is concerned, are an exception
to the general rule contained in Section 32 sub-section (1) of the
Act, 1996.
94. We may now proceed to look into Section 32 of the Act, 1996. The
said provision reads as under: -
“ 32. Termination of proceedings.—
(1) The arbitral proceedings shall be terminated by the final
arbitral award or by an order of the arbitral tribunal under
sub-section (2).
(2) The arbitral tribunal shall issue an order for the
termination of the arbitral proceedings where—
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(a) the claimant withdraws his claim, unless the respondent
objects to the order and the arbitral tribunal recognises a
legitimate interest on his part in obtaining a final
settlement of the dispute,
(b) the parties agree on the termination of the proceedings, or
(c) the arbitral tribunal finds that the continuation of the
proceedings has for any other reason become unnecessary
or impossible.
(3) Subject to section 33 and sub-section (4) of section 34, the
mandate of the arbitral tribunal shall terminate with the
termination of the arbitral proceedings. ”
95. A bare perusal of the aforesaid provision, particularly, Section 32
sub-section (1), reveals that, the termination of arbitral
proceedings under the Act, 1996, may occur in two distinct ways;
first, through the passing of the final award, or secondly by an
order of the arbitral tribunal under sub-section (2), thereof.
96. Section 32 sub-section (2) of the Act, 1996 warrants a careful
examination. The said provision sets out the three situations in
which an arbitral tribunal may, without rendering the final award,
terminate the arbitral proceedings by passing an order to that
effect. The arbitral tribunal may, by an order, terminate the
proceedings where: -
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(i) First, as per sub-clause (a), if the claimant withdraws his
claim, and the respondent has no objection to the
withdrawal. However, if the respondent raises an objection
to the withdrawal, on the ground that it may impede the
dispute from being finally resolved, the arbitral tribunal
may refuse to terminate the proceedings. What is sought to
be conveyed by the phrase “ the arbitral tribunal recognises a
legitimate interest on his part in obtaining a final settlement of
the dispute ” used in sub-clause (a) is that, the objection to the
withdrawal by the respondent, must be founded upon a
genuine interest on his part, in having the dispute resolved.
Where such objections are motivated by any extraneous
considerations, such as an intent to either delay or protract
the dispute or to vexatiously harass the claimant through
the continuation of the proceedings, the arbitral tribunal
may decline to entertain such objections., and proceed to
order a termination of the proceedings.
Where any objection has been raised by the respondent, the
arbitral tribunal, before passing an order for termination of
the proceedings, is required to make a finding, that the
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objections raised, are not bona-fide insofar as the resolution
of the dispute is concerned.
Insofar, as the question when such a respondent could be
said to have a legitimate interest in securing the final
settlement of dispute is concerned, it is not possible to lay
down any straitjacket formula or prescribe any exhaustive
list. The answer must invariably turn upon the peculiar
facts and attendant circumstances of each case. Each case
would have to be assessed, keeping in mind the nature of
the claims, the stage of the proceedings, the evidence on
record, and the preliminary findings already made by the
arbitral tribunal. We shall discuss this in more detail in the
latter parts of this judgment.
(ii) Secondly, as per sub-clause (b), where both the parties agree
to the termination of the arbitral proceedings, the arbitral
tribunal shall pass an order to such effect.
(iii) Thirdly, as per sub-clause (c), where the arbitral tribunal
finds that the continuation of the proceedings has “ for any
other reason ” become unnecessary or impossible, the arbitral
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proceedings shall pass an order terminating the
proceedings.
97. We shall discuss sub-section (2) of Section 32, particularly, the
scope and extent of the arbitral tribunal’s authority to pass an
order for termination of proceedings thereunder, in more detail in
the subsequent parts of this judgment.
98. Lastly, sub-section (3) of Section 32 stipulates what would be the
legal effect of the termination of arbitral proceedings under the
Act, 1996. It provides that, subject to the provisions of Section(s)
33 and 34(4), the termination of the arbitral proceedings, shall in
consequence also terminate the “ mandate of the arbitral tribunal ”.
99. To put it simply, upon termination of the arbitral proceedings,
either by way of a final award or an order to that effect, as the case
may be, the arbitral tribunal, save and except the exercise of the
limited powers conferred upon it by Section(s) 33 and 34(4)
respectively, shall cease to have any further power or function,
under the Act, 1996.
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100. Thus, apart from the power to correct or interpret an award and
eliminating the grounds for setting aside the arbitral award, in
terms of Section(s) 33 and 34(4) respectively, the arbitral tribunal,
upon the termination of the proceedings, is divested of all other
powers, and no longer has any jurisdiction, in respect of the
dispute.
ii. What is the source of the Arbitral Tribunal’s power to terminate
the proceedings under the Scheme of the Act, 1996?
101.
What can be discerned from the above is that, Section(s) 25, 30 and
38 of the Act, 1996 respectively, empower the arbitral tribunal to
terminate the proceedings on different grounds, stipulated
therein.
102. Although, Section 32 sub-section (1) provides that an arbitral
proceeding shall be terminated either by a final award or by an
order under sub-section (2) thereof, yet the situations in which the
tribunal may pass such an order do not explicitly encompass the
situations contemplated under Section(s) 25, 30 and 38 of the Act,
1996 respectively.
Special Leave Petition (C) No. 10389 of 2025 Page 55 of 269
103. It was argued on behalf of the appellants herein, that any order of
termination has to be traced back to Section 32 sub-section (2) of
the Act, 1996, more particularly, the residual provision contained
in sub-clause (c).
104. Section 32(2)(c) empowers the arbitral tribunal to pass an order of
termination, where it finds that the proceedings has for any other
reason become “ unnecessary or impossible ”.
105.
According to the proposition of law, put forth by the appellants,
this expression is wide enough to encompass the different
scenarios under which proceedings may be terminated in terms of
Section(s) 25, 30 or 38 of the Act, 1996, respectively.
a. Contradictory Views on the subject.
106. Before we proceed to answer the aforesaid contention canvassed
on behalf of the appellant, it would be apposite look into the
various decisions on the subject, and the cleavage of opinion
expressed as regards the scope and power of an arbitral tribunal
to terminate the proceedings under the Act, 1996.
Special Leave Petition (C) No. 10389 of 2025 Page 56 of 269
I. Decisions reading Termination under Section(s) 25, 30 or 38
respectively with Section 32 sub-section (2) of the Act, 1996.
107. The question as to when the arbitral tribunal would be
empowered to either suspend or terminate the proceedings under
the various provisions of the Act, 1996, came to be examined for
the first time in Maharashtra State Electricity Board v. Datar
Switchgear Ltd. reported in 2002 SCC OnLine Bom 983 .
108. The decision of the High Court of judicature at Bombay in Datar
Switchgear (supra), is significant. The facts of the case are not
relevant for the present discussion. To put it succinctly, the
question that came up before the High Court was, whether an
arbitral tribunal is empowered to suspend or terminate the
proceedings on account of the failure of the respondent therein to
comply with its interim order directing the deposit of a specified
amount, in terms of the contract. The relevant paragraphs read as
under: -
“2. The question which this Court is called upon to decide in
these proceedings is whether an Arbitral Tribunal
constituted under the Arbitration and Conciliation Act, 1996
is empowered by the provisions of the Act to suspend the
hearing of the arbitral proceedings and, in the alternate,
whether the Court exercising jurisdiction under section 9 can
issue a direction to that effect. Shorn at this stage of all the
details to which it would nevertheless become necessary to
advert during the course of the judgment, the Arbitral
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Tribunal by an interim direction, directed the petitioner
(“MSEB”) to deposit certain amounts which were permitted
to be withdrawn by the respondent (“DSL”) against Bank
Guarantees. The Bank which had issued the Bank Guarantees
extended the guarantees from time to time but then declined
to renew them any further. The Guarantees were not invoked
by the MSEB before expiry, as a result of a clause in the
guarantees which made invocation conditional upon
permission being granted by the Arbitral Tribunal to MSEB.
DSL has, in the meantime, been declared a sick industrial
undertaking under the Sick Industrial Companies (Special
Provisions) Act, 1985 and pleads that it is unable financially
to secure any alternative Bank Guarantee at this stage. On
an application moved by MSEB, the Arbitral Tribunal has
ordered DSL to bring back the moneys which were
withdrawn and to this order, DSL has submitted itself. The
Arbitral Tribunal has declined to accede to the prayer of
MSEB that the arbitral proceedings be suspended in their
entirety (including the hearing of the counter claim of
MSEB) until the moneys are brought back. That decision is
challenged by MSEB. Of the three arbitrators constituting
the Arbitral Tribunal, Mr. Justice V.D. Tulzapurkar has
expressed the view that he was doubtful as to whether the
Tribunal had the power to suspend the proceedings, but, that
in any case, no case for suspension has been made out since
the conduct of DSL was neither deliberate, nor contumacious.
The second learned arbitrator Mr. Justice M.L. Pendse has
held that there was no power in the Arbitral Tribunal to
suspend its proceedings and to grant a stay as prayed but,
that in any event, in view of the fact that the arbitral
proceedings have proceeded to a considerable extent and
evidence has been substantially recorded, it would not be
appropriate for the Tribunal to accede to the prayer. A
dissenting view has, however, been expressed by Mr. Justice
S.C. Pratap, who has held that there is a power in the Arbitral
Tribunal to grant a stay of proceedings and a sufficient
ground has been made out before the Tribunal to do so in the
facts of the present case, since the conduct of DSL is
contumacious. The dissenting member of the Tribunal has,
however, directed that the hearing of the counter claim
preferred by MSEB must proceed though, as already noted
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earlier, the prayer of MSEB was that the entire proceedings
including hearing of the counter claim ought to be stayed.
The Arbitral Tribunal has thus by a majority declined to stay
the proceedings before it. In these proceedings, MSEB has
moved the Court both in the exercise of its appellate
jurisdiction under section 37 of the Act, treating the order
passed by the Arbitral Tribunal as one under section 17
declining to grant an interim measure of protection and in
the alternative under section 9, contending that even if the
appeal is held not to be maintainable, this Court has the power
and jurisdiction to suspend the arbitral proceedings as
prayed. The issues which, therefore, arise before the Court,
relate to (i) whether the Arbitral Tribunal has the power to
stay or suspend its proceedings under the Act; (ii) whether
the Court has the power to do so in a proceeding under section
9; and (iii) whether a case for the exercise of power in the
present case has been made out.”
(Emphasis supplied)
109. The High Court speaking through Dr. D.Y. Chandrachud J. (as his
Lordship then was), answered the aforesaid in a negative, with the
following pertinent observations on the power of the arbitral
tribunal to terminate the arbitral proceedings: -
(i) First, the High Court held that the termination of the
mandate of the arbitrator is not co-terminus with the
termination of the arbitral proceedings. In the former, the
arbitrator merely withdraws from office, thereby
permitting the appointment of a substitute arbitrator to
continue the proceedings. In the latter, however, the arbitral
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tribunal itself collapses. In this regard, the High Court gave
an illustration that where the tribunal, under Section 16 of
the Act, 1996, holds that there is no valid arbitration
agreement, the same would result in the termination of
proceedings, and with it, ipso facto, the tribunal itself. The
relevant observations read as under: -
“36. [...] The termination of a mandate of the
arbitrator is not co-terminus with the termination of
arbitral proceedings because when the mandate of the
arbitrator terminates when he withdraws from the
office or by agreement between the parties, a substitute
arbitrator is to be appointed according to the same
rules that were originally applicable to the
appointment of the arbitrator.
“37. [...] A determination by the Arbitral Tribunal on
the question of the jurisdiction or on the existence or
validity of the arbitration agreement has important
consequences in terms of the continuance or, as the
case may be, the cessation of proceedings. A ruling by
the Arbitral Tribunal that it has no jurisdiction or, as
the case may be, that there is no valid or existing
arbitration agreement will result in a termination of
proceedings by the Arbitral Tribunal. The power to
make that determination has specifically been
entrusted to the Arbitral Tribunal.”
(Emphasis supplied)
(ii) Secondly, although Section 25 of the Act, 1996 contemplates
three distinct scenarios of default by a party, yet the
authority of the arbitral tribunal to order a termination of
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the proceedings arises in only one of those scenarios,
namely where the claimant fails to communicate his
statement of claim in terms of Section 23. In all other cases
of default by a party, such as the failure to file a statement
of defence, to appear during a hearing or to produce any
evidence required, it would attract only the imposition of
certain penalties. The tribunal may forfeit the right to file
the statement of defence, or seek the assistance of the court
under Section 27 to obtain the evidence, by which the party
in default may be held in contempt, or it may proceed to
pass an ex-parte award. However, the tribunal in these
situations is not empowered to terminate the proceedings
unlike Section 25(a), and must continue with the arbitration.
The relevant observations read as under: -
“ 42. As a part of Chapter V, certain provisions have
been enacted to deal with the case of defaults by a
party. Section 25 envisages a situation where without
sufficient cause, (i) the claimant fails to communicate
his statement of claim within the period prescribed, (ii)
the respondent fails to communicate his statement of
defence or (iii) a party fails to appear or produce
documentary evidence. In a case where the claimant
fails to communicate his statement of claim, the
Arbitral Tribunal shall terminate the proceedings.
Where the respondent fails to communicate his
statement of defence, the Tribunal shall continue the
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proceedings without treating that failure in itself as an
admission of the allegations made by the claimant. The
third possibility which is envisaged by section 25 is
where a party fails to appear at an oral hearing or to
produce documentary evidence, in which case, the
Tribunal shall continue the proceedings and make the
Arbitral Award on the evidence before if.
43. The Arbitral Tribunal can apply to the Court for
assistance in taking evidence and the procedure in this
regard its regulated by sub-sections (1) to (4) of section
27. Sub-section (5) of section 27 lays down that
persons failing to attend in accordance with a process
issued by the Court for the recording of evidence before
the Arbitral Tribunal or making any other default, or
refusing to give their evidence, or being “guilty of any
contempt of the Arbitral Tribunal during the conduct
of arbitral proceedings shall be subject to the like
disadvantages, penalties and punishments by order of
the Court on the re-presentation of the Arbitral
Tribunal as they would incur for the like offences in
suits tried before the Court”. The power to punish for
any contempt of the Arbitral Tribunal has been vested
with the Court. ”
(Emphasis supplied)
(iii) Thirdly, the termination of arbitral proceedings may take
place as per Section 30 sub-section (2) of the Act, 1996 if the
parties settle the dispute, during the course of the arbitral
proceedings. The relevant observations read as under: -
“45. Chapter VI of the Act is entitled “Making of
Arbitral Award and termination of proceedings”. The
termination of proceedings can take place under
section 30(2) if the parties settle the dispute, during
the course of arbitral proceedings and if a request to
that effect is made by the parties before the Arbitral
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Tribunal. That settlement then culminates in an
agreed Arbitral Award. Section 31 deals with the form
and contents of the Arbitral Award and sub-section (6)
thereof provides that the Arbitral Tribunal may, at any
time during the arbitral proceedings, make an interim
Arbitral Award on any matter with respect to which it
may make a final Arbitral Award.”
(iv) Fourthly, under Section 38 of the Act, 1996 the arbitral
tribunal is empowered to fix the amount of deposit as an
advance towards costs which includes the fees and
expenses of the arbitrator, witnesses, and the tribunal itself.
Such deposits are payable in equal shares by the parties, but
where one party fails to pay his share of the deposit, the
other party may pay that share. However, where the other
party also does not pay the aforesaid share in respect of a
claim or the counter claim, the arbitral tribunal under the
Second Proviso to Section 38 sub-section (2) may suspend
or terminate the proceedings in respect of such claim or
counter-claim as the case may be. The relevant observations
read as under: -
“49. Chapter IX of the Act is entitled “appeals” and in
so far as the present case is concerned, it is material to
note that an appeal lies against an order of the Arbitral
Tribunal granting or refusing to grant an interim
measure under section 17. Chapter X of Part-I makes
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miscellaneous provisions and section 38 thereof deals
with deposits. Sub-section (1) of section 38 empowers
the Arbitral Tribunal to fix the amount of deposit as
an advance for costs referred to in sub-section (8) of
section 31. Sub-section (8) of section 31 provides for
costs including the fees and expenses of the arbitrator
and witnesses, legal fees and expenses, administrative
fees of the institution supervising the arbitration and
other expenses incurred in connection with the arbitral
proceedings and Award. Sub-section (2) of section 38
provides that the deposit is to be payable in equal
shares by the parties, but where one party fails to pay
his share of the deposit, the other party may pay that
share. The second proviso to sub-section (2) enunciates
that where the other party also does not pay the
aforesaid share in respect of the claim or the counter
claim, the Arbitral Tribunal may suspend or terminate
the arbitral proceedings in respect of such claim or
counter-claim as the case may be. A provision thus has
been enacted for the suspension of the proceedings by
the Arbitral Tribunal where costs have not been
deposited. ”
(Emphasis supplied)
(v)
Fifthly, Section 32 sub-section (1) of the Act, 1996, stipulates
that the arbitral proceedings shall be terminated by the final
award or by an order under sub-section (2) thereof. Sub-
section (2) contemplates three situations where the tribunal
is vested with the power to the arbitral proceedings,
namely, (i) when the claimant withdraws his claim, (ii)
when the parties agree and (iii) when the Tribunal finds that
continuation of the proceedings has for any other reason
Special Leave Petition (C) No. 10389 of 2025 Page 64 of 269
become unnecessary or impossible. The termination of
proceedings results in the termination of the mandate of the
tribunal. The relevant observations read as under: -
“46. Section 32 is entitled “Termination of
proceedings” and sub-section (1) provides that the
arbitral proceedings shall be terminated by the final
Arbitral Award or by an order of the Arbitral Tribunal
under sub-section (2). Sub-section (2) of section 32 is
important for the purposes of the present proceedings
[...]
“47. Sub-section (2), therefore, contemplates three
situations where the Arbitral Tribunal is vested with
the power to terminate the arbitral proceedings,
namely, (i) when the claimant withdraws his claim, (ii)
when the parties agree and (iii) when the Tribunal
finds that continuation of the proceedings has for any
other reason become unnecessary or impossible. The
mandate of the Arbitral Tribunal terminates with the
termination of the arbitral proceedings. (Sub-section
(3) of section 32). [...]
(Emphasis supplied)
(vi) Sixthly, the High Court observed that clause (c) of Section
32(2) vests a residuary power in the arbitral tribunal to
terminate the proceedings where it finds that a continuation
thereof has for any other reason become unnecessary or
impossible. As no straitjacket formula could be laid down
as to when the proceedings would become either
unnecessary or impossible the legislature has left it for the
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arbitral tribunal to determine the same. Yet the expression
“unnecessary” must be construed to mean a situation where
the proceedings are rendered infructuous or where the
dispute itself does not survive, or the adjudication thereof
is unnecessary as a result of any valid reason (emphasis).
Similarly, impossibility is not to be construed to mean a
mere physical impossibility of an adjudication. A consistent
course of conduct of the party can also render the
continuation of the proceedings impossible. However, the
High Court cautioned that an arbitral tribunal should be
weary of not permitting a party to take the benefit of its own
contumacious conduct and seek the termination of
proceedings. The relevant observations read as under: -
“[...] 47. Clause (c) of sub-section (2) of section 32 has
vested a residuary power in the Arbitral Tribunal to
terminate the proceedings where it finds that a
continuation thereof has for any other reason become
unnecessary or impossible. The legislature has
advisedly left it to the Tribunal to determine as to
when the continuation of the proceedings has become
unnecessary or impossible. The expression
“unnecessary” may for instance involve a situation
where proceedings are rendered infructuous. A
situation may have arisen as a result of which an
adjudication into the dispute has become unnecessary
either as a result of the fact that the dispute does not
survive or for any other valid reason. Situations may
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also arise where a continuation of proceedings is
rendered impossible. Impossibility is not merely to be
viewed from the point of view of a physical
impossibility of an adjudication, but may conceivably
encompass a situation where a party by a consistent
course of conduct renders the very continuation of the
arbitral proceedings impossible. Then again a party
which has been guilty of contumacious conduct cannot
be heard to seek the benefit of its conduct to seek
termination. It is impossible to catalogue the
circumstances in which the Arbitral Tribunal may
hold that it is either unnecessary or impossible to
continue the arbitral proceedings.”
(Emphasis supplied)
110. Accordingly, the Bombay High Court in Datar Switchgear (supra)
held that under the scheme of the Act, 1996, the arbitral tribunal is
not empowered to either suspend or terminate the proceedings for
the purpose of aiding or securing the execution or compliance of
any interim order passed by it under Section 17 of the Act, 1996.
111. However, in arriving at the aforesaid conclusion, the Bombay
High Court made some pertinent observations as regards the
interplay between Section(s) 25, 30, 32 and 38 of the Act, 1996
respectively. To understand the same, paragraph 44 has to be read
in conjunction with paragraphs 50, 55 and 57 respectively. They
read as follows: -
Special Leave Petition (C) No. 10389 of 2025 Page 67 of 269
“44. These statutory provisions enacted by Parliament are
extremely material for, they reveal the scheme of the
legislation. The legislature has envisaged a default of a certain
specified nature and character in section 25 of the Act and
has authorised the Arbitral Tribunal to terminate the
proceedings where a claim has not been filed within the period
prescribed by the Tribunal. Other kinds of defaults including
a default in failing to attend for giving evidence in accordance
with the process issued by the Court or contempt of the
Arbitral Tribunal during the conduct of arbitral proceedings
are subject to the imposition of disadvantages, penalties and
punishments by order of the Court on the re-presentation of
the Tribunal. The canvass of Chapter V is in relation to the
conduct of arbitral proceedings. Chapter V does not
encompass the termination of arbitral proceedings by the
Arbitral Tribunal save and except for the reference to
termination in section 25(a).
xxx xxx xxx
50. A reading of the provisions contained in Part-I of the
Arbitration and Conciliation Act, 1996 would, therefore, in
my view, leave no manner of doubt that the Arbitral Tribunal
does not have the power to suspend the arbitral proceedings
before it as a step in aid of the execution of an interim order
passed by the Arbitral Tribunal. While consolidating and
amending the law relating to domestic and international
commercial arbitration, the legislature has made specific
provisions for the termination or, as the case may be, for
suspension of arbitral proceedings. The Arbitral Tribunal is
empowered to rule on its jurisdiction and to determine a
challenge to the existence or the validity of an arbitration
agreement. In such a situation, the recent decision of three
learned Judges of the Supreme Court in (Bhatia
2
International v. Bulk Trading S.A.) , (2002) 4 SCC
105 holds that applications for stay of arbitral proceedings or
to challenge the existence or validity of the arbitration
agreement or involving the jurisdiction of the Arbitral
Tribunal have to be made to the Arbitral Tribunal under the
Act. Such applications cannot be made to the Court under
section 9. Where there is a challenge to the jurisdiction of the
Arbitral Tribunal or the existence or validity of the
arbitration agreement is questioned, an application can only
Special Leave Petition (C) No. 10389 of 2025 Page 68 of 269
lie before the Arbitral Tribunal to have these issues
adjudicated. As an incident of its power to adjudicate on its
jurisdiction, the Arbitral Tribunal may entertain an
application for stay or as a consequence of its determination
upholding a challenge to its jurisdiction or to the existence or
validity of the agreement on arbitration, terminate
proceedings. In so far as defaults are concerned, the
legislature has made specific provisions which envisage
specific instances of default and provide clear cut
consequences of those defaults. Among these circumstances,
as already noted, are those envisaged in sections 25, 27(5) and
38 of the Act. Provisions have been made in section 32 for
termination of proceedings. That being the position, it would
be impermissible to read into sub-section (3) of section 19 a
power to suspend arbitral proceedings or to terminate arbitral
proceedings as an incident of the enforcement of an interim
order.
xxx xxx xxx
[...] The circumstances in which arbitral proceedings can be
terminated, or as the case may be, can be suspended are
defined by the Act. The Act has consolidated and amended the
law relating to domestic and international commercial
arbitration. The legislation envisages defaults and enunciates
the consequences of those defaults. [...]
xxx xxx xxx
57. [...] The power of the Arbitral Tribunal contrariwise is a
power which the Arbitral Tribunal has during the pendency
of arbitral proceedings before it to order an interim measure
of protection. In so far as the Arbitral Tribunal is concerned,
the proceedings terminate upon a final Arbitral Award or on
an order passed under sub-section (2) of section 32. [...]”
(Emphasis supplied)
112. According to the High Court, the legislature recognizes the
termination or, as the case may be, the suspension of the arbitral
proceedings for only defaults of a certain specified nature and
Special Leave Petition (C) No. 10389 of 2025 Page 69 of 269
character, and has thus, made specific provisions. It observed that
Section(s) 25 and 38 of the Act, 1996 respectively, envisage such
instances, where the consequence of a default would be
termination of the proceedings. Section 32 of the Act, 1996, more
particularly sub-section (2) is the provision which provides for the
termination of the proceedings.
113. Thus, as per Datar Switchgear (supra), Section(s) 25, 31 and 38 of
the Act, 1996 respectively, merely enumerate the instances in
which the arbitral proceedings may be terminated. However, the
order for effecting such termination is not passed under any of the
aforesaid provisions. The provision under which the arbitral
tribunal passes an order for termination of the proceedings is
Section 32 sub-section (2) of the Act, 1996.
114. To put it simply, Section(s) 25, 31 and 38 of the Act, 1996
respectively, merely envisage the situations where an arbitral
tribunal would be empowered to terminate the proceedings.
However, the power to pass an order for the termination of the
proceedings lies under Section 32 sub-section (2) of the Act, 1996
alone, even if such termination is pursuant to the aforesaid
provisions of Section(s) 25, 31 and 38 of the Act, 1996 respectively.
Special Leave Petition (C) No. 10389 of 2025 Page 70 of 269
115. Datar Switchgear (supra) expressly observes in the context of
Section 25 of the Act, 1996 that the same “ does not encompass the
termination of arbitral proceedings by the Arbitral Tribunal save and
except for the reference to termination in section 25(a)”. Thus,
according to it, the use of the words “ terminate the proceedings ” in
Section(s) 25, 31 and 38 of the Act, 1996 respectively, is only a
reference to the power of termination, that is enshrined in Section
32(2) of the Act, 1996.
116. The provision of Section 32 of the Act, 1996, first fell for the
consideration of this Court in Lalitkumar V. Sanghavi (supra). In
the said case, the arbitrator expressed his anguish at the dispute
having remained pending for nearly four-years. During this
period, the claimant had shown no interest in pursuing the
arbitration, and had even failed to pay the fees as directed.
Accordingly, the arbitral proceedings came to be terminated. The
relevant observations read as under: -
“5. By his order dated 29-10-2007, the presiding arbitrator
informed the appellants that the arbitration proceedings stood
terminated. The relevant portion of the order reads as follows:
“The matter is pending since June 2003 and
though the meeting was called in between June
2004 and 11-4-2007, the claimant took no interest
Special Leave Petition (C) No. 10389 of 2025 Page 71 of 269
in the matter. Even the fees directed to be given is
not paid.
In these circumstances please note that the
arbitration proceedings stand terminated. All
interim orders passed by the Tribunal stand
vacated.”
(Emphasis supplied)
116.1 In appeal, this Court inter-alia held that under the Act, 1996, more
particularly Section 32, an arbitral proceeding can be terminated in
only two ways. Either by the making of the final award, or by
passing an order of termination of proceedings under sub-section
(2) of Section 32. Sub-section (2) of Section 32, further provides
three contingencies, where the proceedings may be terminated.
Any such order of termination of proceedings would also
terminate the mandate of the arbitral tribunal. Accordingly, it held
that the order passed by the arbitrator terminating the proceedings
on the ground of failure to pay the fees and want of prosecution on
the part of claimant could have only fallen within the scope of
clause (c) of Section 32(2) i.e., where the continuation of the
proceedings has become impossible. The relevant observations
read as under: -
“11. Section 32 of the Act on the other hand deals with the
termination of arbitral proceedings. From the language of
Special Leave Petition (C) No. 10389 of 2025 Page 72 of 269
Section 32, it can be seen that arbitral proceedings get
terminated either in the making of the final arbitral award or
by an order of the Arbitral Tribunal under sub-section (2).
Sub-section (2) provides that the Arbitral Tribunal shall
issue an order for the termination of the arbitral proceedings
in the three contingencies mentioned in clauses (a) to (c)
thereof.
12. On the facts of the present case, the applicability of
clauses (a) and (b) of Section 32(2) is clearly ruled out and
we are of the opinion that the order dated 29-10-2007 by
which the Tribunal terminated the arbitral proceedings could
only fall within the scope of Section 32, sub-section (2),
clause (c) i.e. the continuation of the proceedings has become
impossible. By virtue of Section 32(3), on the termination of
the arbitral proceedings, the mandate of the Arbitral Tribunal
also comes to an end. [...]”
(Emphasis supplied)
117. This Court in Lalitkumar V. Sanghavi (supra) further held that the
appropriate remedy against an order terminating the arbitral
proceedings lies by way of an application under Section 14 of the
Act, 1996. However, for the sake of clarity, the question as to
where the remedy against an order of termination of proceedings
should lie shall be addressed in the latter parts of this judgment.
118. Thus, as per Lalitkumar V. Sanghavi (supra) it appears that an
arbitral proceeding can be terminated under the Act, 1996 only by
the passing of an order under Section 32(2). Furthermore, any such
termination on the ground of non-payment of fees or
Special Leave Petition (C) No. 10389 of 2025 Page 73 of 269
disinclination to pursue the arbitration, would fall within the
scope of proceedings being rendered unnecessary or impossible in
terms of clause (c) of Section 32(2) of the Act, 1996.
119. We are conscious of the fact that in Lalitkumar V. Sanghavi
(supra), the termination of the arbitral proceedings by the tribunal
was not strictly on the ground of non-payment of the arbitral fees.
The arbitral tribunal had terminated the proceedings due to the
lack of interest on the part of the claimant therein.
120. In such circumstances, it could be argued that Lalitkumar V.
Sanghavi (supra) never held that a termination of proceedings
stricto-sensu for the failure to pay the deposit in terms of Section
38, would also fall under Section 32(2)(c) of the Act, 1996.
121.
We shall address this line of argument in more detail, once we
examine the various decisions of the High Courts which have
construed the power of termination of proceedings under Section
32(2) of the Act, 1996 to be distinct from that under Section(s) 25
and 38 of the Act, 1996 respectively.
122.
Nevertheless, whether the ratio of Lalitkumar V. Sanghavi (supra)
supports the above proposition of law can be discerned from the
Special Leave Petition (C) No. 10389 of 2025 Page 74 of 269
manner in which the various High Courts have understood and
applied the ratio of the said decision.
123. In this regard we may look into the decision of the Bombay High
Court in Neeta Lalitkumar Sanghavi v. Bakulaben Dharmadas
Sanghavi reported in 2019 SCC OnLine Bom 250 and the decision
of the Delhi High Court in PCL Suncon v. National Highway
Authority of India reported in 2021 SCC OnLine Del 313
respectively.
124. The controversy that arose in Lalitkumar V. Sanghavi (supra),
more particularly, the termination of proceedings once again
resurfaced before the Bombay High Court in Neeta Lalitkumar
Sanghavi (supra).
125.
Although the principal issue in Neeta Lalitkumar Sanghavi
(supra) was whether the remedy against the termination of
proceedings on the ground of failure to implead the legal heirs,
would lie under Section 14 or 34 of the Act, 1996, yet the decision
is significant for the purpose of gauging how the High Court
understood the ratio of Lalitkumar V. Sanghavi (supra).
126. The Bombay High Court from a combined reading of Section 32 of
the Act, 1996 and the ratio of Lalitkumar V. Sanghavi (supra),
Special Leave Petition (C) No. 10389 of 2025 Page 75 of 269
arrived at the same conclusion. It observed that as per Section 32,
the arbitral proceedings shall stand terminated by either the
pronouncement of the final arbitral award or by an order of the
arbitrator under sub-section (2) thereof. The relevant observations
read as under: -
“19. Section 32(1) stipulates that the arbitral proceedings
shall be terminated by the final arbitral award or by an order
of the arbitral tribunal under sub-section (2). Sub-section (2)
of Section 32 provides that the arbitral tribunal shall issue an
order for the termination of the arbitral proceedings where (a)
the claimant withdraws his claim, unless the respondent
objects to the order and the arbitral tribunal recognizes a
legitimate interest on his part in obtaining a final settlement
of the dispute, (b) the parties agree on the termination of the
proceedings, or (c) the arbitral tribunal finds that the
continuation of the proceedings has for any other reason
become unnecessary or impossible. Section 32(3) stipulates
that subject to section 33 and subsection (4) of section 34, the
mandate of the arbitral tribunal shall terminate with the
termination of the arbitral proceedings.
xxx xxx xxx
24. [...] Section 32 of the Act provides for the termination of
arbitral proceedings. It provides that the arbitral proceedings
shall stand terminated by pronouncement of the final arbitral
award or by an order of the arbitrator under sub-section (2)
of Section 32. In the facts of the present case, the Arbitral
Tribunal has terminated the proceedings by virtue of not
bringing the petitioners on record in the arbitral proceedings.
There is no pronouncement of a final arbitral award in the
facts of the present case as stipulated under Section 32(1).
Every order of the Tribunal terminating the arbitral
proceedings can never be terms as an award. This is clear
from an ex-facie reading of section 32. [...] ”
Special Leave Petition (C) No. 10389 of 2025 Page 76 of 269
(Emphasis supplied)
127. Similarly, in PCL Suncon (supra), the Delhi High Court held that
as per the decision of Lalitkumar V. Sanghavi (supra) Section 32
of the Act, 1996 is exhaustive and covers all cases of termination
of arbitral proceedings under the Act. It further held that even an
order terminating the proceedings for the failure to file the
statement of claims in terms of Section 25 would, in substance, be
an order under Section 32 sub-section (2) of the Act, 1996. The
relevant observations read as under: -
“25. Section 32 of the A&C Act also draws a clear distinction
between a final arbitral award and orders passed by an
Arbitral Tribunal. In terms of Sub-section (1) of Section 32
of the A&C Act, arbitral proceedings stand terminated by a
final award or by such orders as are specified under Sub-
section (2) of the said A&C Act.
xxx xxx xxx
37. The Supreme Court held the said order to be one
terminating the arbitral proceedings under Section 32(2)(c)
of the A&C Act as the said order would not qualify as an
order under Clauses (a) or (b) of Section 32(2) of the A&C
Act. The court proceeded on the basis that Section 32 of the
A&C Act is exhaustive and covers all cases of termination of
arbitral proceedings. This is implicit in paragraphs nos. 11
and 12 of the said decision, which read as under:
“11. Section 32 of the Act on the other hand deals
with the termination of arbitral proceedings. From
the language of Section 32, it can be seen that
arbitral proceedings get terminated either in the
making of the final arbitral award or by an order of
Special Leave Petition (C) No. 10389 of 2025 Page 77 of 269
the Arbitral Tribunal under sub-section (2). Sub-
section (2) provides that the Arbitral Tribunal
shall issue an order for the termination of the
arbitral proceedings in the three contingencies
mentioned in clauses (a) to (c) thereof.
12. On the facts of the present case, the
applicability of clauses (a) and (b) of Section 32(2)
is clearly ruled out and we are of the opinion that
the order dated 29-10-2007 by which the Tribunal
terminated the arbitral proceedings could only fall
within the scope of Section 32, sub-section (2),
clause (c) i.e. the continuation of the proceedings
has become impossible. By virtue of Section 32(3),
on the termination of the arbitral proceedings, the
mandate of the Arbitral Tribunal also comes to an
end. Having regard to the scheme of the Act and
more particularly on a cumulative reading of
Section 32 and Section 14, the question whether
the mandate of the arbitrator stood legally
terminated or not can be examined by the court “as
provided under Section 14(2)”.
xxx xxx xxx
39. An order terminating the proceedings on failure of the
claimant to file its Statement of Claims within the stipulated
time, is also in the nature of an order under Sub-section (2)
of Section 32 of the A&C Act and not an arbitral award
because such an order does not decide any of the points on
which the parties are in issue in the arbitration.”
(Emphasis supplied)
128. In yet another decision of the Delhi High Court in Gangotri
Enterprises Ltd. v. NTPC Tamil Nadu Energy Co. Ltd. reported in
2017 SCC OnLine Del 6560 , it was held that where the arbitrator
terminates the proceeding in terms of Section 25(a) of the Act,
Special Leave Petition (C) No. 10389 of 2025 Page 78 of 269
1996, the same would be a termination within the meaning of
Section 32(2)(c) of the said Act.
128.1 In the said case, the appellant was given more than five
opportunities to file its statement of claims, yet he failed to do so
each time. Consequently, the arbitrator in terms of Section 25(a)
of the Act, 1996, foreclosed the appellant’s right to file the
statement of claim.
128.2
However, the arbitrator did not terminate the proceedings in
view of the counter-claims filed by the respondent. Instead, the
appellant was directed to file his statement of defence in respect
of the same, failing which the proceedings would continue
without it.
128.3
Aggrieved by the aforesaid, the appellants moved the High Court
contending that the order passed by the arbitrator, closing their
right to file the statement of claims, had effectively terminated the
proceedings and the mandate of the tribunal in respect of the
claims, thereby entitling them to invoke the remedy under Section
14 of the Act, 1996.
128.4 However, the respondent therein contended that since the
proceedings had not been terminated, and the arbitrator was still
Special Leave Petition (C) No. 10389 of 2025 Page 79 of 269
continuing to adjudicate some of the disputes, there was no
termination of the mandate, and as a result the appellants were
not entitled to the relief under Section 14 of the Act, 1996.
128.5 The Delhi High Court observed that although the arbitrator did
not terminate the proceedings in its entirety yet by virtue of
closing the right of the appellants to file his statement of claim it
had, in effect terminated the proceedings.
128.6 Lalitkumar V. Sanghavi
Placing reliance on (supra) it held that
such an order had the effect of terminating both the proceedings
and the mandate of the tribunal terms of Section 32(2) of the Act,
1996 insofar as the claim is concerned, irrespective of the fact that
the proceedings were still in progress in respect of the counter-
claims, inasmuch as the final award that would be eventually
passed would not include the said claims.
128.7 The relevant observations read as under: -
“12. GEL, thereafter, sought time to file its statement of
claims but admittedly failed to do so. GEL's request for
extending the time to file the statement of claims was accepted
and the arbitrator extended time to file statement of claims on
more than five occasions. However, since GEL failed to do so,
the arbitrator passed the Interim Arbitral Order dated
28.04.2016 under Section 23 and 25 of the Act, in effect
closing the right of GEL to file the statement of claims. The
arbitrator, further directed GEL to file its response to the
counter claims filed by NTECL.
Special Leave Petition (C) No. 10389 of 2025 Page 80 of 269
15. Mr. Bharat Sangal, the learned counsel appearing for
NTECL submitted that the question of examining a
controversy as to whether the arbitrator is de jure or de
facto unable to act, would arise only in cases where the
proceedings are finally closed and not in cases where the
arbitrator is still continuing to adjudicate some of the
disputes. He submitted that the decision in the case of Lalit
Kumar v. Sanghavi (supra) would be applicable only in cases
where the mandate of the arbitrator is terminated on account
of final order terminating the proceedings in entirety.
xxx xxx xxx
22. The learned counsel for GEL has sought to place GEL's
case under Section 14(2) of the Act on the basis that the
arbitrator has terminated the proceedings and therefore, by
virtue of Section 32(3) of the Act, the mandate of the
arbitrator also stands terminated; consequently, falling
within the scope of Section 14(2) of the Act.
xxx xxx xxx
23. It is necessary to observe that by the order dated
28.04.2016, the arbitrator has not terminated the arbitral
proceedings in its entirety; he has terminated the
proceedings qua the claims of GEL by closing GEL's right to
file its claims. The arbitrator has therefore captioned the order
as “Interim Arbitral Order passed under Sec 23 & 25 of the
Arbitration and Conciliation Act 1996/2015
(Amendments)”. By the said order, he also directed GEL to
file a response to the counter-claims of NTECL and further
clarified that “the final award will be pronounced after the
adjudication of the counter claims”.
24. Having stated the above, Mr. Sangal's the contention
that the arbitrator's mandate has not terminated by the
impugned order dated 28.04.2016 as the arbitral proceedings
have not terminated, is erroneous. Clearly, the arbitral
proceedings qua the disputes raised by GEL were terminated
on account of its failure to file the statement of claims within
the time as specified. Undisputedly, the effect of the order of
28.04.2016 is that arbitrator's mandate for deciding the
claims intended to be raised by GEL stands terminated and
he is de jure or de facto unable to act as an arbitrator qua such
Special Leave Petition (C) No. 10389 of 2025 Page 81 of 269
claims even though his mandate to continue the proceedings
and adjudicate the counter claims has not come to an end.
26. The decision in the case of Lalitkumar V.
Sanghavi (supra) also turned on the principle that the
petitioner could not be rendered remediless on account of the
arbitrator terminating the proceedings. In that case no
recourse would be available to the petitioner under Section 34
of the Act and thus the question would have to be considered
within the scope of Section 14 of the Act. Thus, this decision
applies only in cases where the arbitral proceedings are
terminated by the arbitrator other than by making an award,
that is, under Section 32(2) of the Act; it is clearly not
applicable where the arbitral proceedings are terminated by
virtue of Section 32(1) of the Act, that is, by making of an
award.
27. Thus, the second question, whether the order dated
28.04.2016 closing the right of GEL to file its statement of
claims and thereby terminating the proceedings qua such
claims, is amenable to challenge under Section 14 of the Act,
is answered in the affirmative. In cases where the arbitrator's
mandate is terminated, a re-course to Section 14(2) of the Act
would be available provided a specific remedy is not provided
under the Act. In the present case, the arbitrator's mandate
to adjudicate any claims of GEL under the Agreement, stands
terminated. Concededly, the order dated 28.04.2016 as also
the final award that may be passed, in as much as it would
not include GEL's claim, would not be amenable to challenge
under Section 34 of the Act.”
(Emphasis supplied)
II. Decisions reading Termination under Section(s) 25, 30 or 38
respectively, to be independent from that under Section 32
sub-section (2) of the Act, 1996.
129. On the other hand, as discussed earlier, the power of the arbitral
tribunal to terminate the proceedings under Section(s) 25, 30 or 38
Special Leave Petition (C) No. 10389 of 2025 Page 82 of 269
of the Act, 1996 respectively, has been construed by various
decisions to be independent from the power to terminate the
proceedings under Section 32 of the said Act.
130. To put it simply, in several decisions the view has been taken that
the provisions of Section(s) 25, 30, 32 and 38 of the Act, 1996
respectively, or at-least some of these provisions, each
independently empower the arbitral tribunal to terminate the
proceeding in the circumstances contemplated therein.
131. Thus, according to the aforesaid proposition, the power to
terminate the proceedings under the Act, 1996 does not emanate
solely from Section 32 sub-section (2), but rather inheres in various
other provisions of the Act, that contemplate the termination of
proceedings.
132. One of the significant decisions in this regard is the judgment of
SREI Infrastructure (supra) rendered by a two-Judge Bench of this
Court. In the said decision, the arbitral tribunal terminated the
proceedings in terms of Section 25 of the Act, 1996 on account of
the claimant’s failure to file his statement of claim despite repeated
Special Leave Petition (C) No. 10389 of 2025 Page 83 of 269
reminders. The tribunal whilst terminating the proceedings
observed that the claimant appeared to be not interested in
pursuing the arbitration and that no explanation had been offered
for his failure to file the statement of claims.
133. Aggrieved by the same, the respondent preferred an application
before the arbitral tribunal seeking recall of the order terminating
the proceedings. The same came to be rejected on the ground that
the tribunal lacked the authority to recommence the proceedings
once they stood terminated. Against the same, a petition under
Article 227 was preferred before the High Court, which came to be
allowed. The High Court remitted the matter back to the tribunal
for fresh consideration on the issue of termination of the
proceedings.
134. In appeal, this Court observed that there was a legislative gap in
the context of the provisions of Section(s) 25(a), 32(2) and 34 of the
Act, 1996 respectively, that required to be resolved. Upon
examining the aforesaid provisions, this Court held that the
termination of proceedings envisaged under Section 25(a) of the
Special Leave Petition (C) No. 10389 of 2025 Page 84 of 269
Act, 1996 is markedly different from that under Section 32(2)(c) for
the following reasons: -
(i) First, it held that Section 25, more particularly clause (a)
provides that when the claimant fails to communicate his
statement of claim within the time as envisaged by Section
23, the arbitral tribunal has to terminate the proceedings.
Thus, the provision contemplates a situation where the
arbitral proceeding is yet to be started. The relevant
observations read as under: -
“20. In the present case, proceedings were terminated
vide order dated 12-12-2011 under Section 25(a).
After termination of proceedings, application to recall
the said order was filed by the claimant on 20-1-2012,
which was rejected by the Arbitral Tribunal on the
ground that it has no jurisdiction to recommence the
arbitration proceedings. Section 25 contemplates a
situation that when the claimant fails to communicate
his statement of claim within the time as envisaged by
Section 23, the Arbitral Tribunal has to terminate the
proceedings. This section thus contemplates a
situation where arbitration proceeding has not been
started. [...]”
(Emphasis supplied)
(ii) Secondly, that the proceedings in terms of Section 25(a) of the
Act, 1996 may be terminated only when the claimant is asked
to show cause as to why he failed to submit his claim within
Special Leave Petition (C) No. 10389 of 2025 Page 85 of 269
the time stipulated and the claimant fails to show any
sufficient cause for the same. Thus, it is the duty of the arbitral
tribunal to give an opportunity to the defaulting claimant to
show sufficient cause for his failure. Where a sufficient cause
is shown, either in response to the tribunal’s notice, or by the
claimant on his own, it is not obligatory for the arbitral
tribunal to terminate the proceedings. The relevant
observations read as under: -
“20. [...] The most important words contained in
Section 25 are “where without showing sufficient
cause—the claimant fails to communicate his
statement of claim”. Under Section 23(1), the claimant
is to state the facts supporting his claim within the
period of time agreed upon by the parties or determined
by the Arbitral Tribunal. The question of termination
of proceedings thus arises only after the time agreed
upon between the parties or determined by the Arbitral
Tribunal comes to an end. When the time as
contemplated under Section 23(1) expires and no
sufficient cause is shown by the claimant the Arbitral
Tribunal shall terminate the proceedings. The question
of showing sufficient cause will arise only when the
claimant is asked to show cause as to why he failed to
submit his claim within the time as envisaged under
Section 23(1) or the claimant, on his own, before the
order is passed under Section 25(a) to terminate the
proceedings comes before the Arbitral Tribunal
showing sufficient cause for not being able to submit
his claim within the time. In both the circumstances
i.e. when a show-cause notice is issued to the claimant
as observed above or the claimant of his own shows
cause for non-filing the claim within the time the
Special Leave Petition (C) No. 10389 of 2025 Page 86 of 269
Arbitral Tribunal shall take a call on terminating the
proceedings. It is easy to comprehend that in the
event, the claimant shows a sufficient cause, the
Arbitral Tribunal can accept the statement of
claim even after expiry of the time as envisaged
under Section 23(1) or grant further time to the
claimant to file a claim. Thus, on sufficient cause
being shown by a claimant even though time has
expired under Section 23(1), it is not obligatory
for the Arbitral Tribunal to terminate the
proceedings. The conjunction of the wordings
“where without showing sufficient cause” and
“the claimant fails to communicate his statement
of claim”, would indicate that it is a duty of the
Arbitral Tribunal to inform the claimant that he
has failed to communicate his claim on the date
fixed for that and requires him to show cause
why the arbitral proceedings should not be
terminated? [...]”
(Emphasis supplied)
(iii) Thirdly, under the scheme of Section 25, ordinarily, the
proceedings have to be terminated only when no sufficient
cause is shown by the claimant for his default in filing the
statement of claim. However, there is no impediment in the
provision for the claimant to show such sufficient cause even
after the termination of the proceedings. This is because the
occasion to show sufficient cause would arise only after the
claimant defaults in filing its statement of claims. Thus, even
after passing the order for terminating the proceedings, if
Special Leave Petition (C) No. 10389 of 2025 Page 87 of 269
sufficient cause is shown, the same can be accepted by the
tribunal. There is no lack of the jurisdiction in the arbitral
tribunal to recall the earlier order on sufficient cause being
shown. The relevant observations read as under: -
“20. [...] Opportunity to show sufficient cause for his
failure to communicate his claim statement can only
be given after he has actually failed to do so. Whether
in a case where the claimant failed to file a statement
of claim and has failed also to show cause before an
order of termination of proceedings is passed, the
claimant is entitled to show cause subsequent to the
termination, is the question which has fallen for
consideration.
21. When the Arbitral Tribunal without sufficient
cause being shown by the claimant to file the claim
statement can terminate the proceedings, subsequent
to termination of proceedings, if the sufficient cause is
shown, we see no impediment in the power of the
Arbitral Tribunal to accept the show cause and permit
the claimant to file the claim. The scheme of Section 25
of the Act clearly indicates that on sufficient cause
being shown, the statement of claim can be permitted
to be filed even after the time as fixed by Section 23(1)
has expired. Thus, even after passing the order of
terminating the proceedings, if sufficient cause is
shown, the claims of statement can be accepted by the
Arbitral Tribunal by accepting the show-cause and
there is no lack of the jurisdiction in the Arbitral
Tribunal to recall the earlier order on sufficient cause
being shown.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 88 of 269
(iv) Lastly, the occasion to terminate the proceedings under
Section 32(2)(c) arises only when the claim is not terminated
under Section 25(a), and the arbitration has proceeded further.
The words “unnecessary” or “impossible” in Section 32(2)(c)
have been used in a context different from that of the default
contemplated under Section 25(a). Furthermore, the use of the
phrase “ the mandate of the Arbitral Tribunal shall terminate ” in
Section 32, and the omission of it in Section 25, clearly indicates
that the nature of termination under the two provisions is
distinct from each other. The distinction being that under
Section 25(a), the proceeding can be recommenced even after
termination, if the claimant shows sufficient cause, but no such
revival is possible under Section 32(2)(c) of the Act, 1996. The
relevant observations read as under: -
“22. Section 32 contains a heading “Termination of
Proceedings”. Sub-section (1) provides that the
arbitral proceedings shall be terminated by the final
arbitral award or by an order of the Arbitral Tribunal
under sub-section (2). Sub-section (2) enumerates the
circumstances when the Arbitral Tribunal shall issue
an order for the termination of the arbitral
proceedings. The situation as contemplated under
Sections 32(2)(a) and 32(2)(b) are not attracted in the
facts of this case. Whether termination of proceedings
in the present case can be treated to be covered by
Section 32(2)(c) is the question to be considered.
Special Leave Petition (C) No. 10389 of 2025 Page 89 of 269
Clause (c) contemplates two grounds for termination
i.e. (i) the Arbitral Tribunal finds that the
continuation of the proceedings has for any other
reason become unnecessary, or (ii) impossible. The
eventuality as contemplated under Section 32 shall
arise only when the claim is not terminated under
Section 25(a) and proceeds further. The words
“unnecessary” or “impossible” as used in clause (c) of
Section 32(2), cannot be said to be covering a situation
where proceedings are terminated in default of the
claimant. The words “unnecessary” or “impossible”
has been used in different contexts than to one of
default as contemplated under Section 25(a). Sub-
section (3) of Section 32 further provides that the
mandate of the Arbitral Tribunal shall terminate with
the termination of the arbitral proceedings subject to
Section 33 and sub-section (4) of Section 34. Section
33 is the power of the Arbitral Tribunal to correct any
computation errors, any clerical or typographical
errors or any other errors of a similar nature or to give
an interpretation of a specific point or part of the
award. Section 34(4) reserves the power of the court to
adjourn the proceedings in order to give the Arbitral
Tribunal an opportunity to resume the arbitral
proceedings or to take such other action as in the
opinion of the Arbitral Tribunal will eliminate the
grounds for setting aside the arbitral award. On the
termination of proceedings under Sections 32(2) and
33(1), Section 33(3) further contemplates termination
of the mandate of the Arbitral Tribunal, whereas the
aforesaid words are missing in Section 25. When the
legislature has used the phrase “the mandate of the
Arbitral Tribunal shall terminate” in Section 32(3),
non-use of such phrase in Section 25(a) has to be
treated with a purpose and object. The purpose and
object can only be that if the claimant shows sufficient
cause, the proceedings can be recommenced.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 90 of 269
135. In Sai Babu v. M/s Clariya Steels Pvt. Ltd. [Civil Appeal No. 4956
of 2019] , another two-Judge Bench of this Court placing reliance
on SREI Infrastructure (supra), reiterated that the termination of
proceedings under Section 25(a) is distinct from that under Section
32(2)(c). As in the former, only the proceedings come to an end
whereas in the latter the mandate of the arbitral tribunal also gets
terminated. Thus, unlike Section 25(a), no option of recall would
lie in cases covered by Section 32 of the Act, 1996. The relevant
observations read as under: -
“The sole arbitrator who was appointed in this case
terminated proceedings under Section 32(2)(c) of the
Arbitration and Conciliation Act, 1996 (hereinafter referred
to as ‘Act’), by order dated 04.05.2017. However, on an
application dated 05.05.2017 to recall the aforesaid order, the
learned arbitrator passed an order on 18.05.2017 stating that,
as good reasons had been made out in the affidavit for recall,
he was inclined to recall the order even though under the Act,
in law, it may be difficult to do so. A revision filed against the
aforesaid order was dismissed by the High Court on
14.06.2017.
Having heard learned counsel for the parties, we are of the
view that the matter is no longer res integra. In SREI
Infrastructure Finance Limited v. Tuff Drilling Private
Limited’ [(2018) 11 SCC 470] [...]
xxx xxx xxx
It is clear, therefore, that a distinction was made by this Court
between the mandate terminating under section 32 and
proceedings coming to an end under section 25. This Court
Special Leave Petition (C) No. 10389 of 2025 Page 91 of 269
has clearly held that no recall application would, therefore, lie
in cases covered by section 32(3).”
(Emphasis supplied)
136. Thus, as per SREI Infrastructure (supra) and Sai Babu (supra)
respectively, the termination of proceedings in terms of Section
25(a) cannot be construed to mean an order of termination under
Section 32(2)(c), as both the provisions operate in different spheres
and context.
137. Hyderabad Metropolitan Development Authority & Anr. v.
In
Ramky Elsamex Hyderabad Ring Road Ltd. reported in 2023 SCC
OnLine TS 4416 , the question that came up for the consideration
of the Telangana High Court was whether an order of termination
pursuant to Section 38(2) would, in effect, constitute an order
under Section 32(2)(c) of the Act, 1996.
138.
The facts shorn of its details, are that the arbitral tribunal therein,
by its order had directed the parties to deposit the fees within a
specified time, failing which the proceedings would stand
terminated. The respondent-claimant therein deposited its share
of the fees, but the appellant defaulted. Notwithstanding the
Special Leave Petition (C) No. 10389 of 2025 Page 92 of 269
default, the tribunal proceeded to continue with the proceedings.
Aggrieved by the same, the appellants approached the High Court
of Telangana inter-alia contending that, since the order of the
arbitral tribunal had not been complied with, the proceedings
automatically stood terminated in terms of Section 32(2)(c) read
with Section 38(2) of the Act, 1996.
139.
The Telangana High Court held that the arbitral tribunal could not
have continued with the proceedings, as the same stood
terminated for the following reasons: -
(i) First, that as per Section 38(2) of the Act, 1996, the arbitral
tribunal is competent to terminate the proceedings where
both the parties fail to deposit the fees as directed. Such an
order of termination would be traceable to Section 32(2)(c)
of the Act, as the non-deposit of the requisite fees makes it
impossible for the tribunal to continue the proceedings. The
relevant observations read as under: -
“15. According to Section 31(8) Costs of arbitration
should be fixed by the Arbitral Tribunal in accordance
with Section 31-A. Section 31-A is about regime for
costs. Section 38 deals with deposits. According to
sub-section (1), the Tribunal is competent to fix the
amount of deposit or supplementary deposit as the case
Special Leave Petition (C) No. 10389 of 2025 Page 93 of 269
may be as advance for the costs referred to in Sub-
section (8) of section 31 which it would expect to incur
in respect of the claim submitted to it. Whenever there
is a counter claim, Arbitral Tribunal is competent to
fix separate amount of deposit for claim and counter
claim. According to Sub-section (2), deposit referred to
in Sub-section (1) should be payable in equal shares by
the parties. First proviso to Sub-section (2) enables one
party to pay the share of the other party also if the other
party fails to pay its share. According to second
proviso, where either party fails to pay share in respect
of claim or counter claim, the Arbitral Tribunal can
suspend or terminate the Arbitral proceedings in
respect of the claim or counter claim. Sub-Section (3)
enables rendering of accounts on such termination.
16. It is thus clear that according to second proviso to
Sub-section (2), the Tribunal is competent to
terminate Arbitral proceedings in case of failure of one
party or both parties to the dispute not paying the
deposit as directed by the Tribunal.
17. Section 32 of the Act, 1996 is in three parts. (i)
According to SubSection (1), Arbitral proceedings get
terminated when final arbitral award is passed or by
an order of the Arbitral Tribunal under Sub-section
(2). According to Sub-section (2), Arbitral Tribunal
shall issue an order for termination of the arbitral
proceedings where the claimant withdraws his claim,
unless respondent objects to such withdrawal; (ii)
where both parties agreed for termination of
proceedings; and (iii) where Arbitral Tribunal finds
that the continuation of the proceedings has for any
other reason becomes unnecessary or impossible.
xxx xxx xxx
22. Once proceedings are terminated traceable to
Section 38(2) read with Section 32(1)(c), the Arbitral
Tribunal has no competence to revive the arbitral
proceedings on the assumption that parties have never
Special Leave Petition (C) No. 10389 of 2025 Page 94 of 269
taken seriously the issue of termination of Arbitral
proceedings. When statute operates the field, the
understanding of the parties has no relevance. When
proceedings stood terminated and when the Arbitral
Tribunal has no competence to revive the Arbitral
proceedings, merely because the parties participated in
the subsequent proceedings has no legal consequence.
The parties cannot confer jurisdiction contrary to
statutory mandate.
23. In the case on hand, clause 32(2)(c) is attracted.
The Tribunal assumed that if parties do not make the
deposit within the time granted, they are not interested
in continuing the Arbitral proceedings. Though, the
Tribunal may not have used the
words unnecessary or impossible, the tone and tenor
of the order dated 10.09.2022 would clearly indicate
that it was impossible to continue the arbitral
proceedings. It is impossible to continue arbitral
proceedings if one of the parties are not keen in
participating in the arbitral proceedings by not
depositing the amount. Thus, having regard to the
conduct of one of the parties, petitioners herein, in not
depositing the fee directed to be paid by the Arbitral
Tribunal, it was impossible for the Arbitral Tribunal
to proceed with the case. It is not the case of the
respondent that he paid the fee payable by the
petitioners also as envisaged by first proviso to Section
38(2) of the Act, 1996. Therefore, reading together
second proviso to Section 38(2) and Section 32(2)(c),
the Arbitral proceedings stood terminated by virtue of
the orders of the Arbitral Tribunal dated 10.9.2022.
Once proceedings are terminated as per these clauses,
it is no more permissible for the Arbitral Tribunal to
commence or continue the Arbitral proceedings.”
(Emphasis supplied)
(ii) Secondly, the High Court by placing reliance on SREI
Infrastructure (supra) held that the termination of
Special Leave Petition (C) No. 10389 of 2025 Page 95 of 269
proceedings under Section 38(2) read with Section 32(2)(c)
is distinct from that under Section 25 of the Act, 1996. Unlike
Section 32(2)(c) where upon the termination of proceedings,
the mandate of the tribunal also comes to an end, Section 25
carves out an exception. This is because, under Section 25,
notwithstanding the termination of the proceedings, the
mandate of the tribunal continues, thereby, making it
permissible for the tribunal to revive the proceedings.
However, under the scheme formed by Section(s) 38(2) and
32(2)(c) no such revival is possible. The relevant
observations read as under: -
“24. Section 32(3) of the Act, 1996 clearly holds that
once Arbitral proceedings are terminated, the mandate
given to the Arbitral Tribunal also gets terminated. In
other words, the mandate comes to an end, the moment
Arbitral proceedings stood terminated. The scheme of
the Act does not envisage revival of Arbitral
proceedings once Arbitral proceedings are terminated.
Section 25 carves out an exception to scheme of
Sections 32 and 38 of the Act, 1996 as held by the
Hon'ble Supreme Court in SREI Infrastructure
Finance Ltd. According to law propounded by the
Hon'ble Supreme Court even if there was default of a
party as envisaged in Section 25, it is permissible for
the Arbitral Tribunal to continue proceedings.
Sections 32 and 38 of the Act, 1996 do not envisage
such course.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 96 of 269
140. Thus, according to the Telangana High Court in Hyderabad
Metropolitan Development Authority (supra), although an order
of termination in terms of Section 25(a) would not fall within the
scope of Section 32(2)(c) of the Act, 1996 as held by SREI
Infrastructure (supra), yet when an order of termination of
proceedings is passed in terms of Section 38(2), the same would
invariably constitute an order under Section 32(2)(c) of the said
Act.
141. In Sushila Kumari & Anr. v. Bhayana Builders Pvt. Ltd. reported
in 2019 SCC OnLine Del 7243 , the arbitral proceedings came to be
terminated on the ground that the claimant failed to quantify the
valuation of her claim. The arbitrator observed that despite several
requests, the claimant refused to quantify her claim because of
which the total arbitral fees could not be properly determined.
Accordingly, the arbitrator terminated the proceedings.
141.1 Aggrieved therefrom, the claimant approached the Delhi High
Court inter-alia contending that even though her claim was non-
monetary, she had already paid the requisite fees of the arbitrator,
and thus, the proceedings could not have been terminated. In
appeal, the Delhi High Court held as under: -
Special Leave Petition (C) No. 10389 of 2025 Page 97 of 269
(i) First, that the power to terminate the proceedings is available
to an arbitral tribunal under Section(s) 25 and 32 of the Act,
1996. It further held that the order passed by the arbitrator
terminating proceedings for the non-valuation of the claims
and thereby the fees payable, was in effect, an order under
Section 32(2)(c) of the Act, 1996. The relevant observations read
as under: -
“76. In this case, as noticed above, since the incumbent
Arbitrator via order dated 14.07.2017 has terminated
the arbitration proceedings without referring to any
provisions of 1996 Act, the same, as has been correctly
argued by Mr. Varma, would fall only under the
provisions of Section 32(2)(c) of the 1996 Act.
77. It is important to note that Subsection (1) of
Section 32 speaks about termination of arbitration
proceedings either upon a final award being rendered
in the matter or by virtue of an order passed by the
Arbitral Tribunal under Subsection (2) of the very
same section.
78. Under Subsection (2) of Section 32, an Arbitral
Tribunal can order termination of the Arbitral
proceedings under three situations as contemplated in
Subclauses (a) to (c) of the very same provision. 79.
Clause (a) of Sub-section (2) of Section 32 provides for
a situation where the claimant withdraws his claim
and the respondent does not object to the termination
of the arbitration proceedings. In case, the respondent
objects, then, the learned Arbitrator would have to
continue with the arbitration proceedings if it
recognizes that the respondent has a legitimate interest
in obtaining a final settlement of the dispute at hand.
Special Leave Petition (C) No. 10389 of 2025 Page 98 of 269
80. Clause (b) of Subsection (2) of Section 32 provides
for a circumstance where parties agree to the
termination of the proceedings.
81. Lastly, clause (c) of Subsection (2) of Section 32
provides that Arbitral Tribunal may terminate the
arbitration proceedings if it finds that the continuation
of the proceedings has for any other reason become
unnecessary or impossible.
xxx xxx xxx
87. As a matter of fact, the power to terminate the
arbitration proceedings is also available in Section 25
of the 1996 Act. ”
(Emphasis supplied)
(ii) Secondly, that despite the appellant’s obdurate refusal to
quantify her claims for the purpose of determining the
arbitrator’s fee, the same did not have the effect of rendering
the continuation of the arbitration proceedings impossible, and
thus, the same could not have been terminated in terms of
Section 32(2)(c) of the said Act. The relevant observations read
as under: -
“82. In the instant case, the substitute Arbitrator
terminated the arbitration proceedings as he found
that the petitioners were obdurate in their stand of not
valuing their claims and thereby enabling
ascertainment of the Arbitrator's fee.
Special Leave Petition (C) No. 10389 of 2025 Page 99 of 269
83. To my mind, the learned Arbitrator could not have
taken recourse to Section 32(1)(c) of the 1996 Act as,
however, unreasonable the learned Arbitrator found
the stand of the petitioners, it would still not be a
circumstance which vested him with the power of
terminating the arbitration proceedings. The reason I
say so is that under clause (c) of Section 32(2) of the
1996 Act, the learned Arbitrator could have
terminated the arbitration proceedings only if their
continuation had become either unnecessary or
impossible.”
(Emphasis supplied)
142. In Dani Wooltex Corpn. v. Sheil Properties (P) Ltd. reported in
(2024) 7 SCC 1 , the appellant therein contended that the
respondent had abandoned its claims, as the company, apart from
filing its statement of claims, never made any effort to convene a
hearing for the same. Accordingly, the arbitral proceedings came
to be terminated. In appeal, this Court held as under: -
(i) First, that under the Act, 1996, apart from Section 25(a), the
power to terminate the proceedings on the ground of
abandonment of claim is available only under Section 32(2)(c)
of the said Act. In the former, the proceedings can be
terminated if the claimant fails to file his statement of claim in
accordance with Section 23 of the Act, 1996. However, in the
latter, the proceedings can only be terminated if the reason is
such that it renders the continuation of the proceedings
Special Leave Petition (C) No. 10389 of 2025 Page 100 of 269
unnecessary or impossible. The relevant observations read as
under: -
“11. Clause (a) of Section 25 of the Arbitration Act
provides that on the failure of the claimants to
communicate the statement of claim in accordance
with sub-section (1) of Section 23, the Arbitral
Tribunal shall terminate the proceedings. Clause (b) of
Section 25 provides that if the respondent fails to
communicate his statement of defence in accordance
with sub-section (1) of Section 23, the Arbitral
Tribunal shall continue the proceedings. Clause (c) of
Section 25 provides that if a party fails to appear at an
oral hearing or to produce documents, the Arbitral
Tribunal may continue the proceedings and make the
arbitral award on the basis of whatever evidence is
available with it. The power to terminate arbitral
proceedings on the claimant's default to file a
statement of claim is the only provision under the
Arbitration Act to terminate the arbitral proceedings
apart from Section 32.
xxx xxx xxx
17. Therefore, clause (c) of sub-section (2) of Section
32 can be invoked for reasons other than those
mentioned in sub-section (1) of Section 32 and clauses
(a) and (b) of sub-section (2) of Section 32. Under
clause (c), the mere existence of a reason for
terminating the proceedings is not sufficient. The
reason must be such that the continuation of the
proceedings has become unnecessary or impossible. In
a given case, when a claimant files a claim and does
not attend the proceedings, clause (a) of Section 25
comes into operation, resulting in the learned
arbitrator terminating the proceedings.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 101 of 269
(ii) Secondly, that as per Section 25 sub-clause (b) and (c), where
a claimant, after the filing of his statement of claims, fails to
appear at an oral hearing or fails to produce documentary
evidence, the arbitral tribunal is empowered to continue with
the proceedings. This clearly indicated the legislative intent
that a claimant’s failure to appear or fix a hearing, cannot, by
itself, be a ground to hold that the proceedings have become
unnecessary or impossible. The relevant observations read as
under: -
“17. [...] If, after filing a claim, the claimant fails to
appear at an oral hearing or fails to produce
documentary evidence, it cannot be said that the
continuation of proceedings has become unnecessary.
If the claimant fails to appear at an oral hearing after
filing the claim, in view of clause (c) of Section 25, the
learned arbitrator can proceed with the arbitral
proceedings. The fact that clause (c) of Section 25
enables the Arbitral Tribunal to proceed in the absence
of the claimant shows the legislature's intention that
the claimant's failure to appear after filing the claim
cannot be a ground to say that the proceedings have
become unnecessary or impossible.”
(Emphasis supplied)
(iii) Thirdly, that under Section 32(2)(c), abandonment of claims
can be a reason to hold that the continuation of proceedings
has become unnecessary. However, in order to terminate the
Special Leave Petition (C) No. 10389 of 2025 Page 102 of 269
proceedings under the said provision, the abandonment of a
claim, either expressly or impliedly, must be clearly
established. The facts and the conduct of the party must be so
clinching and convincing that it leads only to one conclusion
that the claimant has given up his claim. Mere absence in
proceedings or failure to fix a date for the hearing does not
amount to abandonment of claim, as once the statement of
claims is filed, it is the arbitral tribunal’s duty under Section
25 to fix a date for hearing and continue with the proceedings.
The relevant observations read as under: -
“13. The order of termination passed by the learned
arbitrator, in this case, gives an impression that he was
of the view that unless parties move the Arbitral
Tribunal with a request to fix a meeting or a date for
the hearing, the Tribunal was under no obligation to
fix a meeting or a date for hearing. The appointment of
the Arbitral Tribunal is made with the object of
adjudicating upon the dispute covered by the
arbitration clause in the agreement between the
parties. By agreement, the parties can appoint an
arbitrator or Arbitral Tribunal. Otherwise, the Court
can do so under Section 11 of the Arbitration Act. An
arbitrator does not do pro bono work. For him, it is a
professional assignment. A duty is vested in the
learned arbitrator or the Arbitral Tribunal to
adjudicate upon the dispute and to make an award. The
object of the Arbitration Act is to provide for an
efficient dispute resolution process. An arbitrator who
has accepted his appointment cannot say that he will
not fix a meeting to conduct arbitral proceedings or a
Special Leave Petition (C) No. 10389 of 2025 Page 103 of 269
hearing date unless the parties request him to do so. It
is the duty of the Arbitral Tribunal to do so. If the
claimant fails to file his statement of claim in
accordance with Section 23, in view of clause (a) of
Section 25, the learned arbitrator is bound to terminate
the proceedings. If the respondent to the proceedings
fails to file a statement of defence in accordance with
Section 23, in the light of clause (b) of Section 25, the
learned arbitrator is bound to proceed further with the
arbitral proceedings. Even if the claimant, after filing
a statement of claim, fails to appear at an oral hearing
or fails to produce documentary evidence, the learned
arbitrator is expected to continue the proceedings as
provided in clause (c) of Section 25. Thus, he can
proceed to make an award in such a case.
xxx xxx xxx
18. Therefore, if the party fails to appear for a hearing
after filing a claim, the learned arbitrator cannot say
that continuing the arbitral proceedings has become
unnecessary. Abandonment by the claimant of his
claim may be grounds for saying that the arbitral
proceedings have become unnecessary. However, the
abandonment must be established. Abandonment can
be either express or implied. Abandonment cannot be
readily inferred. One can say that there is an implied
abandonment when admitted or proved facts are so
clinching and convincing that the only inference
which can be drawn is of the abandonment. Mere
absence in proceedings or failure to participate does
not, per se, amount to abandonment. Only if the
established conduct of a claimant is such that it leads
only to one conclusion that the claimant has given up,
his/her claim can an inference of abandonment be
drawn. Merely because a claimant, after filing his
statement of claim, does not move the Arbitral
Tribunal to fix a date for the hearing, it cannot be said
that the claimant has abandoned his claim. The reason
is that the Arbitral Tribunal has a duty to fix a date for
Special Leave Petition (C) No. 10389 of 2025 Page 104 of 269
a hearing. If the parties remain absent, the Arbitral
Tribunal can take recourse to Section 25.
(Emphasis supplied)
142.1 Accordingly, this Court in Dani Wooltex (supra) whilst setting
aside the order passed by the arbitral tribunal for termination of the
proceedings, summarized its conclusion as under: -
“ 25. To conclude:
25.1. The power under clause (c) of sub-section (2) of Section
32 of the Arbitration Act can be exercised only if, for some
reason, the continuation of proceedings has become
unnecessary or impossible. Unless the Arbitral Tribunal
records its satisfaction based on the material on record that
proceedings have become unnecessary or impossible, the
power under clause (c) of sub-section (2) of Section 32 cannot
be exercised. If the said power is exercised casually, it will
defeat the very object of enacting the Arbitration Act;
25.2. It is the Arbitral Tribunal's duty to fix a meeting for
hearing even if parties to the proceedings do not make such a
request. It is the duty of the Arbitral Tribunal to adjudicate
upon the dispute referred to it. If, on a date fixed for a
meeting/hearing, the parties remain absent without any
reasonable cause, the Arbitral Tribunal can always take
recourse to the relevant provisions of the Arbitration Act,
such as Section 25;
25.3. The failure of the claimant to request the Arbitral
Tribunal to fix a date for hearing, per se, is no ground to
conclude that the proceedings have become unnecessary; and
25.4. The abandonment of the claim by a claimant can be a
ground to invoke clause (c) of sub-section (2) of Section 32.
The abandonment of the claim can be either express or
implied. The abandonment cannot be readily inferred. There
is an implied abandonment when admitted or proved facts are
Special Leave Petition (C) No. 10389 of 2025 Page 105 of 269
so clinching that the only inference which can be drawn is of
the abandonment. Only if the established conduct of a
claimant is such that it leads only to one conclusion that the
claimant has given up his/her claim can an inference of
abandonment be drawn. Even if it is to be implied, there must
be convincing circumstances on record which lead to an
inevitable inference about the abandonment. Only because a
claimant, after filing his statement of claim, does not move
the Arbitral Tribunal to fix a date for the hearing, the failure
of the claimant, per se, will not amount to the abandonment
of the claim. ”
(Emphasis supplied)
143. This Court in SREI Infrastructure (supra) held that a termination
of proceedings under Section 32 of the Act, 1996, is wholly distinct
from a termination under Section 25. The reason behind this
distinction, as per SREI Infrastructure (supra) is in view of the use
of the expression “ mandate of the arbitral tribunal shall terminate with
the termination of the arbitral proceedings ” in Section 32 and the
omission thereof in Section 25 of the Act, 1996.
144. The expression “ mandate of the arbitral tribunal shall terminate with
the termination of the arbitral proceedings ” is unique to the provision
of Section 32. This phrase has not been used by the legislature in
any other provision of the Act, 1996. Even the other provisions in
Special Leave Petition (C) No. 10389 of 2025 Page 106 of 269
which termination of proceedings has been alluded to, such as
Section(s) 25 or 38 of the Act, 1996, the aforesaid phrase is absent.
b. Interplay between Section(s) 25, 30 38 and the termination of
proceedings under Section 32 of the Act, 1996.
145. Before we proceed to understand the framework of termination of
proceedings under Section(s) 25, 30, 32 and 38 of the Act, 1996
respectively, it would be apposite to understand the legislative
history that led to the enactment of these provisions.
146. Prior to the 1996 Act, three Acts governed the law of Arbitration
in India, namely, the Arbitration (Protocol and Convention) Act,
1937, which gave effect to the Geneva Convention; the Arbitration
Act, 1940 which dealt with domestic awards; and the Foreign
Awards (Recognition and Enforcement) Act, 1961 which gave
effect to the New York Convention of 1958 which dealt with
challenges to awards made which were foreign awards.
147. However, with the passage of time, the existing laws were felt to
have become outdated to address the economic reforms taking
place in the country and to keep pace with the emerging
Special Leave Petition (C) No. 10389 of 2025 Page 107 of 269
international standards governing the resolution of domestic and
international commercial disputes through arbitration.
148. Accordingly, the Act, 1996 was enacted by the Parliament inter-alia
to consolidate and amend the law relating to domestic arbitration,
international commercial arbitration, enforcement of foreign
arbitral awards, by taking into account the United Nations
Commission on International Trade Law’s Model law on
International Commercial Arbitration adopted in 1985 (for short,
the “ UNCITRAL Model ”).
149. The Statement of Objects and Reasons appended to the Act states
that although the UNCITRAL Model Law and Rules are intended
to deal with international commercial arbitration and conciliation,
yet the harmonised concepts on arbitration and conciliation
contained therein are universal in application and would serve as
a model legislation on domestic arbitration and conciliation.
150. The Statement of Objects and Reasons of the Act, 1996 reads as
under: -
Special Leave Petition (C) No. 10389 of 2025 Page 108 of 269
“ STATEMENT OF OBJECTS AND REASONS
The law on arbitration in India was substantially contained
in three enactments, namely - the Arbitration Act, 1940, the
Arbitration (Protocol and Convention) Act, 1937 and the
Foreign Awards (Recognition and Enforcement) Act, 1961.
The Arbitration Act, 1940 was widely felt to have become
outdated. The Law Commission of India, several
representative bodies of trade and industry and experts in the
field of arbitration had proposed amendments to this Act to
make it more responsive to contemporary requirements. It
was also felt that economic reforms taking place in India may
not become fully effective if the laws dealing with settlement
of both domestic and international commercial disputes
remains out of tune with such reforms. Conciliation, like
arbitration is also getting worldwide recognition as an
instrument for settlement of disputes.
The United Nations Commissions on International Trade
Law (UNCITRAL) adopted the Model law on International
Commercial Arbitration in 1985. The General Assembly of
the United Nations has recommended that all countries give
due consideration to the said Model Law in view of the
desirability of uniformity of the law of arbitral procedures and
the specific needs of international commercial arbitration
practice. The UNCITRAL also adopted a set of Conciliation
Rules in 1980. The General Assembly of the United Nations
has recommended the use of these Rules in cases where the
disputes arise in the context of international commercial
relations and the parties seek amicable settlement of their
disputes by recourse to conciliation. An important feature of
the said UNCITRAL Model Law and Rules is that they have
harmonised concepts on arbitration and conciliation of
different legal systems of the world and thus contain
provisions which are designed for universal application. The
UNCITRAL Model Law and Rules, though, are intended to
deal with international commercial arbitration and
conciliation, they could, with appropriate modifications,
serve as a model for legislation on domestic arbitration and
conciliation.
Special Leave Petition (C) No. 10389 of 2025 Page 109 of 269
In India, in order to consolidate and amend the law relating
to domestic arbitration, international commercial
arbitration, enforcement of foreign arbitral awards and to
define the law relating to conciliation, taking into account the
Model Law and Conciliation Rules adopted by the
UNCITRAL, the President of India promulgated on 16th
January, 1996, the Arbitration and Conciliation Ordinance,
1996 as the Parliament was not in session and the
circumstances existed which rendered it necessary to take
immediate action. The ordinance could not be replaced by an
Act as the Parliament session was prorogued without passing
the Bill. But in order to give further continued effect to the
provisions of the said Ordinance, the President promulgated
the Arbitration and Conciliation (Second) Ordinance, 1996
on 26th March, 1996 which could also not be passed by the
Parliament. On 21st June, 1996, the President promulgated
the Arbitration and Conciliation (Third) Ordinance, 1996.
To replace the Ordinance of 21st June, 1996, the Arbitration
and Conciliation Bill was introduced in the Parliament. The
Bill was passed by both the Houses of Parliament and
received the assent of the President on 16th August, 1996 and
was titled as the Arbitration and Conciliation Act, 1996.
The main objects of the Act are-
(i) to comprehensively cover international and
commercial arbitration and conciliation as also
domestic arbitration and conciliation;
(ii) to make provision for an arbitral procedure which is
fair, efficient and capable of meeting the needs of the
specific arbitration;
(iii) to provide that the arbitral tribunal gives reasons for
its arbitral award;
(iv) to ensure that the arbitral tribunal remains within the
limits of its jurisdiction;
(v) to minimise the supervisory role of courts in the
arbitral process;
(vi) to permit an arbitral tribunal to use mediation,
conciliation or other procedures during the arbitral
proceedings to encourage settlement of disputes;
(vii) to provide that every final arbitral award is enforced in
the same manner as if it were a decree of the court;
Special Leave Petition (C) No. 10389 of 2025 Page 110 of 269
(viii) to provide that a settlement agreement reached by the
parties as a result of conciliation proceedings will have
the same status and effect as an arbitral award on
agreed terms on the substance of the dispute rendered
by an arbitral tribunal; and
(ix) to provide that, for purposes of enforcement of foreign
awards, every arbitral award made in a country to
which one of the two international conventions
relating to foreign arbitral awards to which India as a
party applies, will be treated as a foreign award.”
(Emphasis supplied)
151. Thus, the Act, 1996 substantially adopts the UNCITRAL Model as
its framework. Several provisions in the said Act pertaining to
domestic arbitration draw heavy inspiration from the UNCITRAL
Model, with many provisions being in substance pari-materia to the
corresponding Article(s) contained in the UNCITRAL Model, with
marginal adaptations and tweaks.
152. Section(s) 25, 30 and 32 of the Act, 1996 in particular mirror
Article(s) 25, 30 and 32 of the UNCITRAL Model, respectively.
Thus, it would be apposite to first understand the underlying
object with which these provisions came to be introduced in the
Model Law.
Special Leave Petition (C) No. 10389 of 2025 Page 111 of 269
I. History of the Working Group on the UNCITRAL Model Law on
International Commercial Arbitration.
153. When the Working Group on International Contract Practices of
UNCITRAL commenced its work on the Model Law on
International Commercial Arbitration all the way back in 1982, the
idea of ‘termination of proceedings’ by the arbitral tribunal first
surfaced in the draft during the deliberations on the now Article
25 of the UNCITRAL Model Law in its Third Session. At that time,
the provisions of Article(s) 30 and 32 as we know now, had not yet
been conceptualised.
154. Article 25 earmarked the first instance where a reference was
made to the termination of arbitral proceedings by the arbitral
tribunal. However, what is particularly noteworthy is that, when
Article 25 was being discussed, the provision was never intended
to confer the arbitral tribunal with a general power to terminate
the proceedings.
155.
The discussions which followed the preparation of Article 25
largely revolved around addressing situations where a party
failed to participate in the arbitration. The authority to terminate
Special Leave Petition (C) No. 10389 of 2025 Page 112 of 269
the arbitral proceedings, was, at that time, understood as an
implied power vested in the arbitral tribunal in seisin of the
dispute. It was in this limited context that the termination of
proceedings by the arbitral tribunal was adverted to.
156. The Working Group in its Third Session recognised that some
jurisdictions were apprehensive to assign sanctity to decisions
rendered ex-parte . According to it, this was an issue that could
potentially allow a party to completely avoid arbitrations that
would result in awards not in their favour by not participating in
the proceedings. Such conduct would effectively leave the
claimant in a lurch, especially in jurisdictions where an ex-parte
award would not be enforceable.
157. Nevertheless, it was decided that the Model Law should explicitly
permit an arbitral tribunal to proceed in the absence of one party.
The Working Group resolved that a draft article be prepared by
the Secretariat to allow the arbitration to continue in a party’s
absence under certain conditions. This was the genesis for the now
Article 25 of the UNCITRAL Model. The relevant observations
read as under: -
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“7. Default
Question 4-13. If one of the parties fails to participate, would
the arbitral tribunal be empowered to go ahead with the
proceedings and make a binding award even without special
authorization by the parties, including reference to
arbitration rules which allow the arbitral tribunal to do so?
If such special authorization were to be required, should the
model law express1y recognize it as being effective, subject to
any restrictions envisaged under question4-l4?
71. There was general agreement that, in principle, the
arbitral tribunal should be empowered to continue the
proceedings even if one of the parties fails to communicate his
statement or to appear at a hearing. However, divergent
views were expressed as to whether the model law should
contain a provision to that effect which would set forth the
conditions for such continuation. under one view, an attempt
should be made to formulate the conditions for such
continuation. Minimum requirements for continuing the
proceedings and rendering an award in case of such _ failure
would be that the party had been given due advance notice
(possibly also requiring a statement of the legal consequences
of default) and that the party had not shown sufficient cause
for his failure. Under another view, it was not practical to
regulate this issue in the model law, since such regulation
might not be readily acceptable in some countries in view of
their general position on ex parte judgements. If, however,
there were to be a provision on this issue, one view was that
it could provide that a court would decide, in the
circumstances of each case, whether ex parte proceedings by
the arbitral tribunal were permissible. Another view
expressed concern over the delay and complications which
might result from such court involvement. The Working
Group decided to attempt to formulate the conditions that
must be met for permitting ex parte proceedings, and to
request the Secretariat to prepare draft provisions taking into
account the suggestions made during the discussion. If such
attempt proved to be fruitless, the issue would have to be left
for decision to the procedural law of each State.”
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(Emphasis supplied)
158. What is interesting is the discussion which immediately followed.
The Working Group decided that in addition to the aforesaid
procedural issues, certain other aspects were also required to be
dealt with in the Model Law. Amongst these was the issue on
termination of arbitral proceedings. The Working Group appears
to be cognizant of the fact that, any deliberation on the default of
one party to participate in the proceedings, would nevertheless
require discussion on the termination of proceedings as-well.
Accordingly, it decided that the Secretariat would prepare draft
provisions on these issues, with explanatory notes if appropriate.
“8. Further issues of arbitral procedure
72. The Working Group agreed that, in addition to the
procedural issues contained in questions 4-1 to 4-14, there
were other issues of arbitral procedure possibly to be dealt
with in the Model Law. The issues suggested for
consideration were: minimum contents of a statement of
claim and statement of defence (cf. arts. 18 and 19 of the
UNCITRAL Arbitration Rules); language to be used in
arbitration proceedings (cf. art. 17 of the UNCITRAL
Arbitration Rules); notice of arbitration (cf. art. 3 of the
UNCITRAL Arbitration Rules), and its effects on a
prescription period; and termination of arbitral proceedings
(cf. art. 34 of the UNCITRAL Arbitration Rules). The
Working Group requested the Secretariat to prepare for its
consideration draft provisions on these issues, with
explanatory notes if appropriate.”
Special Leave Petition (C) No. 10389 of 2025 Page 115 of 269
159. At its Fourth Session, the Working Group considered the aforesaid
issue on the default of a party and examined the draft Article 24
(which eventually became Article 25 of the UNCITRAL Model).
Two different variants of the draft Article 24 were presented to the
Working Group, being Alternative ‘A’ and Alternative ‘B’,
respectively. The relevant observations read as under: -
“Article 24
124. The text of article 24 as considered by the Working
Group was as follows:
Alternative A:
Article 24
(1) If, within the period of time fixed by the arbitral
tribunal, the claimant has failed to communicate
his statement of claim without showing sufficient
cause for such failure, the arbitral tribunal shall
issue an order for the termination of the arbitration
proceedings.
(2) If, within the period of time fixed by the arbitral
tribunal, the respondent fails to communicate his
statement of defence without showing sufficient
cause for such failure, the arbitral tribunal shall
order that the proceedings continue.
(3) If one of the parties, invited in writing at least
30 days in advance, fails to appear at a hearing
without showing sufficient cause for such failure,
the arbitral tribunal may proceed with the
arbitration; if the tribunal decides to do so, it shall
notify the parties in writing.
(4) If one of the parties, invited in writing to
produce documentary evidence within a specified
period of time of not less than 30 days, fails to do
Special Leave Petition (C) No. 10389 of 2025 Page 116 of 269
so, the arbitral tribunal may make the award on the
evidence before it; if the tribunal decides to do so, it
shall notify the parties in writing.
[(5) The defaulting party may, within 15 days after
issuance of the order referred to in paragraph (1) or
(2), or the notification referred to in paragraph (3)
or (4), request the Authority specified in article 17
to review the decision of the arbitral tribunal as to
whether the conditions laid down in the respective
paragraph of this article were fulfilled.]
Alternative B:
Article 24
If, without showing sufficient cause for the failure,
(a) the respondent fails to communicate
his statement of defence within the
period of time fixed by the arbitral
tribunal; or
(b) one of the parties, invited at least 30
days in advance, fails to appear at a
hearing; or
(c) one of the parties, invited in writing
to produce documentary evidence
within a specified period of time of not
less than 20 days, fails to do so,
the other party may request the
Authority specified in article 17 to
authorize [instruct] the arbitral tribunal
to proceed with the arbitration.
125. The Working Group supported the policy underlying
paragraphs (1) to (4) of Alternative A. It was generally
agreed that these provisions were subject to the contrary
agreement of the parties. It was noted that in paragraph (4)
of article 24 (Alternative A) the words "without showing
sufficient cause for such failure" had been erroneously
omitted and should be added after the words "fails to do so".
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126. It was agreed that paragraph (5) of Alternative A as well
as the entire text of Alternative B should be deleted since they
introduced a degree of court supervision of international
commercial arbitration which was neither necessary nor
desirable.
127. The view was expressed that this article should set forth
principles in a general way without detailed procedural rules.
128. The Working Group was in agreement that this article
should in its result preserve a balance of equality between the
parties. It was noted, however, that it was difficult to preserve
a formal equality since the parties were in different
situations. The claimant has every reason to pursue his claim
if he believes it is justified, since otherwise he will have
incurred expenses for no substantive purpose. On the other
hand, the respondent may fail to act in the arbitration so as
to impede its progress.
129. It was suggested that the parties might be in a situation
of greater equality if the failure of the defendant to
communicate his statement of defence was treated as a denial
of the claim. In such a case, even though the respondent was
in default in respect of the arbitral procedure, the claimant
would have to establish the merits of his case before the
arbitral tribunal.
130. It was suggested that the time-limits provided for in this
article might be too short, taking into account the distances
and possible delays in communications. It was also suggested
that a flexible approach in giving the arbitral tribunal some
discretion in setting time-limits might be appropriate.
131. The view was also expressed that it would be
appropriate to make clear in paragraph (3) that the arbitral
tribunal should give a party a period of time to show that he
had sufficient cause for his failure to appear at a hearing. ”
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160. The significant take-aways from the above discussion of the
Working Group, for the present issue at hand, emerge from the
draft version of Article 24 that was proposed and the general
object underlying the said provision highlighted by the Working
Group.
161. In the Alternative ‘A’ version of draft Article 24, more particularly
clause (5), a party was empowered to approach the authority
stipulated in the then draft Article 17 to pass a direction to the
arbitral tribunal, to continue with the proceedings. Similar
provision was also included in the Alternative ‘B’ version of draft
Article 24.
162. We shall discuss the vital importance of the aforesaid in the latter
parts of this judgment.
163. Suffice to say, for the present moment, the observations made by
the Working Group on the draft Article 24 at para 127 are
significant. The Working Group observed that the draft Article 24
should only “ set forth principles in a general way without detailed
procedural rules ” (emphasis).
Special Leave Petition (C) No. 10389 of 2025 Page 119 of 269
164. The above observations clearly show, that whilst drafting the now
Article 25, what was in the mind of the Working Group was only
to provide the general principles in respect of the consequences of
a party’s default and the power of the arbitral tribunal to continue
with the proceedings ex-parte in certain situations.
165. The Working Group never intended Article 25 to vest the arbitral
tribunal with the power to terminate the proceedings. The
authority of the arbitral tribunal to terminate the proceedings,
was, at that stage, always understood to be impliedly vested in the
arbitral tribunal.
166. We say so, because the Working Group felt the need to incorporate
a specific provision in respect of the power of the arbitral tribunal
to terminate the proceedings at a much later stage, and for very
different reasons, which we shall shortly discuss.
167. One another key provision which was introduced and deliberated
upon by the Working Group during its Fourth Session, was the
provision on settlement of disputes by the parties during the
course of proceedings.
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168. The Working Group examined the draft Article 33 prepared by the
Secretariat. The said draft provision inter-alia stipulated that where
the parties during the course of arbitration arrive at a settlement
of the dispute, the arbitral tribunal shall either issue an order for
termination of the proceedings or upon request from both parties,
record the settlement in the form of an award, if agreeable to the
tribunal. The said provision ultimately was adopted in the
UNCITRAL Model as Article 30 (corresponding Section 30 of the
Act, 1996). The relevant observations read as under: -
“Article 33
171. The text of article 33 as considered by the Working
Group vas as follows:
Article 33
Alternative A: (1) If, during the arbitration proceedings, the
parties agree on a settlement of the dispute, the arbitral
tribunal shall either issue an order for the termination of the
arbitration proceedings or, if requested by both parties and
accepted by the tribunal, record the settlement in the form of
an arbitral award on agreed terms.
A1ternative B: (1) If, during the arbitration proceedings, the
parties agree on a settlement of the dispute, the arbitral
tribunal shall, if requested by [both parties] [a party, unless
the arbitration agreement requires a request by both
parties1', record the settlement in the form of an arbitral
award on agreed terms, unless the arbitral tribunal has [good
and substantial compelling] reasons, in particular grounds of
international public polies , not to follow that request.
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(2) An award on agreed terms shall be made in accordance
with the provisions of articles 27 and 35 and shall state that
it is an award [On agreed terms]. Such an award has the same
status and executory force as] [shall be treated like any other
award on the merits of' the case.
172. There was general agreement that Alternative A of
paragraph (1) was preferable.
173. However, in this context a view was expressed that the
procedure for recording a settlement as an award on agreed
terms would not be necessary if the Model Law would provide
for the enforceability of the settlement agreement as such.
174. It was suggested that the arbitral tribunal should be
empowered to record a settlement in the form of an arbitral
award on agreed terms on the request of either party. It was
pointed out that it is often the case that only the party who is
to receive payment under the award has an interest in
converting the settlement into an award which can then be
enforced under the 1958 New York Convention.
175. On the other hand, it was noted that a settlement may
be ambiguous or subject to conditions that might not be
apparent to the arbitral tribunal. According to this view,
which received a majority of the support, there were fewer
dangers of injustice by requiring both parties to request an
award on agreed terms.
176. The Working Group was of the view that the arbitral
tribunal should have the right to decide whether it would
record the settlement in the form of an agreed award.”
169. This was the second instance where a reference to “ termination of
proceedings ” surfaced in the draft UNCITRAL Model. The
significance of the aforesaid lies in the discussions that followed
in the next session.
Special Leave Petition (C) No. 10389 of 2025 Page 122 of 269
170. Due to the reference to “ termination of proceedings ” in the various
draft provisions of the Model Law, more particularly, draft
Article(s) 24 and 33, respectively, an impending need was felt by
the Working Group to discuss a dedicated provision on the
termination of arbitral proceedings.
171.
Thus, in its Fifth session, the Working Group discussed the
possibility of a new provision pertaining to termination of
proceedings. The Working Group felt that, in light of the various
draft provisions that allude to the termination of proceedings, it
would be appropriate if the Model Law provided “ certainty in
respect of important consequences of the termination of arbitral
proceedings ”. The relevant observations read as under: -
“F. Termination of arbitral proceedings
38. The Working Group considered the question whether it
would be appropriate to include in the model law a provision
on termination of arbitral proceedings (on the basis of a note
by the Secretariat, WP.4l, paras. 38-41 and draft article F).
39. There was wide support in the Working Group for the
view that the model law should contain a provision on
termination of arbitral proceedings. Such a provision would
be useful because it would provide certainty in respect of
Special Leave Petition (C) No. 10389 of 2025 Page 123 of 269
important consequences of the termination of arbitral
proceedings.
40. The prevailing view was that there should be no
automatic termination of arbitral proceedings and that a
procedural decision by the arbitral tribunal was needed for
terminating the arbitral proceedings. However, it was
suggested that the wording should indicate that a special
order of termination was not always necessary, for example,
when the dispute was settled by an agreement of the parties
or by an award on the merits of the claim.
41. It was also suggested that the model law should contain a
rule empowering the arbitral tribunal to decide whether it
was appropriate to terminate the proceedings after the
tribunal gave suitable notice to the parties of its intention to
terminate the proceedings. ”
(Emphasis supplied)
172. The above discussion of the Working Group is significant. It
highlights the considerations that weighed with the Working
Group when it began to draft a dedicated provision on the
termination of arbitral proceedings.
173. The Working Group observed that, possibly in light of the draft
Article(s) 24 and 33 (now Article(s) 25 and 30 of the UNCITRAL
Model, respectively), in order to avoid the possibility of an
“ automatic termination of proceedings ”, a procedural decision by the
Special Leave Petition (C) No. 10389 of 2025 Page 124 of 269
arbitral tribunal should be required for the termination of
proceedings.
174. The instances specified by the Working Group, where such an
order would be required are also significant. It observed that such
an order should not be required where either the parties settle the
dispute or where a final award is rendered. The former was
suggested in light of the draft Article 33, which initially
empowered the tribunal to terminate the proceedings by issuing
an order to such effect or by passing an award recording the terms
of settlement.
175. In the Sixth Session, the Working Group considered both the draft
Article 33 and the provision on termination of proceedings, then
numbered as draft Article F, which later came to be adopted as
Article 32 of the UNCITRAL Model and corresponding Section 32
of the Act, 1996.
176.
The deliberations of the Working Group on draft Article F read as
under: -
“F. Termination of arbitral proceedings
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47. The text of article F as considered by the Working Group
was as follows:
“Article F
(1) The arbitral proceedings are terminated:
(a) by the [making/ [delivery] of the final
award which constitutes or completes
the disposition of all claims submitted
to arbitration; or
(b) by an agreement of the parties that
the arbitral proceedings are to be
terminated; or
(c) by an order of the arbitral tribunal in
accordance with paragraph (2) of this
article.
(2) After having given suitable notice to the
parties, the arbitral tribunal shall issue an order for
the termination of the arbitral proceedings when
the claimant withdraws his claim or if for any other
reason the continuation of the proceedings becomes
unnecessary or inappropriate.
The mandate of the arbitral tribunal is terminated
with the termination of the arbitral proceedings,
subject to the provisions of article XXIV.
General considerations
48. Some support was expressed for the deletion of this article
because it was not necessary to regulate in such detail the
ending of the mandate of the arbitral tribunal. However, the
view prevailed that the article should be retained since there
may be other cases where the moment of termination of
arbitral proceedings maybe important, like, for example, the
continuation of the running of a limitation period or the
possibility to institute legal proceedings before another forum
on the same dispute.
Paragraph (1)
49. The Working Group adopted sub-paragraph (a) with the
word "making" instead of the word "delivery".
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50. Regarding sub-paragraph (b) it was suggested that the
wording should define more clearly the moment of the
termination of the arbitral proceedings. It was also suggested
that sub-paragraph (b) should make clear whether an
agreement of the parties to terminate arbitral proceedings
covered only specific agreements to that effect or also cases
where the parties had agreed in advance on a deadline for
making the award.
51. Regarding sub-paragraph (c) it was suggested that, while
the arbitral tribunal should be under an obligation to issue an
order for the termination of the proceedings, in the absence of
such an order the interested party should have a possibility to
establish that the proceedings had terminated.
Paragraph (2)
52. The Working Group was of the view that the withdrawal
of a claim should not ipso facto terminate arbitra1
proceedings since the defendant might have a legitimate
interest in a final settlement of the dispute.
Paragraph (3)
53. There was general support for paragraph (3) of this
article. It was noted that this paragraph should include a
reference to article XXX (3) as suggested in foot-note 16 of
document A/CN.9/WG.II/WP.44.”
177. The Working Group then deliberated on the draft Article 33,
which was renumbered as ‘Article XXI’. The relevant observations
read as under: -
“Article XXI
105. The text of article XXI as considered by the Working
Group was as follows:
Article XXI
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(1) If, during the arbitration proceedings, the
parties agree on a settlement of the dispute, the
arbitral tribunal shall either terminate the
arbitration proceedings or, if requested by the
parties and accepted by the tribunal, record the
settlement in the form of an arbitral award on
agreed terms.
(2) An award on agreed terms shall be made in
accordance with the provisions of article XXII and
shall state that it is an award. Such an award has
the same status and executory force as any other
award on the merits of the case.
Paragraph (1)
106. The Working Group adopted this paragraph, subject to
improvement of its wording along the following lines: "If,
during arbitration proceedings, the parties settle the dispute,
the arbitral tribunal shall terminate the proceedings and, if
requested by the parties and not objected to by the arbitral
tribunal, record the settlement in the form of an arbitral
award on agreed terms". Paragraph (2).
107. The Working Group adopted this paragraph. It was
noted that the last sentence might later have to be modified in
order to qualify this statement as regards reasons for recourse
against such an award or its enforcement.”
178. What can be discerned from the above is that while the draft
Article 33 (now Article 30 of the UNCITRAL Model), which
empowers the arbitral tribunal to issue an order for termination of
proceedings under the said provision, was initially accepted by
the Working Group, yet the phraseology of the provision
underwent subtle changes in its Sixth Session. The words “ shall
Special Leave Petition (C) No. 10389 of 2025 Page 128 of 269
either issue an order for the termination of the arbitration proceedings ”
came to be omitted.
179. This occurred in light of the draft Article F (now Article 32 of the
UNCITRAL Model), which empowered the tribunal to issue an
order for the termination of proceedings. The scenario where the
proceedings would be terminated in light of settlement of the
disputes was consolidated into Article F sub-clause (1)(b).
180. The suggestion made in the Fifth Session that the provision on
termination of proceedings should not require any order to that
effect if the parties settle the dispute, was rejected. This was
because it felt that it should be the parties, rather than the arbitral
tribunal, who should have a say on whether the dispute has been
settled.
181. This change occurred in light of certain suggestions by the State
Members to the Working Group, who participated in the drafting
of the Model Law from the Fifth Session. The Commission had
decided “ to expand the membership of the Working Group to all States
members ” and a total of 36 States along with several international
Special Leave Petition (C) No. 10389 of 2025 Page 129 of 269
organisations participated and provided comments on the draft
provisions.
182. These comments were compiled and put before the Working
Group in its Fifth and Sixth Session as ‘Analytical compilation of
comments by Governments and International organizations on the draft
text of model law on international commercial arbitration ’ available in
the Report of the Secretary General.
183. On the draft Article 33, Austria and Mexico suggested the removal
of the discretionary power of the arbitral tribunal to record the
settlement as an award, as the same, in their view, unjustifiably
restricted party autonomy. The relevant observations read as
under: -
“ Austria and Mexico propose the deletion of the words ‘and
not objected to by the arbitral tribunal’ in article 30(1).
Austria considers that these words restrict the autonomy of
the parties in an unjustified way since, if the subject-matter
of the dispute is capable of being submitted to arbitration, the
parties are free to settle the dispute without any restrictions
by the arbitral tribunal. In the view of Mexico, the arbitral
tribunal should not be able to oppose the recording in the form
of an award of the settlement which the parties have reached .”
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184. Yugoslavia, on the other hand, stated that there could be certain
circumstances where the arbitral tribunal may have a reason to
object. It suggested that the Model Law should spell out the
criteria for such objection, such as where the settlement is
incompatible with public policy. The relevant observations read as
under: -
“ In the view of Yugoslavia, it would be necessary to
determine, at least by using general terms, the criteria on the
basis of which the arbitra1 tribunal would be empowered to
reject the parties' proposal to record their settlement in the
form of an arbitral award. Objections of the arbitral tribunal
should be limited to establishing that the stipulated
settlement is incompatible with the public order of the legal
system applicable to the arbitration .”
185. The Asian-African Legal Consultative Organization (AALCO)
suggested that where the parties settle the dispute, they must be
obliged to notify the arbitral tribunal of the same. It is only when
the arbitral tribunal is appropriately notified by both parties that
the dispute has been settled, should the proceedings be terminated
by the tribunal. The relevant observations read as under: -
“ 3. AALCC is of the view that if the parties settle the dispute
during the arbitral proceedings they must be obliged to notify
the arbitral tribunal, and the arbitral tribunal should
terminate the proceedings only upon receipt of such
notification. Paragraph (l) of article 30, therefore, needs to .be
amended accordingly.”
Special Leave Petition (C) No. 10389 of 2025 Page 131 of 269
186. Keeping in mind the above suggestions, the Working Group noted
the possibility that a settlement may be ambiguous or subject to
conditions which would be unacceptable to the tribunal.
Accordingly, it decided that there were fewer dangers of injustice
in requiring both parties to simply intimate the tribunal about the
settlement of the dispute, upon which the arbitral tribunal would
terminate the proceedings, and if it has no objection, proceed to
record the same by way of an award.
187. Thus, the expression “ shall issue an order for termination of
proceedings ” was omitted from the draft Article 33 / Article XXI
(now Article 30 of the UNCITRAL Model), and the concept of
termination of proceedings upon settlement of the dispute, came
to be incorporated in the draft Article F (now Article 32 of the
UNCITRAL Model), more particularly in clause (1)(b) thereof,
where the proceedings could be terminated pursuant to an
agreement between the parties in this regard.
188. The aforesaid indicates that the Working Group considered the
draft Article F (now Article 32 of the UNCITRAL Model) to be the
Special Leave Petition (C) No. 10389 of 2025 Page 132 of 269
sole provision under which the arbitral proceedings could be
terminated in terms of an order by the arbitral tribunal. The other
instances which allow the arbitral tribunal to terminate the
proceedings, only make a reference to the power of the tribunal to
terminate the proceedings enshrined in Article 32 of the
UNCITRAL Model.
189.
In the Seventh Session the draft provisions on the default of a
party, settlement of disputes and termination of proceedings were
put in their final placeholder numbers being Articles 25, 30 and 32
respectively of the UNCITRAL Model as it stands today. The
relevant discussions on the aforesaid provisions are as under: -
“Article 25
81. The text of article 25 as considered by the Working Group
was as follows:
Article 25.
Default of a party Unless otherwise agreed by the
parties, if, without showing sufficient cause.
(a) the claimant fails to communicate his
statement of claim in accordance with
article 23 (1), the arbitral proceedings
shall be terminated;
(b) the respondent fails to communicate
his statement of defence in accordance
with article 23 (1),
Special Leave Petition (C) No. 10389 of 2025 Page 133 of 269
Variant A: the arbitral proceedings shall continue;
Variant B: the arbitral tribunal shall continue the
proceedings without treating such failure as an
admission of the claimant's allegations;
Variant C: the arbitral tribunal shall treat this as a
denial of the claim and continue the proceedings;
(c) any party fails [to comply with a request by the
arbitral tribunal) to appear at a hearing, or to
produce documentary evidence, the arbitral
tribunal [may] [shall] continue the proceedings
[and may make the award on the evidence before it].
82. The Working Group adopted that article, including, in
subparagraph (b), the wording of variant B, and
subparagraph (c) in the following modified form:
"(c) any party fai1s to appear at a hearing, or to
produce documentary evidence, the arbitral
tribunal may continue the proceedings and make
the award on the evidence before it."
83. As regards the three variants presented in subparagraph
(b), the Working Group, after deliberation, adopted the
wording of variant B. That wording, while according certain
discretion to the arbitral tribunal, contained a limitation
which was considered useful in view of the fact that under
many national laws on civil procedure default of the
defendant in court proceedings was treated as an admission
of the claimant's allegations.
84. It was suggested that the provision should be more
elaborate and provide some guidance concerning certain
procedural issues (e.g., how to establish the default and in
what manner to conduct the proceedings and make the
award). The Working Group, after deliberation, was agreed
that a model law need not contain detailed procedural rules
in that respect.
Special Leave Petition (C) No. 10389 of 2025 Page 134 of 269
Article 30
109. The text of article 30 as considered by the Working
Group was as follows:
Article 30. Settlement
(1) If. during arbitral proceedings. the parties settle
the dispute, the arbitral tribunal shall terminate
the proceedings and. if requested by the parties and
not objected to by the arbitral tribunal. record the
settlement in the form of an arbitral award on
agreed terms.
(2) An award on agreed terms shall be made in
accordance with the provisions of article 31 and
shall state that it is an award. Such an award has
the same status and executory force as any other
award on the merits of the case.
110. The Working Group adopted that article. subject to the
replacement, in paragraph (2). of the words "executory force"
by the word "effect".
Article 32
113. The text of article 32 as considered by the Working
Group was as follows:
Article 32. Termination of proceedings
Variant A:
(1) The arbitral proceedings are terminated:
(a) by the making of the final award
which disposes of all claims
submitted to arbitration or
(b) by an agreement of the parties that
the arbitral proceedings are to be
terminated at a specified date [or after
expiry of a specified period of time); or
Special Leave Petition (C) No. 10389 of 2025 Page 135 of 269
(c) by an order of the arbitral tribunal in
accordance with paragraph (2) of this
article.
(2) After having given suitable notice to the
parties. the arbitral tribunal shall issue an order for
the termination of the arbitral proceedings
(a) when the claimant withdraws his
claim. unless the respondent objects
thereto and the arbitral tribunal
recognizes a legitimate interest on his
part in obtaining a final settlement of
the dispute or
(b) if for any other reason the
continuation of the proceedings
becomes unnecessary or
inappropriate.
[Where the arbitral tribunal fails to issue an order
of termination. any party may request from the
Court specified in article 6 a ruling on the
termination of the proceedings.]
(3) The mandate of the arbitral tribunal terminates
with the termination of the arbitral proceedings.
subject to the provisions of articles 33 and 34 (4).
Variant B:
(1) The arbitral proceedings are terminated either
by the final award or by agreement of the parties or
by an order of termination [by the arbitral tribunal]
[which the arbitral tribunal may issue when the
continuation of the proceedings appears
unnecessary or inappropriate].
(2) The mandate of the arbitral tribunal terminates
with the termination of the arbitral proceedings.
subject to the provisions of articles 33 and 34 (4).
Special Leave Petition (C) No. 10389 of 2025 Page 136 of 269
114. The Working Group adopted that article. based on
variant B. in the following modified form:
"(1) The arbitral proceedings are terminated either
by the final award or by agreement of the parties or
by an order of the arbitral tribunal in accordance
with paragraph (2) of this article.
"(2) The arbitral tribunal
(a) "shall issue an order for the
termination of the arbitral
proceedings when the claimant
withdraws his claim. unless the
respondent objects thereto and the
arbitral tribunal recognizes a
legitimate interest on his part in
obtaining a final settlement of the
dispute;
(b) “may issue an order of termination
when the continuation of the
proceedings becomes for any other
reason unnecessary or inappropriate.
"(3) The mandate of the arbitral tribunal
terminates with the termination of the arbitra1
proceedings, subject to the provisions of articles 33
and 34 (4)."
115. While there was some support for the more elaborate
draft provisions presented in variant A. the Working Group,
after deliberation. decided in favour of variant B. for the sake
of simplicity.
116. AI regards termination of the proceedings by an order of
the arbitral tribunal, the Working Group adopted the more
explicit wording "which the arbitral tribunal may issue when
the continuation of the proceedings appears unnecessary or
inappropriate" as well as the provision contained in
paragraph (2) (a) of variant A. in order to give some
indication of the reasons for an order of termination. ”
Special Leave Petition (C) No. 10389 of 2025 Page 137 of 269
190. In the Seventh Session several significant alterations were made to
the Article(s) 25, 30 and 32 of the UNCITRAL Model. The
expression “ shall issue an order for termination of proceedings” was
omitted from the Articles 25 and 30 respectively, and was
exclusively retained in Article 32.
191. Thereafter, the Article(s) 25 and 30 merely specified that the
proceedings shall terminate, if the claimant fails to communicate
its claims or the parties arrive at a settlement of the dispute,
respectively.
192. The Article 32 further allowed a party to approach the designated
national court having jurisdiction over the arbitral tribunal in the
event the tribunal fails to issue an order for the termination of
proceedings. Lastly, the expression – “ issue an order of termination
when the continuation of the proceedings becomes for any other reason
unnecessary or inappropriate ” was employed to confer a discretion
on the arbitral tribunal to terminate the proceedings.
Special Leave Petition (C) No. 10389 of 2025 Page 138 of 269
193. A slew of comments was received by the Commission on the
contours of the Article(s) 25, 30 and 32 of the UNCITRAL Model.
194. The Soviet Union suggested that instead of providing the
termination of arbitral proceedings by any agreement between the
parties on this behalf under clause (1) of Article 32, it would be
apposite if the same is placed under clause (2) that stipulates when
the tribunal would be empowered to issue an order for the
termination of proceedings.
195. According to the Soviet Union, the agreement of the parties to
terminate arbitration is only a ground on which the proceedings
can be terminated by the tribunal. The Soviet Union further
suggested that the word “ inappropriate ” be replaced from the
expression “ when the continuation of the proceedings becomes for any
other reason unnecessary or inappropriate ” in Article 32. According to
the Soviet Union, Article 32 should only specify the circumstances
or grounds on which the proceedings can be terminated rather
than conferring discretion to an arbitral tribunal to terminate the
proceedings by use of the word “ inappropriate ”. The relevant
observations read as under: -
Special Leave Petition (C) No. 10389 of 2025 Page 139 of 269
“ 1. The Soviet Union states that from the juridical and
technical point of view arbitral proceedings may be
terminated by an award or by an order of the arbitra1
tribunal, but not directly by an agreement of the parties. Such
agreement by the parties rather serves as a ground for an
order for the termination of proceedings. For this reason it is
proposed to move the reference to the agreement of the parties
from paragraph (1) to paragraph (2)(a) of article 32. ”
xxx xxx xxx
3. In the view of the Soviet Union, the reference in paragraph
(2)(b) to the case where the continuation of proceedings
becomes unnecessary or inappropriate is unclear. It is
proposed to replace the word "inappropriate", which gives too
much discretion to an arbitral tribunal, by the word
"impossible" (following the example of article 34(2) of the
UNCITRAL Arbitration Rules) or by the word "pointless"
or any similar word.”
196. The above suggestions, were ultimately accepted, and Article 32
was reformulated to only specify the grounds on which the
proceedings can be terminated by the arbitral tribunal.
197. Several more suggestions were also made by various State
Members on the wording of the Article 32. Despite the fact that
these suggestions were not accepted in entirety, yet the reasoning
given for the rejection of these suggestions in the travaux
préparatoires on the UNCITRAL Model are significant.
Special Leave Petition (C) No. 10389 of 2025 Page 140 of 269
198. Austria had suggested that the provision should define the criteria
for the “withdrawal of a claim” to avoid uncertainties insofar as
termination of proceedings is concerned.
“2. Austria suggests specifying in article 32(2)(a) criteria for
the withdrawal of a claim, in order to avoid uncertainty about
the termination of arbitral proceedings. The following
rewording of paragraph (2)(a) is proposed:
"(a) shall issue an order for the termination of the
arbitral proceedings when the claimant withdraws
his claim either before the communication of the
statement of defence by the respondent or with the
consent of the respondent if the latter has already
communicated his statement of defence or by
waiver of the claimant's rights to the subject-
matter;".
199. However, the aforesaid suggestion was rejected for the reasons
evident in the travaux préparatoires on the UNCITRAL Model. The
preparatory works on the UNCITRAL Model note that the
provision of Article 32 was intended to enumerate only the
circumstances that would automatically lead to a termination of
proceedings. It was incorporated to stipulate those situations and
circumstances that rendered the continuation of proceedings
impossible or unnecessary. The relevant observations read as
under: -
Special Leave Petition (C) No. 10389 of 2025 Page 141 of 269
“ Two variants were discussed and put to the table for
consideration. The first suggested enumerating all those
circumstances that would automatically lead the tribunal to
terminate proceedings, further noting that such
circumstances should be explicitly spelt out. The second
variant suggested limiting the termination of proceedings
only to those cases that rendered continuation of proceedings
impossible or unnecessary. All other circumstances would
not lead to termination. It was stated that: ‘If this approach
is taken, a special rule on termination of arbitral proceedings
may be regarded as superfluous because it would cover the
cases when termination is a self-evident consequence. A draft
article F was thus framed [...]”
(Emphasis supplied)
200. Thus, it was deemed not necessary to articulate the manner in
which a claim could be withdrawn. As long as such withdrawal
resulted in the proceedings becoming unnecessary or impossible,
it would suffice the requirements of Article 32.
201. This is the precise reason why the Working Group in its Seventh
Session, first , chose not to alter clause (a) of Article 32 and
secondly , substituted the word “may” in clause (b) (now clause
(c)) to make it obligatory for the arbitral tribunal to terminate the
proceedings where its continuation becomes impossible or
unnecessary. The relevant observations read as under: -
Special Leave Petition (C) No. 10389 of 2025 Page 142 of 269
“ 37. Article 32, paragraph 2, subparagraph·(b): The text
states that where the arbitral proceedings become
unnecessary or inappropriate, the arbitral tribunal "may"
order the termination of the proceedings. The word "may"
indicates a right and not an obligation. Consequently, despite
a conviction that the proceedings have become unnecessary
or inappropriate, the arbitral tribunal may, nevertheless,
order their continuation. On what grounds? To what
purpose? In whose interest? The text does not state. It is clear
that the continuation of such proceedings would be nothing
more than a waste of time, effort and money. We therefore
propose that paragraph 2 be amended as follows:
"2. The arbitral tribunal shall issue an order for the
termination of the arbitral proceedings when:
(a) The claimant withdraws (no change).
(b) The arbitral proceedings become, for
any other reason, unnecessary or
inappropriate."
202. Canada expressed concerns that the draft of provision of Article
32 gave unchecked discretion to the arbitral tribunal to terminate
the proceedings. Accordingly, it proposed that the provision
should enable the aggrieved party to seek a review of the decision
of the arbitral tribunal by the national courts having jurisdiction.
The relevant observations read as under: -
“1. Canada states that paragraph (2)(b) apparently gives the
arbitral tribunal complete discretion to terminate the
proceedings whenever it decides that the continuation of the
proceedings becomes "unnecessary or inappropriate". It
Special Leave Petition (C) No. 10389 of 2025 Page 143 of 269
might be desirable to provide that such a decision is
reviewable by the Court.
203. Yugoslavia also expressed similar concerns that the grounds
specified in the draft of Article 32 were too general and vague,
which could potentially result in wrongful terminations. The
relevant observations read as under: -
“2. In the view of Yugoslavia, the grounds for the termination
of arbitral proceedings specified in paragraph (2)(b) are too
general and vague and may result in terminating the
proceedings even where this is not in the interest of the
parties. Thes suggestion is that an attempt. be made to
identify some grounds more precisely.”
204. However, these concerns became irrelevant when the Working
Group in its Seventh Session accepted the suggestion put forth by
Egypt and curtailed the discretion of the arbitral tribunal to
terminate the proceedings under the draft of Article 32. The
relevant observations read as under: -
“ Egypt had set out its objection as regards the tribunal’s
potential permissive power to terminate proceedings that
were otherwise unnecessary or impossible. It was emphasised
that the tribunal should possess no discretion in the matter
as this was clearly a waste of time and money and was not in
the parties’ interest.9 This is sensible because despite the fact
that the parties possess the right to petition the courts on this
matter, a potentially discretionary power conferred upon the
tribunal may have led to an unnecessary and prolonged tug-
of-war. It was at the sixth session of Working Group II that
the provision began to finally resemble its existing
Special Leave Petition (C) No. 10389 of 2025 Page 144 of 269
manifestation. Draft article F stated, for the first time, that
proceedings shall be terminated also by a final award, in
addition to an agreement of the parties and through an order
by the tribunal on the grounds already explained in previous
sessions.10 At the seventh session, two alternative variants
were put forward, but these did not differ from each other in
any substantial way and are reflective of the final version of
article 32. However, two issues are worth highlighting. First,
a bracketed proposal was suggested in the f irst and most
elaborate variant whereby if the tribunal fails to issue a
termination order despite the existence of the situations set
out in article 32, then the parties are entitled to make a
request to the courts. As we already stated, the Egyptian
proposal definitively settled this matter by curtailing the
tribunal’s discretionary powers. Second, both variants
required that prior to the issuance of a termination order, the
tribunal provide appropriate notice to the parties.11 Neither
of these two considerations survived the final draft (despite
the latter’s existence in article 34 of the UNCITRAL
Arbitration Rules), although it is certainly good practice for
the tribunal to forewarn the parties about its intention to
terminate proceedings. At the end of the seventh session, the
final version of the article was adopted.12 The 2006 revision
of the Model Law did not affect article 32 .”
205. What can be discerned from the above discussion is that: -
(i)
First, Article 32 of the UNCITRAL Model, which is pari-
materia to Section 32 of the Act, 1996, was intended to be the
only provision pertaining to the power of the arbitral
tribunal to terminate the proceedings. The provision was
drafted due to the impending need felt by the Working
Group for a dedicated provision on the termination of
Special Leave Petition (C) No. 10389 of 2025 Page 145 of 269
proceedings that enumerates all the circumstances that
could lead to such termination and provide certainty in
respect of the important consequences flowing therefrom.
The relevant observations read as under: -
“38. The Working Group considered the question
whether it would be appropriate to include in the
model law a provision on termination of arbitral
proceedings (on the basis of a note by the Secretariat,
WP.4l, paras. 38-41 and draft article F).
39. There was wide support in the Working Group for
the view that the model law should contain a provision
on termination of arbitral proceedings. Such a
provision would be useful because it would provide
certainty in respect of important consequences of the
termination of arbitral proceedings.
xxx xxx xxx
41. It was also suggested that the model law should
contain a rule empowering the arbitral tribunal to
decide whether it was appropriate to terminate the
proceedings after the tribunal gave suitable notice to
the parties of its intention to terminate the
proceedings. ”
(ii) Secondly, that Article 32 was introduced in the Model Law
only after the provisions of Articles 25 and 30 respectively,
as the Working Group felt that the termination of
proceedings envisaged under the aforesaid two provisions
should not be automatic, rather it must require a specific
Special Leave Petition (C) No. 10389 of 2025 Page 146 of 269
order in that regard by the arbitral tribunal. The entire
purport behind drafting Article 32 stemmed from the
Working Group’s realisation that a separate provision was
required to supplement the “termination of proceedings”
envisaged under Articles 25 and 30 of the UNCITRAL
Model, respectively. The relevant observations read as
under: -
“40. The prevailing view was that there should be no
automatic termination of arbitral proceedings and that
a procedural decision by the arbitral tribunal was
needed for terminating the arbitral proceedings.
However, it was suggested that the wording should
indicate that a special order of termination was not
always necessary, for example, when the dispute was
settled by an agreement of the parties or by an award
on the merits of the claim.”
xxx xxx xxx
Despite the fact that this was not a controversial
provision, some concerns were voiced in the initial
stages of the drafting process as to whether or not a
provision concerning termination of proceedings was
really required. However, the majority view prevailed,
whereby this was felt to be important for the parties,
including for the calculation of limitation periods,
whether the tribunal could alter the award or issue an
additional award, as well as others. When the issue of
termination of arbitral proceedings was mooted in the
preparatory stages of the work of Working Group II,
reference was made to article 34 of the UNCITRAL
Arbitration Rules, without much elaboration.5 Draft
article 24(a) iterated the principle now found in article
Special Leave Petition (C) No. 10389 of 2025 Page 147 of 269
25(a) of the Model Law, whereby if the claimant fails
to communicate his statement of claim in due time
without showing sufficient cause, the tribunal shall
issue a termination order. It was only during the fifth
session of Working Group II that the issue was given
significant attention. Two variants were discussed and
put to the table for consideration. The first suggested
enumerating all those circumstances that would
automatically lead the tribunal to terminate
proceedings, further noting that such circumstances
should be explicitly spelt out. The second variant
suggested limiting the termination of proceedings only
to those cases that rendered continuation of
proceedings impossible or unnecessary. All other
circumstances would not lead to termination. It was
stated that: ‘If this approach is taken, a special rule on
termination of arbitral proceedings may be regarded as
superfluous because it would cover the cases when
termination is a self-evident consequence. A draft
article F was thus framed [...]”
(Emphasis supplied)
(iii) Lastly, the Working Group itself considered that the scheme
formed by Article(s) 25 and 30, insofar as they provide for
the termination of proceedings, has to be construed in light
of Article 32 of the UNCITRAL Model. Article(s) 25 and 30
of the UNCITRAL Model were only concerned with setting
forth the general principles and certain situations when the
proceedings could be terminated. In all such circumstances,
the termination would still nevertheless be governed by
Special Leave Petition (C) No. 10389 of 2025 Page 148 of 269
Article 32 of the UNCITRAL Model. The Working Group
noted in the context of Article 30, that in the event of a
settlement of the dispute by the parties, the proceedings
would be terminated in terms of Article 32 sub-clause (2).
Similarly, the travaux préparatoires on the UNCITRAL Model
notes that a default by the claimant in terms of Article 25(a)
would in essence attract the provision of Article 32(2)(c), i.e.,
it would render the proceedings unnecessary or impossible.
The relevant observations read as under: -
“127. The view was expressed that this article should
set forth principles in a general way without detailed
procedural rules.
xxx xxx xxx
Article 32. Termination of proceedings
Article 32 (l)
26. Mr. LEBEDEV (Union of Soviet Socialist
Republics) drew attention to his delegation's written
comment in document A/CN.9/263 (p. 44). The
Commission had already approved in article 30 (l) the
principle that if there was a settlement between the
parties, the proceedings should be terminated by the
arbitral tribunal. For the sake of consistency with that,
the reference to the agreement of the parties should be
transferred from paragraph (l) of article 32 to para-
graph (2). He thought that was only a drafting point.
Also, by describing the award as "final", the article
introduced a new concept.
xxx xxx xxx
Special Leave Petition (C) No. 10389 of 2025 Page 149 of 269
Paragraph 1 addresses the question as to which actions
of the tribunal serve to terminate arbitral proceedings.
Only two are mentioned, namely a final award or a
termination order issued by the tribunal as prescribed
in paragraph 2 of article 32. Although what
constitutes a final award is covered in several places in
the Model Law, it is instructive to set out some key
features here because there is no general definition
therein. The same applies as regards the construc tion
of the term ‘order’. The termination of arbitral
proceedings by means of an award is the normal
avenue that terminates proceedings, provided, of
course, that the award has indeed become final and is
not subject to further challenges under articles 33 and
34 of the Model Law, or other additional challenges
under the law of the seat. The termination of
proceedings other than through an order is exceptional
and is elaborated in paragraph 2 of article 32.
Paragraph 2 enumerates three situations whereby the
tribunal is obliged (with limited discretion in
subparagraph (b)) to terminate the proceedings. Some
Model Law jurisdictions, as is the case with section
608(2)(1) of the ZPO, expand on these, adding in the
case at hand a fourth situation, namely where the
claimant fails to file his claim. This situation is also
covered in article 25(a) of the Model Law. No doubt,
this may well be encompassed within subparagraph
2(c) of article 32 given its broad ambit.”
(Emphasis supplied)
II. Section 32 of the Act, 1996 and the import of the expression
“Mandate of Arbitral Tribunal”.
Special Leave Petition (C) No. 10389 of 2025 Page 150 of 269
206. The provision of Section 32 is contained in Chapter VI of the Act,
1996 which is titled “ Making of arbitral award and termination of
proceedings ”.
207. The marginal note appended to Section 32 of the Act, 1996 reads
“ Termination of proceedings ”. The marginal note along with the
expression “ The arbitral proceedings shall be terminated by the final
arbitral award or by an order of the arbitral tribunal under sub-section
(2) ” used in Section 32 sub-section (1) leaves little to imagination.
208.
The aforesaid expression clearly stipulates that the termination of
arbitral proceedings under the Act, 1996 can occur in only two
ways. The arbitral proceedings come to an end either through the
passing of the final award or by an order of the arbitral tribunal
under sub-section (2) of Section 32.
209. No other provision in the Act, 1996 except Section 32 empowers
the arbitral tribunal to pass an order of termination of
proceedings. Section(s) 25(a), 30 and 38 of the Act, 1996 only state
that the arbitral tribunal shall terminate the proceedings in the
circumstances enumerated therein.
Special Leave Petition (C) No. 10389 of 2025 Page 151 of 269
210. Section 25 clause (a) of the Act, 1996 stipulates that if the claimant
fails to communicate his statement of claim “ the arbitral tribunal
shall terminate the proceedings ”. Similarly, Section 30 sub-section (2)
provides that if the parties settle the dispute during the arbitral
proceedings “ the arbitral tribunal shall terminate the proceedings ”.
The Second Proviso to Section 38 also states that where none of the
parties pay the deposit as required by the arbitral tribunal, in
respect of a claim or a counter-claim, then “ the arbitral tribunal may
suspend or terminate the arbitral proceedings in respect of such claim or
counter-claim, as the case may be ”.
211.
This clearly indicates that any order for termination of
proceedings by the arbitral tribunal would squarely fall within the
provision of Section 32 sub-section (2). The use of the words
“shall” and “or” in the expression “ The arbitral proceedings shall be
terminated by the final arbitral award or by an order of the arbitral
tribunal under sub-section (2) ” clearly show that the arbitral
proceedings can come to an end in only two distinct ways, as
specified in sub-section (1).
Special Leave Petition (C) No. 10389 of 2025 Page 152 of 269
212. The Explanatory Notes on the UNCITRAL Model, more
particularly on Article 32 clearly states that only two actions by the
arbitral tribunal can result in the termination of proceedings,
namely, the passing of the final award or the issuance of an order
for termination of proceedings as prescribed in paragraph (2) of
the said provision. The termination of arbitral proceedings by
means of a final award is the general rule and whereas the
issuance of an order in terms of paragraph (2) is an exception. The
relevant observations read as under: -
“Paragraph 1 addresses the question as to which actions of
the tribunal serve to terminate arbitral proceedings. Only
two are mentioned, namely a final award or a termination
order issued by the tribunal as prescribed in paragraph 2 of
article 32. Although what constitutes a final award is covered
in several places in the Model Law, it is instructive to set out
some key features here because there is no general definition
therein. The same applies as regards the construction of the
term ‘order’. The termination of arbitral proceedings by
means of an award is the normal avenue that terminates
proceedings, provided, of course, that the award has indeed
become final and is not subject to further challenges under
articles 33 and 34 of the Model Law, or other additional
challenges under the law of the seat. The termination of
proceedings other than through an order is exceptional and is
elaborated in paragraph 2 of article 32 .”
(Emphasis supplied)
213. The provisions of Section(s) 25(a), 30 and 38 of the Act, 1996,
merely enumerate the different circumstances in which the
Special Leave Petition (C) No. 10389 of 2025 Page 153 of 269
arbitral tribunal would be empowered to pass an order for
termination of proceedings under sub-section (2) of Section 32.
214. This is further fortified from the marginal note to Section 32 of the
Act, 1996. It is trite to say that, in the absence of any inherent
conflict or contradiction between the marginal note and the
substantive parts of a particular provision, the marginal note may
be used to aid in the interpretation of the provision.
215. This is further evident from the discussions of the Working Group
on the UNCITRAL Model Law, which decided to adopt Article 32
(corresponding Section 32 of the Act, 1996) in order to ensure that
the arbitral proceedings should not terminate automatically unless
an order to that effect is passed by the arbitral tribunal.
216. At the time of preparation of the UNCITRAL Model, both the
Articles 25 and 30 respectively, had stipulated that the
proceedings shall terminate if the claimant does not file its
statement of claims or where the parties arrive at a settlement of
the dispute, respectively. The Working Group was concerned that,
there could be a situation where, even without the indulgence of
the arbitral tribunal, the proceedings could simpliciter come to an
Special Leave Petition (C) No. 10389 of 2025 Page 154 of 269
end as soon as the conditions stipulated in Article(s) 25 and 30
were fulfilled.
217. Accordingly, it decided to adopt a dedicated provision relating to
termination of proceedings that would explicitly require an
arbitral tribunal to issue a formal order to such effect in order to
bring the arbitral proceedings to an end. It was with this view that
Article 32 was incorporated in the UNCITRAL Model Law. At the
cost of repetition, the relevant observations are once again
reproduced below: -
“38. The Working Group considered the question whether it
would be appropriate to include in the model law a provision
on termination of arbitral proceedings (on the basis of a note
by the Secretariat, WP.4l, paras. 38-41 and draft article F).
39. There was wide support in the Working Group for the
view that the model law should contain a provision on
termination of arbitral proceedings. Such a provision would
be useful because it would provide certainty in respect of
important consequences of the termination of arbitral
proceedings.
40. The prevailing view was that there should be no
automatic termination of arbitral proceedings and that a
procedural decision by the arbitral tribunal was needed for
terminating the arbitral proceedings. [...]”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 155 of 269
218. One another reason for why the termination of proceedings in
terms of Sections 25, 30 or 38 of the Act, 1996 respectively, have to
be construed in terms of Section 32 of the said Act, is in view of the
Chapters under which the aforesaid provisions are contained.
219. Section 25 of the Act, 1996 is contained in Chapter V which deals
with the “ Conduct of arbitral proceedings ”. The discussions of the
Working Group on UNCITRAL Model, particularly Article 25
thereof, indicate that the considerations that weighed with it for
its enactment had nothing to do with empowering the arbitral
tribunal to terminate the proceedings. Rather it was due to the
apprehension that some jurisdictions were wary of decisions
rendered ex-parte .
220. The object underlying Article 25 of the UNCITRAL Model and the
corresponding Section 25 of the Act, 1996 is to ensure that a party
cannot thwart arbitration by simpliciter not participating in the
arbitral proceedings and thereby leaving the other party in a lurch.
It was enacted to expressly recognise the circumstances and the
manner in which an arbitral tribunal could continue with the
arbitral proceedings even in the absence of one party.
Special Leave Petition (C) No. 10389 of 2025 Page 156 of 269
221. Thus, Section 25 of the Act, 1996 only deals with the continuation
of the arbitral proceedings, more particularly the manner in which
the proceedings would progress in the absence of one party.
222. Likewise, Section 30 of the Act, 1996 also only stipulates the form
and manner in which the arbitral tribunal may pass an award
recording the settlement of dispute by the parties. It only goes to
the extent of laying down how the arbitral tribunal is expected to
proceed if the parties arrive at a settlement during the course of
the arbitral proceedings. It does not in itself empower the arbitral
tribunal to terminate the proceedings, rather only ascribes the
circumstances that could enable the tribunal to terminate the
proceedings in terms of Section 32(2) of the Act, 1996.
223. Similarly, Section 38 of the Act, 1996 is contained in Chapter X,
titled “ Miscellaneous ”. Sub-section (1) thereof, empowers the
arbitral tribunal to direct the deposit of a certain amount as
advance towards the cost it likely expects to incur in respect of the
continuation of the proceedings. The aforesaid provision is
omnibus in nature and applies to every stage of the arbitral
proceedings.
Special Leave Petition (C) No. 10389 of 2025 Page 157 of 269
224. Sub-section (3) of Section 38 is of significance. It stipulates that
once the proceedings stand terminated, the arbitral tribunal shall
furnish the account of all the deposits received by it, and return
any unexpended balance to the parties.
225. What is particularly noteworthy is that Section 38 sub-section (3),
insofar as its application is concerned, does not speak about the
termination of proceedings in certain circumstances. Irrespective
of the provision under which the proceedings come to be
terminated by the arbitral tribunal, the said provision would
require the arbitral tribunal to render the accounts to the parties.
226. To put it simply, irrespective of whether the proceedings are
terminated either under Section(s) 25, 30 or 32, the arbitral
tribunal, as per sub-section (3) of Section 38 is obliged to furnish
the account of all the deposits received by it and return any
unexpended balance to the parties.
227.
The statutory design of Section 38 of the Act, 1996 itself
acknowledges that the power to retain deposits is co-terminus
with the subsistence of arbitral proceedings. Once the proceedings
Special Leave Petition (C) No. 10389 of 2025 Page 158 of 269
stand terminated, sub-section (3) mandates the arbitral tribunal to
render accounts and return unspent deposits.
228. Thus, it would be logically inconsistent to say that although sub-
section (3) of Section 38 would be attracted where the proceedings
are terminated in terms of Section 32 sub-section (2), yet, when it
comes to the termination of proceedings on account of default of
the parties in paying the requisite costs, such termination would
be distinct, and not attract the provision Section 32 of the Act, 1996.
229. In the absence of anything to the contrary, one part of a provision
cannot be isolated and confined to a narrow field of operation by
giving it a restrictive or selective interpretation while the
remaining parts of the provision are read in an expansive manner
and construed to apply to the entirety of the Act, 1996.
230. A provision cannot be read in an inconsistent manner. It must be
read as a whole, every sub-section forming part thereof must be
given a harmonious, consistent and purposeful interpretation, so
as to give effect to the legislative intent underlying the enactment.
It is impermissible to dismember a provision and ascribe to it
Special Leave Petition (C) No. 10389 of 2025 Page 159 of 269
multiple meanings divorced from its textual and contextual
setting.
231. The Chapter in which the provision of Section 38 is contained
along with the general applicability of the sub-section(s) contained
therein, clearly suggests that the said provision does not vest a
separate and distinct power in the arbitral tribunal to terminate
the proceedings and rather only enumerates one another
circumstance in which the proceedings could be terminated by the
arbitral tribunal.
232. Viewed in this conspectus, it is not open to contend that
termination of proceedings arising out of non-payment of costs in
terms of Section 38 of the Act, 1996 stands on a different footing
from a termination under Section 32(2). The statute does not
recognise such a dichotomy, nor does the scheme of the Act, 1996
warrant such an interpretation.
233.
We may now look into the decision of this Court in SREI
Infrastructure (supra).
Special Leave Petition (C) No. 10389 of 2025 Page 160 of 269
234. A two - Judge Bench of this Court in SREI Infrastructure (supra)
held that the termination of proceedings under Section 25(a) of the
Act, 1996 was wholly distinct in nature from a termination under
Section 32(2) of the Act, 1996 for two reasons: -
(i) First, that Section 25(a) of the Act, 1996, more particularly
the termination that takes place in lieu thereof occurs at a
stage where the arbitral proceeding is yet to be started. The
use of the word “ sufficient cause ” in the said provision
indicates that the proceedings can be terminated only when
no sufficient cause is shown by the claimant for his default
in filing the statement of claim.
(ii) Secondly, that unlike Section 32 of the Act, 1996, the
legislature in its wisdom, consciously omitted the phrase
“ the mandate of the Arbitral Tribunal shall terminate ” in Section
25(a) of the Act, 1996. This clearly indicates that the nature
of termination under the two provisions is distinct from
each other.
235. Similarly, in Sai Babu (supra), another coordinate bench of this
Court reiterated that the omission of the expression “ the mandate
of the Arbitral Tribunal shall terminate ” in Section 25(a) clearly
Special Leave Petition (C) No. 10389 of 2025 Page 161 of 269
indicates that the termination of proceedings thereunder is
different in nature from that under Section 32(2) of the Act, 1996.
236. We are unable to agree with the views expressed by this Court in
SREI Infrastructure (supra) and Sai Babu (supra) insofar as they
hold that the termination of proceedings under Sections 25(a) and
32(2) of the Act, 1996 are distinct from one another.
237. This is because, it would be logically indefensible to say that the
termination of proceedings in terms of Section 25(a) takes place at
a different stage, more particularly prior to the commencement of
arbitral proceedings. We say so because Section 21 of the Act, 1996
clearly states that “ the arbitral proceedings in respect of a particular
dispute commence on the date on which a request for that dispute to be
referred to arbitration is received by the respondent ”. A claimant under
the scheme of the Act, 1996 is expected, rather required to
communicate its statement of claims only after the commencement
of the arbitral proceedings.
238. Furthermore, as far as the requirement of existence of a “ sufficient
cause ” is concerned for the termination of proceedings under
Special Leave Petition (C) No. 10389 of 2025 Page 162 of 269
Section 25(a), the said expression only indicates when the arbitral
tribunal would be empowered to terminate the proceedings. The
existence of a sufficient cause is only a rider on when it would be
permissible for the tribunal to terminate the proceedings. It does
not in any way alter the nature of the order for termination, once
passed by the arbitral tribunal. Moreover, the expression
“ sufficient cause ” used in the substantive part of Section 25, applies
to all sub-clauses of the said provision.
239. The Working Group on the UNCITRAL Model itself
acknowledged that the introductory sentence to Article 25, more
particularly the phrase “ sufficient cause ” governed all three sub-
paragraphs of the provision. The relevant observations read as
under: -
“ 32. The CHAIRMAN said that in his view there was no
contradiction, since the introductory sentence governed all
three subparagraphs. Under the Soviet Union proposal, the
tribunal would be bound to comply with a request for
continuation of the proceedings made by one of the parties
under subparagraph (c) only if the defaulting party had not
shown sufficient cause .”
240.
Thus, it is manifestly clear that the aforesaid expression has
nothing to do with the nature of the order for termination of
Special Leave Petition (C) No. 10389 of 2025 Page 163 of 269
proceedings. The provision only stipulates the circumstances in
which it would be permissible for the arbitral tribunal to terminate
the proceedings i.e., where the claimant fails to communicate its
statement of claims within the specified period without any
sufficient cause for such default.
241. The expression “ the mandate of the Arbitral Tribunal shall terminate”
is undoubtedly unique to the provision of Section 32 of the Act,
1996. However, the use of the said expression is in no manner
intended to convey that the nature of termination under Section
32(2) is distinct from the termination of proceedings under the
other provisions of the Act, 1996.
242. The expression “ mandate of the Arbitral Tribunal” only refers to the
obligation of the arbitral tribunal to administer the arbitration by
conducting the proceedings in order to adjudicate upon the
dispute referred to it. It is merely descriptive of the function
entrusted to the tribunal, namely, the authority and duty to
adjudicate the disputes before it.
Special Leave Petition (C) No. 10389 of 2025 Page 164 of 269
243. As such, the termination of mandate of the arbitral tribunal
signifies nothing more than the cessation of the authority of the
tribunal to proceed further in the reference. It denotes an end to
the tribunal’s jurisdiction over the subject matter of the arbitration
in that particular reference and cannot be construed as creating a
specialised form of termination distinct from the other provisions
of the Act, 1996.
244. Irrespective of whether the proceedings are terminated on account
of the rendition of a final award, or by the withdrawal of claims,
or on account of default by the claimant, or the intervention of any
impossibility in the continuation of the proceedings, the legal
effect remains the same, inasmuch as the arbitral tribunal
thereafter stands divested of authority to act in the reference.
245. When the arbitral proceedings are terminated on account of
default of a party in communicating its statement of claims as per
Section 25(a) of the Act, 1996, the consequence that flows from
such termination is no different from a termination in terms of
Section 32 of the said Act. In both scenarios, the tribunal ceases to
Special Leave Petition (C) No. 10389 of 2025 Page 165 of 269
possess any authority to adjudicate upon the dispute referred to
it.
246. Similarly, once the dispute stands resolved by agreement of the
parties and the tribunal either records such settlement in the form
of an arbitral award or otherwise orders the termination of
proceedings in terms of Section 30 of the Act, 1996, the duty of the
arbitral tribunal to adjudicate the dispute also comes to an end.
There remains no lis for adjudication by the tribunal and
consequently no function for it to discharge. The termination of
proceedings, by operation of Section 30 of the Act, 1996, thus
attains the same effect and finality as under Section 32 of the said
Act.
247. The aforesaid may be looked at from one another angle. The
omission of the expression “ the mandate of the Arbitral Tribunal shall
terminate” in Sections 25, 30 and 38 of the Act, 1996 respectively, is
for the simple reason that the said provisions do not pertain to the
manner in which the arbitral proceedings come to an end, rather
only prescribe the circumstances in which the proceedings may be
terminated. Section 32 of the Act, 1996 on the other hand, explicitly
Special Leave Petition (C) No. 10389 of 2025 Page 166 of 269
relates to the termination of proceedings, and thus, the legislature
in order to provide certainty as regards the consequences of such
termination, incorporated the aforesaid expression.
248. This is fortified from the deliberations of the Working Group that
led to the enactment of Article 32 of the UNCITRAL Model, as
already discussed aforesaid.
249. The other reason why this expression has been omitted may be
understood from Section 38 of the Act, 1996. The Second Proviso
to Section 38 sub-section (2) empowers the arbitral tribunal to
suspend or terminate the proceedings for a particular claim or
counter-claim in respect of which the requisite deposits have not
been made by the parties.
250. When the arbitral tribunal terminates the proceedings in respect
of a particular claim or counter-claim, it does not mean that the
entire proceedings have terminated, rather only signifies the end
of the proceedings for that particular claim or counter-claim, as the
case may be. There could be situations where the proceedings may
be terminated in respect of one particular claim, but in respect of
Special Leave Petition (C) No. 10389 of 2025 Page 167 of 269
the other claims and counter-claims, the proceedings could be
continuing. In such circumstances, the mandate of the arbitral
tribunal would also continue to survive de hors the termination in
respect of a particular claim or counter-claim, as the case may be.
251. Thus, the common thread that runs across Sections 25, 30 32 and
38 of the Act, 1996 respectively, is that although the arbitral
proceedings may terminate for varied reasons, yet the
consequence of such termination remains the same i.e., the arbitral
reference stands concluded and the authority of the tribunal
stands extinguished.
252. The termination of proceedings under Section(s) 25 and 38 of the
Act, 1996, is not a trivial procedural formality. It envisages a
situation where a claimant due to his own belligerence, fails to
communicate its statement of claims, without any sufficient cause
or does not pay the requisite costs required by the arbitral tribunal
to function.
253. Under the scheme of the Act, 1996, parties are empowered to refer
their disputes to an arbitral tribunal. The arbitral tribunal which
Special Leave Petition (C) No. 10389 of 2025 Page 168 of 269
in turn is in seisin of the dispute, has a positive duty to adjudicate
and resolve the dispute that has arisen between the parties.
254. This reference however, is singular, not perpetual. It ordains one
arbitral process, not an indefinite series of retry attempts. Once the
arbitral tribunal is seized of a dispute, the mechanism
contemplated under the Act, 1996 cannot be again reinvoked to
refer the same dispute to another tribunal.
255. Likewise, once the proceedings before the arbitral tribunal, come
to an end, either by way of a final award or an order for
termination of the proceedings in the situations envisaged under
the Act, 1996, the reference also comes to an end, and attains
finality.
256. We say so, because if the claimant is allowed a fresh arbitration, it
would reduce the entire mechanism into a farce. It would lead to
a situation where the claimant would have no incentive to pursue
the proceedings with diligence.
257. Arbitration is built on procedural self-responsibility. Its edifice is
the idea that each party must advance its case diligently, without
Special Leave Petition (C) No. 10389 of 2025 Page 169 of 269
dependence on judicial paternalism. Section(s) 25 and 38 of the
Act, 1996 respectively, insofar as they empower the termination of
proceedings on account of default by a party, crystalize this
principle.
258. The consequence of termination is not a trivial procedural
formality. It has been enshrined to penalise inertia and
recalcitrance of the parties.
259. To permit a party who by its own contumacious conduct allowed
the proceedings to be terminated in the first instance, to again set
the entire mechanism under the Act, 1996 in motion before another
set of arbitrators, would defeat the procedural self-responsibility
that the parties carry with themselves into arbitration. It would
give a license to the parties to proceed carelessly, miss deadlines,
cause disruption, and if the proceedings are terminated then
simply restart them once again.
260. Arbitration is not infinite. Arbitrator availability is scarce;
administrative capacity at institutions is finite; the arbitral process
itself is resource-sensitive. A claimant who can repeatedly initiate
Special Leave Petition (C) No. 10389 of 2025 Page 170 of 269
proceedings after default squanders the finite capital of the
arbitral system.
261. Allowing such default also runs the risk of opening the floodgates
of ‘Tribunal Hopping’. If a party senses the possibility of an
unfavourable outcome, it can simply let the proceedings get
terminated by his wilful conduct, and then re-initiate arbitration
before another tribunal.
262. Thus, it is imperative that the termination of proceedings either
under Section 25 or Section 38 of the Act, 1996 respectively, is
construed to be an order for the termination of proceedings within
the meaning of Section 32(2) of the Act, 1996.
263. An order terminating the proceedings on account of the claimant’s
failure to file the statement of claims or to deposit the requisite fees
in terms of Section(s) 25 and 38, is in essence an order under
Section 32(2) of the Act, 1996.
264. The decision of the Delhi High Court in PCL Suncon (supra) which
held that Section 32 of the Act, 1996 is exhaustive and covers all
Special Leave Petition (C) No. 10389 of 2025 Page 171 of 269
cases of termination of arbitral proceedings under the Act, 1996,
lays down the correct proposition of the law.
265. Similarly, the decision of the Bombay High Court in Datar
Switchgear (supra) insofar as it lays down that the power of the
arbitral tribunal to terminate the proceedings under the scheme of
the Act, 1996 lies only in Section 32(2) and that the use of the word
“termination” in Section(s) 25, 30 and 38, merely denotes the
consequence that would ensue in the circumstances envisaged
therein, is also correct.
266. The power of the arbitral tribunal to terminate the proceedings is
available only under Section 32(2) of the Act, 1996. The other
provisions, namely, Section(s) 25, 30 and 38 of the Act, 1996, only
denote the circumstances in which the tribunal would be
empowered to take recourse of Section 32(2) and thereby,
terminate the proceedings.
B. Remedy under the Act, 1996 against an order terminating the
arbitral proceedings.
Special Leave Petition (C) No. 10389 of 2025 Page 172 of 269
267. As discussed in the earlier parts of this judgment, this Court in
Lalitkumar V. Sanghvi (supra) and SREI Infrastructure (supra)
respectively, acknowledged that there was an apparent lacuna in
the scheme of the Act, 1996.
268. It observed that where the mandate of the arbitrator terminates,
either as a result of the arbitrator withdrawing from the office, or
upon agreement of the parties, the Act, 1996 stipulates the
recourse that would be available namely, to seek appointment of
a substitute arbitrator in terms of Section 15 of the Act, 1996.
269. However, in the event the arbitral proceedings are terminated
and, in consequence thereof, the mandate of the arbitral tribunal
also terminates, the Act, 1996 is completely silent on the remedy
that may be availed against the same. None of the provisions in
the Act, 1996 address the course of action that would be available
to a party against an order terminating the arbitral proceedings.
270.
A seven-Judge Bench of this Court in SBP & Co. v. Patel Engg.
Ltd. reported in (2005) 8 SCC 618 expressly disapproved the
approach of various High Courts entertaining challenges to the
Special Leave Petition (C) No. 10389 of 2025 Page 173 of 269
procedural orders passed by the arbitral tribunal under their
supervisory jurisdiction in terms of Article 227. This Court held
that the Act, 1996 is a complete code, and that unless a party
aggrieved by any order of the arbitral tribunal has statutory right
of appeal against such order under the Act, 1996, the party would
have no choice but to wait until the award is passed to raise its
grievances whilst assailing the final award. The relevant
observations read as under: -
“45. It is seen that some High Courts have proceeded on the
basis that any order passed by an arbitral tribunal during
arbitration, would be capable of being challenged under
Article 226 or 227 of the Constitution of India. We see no
warrant for such an approach. Section 37 makes certain
orders of the arbitral tribunal appealable. Under Section 34,
the aggrieved party has an avenue for ventilating his
grievances against the award including any in-between
orders that might have been passed by the arbitral tribunal
acting under Section 16 of the Act. The party aggrieved by
any order of the arbitral tribunal, unless has a right of appeal
under Section 37 of the Act, has to wait until the award is
passed by the Tribunal. This appears to be the scheme of the
Act. The arbitral tribunal is after all, the creature of a
contract between the parties, the arbitration agreement, even
though if the occasion arises, the Chief Justice may constitute
it based on the contract between the parties. But that would
not alter the status of the arbitral tribunal. It will still be a
forum chosen by the parties by agreement. We, therefore,
disapprove of the stand adopted by some of the High Courts
that any order passed by the arbitral tribunal is capable of
being corrected by the High Court under Article 226 or 227
Special Leave Petition (C) No. 10389 of 2025 Page 174 of 269
of the Constitution of India. Such an intervention by the
High Courts is not permissible.
46. The object of minimizing judicial intervention while the
matter is in the process of being arbitrated upon, will
certainly be defeated if the High Court could be approached
under Article 227 of the Constitution of India or under
Article 226 of the Constitution of India against every order
made by the arbitral tribunal. Therefore, it is necessary to
indicate that once the arbitration has commenced in the
arbitral tribunal, parties have to wait until the award is
pronounced unless, of course, a right of appeal is available to
them under Section 37 of the Act even at an earlier stage.”
271. Accordingly, this Court in SBP & Co. (supra) held that the
supervisory jurisdiction of the High Courts cannot be invoked to
interfere with the orders passed by an arbitral tribunal.
272. In Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd.
reported in (2022) 1 SCC 75 a three-Judge Bench of this Court held
that although the scheme of the Act, 1996 is a complete code in
itself without there being scope for any judicial interference
beyond what is permitted therein, yet, a legislative enactment by
itself cannot curtail a constitutional right, particularly that under
Article 227 of the Constitution. It held that in exceptional
circumstances an order passed by the arbitral tribunal would be
amenable to challenge under Article 227, if the party aggrieved
Special Leave Petition (C) No. 10389 of 2025 Page 175 of 269
therefrom is either left remediless under the statute or a clear “bad
faith” is shown by one of the parties. The relevant observations
read as under: -
“13. The Arbitration Act itself gives various procedures and
forums to challenge the appointment of an arbitrator. The
framework clearly portrays an intention to address most of
the issues within the ambit of the Act itself, without there
being scope for any extra statutory mechanism to provide just
and fair solutions.
xxx xxx xxx
18. In any case, the hierarchy in our legal framework,
mandates that a legislative enactment cannot curtail a
constitutional right. In Nivedita Sharma v. COAI, this
Court referred to several judgments and held : (SCC p. 343,
para 11)
“11. We have considered the respective
arguments/submissions. There cannot be any
dispute that the power of the High Courts to issue
directions, orders or writs including writs in the
nature of habeas corpus, certiorari, mandamus, quo
warranto and prohibition under Article 226 of the
Constitution is a basic feature of the Constitution
and cannot be curtailed by parliamentary
legislation — L. Chandra Kumar v. Union of
6
India . However, it is one thing to say that in
exercise of the power vested in it under Article 226
of the Constitution, the High Court can entertain
a writ petition against any order passed by or
action taken by the State and/or its
agency/instrumentality or any public authority or
order passed by a quasi-judicial body/authority,
and it is an altogether different thing to say that
each and every petition filed under Article 226 of
the Constitution must be entertained by the High
Court as a matter of course ignoring the fact that
Special Leave Petition (C) No. 10389 of 2025 Page 176 of 269
the aggrieved person has an effective alternative
remedy. Rather, it is settled law that when a
statutory forum is created by law for redressal of
grievances, a writ petition should not be
entertained ignoring the statutory dispensation.”
(emphasis supplied)
It is therefore, prudent for a Judge to not exercise discretion
to allow judicial interference beyond the procedure
established under the enactment. This power needs to be
exercised in exceptional rarity, wherein one party is left
remediless under the statute or a clear “bad faith” shown by
one of the parties. This high standard set by this Court is in
terms of the legislative intention to make the arbitration fair
and efficient.”
(Emphasis supplied)
a. Contradictory Views on the subject.
273. In Lalitkumar V. Sanghvi (supra) the appellants therein,
aggrieved by the order for termination of the arbitral proceedings,
preferred a fresh application under Section 11 of the Act, 1996 for
seeking appointment of a new arbitrator. The said application
came to be rejected by the High Court. The High Court had
observed that the appropriate remedy against the termination of
arbitral proceedings lies by way of a petition under Article 226
read with 227 of the Constitution and not Section 11. In appeal,
this Court made the following pertinent observations: -
Special Leave Petition (C) No. 10389 of 2025 Page 177 of 269
(i) First, placing reliance on SBP & Co. (supra), it was
reiterated that the supervisory jurisdiction of the High
Courts cannot be invoked to interfere with the orders
passed by an arbitral tribunal. It observed that under the
scheme of the Act, 1996 specific provisions have been
enacted enumerating the circumstances in which the order
passed by the arbitral tribunal may be challenged by way of
an appeal under Section 37. Except in these limited
circumstances in which a right of appeal has been provided,
a party aggrieved by an order of the arbitral tribunal cannot
challenge the same by invoking the writ jurisdiction. The
relevant observations read as under: -
“7. [...] That application came to be dismissed by the
order under appeal in substance holding that such an
application invoking Section 11 of the Act is not
maintainable—with an observation that “the remedy
of the applicant is by filing a writ petition not an
application under Section 11 of the Act”.
8 . Within a couple of weeks thereafter, the original
applicant died on 7-10-2012. The question is whether
the High Court is right in dismissing the application
as not maintainable. By the judgment under appeal,
the Bombay High Court opined that the remedy of the
appellant lies in invoking the jurisdiction of the High
Court under Article 226 of the Constitution. In our
view, such a view is not in accordance with the law
declared by this Court in SBP & Co. v. Patel Engg.
Special Leave Petition (C) No. 10389 of 2025 Page 178 of 269
Ltd. The relevant portion of the judgment reads as
under: (SCC p. 663, para 45)
“45. It is seen that some High Courts have
proceeded on the basis that any order passed by
an Arbitral Tribunal during arbitration, would
be capable of being challenged under
Article 226 or 227 of the Constitution [of
India]. We see no warrant for such an
approach. Section 37 makes certain orders of
the Arbitral Tribunal appealable. Under
Section 34, the aggrieved party has an avenue
for ventilating his grievances against the
award including any in-between orders that
might have been passed by the Arbitral
Tribunal acting under Section 16 of the Act.
The party aggrieved by any order of the
Arbitral Tribunal, unless has a right of appeal
under Section 37 of the Act, has to wait until
the award is passed by the Tribunal. This
appears to be the scheme of the Act. The
Arbitral Tribunal is, after all, a creature of a
contract between the parties, the arbitration
agreement, even though, if the occasion arises,
the Chief Justice may constitute it based on the
contract between the parties. But that would
not alter the status of the Arbitral Tribunal. It
will still be a forum chosen by the parties by
agreement. We, therefore, disapprove of the
stand adopted by some of the High Courts that
any order passed by the Arbitral Tribunal is
capable of being corrected by the High Court
under Article 226 or 227 of
the Constitution [of India]. Such an
intervention by the High Courts is not
permissible.””
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 179 of 269
(ii) Secondly, that merely because there is no provision under
the Act, 1996 for an appeal against an order terminating the
arbitral proceedings, does not mean that a fresh application
under Section 11 would be maintainable. It observed that
where any controversy arises regarding the termination of
the mandate of the arbitrator, Section 14(2) empowers the
court to decide on the same. Since the termination of
proceedings under Section 32 also brings the mandate of the
arbitrator to an end, this Court held that a cumulative
reading of Section 14 and Section 32 would indicate that the
question whether the mandate of the arbitrator stood
legally terminated or not can be examined by the court. The
relevant observations read as under: -
“8. [...] That need not, however, necessarily mean that
the application such as the one on hand is maintainable
under Section 11 of the Act.
xxx xxx xxx
10.3. Section 14 declares that “the mandate of an
arbitrator shall terminate” in the circumstances
specified therein. [...] Section 14(2) provides that if
there is any controversy regarding the termination of
the mandate of the arbitrator on any of the grounds
referred to in clause (a) then an application may be
made to the Court — “to decide on the termination of
the mandate”.
Special Leave Petition (C) No. 10389 of 2025 Page 180 of 269
12. On the facts of the present case, the applicability of
clauses (a) and (b) of Section 32(2) is clearly ruled out
and we are of the opinion that the order dated 29-10-
2007 by which the Tribunal terminated the arbitral
proceedings could only fall within the scope of Section
32, sub-section (2), clause (c) i.e. the continuation of
the proceedings has become impossible. By virtue of
Section 32(3), on the termination of the arbitral
proceedings, the mandate of the Arbitral Tribunal also
comes to an end. Having regard to the scheme of the
Act and more particularly on a cumulative reading of
Section 32 and Section 14, the question whether the
mandate of the arbitrator stood legally terminated or
not can be examined by the court “as provided under
Section 14(2)”.”
274. In SREI Infrastructure (supra) this Court drew a distinction
between the termination of arbitral proceedings under Section
25(a) and that under Section 32(2) of the Act, 1996. It held that in
the former, since there is no termination of the mandate of the
tribunal, a remedy by way of a recall application could lie. In other
words, the arbitral tribunal could entertain a recall application
against the termination of proceedings under Section 25(a), and if
the circumstances warrant, it would be empowered to revive the
said proceedings. However, where the proceedings are terminated
under Section 32(2) of the Act, 1996, the mandate of the tribunal
also ceases; hence there would be no scope for a recall application.
The relevant observations read as under: -
Special Leave Petition (C) No. 10389 of 2025 Page 181 of 269
“22. [...] Sub-section (3) of Section 32 further provides that
the mandate of the Arbitral Tribunal shall terminate with the
termination of the arbitral proceedings subject to Section 33
and sub-section (4) of Section 34. Section 33 is the power of
the Arbitral Tribunal to correct any computation errors, any
clerical or typographical errors or any other errors of a similar
nature or to give an interpretation of a specific point or part
of the award. Section 34(4) reserves the power of the court to
adjourn the proceedings in order to give the Arbitral
Tribunal an opportunity to resume the arbitral proceedings
or to take such other action as in the opinion of the Arbitral
Tribunal will eliminate the grounds for setting aside the
arbitral award. On the termination of proceedings under
Sections 32(2) and 33(1), Section 33(3) further contemplates
termination of the mandate of the Arbitral Tribunal, whereas
the aforesaid words are missing in Section 25. When the
legislature has used the phrase “the mandate of the Arbitral
Tribunal shall terminate” in Section 32(3), non-use of such
phrase in Section 25(a) has to be treated with a purpose and
object. The purpose and object can only be that if the claimant
shows sufficient cause, the proceedings can be recommenced.
xxx xxx xxx
26. There cannot be a dispute that the power exercised by the
Arbitral Tribunal is quasi-judicial. In view of the provisions
of the 1996 Act, which confers various statutory powers and
obligations on the Arbitral Tribunal, we do not find any such
distinction between the statutory tribunal constituted under
the statutory provisions or Constitution insofar as the power
of procedural review is concerned. We have already noticed
that Section 19 provides that the Arbitral Tribunal shall not
be bound by the rules of procedure as contained in the Civil
Procedure Code. Section 19 cannot be read to mean that the
Arbitral Tribunal is incapacitated in drawing sustenance
from any provisions of the Code of Civil Procedure.
xxx xxx xxx
33. We endorse the views of the Patna High Court, the Delhi
High Court and the Madras High Court as noted above,
Special Leave Petition (C) No. 10389 of 2025 Page 182 of 269
insofar as they have held that the Arbitral Tribunal after
termination of proceedings under Section 25(a) on sufficient
cause being shown can recall the order and recommence the
proceedings.”
(Emphasis supplied)
275. In Bharat Heavy Electricals Limited v. Jyothi Turbopower
Services Private Limited , reported in 2016 SCC OnLine Mad
4029 , one of us; Mahadevan J., held that there is a fine distinction
between the inherent power of review and the power of
procedural review. In the former, the power is exercised in respect
of a decision on merits. Whereas, in the latter, the power is
exercised in respect of the conduct of its own procedure. Under
the Act, 1996, an arbitral tribunal does not have the power to
review its own decision on merits, however, it does have the
implied power to procedural review, i.e., to recall an order for
termination of proceedings. The relevant observations read as
under: -
“ 18. The learned Arbitrator has also opined that an order
under Section 25(a) of the said Act cannot be construed to be
an award as there is no decision on merit and thus, it may not
be possible to maintain an appeal under Section 34 of the said
Act (reliance was placed on the decision of the Division Bench
of the Delhi High Court in ATV Projects
India v. IOC, (2013) 200 DLT 553). The learned Arbitrator
thus opined that since a party cannot be without a remedy,
what should be the remedy in such a situation needed to be
examined. The Tribunal, while accepting that there cannot be
Special Leave Petition (C) No. 10389 of 2025 Page 183 of 269
any power of review inherent in character, that proposition
would apply to decision on merits. However, with respect to
procedural review, the implied power is available with the
Tribunal to deal with petitions similar to the ones in the
present case. The observations made by the Hon'ble Supreme
Court in Grindlays Bank Ltd. v. The Central Govt.
Industrial Tribunal, reported in (1981) 2 SCC 150 : AIR
1981 SC 806, in latter part of para 13 were specifically
referred to, which are once again extracted as under:
“13. ………Furthermore, different considerations
arise on review. The expression ‘review’ is used in
the two distinct senses, namely (1) a procedural
review which is either inherent or implied in a
Court or Tribunal to set aside a palpably erroneous
order passed under a misapprehension by it, and
(2) a review on merits when the error sought to be
corrected is one of law and is apparent on the face
of the record. It is in the latter sense that the Court
in Patel Narshi Thakershi ase ((1971) 3 SCC
844 : AIR 1970 SC 1273) held that no review lies
on merits unless a statute specifically provides for
it. Obviously when a review is sought due to a
procedural defect, the inadvertent error committed
by the Tribunal must be corrected ex debito
justitiae to prevent the abuse of its process, and
such power inheres in every Court or Tribunal.”
19. The Division Bench's opinion of the Delhi High Court
in ATV Projects India Ltd. case (supra) was referred to to
support the conclusion where paras 17 and 18 of the
judgment read as under:
“17. We may in this regard also notice that the
legislature, in Section 25, has not provided for
termination of proceedings automatically on
default by a party but has vested the discretion in
the arbitral tribunal to, on sufficient cause being
shown condone such default. We are of the view
that no distinction ought to be drawn between
showing such sufficient cause before the
Special Leave Petition (C) No. 10389 of 2025 Page 184 of 269
proceedings are terminated and after the
proceedings are terminated. If the arbitral tribunal
is empowered to condone default on sufficient
cause being shown, it matters not when the same is
shown. It may well high be possible that the
sufficient cause itself is such which prevented the
party concerned from showing it before the
proceedings terminated. It would be a pedantic
reading of the provision to hold that the arbitral
tribunal in such cases also stands denuded. Once
the legislature has vested the arbitral tribunal with
such power, an order of termination cannot be
allowed to come in the way of exercise thereof.
18. There is another reason for us to hold so. The
emphasis of the Arbitration Act is to provide an
alternative dispute resolution mechanism. The
provisions of the Act ought to be interpreted in a
manner that would make such adjudication
effective and not in a manner that would make
arbitration proceedings cumbersome. A view that
the arbitral tribunal is precluded, even where
sufficient cause exists, from reviving the arbitral
proceedings and the only remedy available to a
party is a writ petition and which remedy is
available only in the High Court often situated at a
distance from the place where the parties are
located, would be a deterrent to arbitration. It is
also worth mentioning that Section 19(2) of the
Act permits the parties to agree on the procedure to
be followed by the arbitral tribunal. The parties
may, while so laying down the procedure, provide
for the remedy of review/revival of arbitral
proceedings and which agreement would be
binding on the arbitral tribunal. If the arbitral
tribunal in such a situation would be empowered
to, on sufficient cause being shown, revive the
arbitral proceedings, we see no reason to, in the
absence of such an agreement hold the arbitral
tribunal to be not empowered to do so. If it were to
be held that such power of review/recall is not
Special Leave Petition (C) No. 10389 of 2025 Page 185 of 269
available to an arbitral tribunal, the arbitral
tribunal would not be competent to set aside an
order under Section 25(b) also, compelling the
respondent against who, proceedings have been
continued, to file a writ petition, making the
continuation of proceedings before the arbitral
tribunal a useless exercise.”
xxx xxx xxx
21. Learned counsel for the petitioner, in support of his plea,
referred to the judgment of the Hon'ble Supreme Court
in Kapra Mazdoor Ekta Union v. Management of Birla
Cotton Spinning and Weaving Mills Ltd., (2005) 13 SCC
777. In the context of an award under the Industrial Disputes
Act, 1947, the scope of the two types of review, one procedural
and other on merits was examined. The question whether a
Tribunal was functus officio having earlier made an award
which was published by the appropriate Government was
examined and in that context, it was observed that the
jurisdiction of the Tribunal had to be seen on the date of the
application made to it and not the date on which it passed the
impugned order. On application of principles discussed, it
was held that where a Court or quasi-judicial authority
having jurisdiction to adjudicate on merits proceeds to do so,
the judgment or an order can be reviewed on merit only if the
Court or the quasi-judicial authority is vested with the power
of review by express provision or by necessary implication.
However, the procedural review belongs to a different
category. Illustratively, this situation is stated to arise where
the Court or quasi-judicial authority having jurisdiction to
adjudicate proceeds to do so, but in doing so, commits a
procedural illegality, which goes to the root of the matter and
invalidates the proceeding itself and consequently, the order
passed therein. There may also be cases where there may be
absence of notice to the opposite party or under a mistaken
impression that the notice has been served or the matter is
taken up on the date other than specified.
Special Leave Petition (C) No. 10389 of 2025 Page 186 of 269
26. The views of both the Delhi and the Calcutta High Courts
are consistent in this behalf that the appropriate course of
action to follow in such a situation would be to move the
Tribunal itself seeking recall of the order and the exercise of
power of such recall would be within the meaning of
procedural review. Whether, in the given facts of the case,
such a power is to be exercised favourably or not in favour of
the applicant would be a matter on the factual matrix of the
case and that stage has not even arisen in the present case.”
(Emphasis supplied)
276. The decision of Bharat Heavy Electricals (supra) further held that
the Act, 1996 is a complete code in itself. It held that the courts
have no power under Section 11 to entertain a second request for
appointment of an Arbitrator unless the order terminating the
proceedings is set aside. Similarly, the parties also cannot invoke
the writ jurisdiction of the High Court to challenge the order for
termination of the proceedings. The only recourse available to the
parties is to file an application for the recall of the order
terminating the proceedings. The relevant observations read as
under: -
“16. On the aspect as to what would be the remedy available
in case of the proceedings being terminated, learned counsel
for the petitioner submitted that it could only be by way of
another petition being filed under Section 11 of the said Act.
We may note here the submission of the learned counsel for
the first respondent/claimant that though this plea may
Special Leave Petition (C) No. 10389 of 2025 Page 187 of 269
prejudice his client, still what was sought to be contended by
the learned counsel for the petitioner would not be correct as
the arbitration clause provided for the mode of appointment
of the Arbitrator. The first respondent would, thus, be
required to once again invoke the arbitration clause giving a
right to the petitioner to appoint the Arbitrator before the
jurisdiction of the Court under Section 11 could be so
invoked. However, the impugned order has referred to the
judgment of the Bombay High Court in Dilnawaz
Kohinoory v. Boman Kohinoor, reported in holding that the
Court has no power under Section 11 of the said Act to deal
with a second request for appointment of an Arbitrator unless
the order closing the proceedings was set aside. Such a view
has also been adopted by the learned Judge of the Calcutta
High Court in NRP Projects Pvt Ltd. v. Hirat
Mukhapadhyay, reported in 2013 (1) Cal LJ 621 in para 71
of the judgment. The latter judgment also is good for the
proposition that an aggrieved party is not entitled to
maintain a writ petition under Article 226 of the
Constitution of India, a view also adopted by the Division
Bench of the Delhi High Court in Awasthi Construction
Co. v. Govt, of ACT of Delhi, reported in 2012 SCC online
Del 443.
xxx xxx xxx
27. We reject the plea of the learned counsel for the petitioner
that on termination of proceedings under Section 25(a) of the
said Act, the Arbitrator becomes functus officio, as he is a
persona designata. Both the methods of appointment of
Arbitrator are possible, i.e. by consent or through the process
of Court. The position would not be different in the two
situations. It is not as if there is a better sanctity to the
appointment of an Arbitrator which enlarges the power if he
is appointed by mutual consent, while there are abridged
powers if he is not appointed by the Court.
28. Thus, we conclusively hold that the appropriate remedy
in case of termination of proceedings under Section 25(a)
would require the Arbitral Tribunal itself to be moved, which
Special Leave Petition (C) No. 10389 of 2025 Page 188 of 269
would then examine the aspects on merits as to why the order
does or does not require to be recalled.
29. We are also in agreement with the views of both the
Calcutta and Delhi High Courts and in view of the aforesaid
finding, that the remedy under Article 226 of the
Constitution of India is not really available as the aforesaid is
the appropriate remedy. The invocation of jurisdiction of this
Court by the petitioner is, in turn, predicated on a belief that
either of the parties aggrieved have to approach this Court
under its extraordinary writ jurisdiction. However, we have
already explained the remedy available and any further
challenge to an order which may be passed in such application
would, in turn, depend on the fate of it. The said Act is a
complete code in itself and the basis is that there should not
be periodic judicial intervention in arbitration proceedings.
Were a favourable order to be passed commencing arbitration
proceedings, the option would only be to challenge the award,
if so advised, under Section 34 of the said Act. Similarly, if
the application was to be dismissed, the position would really
be no different.”
(Emphasis supplied)
277.
In M/s VAG Educational Services v. Aakash Educational Services
Ltd. reported in 2022 SCC OnLine Del 3401 , the Delhi High Court
held that a petition under Article 227 would be maintainable
against an order terminating the proceedings under Section 32(2)
of the Act, 1996.
278. In the said case, the respondent-claimant therein withdrew its
claims before the arbitral tribunal, consequent to which, the
proceedings came to be terminated by the arbitrator in terms of
Special Leave Petition (C) No. 10389 of 2025 Page 189 of 269
Section 32(2)(a) of the Act, 1996. Sometime thereafter, the
respondent-claimant, filed an application before the arbitrator
seeking recall of the order for termination of the proceedings. The
respondent-claimant stated that that his counsel had no
instruction to withdraw the claims, and the same had occasioned
due to an inadvertent miscommunication. Accordingly, the
arbitrator allowed the aforesaid recall application and restored the
proceedings. The relevant observations read as under: -
“ 3. The issue in controversy is brief. Arb. Case No. 110/18,
which was continuing between the petitioner and the
respondent before a learned sole arbitrator, was withdrawn
by the respondent, as the claimant in the arbitral proceedings
on 21-9-2019. [...]
4. Subsequently, the respondent, as the claimant in the
arbitral proceedings, moved an application seeking recall of
the afore-extracted order dated 21-9-2019. It was sought to
be contended, therein, that no consent, for withdrawal of the
arbitral proceedings, had been granted either by the
authorised representative or by the “proxy counsel” who was
present on behalf of the respondent claimant.
5. However, during the pendency of the said application, an
affidavit was filed by the counsel representing the respondent
claimant, adopting an entirely different stand. In the said
affidavit, it was sought to be contended that the learned
counsel had inadvertently signed the withdrawal order sheet
of the arbitral proceedings, as her instructions, from her
Senior Counsel were to withdraw another matter pending
before the same learned sole arbitrator.
Special Leave Petition (C) No. 10389 of 2025 Page 190 of 269
6. As such, the affidavit effectively gave up the plea, in the
application, that the order dated 21-9-2019, of the learned
sole arbitrator, terminating the arbitral proceedings as
withdrawn, was passed in error or without authorisation.
Learned counsel for the respondent claimant accepted
responsibility for having signed the withdrawal application,
but pleaded that it was owning to an inadvertent mistake.
7. By the impugned order dated 18-1-2020, the learned
arbitrator allowed the aforenoted application of the
respondent claimant and restored the arbitral proceedings,
observing that a party could not be permitted to be prejudiced
owing to fault of counsel. However, the learned arbitrator
took exception to the assertions in the application which, he
felt, questioned his impartiality in the proceedings. He,
therefore, recused from the proceedings and allowed parties
to appoint an alternate arbitrator.”
279.
Aggrieved by the aforesaid, the appellant therein challenged the
restoration of the arbitral proceedings before the High Court by
way of a petition under Article 227 of the Constitution. The High
Court held as under: -
(i) First, the High Court placing reliance on SBP & Co. (supra)
and Bhaven Construction (supra), held that ordinarily
procedural orders passed by the arbitral tribunal are not
amenable to challenge under Article 227 of the Constitution,
as the grounds for challenging the same can always be
raised by an aggrieved party while assailing the final award
Special Leave Petition (C) No. 10389 of 2025 Page 191 of 269
under Section 34 of the Act, 1996. The relevant observations
read as under: -
“9. I had initial misgivings regarding the
maintainability of the present petition, predicated on
the judgments of the Supreme Court in SBP &
Co. v. Patel Engg. Ltd. and Bhaven
Construction v. Sardar Sarovar Narmada Nigam
2
Ltd. However, having heard Ms Agarwal, learned
counsel for the petitioner and on a careful perusal of
the said decisions, the situation which obtained in
those cases appears distinguishable from that which
obtains in the present case. The position of law which
emerges from the decisions in SBP & Co.
1
case and Bhaven Construction case which has also
been adopted in earlier decisions rendered by me, is
that interlocutory orders passed during arbitral
proceedings cannot be challenged under Article 227 of
the Constitution of India, as the grounds on which
such orders are sought to be challenged would be
available as grounds to challenge the final award
which may come to be passed in the arbitral
proceedings. In such circumstances, the decisions
1
in SBP & Co. case and Bhaven Construction
case require the challenger to await the passing of final
award in the arbitral proceedings and to reserve the
grounds on which the interlocutory order is sought to
be challenged for being urged in the challenge to the
final arbitral award under Section 34 of
the Arbitration and Conciliation Act, 1996 Act (“the
1996 Act”), should such occasion arise.”
(ii) Secondly, the High Court observed that the revival of
proceedings by the arbitral tribunal after its termination in
terms of Section 32(2) of the Act, 1996, however, was a
distinct situation. Such an order for restoration of the
Special Leave Petition (C) No. 10389 of 2025 Page 192 of 269
proceedings would be amenable to challenge under Article
227. This according to the High Court was in view of Section
32 sub-section (3), which stipulates that once the
proceedings are terminated, the mandate of the arbitral
tribunal would also terminate with it. The arbitrator in such
a scenario becomes functus officio and ceases to have
jurisdiction to entertain any further applications or pass any
orders in the proceedings save for the limited power to pass
orders in terms of Section 33 of the Act, 1996. The relevant
observations read as under: -
“10. The situation that obtains in the present case is
clearly distinct. The court, in the present case, is seized
with the issue of whether an Arbitral Tribunal which
has terminated the arbitral proceedings as withdrawn
could, thereafter, entertain an application for recall of
the said order and revive the arbitral proceedings.
11. The legal position that emanates from the statute,
in this regard, appears fairly clear. Section 32 of
the 1996 Act deals with “termination of
proceedings” [...]
12. A case in which the claimant withdraws his claim
and, on that basis, the arbitral proceedings are
terminated, falls within Section 32(2)(a). Sub-section
(3) of Section 32 ordains that, with the termination of
the arbitral proceedings, the mandate of the arbitral
proceedings would also terminate. This is made subject
only to Sections 33 and 34(4) of the 1996 Act [...]
Special Leave Petition (C) No. 10389 of 2025 Page 193 of 269
xxx xxx xxx
15. By operation of Section 32(3), the mandate of the
learned sole arbitrator terminated on 21-9-2019. Once
the mandate of an arbitrator terminates, the arbitrator
is rendered functus officio. He has no jurisdiction,
thereafter, to entertain any application or pass any
orders in the proceedings. The limited orders which an
arbitrator, whose mandate stands terminated, may
pass, are restricted to orders under Section 33 of
the 1996 Act, which, as already noted, does not apply
in the present case.
(Emphasis supplied)
280. Accordingly, the High Court held that the arbitrator entertaining
a recall application after the termination of proceedings under
Section 32(2) of the Act, 1996 and subsequently, passing an order
for the restoration of the same was without jurisdiction, and was
thus set-aside and quashed. The relevant observations read as
under: -
“16. The sequitur is obvious. The learned arbitrator, at the
time of passing the impugned order, was coram non judice,
as his mandate stood terminated on 21-9-2019.
17. The impugned order, therefore, has been passed without
jurisdiction and, accordingly, cannot be allowed to remain.
Resultantly, the order dated 18-1-2020, passed by the learned
sole arbitrator is quashed and set aside. The order dated 21-
9-2019 shall revive.”
Special Leave Petition (C) No. 10389 of 2025 Page 194 of 269
281. What has been conveyed in so many words by the Delhi High
Court in VAG Educational Services (supra) is that any procedural
order passed by the arbitrator, even if the same terminates the
proceedings, will not be amenable to challenge under Article 227
of the Constitution. It is only in exceptional circumstances, where
the arbitrator passes an order, after being rendered functus officio,
would the remedy lie under Article 227.
282. To put it simply, the Delhi High Court in VAG Educational
Services (supra) entertained the petition under Article 227, not
because the Act, 1996 ostensibly provides no remedy against an
order for termination or restoration of proceedings, but solely for
the reason that the arbitral tribunal, after the termination of its
mandate, had acted without any jurisdiction.
283. Thus, both the Madras High Court in Bharat Heavy Electricals
(supra) and the Delhi High Court in VAG Educational Services
(supra), have held that the Act, 1996 is a complete code. Any
procedural order passed by the arbitral tribunal, terminating the
proceedings will not be amenable to challenge under Article 227
of the Constitution.
Special Leave Petition (C) No. 10389 of 2025 Page 195 of 269
284. However, the aforesaid two decisions take divergent views on the
power of the arbitral tribunal to entertain a recall application, after
the termination of the proceedings.
285. Bharat Heavy Electricals (supra) holds that the arbitral tribunal
does have the limited procedural power to review its own orders
insofar as the conduct of arbitral proceedings is concerned, albeit
in the context of a termination under Section 25(a) of the Act, 1996.
286. Whereas, VAG Educational Services (supra) holds that such
power to review is not available to an arbitral tribunal, atleast
insofar as termination of proceedings under Section 32(2) is
concerned. This is in view of Section 32 sub-section (3) of the Act,
1996, which stipulates that the termination of proceedings
consequently terminates the mandate of the arbitrator as-well, as
also held in SREI Infrastructure (supra).
287. However, in regards to the aforesaid proposition of law, the
observations made in one another decision of the Delhi High
Court in Future Coupons Pvt. Ltd. v. Amazon.Com NV Investment
Special Leave Petition (C) No. 10389 of 2025 Page 196 of 269
Holdings LLC reported in 2022 SCC OnLine Del 3890 are
significant.
288. In Future Coupons (supra) the petitioners therein filed an
application under Section 32(2)(c) of the Act, 1996, seeking
termination of the proceedings inter-alia on the ground that by
virtue of the subsequent developments, no dispute survived for
adjudication. The said application came to be rejected by the
arbitral tribunal. Aggrieved therefrom, the petitioners filed a
petition under Article 227 before the High Court. The relevant
observations read as under: -
th
“44. In the wake of the aforesaid order dated 17 December
2022 of the CCI, the petitioners applied, to the learned
Arbitral Tribunal, under Section 32(2)(c) of the 1996
Act, seeking termination of the arbitral proceedings.
Inasmuch as this Court is not entering into the merits of the
th
impugned order dated 28 June 2022, whereby the said
application was dismissed by the learned Arbitral Tribunal,
it would not be appropriate for this Court to detail the rival
contentions of the parties in that regard. Suffice it to state
that the petitioners' contention was that, with the approval
th
contained in the order dated 28 November 2019, granted by
the CCI to the Combination having been placed in abeyance
th
by the subsequent order dated 17 December 2021 of the CCI,
the FCSHA and FCSSA and FRSHA could no longer be
acted upon and that, therefore, that no dispute survived for
adjudication in the arbitral proceedings. In that view of the
matter, the petitioners contended that the arbitral
proceedings were required to be terminated under Section
32(2)(c) of the 1996 Act.
Special Leave Petition (C) No. 10389 of 2025 Page 197 of 269
45. Further, contended FRL, were the learned NCLT to admit
the application filed by Bank of India under Section 7 of the
IBC, a moratorium would invariably be put in place in terms
of Section 14(1) of the IBC. Any such moratorium, if put in
place, would render further continuance of the arbitral
proceedings illegal and impermissible. On this ground, too,
therefore, FRL sought termination of the arbitral proceedings
under Section 32(2)(c).
46. The learned Arbitral Tribunal has rejected the said
th
application by the impugned order dated 28 June 2022.
47. Though, till then, no moratorium in terms of Section
14(1) of the IBC had been put in place by the learned NCLT,
the learned Arbitral Tribunal, in para 161 of the impugned
th
order dated 28 June 2022, rejected FRL's submissions,
observing that, even if a moratorium under Section 14(1) of
the IBC were to be imposed by the learned NCLT, such a
moratorium would operate only against FRL and not against
the Biyanis who could continue to participate in the
proceedings. As such, the learned Arbitral Tribunal opined
that the imposition of such a moratorium would not amount
to an interdiction, on the learned Arbitral Tribunal,
concluding hearings and passing an Award, and would in
any case remain in force only till it was in place.
48. The learned Arbitral Tribunal further expressed the view
th
that the effect of the order dated 17 December 2021 of the
CCI on the FCSHA, FCSSA and FRSHA were matters which
are required to be examined in detail, and could not constitute
a justifiable basis to terminate the arbitral proceedings
midway under Section 32(2)(c). The CCI order dated
th
17 December 2021, according to the learned Arbitral
Tribunal, could not be said to have rendered the continuation
of the arbitral proceedings “unnecessary” or “impossible”,
being the only two exigencies statutorily envisaged by
Section 32(2)(c), in which the arbitral proceedings could be
terminated.
Special Leave Petition (C) No. 10389 of 2025 Page 198 of 269
xxx xxx xxx
55. These two petitions, under Article 227 of the
Constitution of India, as already noted, assail the aforesaid
th
order dated 28 June 2022, passed by the learned Arbitral
Tribunal on the petitioners' application under Section
32(2)(c) of the 1996 Act and the procedural order No. 10
th
dated 11 October 2022 passed by the learned Arbitral
Tribunal on Amazon's application under Section 23(3) of the
1996 Act.”
289. The High Court held that the petitioners therein could not have
invoked Article 227 to assail the procedural order passed by the
arbitrator refusing to terminate the proceedings for the following
reasons: -
(i) First, that as per the decisions of SBP & Co. (supra)
interlocutory orders passed in the arbitral proceedings,
except to the limited extent permitted under Section(s) 34
and 37 of the Act, 1996 are otherwise immune from
challenge under Article 227. Bhaven Construction (supra)
on the other hand carves out two exceptional circumstances
where such an order would be amenable to challenge under
Article 227. This being, where the order is assailed on the
ground of want of good faith or where if not for the remedy
Special Leave Petition (C) No. 10389 of 2025 Page 199 of 269
under Article 227, the aggrieved litigant would be left
remediless. The relevant observations read as under: -
“77. The ratio decidendi that emerges from para 45
of SBP is clear and unequivocal. Challenges to
orders/awards passed in arbitral proceedings have
either to be under Section 37(2) or under Section 34(1)
of the 1996 Act. [...]
81. SBP, thus, keeps, completely outside the reach of
Article 227 of the Constitution of India, interlocutory
arbitral orders.
82. Bhaven Constructions envisages, however, one
more circumstance in which an interlocutory order of
an Arbitral Tribunal could be challenged under Article
227 of the Constitution of India, which is where the
order is assailed on the ground of want of good faith.
Save and except for this limited caveat - which is
unlikely to apply in a majority of cases - Bhaven
Constructions reinforces the law enunciated in SBP,
by holding that Article 227 of the Constitution of India
would be available to a litigant aggrieved by an
interlocutory arbitral order only where, but for Article
227, the aggrieved litigant is remediless. Dealing with
a contention, advanced before it, that the 1996 Act,
being an instrument of parliamentary legislation,
could not curtail the constitutional remedy envisaged
by Article 227 [...]
83. Bhaven Constructions, therefore, in a sense
clarifies SBP by restricting the amenability to
challenge under Article 227 of the Constitution of
India, or interlocutory arbitral orders, to cases where,
either, want of good faith is pleaded, or the party is
otherwise remediless. ”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 200 of 269
(ii) Secondly, that the expression “remediless” used in Bhaven
Construction (supra) has to be construed in light of the
scheme of the Act, 1996. Any order or award passed by the
arbitral tribunal that can be challenged within the confines
of Section(s) 34 and 37 of the Act, 1996 would not be
amenable to challenge under Article 227, since a statutory
remedy has been already provided under the Act. Even
where no statutory remedy exists under the Act, 1996
against any order passed by the arbitral tribunal, the same
cannot be assailed by invoking Article 227, if the ground for
challenging such an order can be raised at the time of
seeking the setting aside of the final award under Section
34. The relevant observations read as under: -
“ 77. The ratio decidendi that emerges from para 45
of SBP is clear and unequivocal. Challenges to
orders/awards passed in arbitral proceedings have
either to be under Section 37(2) or under Section 34(1)
of the 1996 Act. Section 37(2) permits challenges
against orders passed at the interlocutory stage in the
arbitral proceedings either where a plea under Section
16(2) or (3) of the 1996 Act is allowed or where a
prayer for grant of interim measure under Section
17(1) is allowed or refused. In the first case, the appeal
would lie under Section 37(2)(a), whereas in the
second, the appeal would lie under Section 37(2)(b).
Special Leave Petition (C) No. 10389 of 2025 Page 201 of 269
78. An interlocutory order of an Arbitral Tribunal
would also be susceptible to challenge, under the 1996
Act, where it is an “interim award”, as the definition
of “arbitral award”, in Section 2(c) of the 1996 Act,
includes an “interim award”. [...]
79. Interim awards of Arbitral Tribunals are,
therefore, amenable to challenge under Section 34 of
the 1996 Act, without waiting for the final award to be
passed. Else, challenges to interlocutory orders have to
be restricted to clauses (a) and (b) of Section 37(2); the
former applying where the learned Arbitral Tribunal
has allowed an application under Section 16(2) or (3)
and the latter where it has refused to grant an interim
measure of protection under Section 17.
xxx xxx xxx
84. It is important to understand, in this context, what
the Supreme Court intended to convey by the use of
the word “remediless”, as it is often sought to be
contended - as has also been contended before me in the
present case - that, as the 1996 Act does not contain
any provision whereunder the impugned interlocutory
order could be challenged, the party is, in fact,
remediless. The mere fact that there is no statutory
provision under which, at that stage, the aggrieved
litigant could challenge the interim Award of the
Arbitral Tribunal, is not sufficient to regard the
litigant as remediless against the said
order. SBP and Bhaven Construction, read conjointly,
make it clear that, even if the challenge to the
impugned order can be made one of the grounds of
challenge to the final Award which may come to be
passed, that suffices as a remedy for the aggrieved
litigant. In such a case, the litigant has to wait till the
final Award is passed and, only thereafter, can vent his
grievances, both against the interlocutory as well as
against the final Award.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 202 of 269
(iii) Lastly, it held that insofar as orders passed under Section
32(2) of the Act, 1996 are concerned, where such an order
does not result in the termination of the arbitral
proceedings, no remedy would lie under Article 227. Any
party aggrieved therefrom would be required to wait for the
final award to be passed and then raise those grounds under
Section 34 of the Act, 1996, more particularly as to why the
proceedings ought to have been terminated. However,
where an order passed under Section 32(2) results in the
termination of the proceedings, the same may be challenged
under Article 227, as there is no other provision under the
Act, 1996 to otherwise challenge such an order. The relevant
observations read as under: -
“86. For the aforesaid reasons, and with all due respect
to Mr Rohatgi, the contention does not appear, to me,
to merit acceptance. What the argument overlooks is
that the impugned order does not allow an application
under Section 32(2). It dismisses it. The order does
not, therefore, terminate the arbitral proceedings. Had
it allowed the application of the petitioners under
Section 32(2), then, perhaps, Amazon might have had
a remedy under Article 227, on the ground that the
arbitral proceedings had come to an end, and there was
no provision in the 1996 Act, whereunder the order
could otherwise be challenged. In such a case, Amazon
would be “remediless”. Where, however, as in the
present case, the application of the petitioners, under
Special Leave Petition (C) No. 10389 of 2025 Page 203 of 269
Section 32(2)(c) of the 1996 Act has been dismissed,
the arbitral proceedings continue. The remedy under
Section 34, to challenge the final award in the arbitral
proceedings, therefore, subsists. Among the grounds of
challenge - if, assuming, the award was against the
petitioners and they chose to challenge it - could be
included the grounds on which the petitioners seek to
assail the impugned orders as well. Thus, the
petitioners are not “remediless”. They have a remedy,
but they have to bide their time.
87. Clipping of arbitral wings is against the basic ethos
of the 1996 Act. Allowing free flight to arbitration is
the very raison d'etre of the reforms that the
UNCITRAL arbitral model sought to introduce. The
1996 Act, founded as it is on the UNCITRAL model,
is pervaded by the same philosophy.
88. I have, in Easy Trip Planners, Siddhast
Intellectual Property Innovations and VRS
Natarajan, among others, consistently followed the
decisions in SBP and Bhaven to hold that an
interlocutory order in arbitral proceedings, which does
not terminate the arbitration or bring it to an end,
cannot be challenged under Article 227 of the
Constitution of India.
89. In Indian Agro Marketing Coop. Ltd., on which
learned Senior Counsel for the petitioners chose to
rely, only reinforces the position. the arbitral
proceedings were terminated by allowing of an
application filed under Section 16 of the 1996 Act. An
application, seeking recall of the said order, was also
dismissed by the learned Arbitral Tribunal. In that
case, as the arbitral proceedings did not survive any
further, and the order under challenge brought the
proceedings to an end, I had entertained a petition
under Article 227 of the Constitution of India.
90. Mr Rohatgi also cited my decision in MS Vag
Educational Services v. Aakash Educational Services
Special Leave Petition (C) No. 10389 of 2025 Page 204 of 269
Ltd.. That, again, was an extreme case, clearly
distinguishable on facts and in law. In the said
case, after terminating the arbitral proceedings, the
learned arbitrator, suo motu, recalled his order and
revived the proceedings. It was in these circumstances
that I held that, as the arbitral proceedings stood
terminated by the arbitrator himself, and as he had no
powers to recall such an order of termination, the case
merited interference under Article 227 of the
Constitution of India.
91. In the present case, the learned Arbitral Tribunal
has not terminated the arbitral proceedings; rather, it
has dismissed the petitioners' application for
terminating the proceedings. Vag Educational
Services, therefore, does not help the petitioners.
xxx xxx xxx
94. The orders under challenge are, plainly,
th
interlocutory orders. The order dated 28 June 2022,
forming subject matter of challenge in CM (M)
1141/2022, rejects the petitioners' application under
Section 32(2)(c) of the 1996 Act, seeking termination
of the arbitral proceedings. In case the arbitral
proceedings deserved to be terminated in law, it would
always be open to the petitioners to so urge, if ever an
occasion arose for them to invoke Section 34 against
any final Award that the learned Arbitral Tribunal
may come to pass.”
(Emphasis supplied)
290. Thus, there appears to be a cleavage of opinion expressed as
regards what would be the appropriate remedy available to a
party aggrieved by the order of termination of proceedings passed
by the arbitral tribunal.
Special Leave Petition (C) No. 10389 of 2025 Page 205 of 269
291. Although there are a plethora of other decisions by the various
High Courts expressing a divergence of opinion in this regard,
including some decisions that treat an order for termination of
proceedings to be an ‘award’ under the Act, 1996 and thus
amenable to challenge under Section 34 thereof, yet we do not
wish to dwell any further on this aspect, particularly in view of the
fact that such an order for termination of proceedings can by no
stretch of imagination be construed to be an award.
292. In this regard, we may only say, that the grounds on which an
award can be challenged under Section 34 of the Act, 1996 are
wholly incompatible with the conditions required to pass an order
for termination of proceedings under the Act, 1996, thereby
indicating that it cannot be termed as an ‘award’. Section 32 sub-
section (1) of the Act, 1996 also clearly delineates that the arbitral
proceedings terminate either by way of an award OR an order for
termination of proceedings, thereby indicating that the latter is not
an ‘award’. The various discussions of the Working Group on this
aspect are also unequivocal.
Special Leave Petition (C) No. 10389 of 2025 Page 206 of 269
293. Lalitkumar V. Sanghvi (supra) holds that Section 14(2) empowers
the court to decide on any controversy regarding the termination
of the mandate of the arbitrator, which would also include the
termination of the proceedings. A similar view has also been taken
in Dani Wooltex (supra), wherein this Court entertained an
application under Section 14 against an order terminating the
proceedings under Section 32(2) of the Act, 1996.
294. SREI Infrastructure (supra) hold that the arbitral tribunal can
entertain a recall application against the termination of
proceedings, albeit in the context of Section 25(a).
295. The Delhi High Court in Future Coupons (supra) held that an
order passed under Section 32(2) that results in the termination of
the proceedings could be challenged under Article 227 of the
Constitution.
296. Since the Act, 1996 provides no remedy against an order for
termination of proceedings, it would serve the ends of justice if a
purposive interpretation of the provision of Section 14 is adopted.
Special Leave Petition (C) No. 10389 of 2025 Page 207 of 269
297. We are of the considered opinion that Section 14 sub-section (2),
particularly the expression “ the Court to decide on the termination of
the mandate ” should be given an expansive meaning to include any
challenge to an order for termination of proceedings simpliciter.
We say so because, the termination of proceedings in essence
results in the arbitrator being absolved of its duty to administer
the arbitration.
298. As already discussed in the foregoing parts of this judgment, an
order for termination of proceedings has the effect of bringing the
mandate of the arbitral tribunal also to an end, which by extension
also terminates the mandate of the arbitrator.
299.
Thus, in our opinion, until this lacunae in the Act, 1996 is not
resolved, the parties aggrieved by an order of termination of
proceedings should be permitted to challenge the same before a
court under Section 14(2) of the Act, 1996.
300.
In this regard, we may once again refer to the discussions of the
Working Group on the draft Article 24 which later became Article
25 of the UNCITRAL Model.
Special Leave Petition (C) No. 10389 of 2025 Page 208 of 269
301. During the drafting stage, the Working Group discussed two
variants of Article 25. Both versions of the draft provision,
contained a provision which empowered a party approach the
‘Authority’ specified in the then draft Article 17 to pass a direction
to the arbitral tribunal to continue with the proceedings.
302. The underlying reason behind the inclusion of the aforesaid clause
was due to the earlier discussions of the Working Group in its
Third Session, wherein it was suggested that an arbitral tribunal
should proceed ex-parte only with the permission of the national
court having jurisdiction over the arbitral tribunal. At the cost of
repetition, the relevant observations are reproduced below: -
“71. [...] If, however, there were to be a provision on this
issue, one view was that it could provide that a court would
decide, in the circumstances of each case, whether ex parte
proceedings by the arbitral tribunal were permissible. [...]
303. The Working Group eventually decided to omit the aforesaid
clause from both versions of the draft Article 24 as it was felt that
this introduced an unnecessary degree of court supervision which
did not align with the Model Law’s principle of minimal judicial
interference. Ultimately it resolved to tweak the draft Article 24 to
Special Leave Petition (C) No. 10389 of 2025 Page 209 of 269
empower the arbitral tribunal directly to proceed ex-parte, in
certain situations of default of by a party, without the need for any
permission.
304. Although the aforesaid clause never made it into Article 25 of the
UNCITRAL Model, yet it is instructive in understanding the
remedy that was once contemplated for a party aggrieved in terms
of the situations envisaged under the now Article 25 of the
UNCITRAL Model and corresponding Section 25 of the Act, 1996.
305. The draft Article 17 referenced in the aforesaid clause defined the
authority that would exercise supervisory jurisdiction over the
arbitral tribunals. As per the said draft Article, the national courts
which were empowered to grant interim relief, appoint an
arbitrator and appoint substitute arbitrators in terms of Articles 9,
11, 14 and 15 of the UNCITRAL Model, respectively
(corresponding Sections 9, 11, 14 and 15, respectively) were
designated as the ‘Authority’.
306. What can be discerned from the aforesaid is that, the potential for
national courts to have supervisory powers over the arbitral
Special Leave Petition (C) No. 10389 of 2025 Page 210 of 269
tribunal in matters relating to the continuation of proceedings ex-
parte were once envisioned. Although the above suggestion was
omitted and the arbitral tribunals were themselves empowered to
proceed ex-parte, yet one cannot lose sight of the fact that, the
Working Group whilst omitting the above provision, never
discussed what would happen in a situation of wrongful
termination of proceedings by the arbitral tribunal.
307. Had the Working Group deliberated upon the above issue as-well,
one cannot help but reach a presumptuous conclusion, that the
Working Group might have allowed a party aggrieved by an order
passed by the arbitral tribunal, to approach the national courts, at
least insofar as it terminates the proceedings.
308. This to our minds, fortifies the view, that a remedy against the
termination of proceedings, should very well be available in the
form of a challenge under Section 14 of the Act, 1996.
309.
However, we must not lose sight of the overarching reason why
the Working Group had abandoned the idea of an aggrieved party
approaching the national courts against any order under Article
Special Leave Petition (C) No. 10389 of 2025 Page 211 of 269
25. The Working Group felt that the autonomy and wisdom of the
arbitral tribunal to decide the correct course of action in the event
of any default of the party should not be undermined. It opined
that the arbitral tribunal, being in seisin of the proceedings was
best suited to assess the conduct of the parties and then take an
appropriate decision in terms of the provision.
310.
What emerges from the aforesaid is that where an arbitral tribunal
passes an order for terminating the proceedings under the Act,
1996, the appropriate remedy available to the parties would be to
first file an application for recall of such order before the arbitral
tribunal itself.
311. It is no more res-integra that there is a clear distinction between a
procedural review and a review on merits as held in Hindustan
Construction Company (supra). When applied to the Act, 1996, the
irresistible conclusion that can be reached is that the power of
review is available to an arbitral tribunal to the limited extent of
curing a patent or procedural error. Thus, an arbitral tribunal has
the power to entertain an application for recall of an order
terminating the proceedings passed by it.
Special Leave Petition (C) No. 10389 of 2025 Page 212 of 269
312. Upon such application being preferred, the arbitral tribunal, as
held in Bharat Heavy Electricals (supra), would then be required
to examine whether the order does or does not deserve to be
recalled.
313. If a favourable order is passed for recommencing arbitration
proceedings, the only option available to a party aggrieved
therefrom, would be to participate in the proceedings and
thereafter challenge the final award under Section 34 of the Act,
1996.
314. If, however, the recall application were to be dismissed, as held in
Lalitkumar V. Sanghvi (supra), the party aggrieved therefrom,
would be empowered to approach the court under Section 14(2) of
the Act, 1996.
315. The court would then in turn examine whether the mandate of the
arbitrator stood legally terminated or not. If it finds that the
proceedings were not terminated in accordance with the law, it
would be empowered to either set-aside the order of termination
of proceedings and remit the matter back to the arbitral tribunal,
Special Leave Petition (C) No. 10389 of 2025 Page 213 of 269
or, if the circumstances so require, proceed to appoint a substitute
arbitrator in terms of Section 15 of the Act, 1996.
316. However, we make it abundantly clear that under no
circumstances, can a party file a fresh application under Section 11
of the Act, 1996 and initiate a second round of arbitration.
C. Whether the order for termination of proceedings passed by the
Sole Arbitrator could be said to be contrary to the decision of this
Court in Afcons (supra).
317. As discussed above, the Sole Arbitrator in the present case had
terminated the arbitral proceedings since neither party was
willing to pay the arbitral fees in respect of either the claim or the
counter-claim.
318. The Sole Arbitrator had initially determined the arbitral fees
payable on the basis of the Statement of Claim filed by the
appellants herein in accordance with the Fourth Schedule of the
Act, 1996. The said fees were to be borne equally by both the
parties.
Special Leave Petition (C) No. 10389 of 2025 Page 214 of 269
319. The appellants herein never objected to the aforesaid
determination of the fees by the Sole Arbitrator. Thereafter, when
the respondents herein filed their counter-claim, the Sole
Arbitrator revised the fees payable in terms of the Fourth Schedule
of the Act, 1996.
320. However, both the appellants and the respondent herein raised
certain objects to the revised arbitral fees determined by the Sole
Arbitrator. The appellants had contended that the counter-claim
filed by the respondents was an exaggerated estimation of the
amount claimed and that they were not in a financial position to
bear the arbitral fees for the total amount in dispute. The
respondent on the other hand, contended that he was liable to pay
only 25% of the total fees of arbitration.
321. Several hearings were conducted by the Sole Arbitrator on the
issue of the fees liable to be paid by the parties. The Sole Arbitrator
held that as per Section 38 of the Act, 1996, both the contesting
parties, namely, the claimant and the respondent, are liable to bear
the fees of arbitration in equal proportion. He further observed
Special Leave Petition (C) No. 10389 of 2025 Page 215 of 269
that the fees payable had been in accordance with the Fourth
Schedule of the Act, 1996 and with the consent of both the parties.
322. However, since neither party was willing to pay the arbitral fees
in respect of either the claim or the counter-claim, the Sole
Arbitrator terminated the proceedings by its order dated
28.03.2022.
323.
The appellants herein have contended that the order passed by the
Sole Arbitrator terminating the arbitral proceedings is contrary to
the decision of this Court in Afcons (supra). It was submitted that
the Sole Arbitrator had proceeded to revise the total arbitral fees
payable by the parties without their consent, and thus, could be
said to be bad in law.
324. In Afcons (supra), this Court was inter-alia called upon to examine
the constitutional validity of the Fourth Schedule of the Act, 1996,
and the manner in which the arbitral fees was required to be
determined in terms of the Act, 1996. This Court upholding the
validity of the Fourth Schedule of the Act, 1996 held that the fee
model proposed in the Fourth Schedule was not mandatory. It
held that the arbitral tribunal cannot unilaterally decide their own
Special Leave Petition (C) No. 10389 of 2025 Page 216 of 269
fees, and any such determination invariably requires the consent
of both the parties.
325. It held that in order to avoid unnecessary conflicts and litigation
between the parties and the arbitrators, the fees of the arbitrators
must be fixed in the very beginning of the arbitral proceedings. If
the parties or the arbitrator(s), as the case may be, are not able to
reach a consensus as regards the fees payable, then the arbitrator
in such a case must decline the assignment and withdraw as an
arbitrator. It held that once the terms of reference have been
finalised between the parties and the arbitrators, it would not be
open for anyone to vary or revise the same.
326.
However, it held the fees so determined by the parties and the
arbitrators would be amenable to revision as the arbitral
proceedings progress, but such revision must be with the consent
of all the parties. It clarified that the arbitral tribunal in no
circumstances can unilaterally revise the arbitral fees that was
initially agreed upon.
327. The relevant observations read as under: -
Special Leave Petition (C) No. 10389 of 2025 Page 217 of 269
“ C.2.4 Directives governing fees of arbitrators in ad hoc
arbitrations
101. Preliminary meetings in arbitration proceedings entail
a meeting convened by the arbitral tribunal with the parties
to arrive at a common understanding about how the
arbitration is to be conducted. It generally takes place at an
early stage of the dispute resolution process, prior to the
―written phase of the proceedings ‖ . Rules of certain
international arbitral institutions provide for convening a
preliminary meeting or case-management conference. The
fees and expenses are typically addressed at this stage. We
propose that this stage of having a preliminary hearing
should be adopted in the process of conducting ad hoc
arbitrations in India as it will provide much needed clarity
on how arbitrators are to be paid and reduce conflicts and
litigation on this issue.
102 These preliminary hearings should also be conducted
when the fees are specified in the arbitration agreement. The
arbitration agreement may have been entered into at an
earlier point in time, even several years earlier. It is possible
that at the time when the disputes between the parties arise,
the fees stipulated in the arbitration agreement may have
become an unrealistic estimate of the remuneration that is to
be offered for the services of the arbitrator due to the passage
of time. In the preliminary hearings, if all the parties and the
arbitral tribunal agree to a revised fee, then that fee would be
payable to the arbitrator(s). However, if any of the parties
raises an objection to the fee being demanded by the
arbitrator(s) and no consensus can be arrived at between such
a party and the tribunal or a member of the tribunal, then the
tribunal or the member of the tribunal should decline the
assignment. Since the relationship between the parties and
arbitrator(s) is contractual in nature, specifically with
respect to the payment of remuneration, there must be a
consensus on the fees to be paid.
103 It is possible that during the preliminary hearings, the
parties and the arbitral tribunal may be unsure about the
extent of time that needs to be invested by the arbitrator(s)
Special Leave Petition (C) No. 10389 of 2025 Page 218 of 269
and the complexity of the dispute. It is also possible that the
arbitral proceedings may continue for much longer time than
was expected. In order to anticipate such contingencies,
during the preliminary hearings, the parties and the
arbitrator(s) should stipulate that after a certain number of
sittings, the fee would stand revised at a specified rate. The
number of sittings after which the revision would take place
and the quantum of revision must be clearly discussed and
determined during the preliminary hearings through the
process of negotiation between the parties and the
arbitrator(s). There is no unilateral power reserved to the
arbitrator(s) to revise the fees on their own terms if they
believe that an additional number of sittings would be
required to settle the dispute. The fees payable to the arbitral
tribunal in an ad hoc arbitration must be settled between the
arbitral tribunal and the parties at the threshold during the
course of the preliminary hearings. Resolution of the fees
payable to the arbitral tribunal by mutual agreement during
the preliminary hearings is necessary. Failing such an
agreement, the arbitrator(s) who decline to accept the fee
suggested by the parties (or any of them) are at liberty to
decline the assignment. The fixation of arbitral fees at the
threshold will obviate the grievance that the arbitrator(s) are
arm-twisting parties at an advanced stage of the dispute
resolution process. In such a situation, a party who is not
agreeable to a unilateral revision of fees demanded by the
arbitral tribunal in the midst of the proceedings has a real
apprehension that its refusal may result in embarrassing
consequences bearing on the substance of the dispute.
104 We believe that the directives proposed by the amicus
curiae, with suitable modifications, would be useful in
structuring how these preliminary hearings are to be
conducted. Exercising our powers conferred under Article
142 of the Constitution, we direct the adoption of the
following guidelines for the conduct of ad hoc arbitrations in
India:
1. Upon the constitution of the arbitral tribunal,
the parties and the arbitral tribunal shall hold
preliminary hearings with a maximum cap of four
Special Leave Petition (C) No. 10389 of 2025 Page 219 of 269
hearings amongst themselves to finalise the terms
‖
of reference (the Terms of Reference ) of the arbitral
tribunal. The arbitral tribunal must set out the
components of its fee in the Terms of Reference
which would serve as a tripartite agreement
between the parties and the arbitral tribunal.
2. In cases where the arbitrator(s) are appointed by
parties in the manner set out in the arbitration
agreement, the fees payable to the arbitrators would
be in accordance with the arbitration agreement.
However, if the arbitral tribunal considers that the
fee stipulated in the arbitration agreement is
unacceptable, the fee proposed by the arbitral
tribunal must be indicated with clarity in the
course of the preliminary hearings in accordance
with these directives. In the preliminary hearings,
if all the parties and the arbitral tribunal agree to a
revised fee, then that fee would be payable to the
arbitrator(s). However, if any of the parties raises
an objection to the fee proposed by the arbitrator(s)
and no consensus can be arrived at between such a
party and the tribunal or a member of the tribunal,
then the tribunal or the member of the tribunal
should decline the assignment.
3. Once the Terms of Reference have been finalised
and issued, it would not be open for the arbitral
tribunal to vary either the fee fixed or the heads
under which the fee may be charged.
4. The parties and the arbitral tribunal may make a
carve out in the Terms of Reference during the
preliminary hearings that the fee fixed therein may
be revised upon completion of a specific number of
sittings. The quantum of revision and the stage at
which such revision would take place must be
clearly specified. The parties and the arbitral
tribunal may hold another meeting at the stage
specified for revision to ascertain the additional
number of sittings that may be required for the
Special Leave Petition (C) No. 10389 of 2025 Page 220 of 269
final adjudication of the dispute which number
may then be incorporated in the Terms of Reference
as an additional term.
5. In cases where the arbitrator(s) are appointed by
the Court, the order of the Court should expressly
stipulate the fee that arbitral tribunal would be
entitled to charge. However, where the Court
leaves this determination to the arbitral tribunal in
its appointment order, the arbitral tribunal and the
parties should agree upon the Terms of Reference
as specified in the manner set out in draft practice
direction (1) above.
6. There can be no unilateral deviation from the
Terms of Reference. The Terms of Reference being
a tripartite agreement between the parties and the
arbitral tribunal, any amendments, revisions,
additions or modifications may only be made to
them with the consent of the parties.
7. All High Courts shall frame the rules governing
arbitrators' fees for the purposes of Section 11(14)
of the Arbitration and Conciliation Act, 1996.
8. The Fourth Schedule was lastly revised in the
year 2016. The fee structure contained in the
Fourth Schedule cannot be static and deserves to be
revised periodically. We, therefore, direct the
Union of India to suitably modify the fee structure
contained in the Fourth Schedule and continue to
do so at least once in a period of three years. ”
(Emphasis supplied)
328. The principal contention raised on behalf of the appellants herein
is that the Sole Arbitrator in the present case had revised the fees
Special Leave Petition (C) No. 10389 of 2025 Page 221 of 269
without the consent of the parties, and as such the same is contrary
to Afcons (supra).
329. However, we are not impressed with the aforesaid submission
canvassed by the appellants herein. The Sole Arbitrator in the
present case at hand, did not unilaterally revise the arbitral fees
from what was initially agreed upon by the parties. The Sole
Arbitrator vide its order dated 23.04.2021 merely revised the
quantum payable in view of the counter-claim that was filed by
the respondents herein.
330. The fees matrix on the basis of which the quantum of the arbitral
fees was revised remained the same i.e., the determination of the
revised fees by the Sole Arbitrator was on the basis of the Fourth
Schedule of the Act, 1996, which the parties had initially agreed
upon.
331. The High Court whilst appointing the Sole Arbitrator in the
present case to adjudicate the disputes between the parties had
directed that the fees payable to the Sole Arbitrator shall be
Special Leave Petition (C) No. 10389 of 2025 Page 222 of 269
determined either in accordance with the Fourth Schedule of the
Act, 1996 or as may be mutually agreed upon by the parties.
332. Pursuant thereto, the Sole Arbitrator determined the arbitral fees
on the first hearing on the basis of the fees matrix in the Fourth
Schedule of the Act, 1996. Neither the appellants nor the
respondents raised any objections to the same at that stage. The
Sole Arbitrator keeping in mind the fee matrix determined the fees
payable on the basis of the claim amount filed by the appellants
herein.
333. Thereafter, when the respondents herein filed their counter-claim,
the Sole Arbitrator merely revised the quantum keeping in mind
the Fourth Schedule of the Act, 1996.
334. This Court in Afcons (supra) held that under the Act, 1996, more
particularly, Section 38 thereof, an arbitral tribunal is empowered
to fix a deposit of costs for claims and counterclaims separately.
The scheme of the Act, 1996 considers claims and counter-claims
to be independent proceedings since the latter is not contingent
upon the former. Thus, it held that the determination of fees under
the Fourth Schedule should also be calculated separately for a
Special Leave Petition (C) No. 10389 of 2025 Page 223 of 269
claim and counter-claim. It expressly rejected the contention that
the term “sum in dispute” used in the schedule refers to a
cumulation of the claim and the counter-claim. The relevant
observations read as under: -
“117 Consequently, on the basis of the above analysis, the
following principles emerge:
(i) the Arbitration Act treats claims and
counterclaims on a par, and holds them subject to
the same procedural timelines and requirements —
(ii) The Arbitration Act allows the Arbitral
Tribunal to fix a deposit of costs for claims and
counterclaims separately, recognising that they are
distinct proceedings
(iii) The Arbitration Act considers claims and
counterclaims to be independent proceedings since
the latter is not contingent upon the former -
Rather, the Act protects the right of any respondent
to raise a counterclaim in an arbitration
proceeding, provided it arises from the arbitration
agreement under dispute Further, in the event of a
default in the payment of a deposit either for the
claim or counterclaim, it specifically notes that the
proceedings will be terminated only in respect of
the claim, or as the case may be, the counterclaim
in respect of which the default has occurred
(iv) Though a counterclaim may arise from similar
facts as a claim, the counterclaim is not a set-off
and is not in the nature of a defence to the claim.
(v) A counterclaim will survive for independent
adjudication even if the claim is dismissed or
withdrawn and the respondent to a claim would be
entitled to pursue their counterclaim regardless of
the pursuit of or the decision on the claim.
Special Leave Petition (C) No. 10389 of 2025 Page 224 of 269
xxx xxx xxx
136. [...] On a combined reading of Section 31(8), Section 31-
A and Section 38(1), it is clear that : (i) separate deposits are
to be made for a claim and counterclaim in an arbitration
proceeding; and (ii) these deposits are in relation to the costs
of arbitration, which includes the fee of the arbitrators.
Therefore, prima facie, the determination of the fee under
Schedule IV should also be calculated separately for a claim
and counterclaim i.e. the term "sum in dispute" refers to
independent claim amounts for the claim and counterclaim.
Such an interpretation is also supported by the definition of
claim and counterclaim, and by the fact that the latter
constitutes proceedings independent and distinct from the
former.
137. If this interpretation were to be discarded in favour of
construing "sum in dispute" as a cumulation of the claim
amount for the claim and counterclaim, it would have far-
reaching consequences in terms of procedural fairness. First,
under the proviso to Section 38(1), the Arbitral Tribunal can
direct separate deposits for a claim and counterclaim. These
are based on the cost of arbitration defined by a conjoint
reading of Sections 31(8) and 31-A, which includes the
arbitrators' fee. Hence, if the arbitrators were to charge a
common fee for both the claim and counterclaim, they would
have to then equitably divide that fee while calculating
individual deposits for the purpose of the proviso to Section
38(1). Second, the second proviso to Section 38(2) provides
that if the deposit is not made by both the parties, the Arbitral
Tribunal can dismiss the claim and/or counterclaim, as the
case may be. If the claim was to be dismissed in such a
manner, it would lead to an absurd situation where the
arbitrators' fee would have to be revised in the middle of the
arbitration proceedings solely on the basis of the amount of
the counterclaim. Third, under Section 23(2-A), the only
requirement of a counterclaim is that it should arise out of the
same arbitration agreement as the claim. However, the cause
of action of a counterclaim may be entirely different from the
claim and possibly far more complex. Therefore, determining
Special Leave Petition (C) No. 10389 of 2025 Page 225 of 269
the arbitrators' fee on a combined basis for both the claim and
counterclaim would thus not match up to the separate effort
they would have to put in for each individual dispute in the
claim and counterclaim.
(Emphasis supplied)
335. Undoubtedly, when the counter-claims were filed by the
respondents herein, the Sole Arbitrator, as per Afcons (supra) was
once again required to seek the consent of the parties for
determining the fees on the basis of the Fourth Schedule in respect
of the said counter-claims.
336. It does not appear from the material on record that the Sole
Arbitrator had obtained the consent of both the parties before
revising the fees payable in lieu of the counter-claims filed.
337. However, we cannot lose sight of one another significant
observation made by this Court in Afcons (supra). This Court held
that when one or both parties, or the parties and the arbitral
tribunal, as the case may be, are unable to reach a consensus on
the fee matrix, it would be open to the arbitral tribunal to
determine the same in accordance with the Fourth Schedule of the
Act, 1996. The Fourth Schedule of the Act, 1996 is the model fee
Special Leave Petition (C) No. 10389 of 2025 Page 226 of 269
schedule that is binding on all. Thus, where the arbitral tribunal
fixes the fee in terms of the Fourth Schedule, the parties would not
be permitted to object to the same. The relevant observations read
as under: -
“ 105 Conscious and aware as we are that (i) Arbitration
proceedings must be conducted expeditiously; (ii) Court
interference should be minimal; and (iii) Some litigants
would object to even a just and fair arbitration fee, we would
like to effectuate the object and purpose behind enacting the
model fee schedule. When one or both parties, or the parties
and the arbitral tribunal are unable to reach a consensus, it
is open to the arbitral tribunal to charge the fee as stipulated
in the Fourth Schedule, which we would observe is the model
fee schedule and can be treated as binding on all.
Consequently, when an arbitral tribunal fixes the fee in terms
of the Fourth Schedule, the parties should not be permitted to
object the fee fixation. It is the default fee, which can be
changed by mutual consensus and not otherwise .”
338. Since the Sole Arbitrator in the present case at hand had revised
the arbitral fees in accordance with the Fourth Schedule of the Act,
1996, it was no longer open for the parties to object to the same.
339.
Although we are of the opinion that the Sole Arbitrator before
proceeding to revise the arbitral fees in accordance with the Fourth
Schedule of the Act, 1996 ought to have first sought the consent of
both the parties, yet we are not inclined to hold the order passed
Special Leave Petition (C) No. 10389 of 2025 Page 227 of 269
by the Sole Arbitrator terminating the arbitral proceedings to be
bad in law on this ground.
340. We say so because, the Sole Arbitrator before terminating the
proceedings enquired from both the parties whether they would
be willing to pay the share of the fees for either the claim or the
counter-claim.
341.
The appellants herein submitted that they were not in a position
to pay the arbitral fees for both the claim and the counter-claim,
and could pay only their share of the fees only in respect of the
claim.
342. As per Section 38 of the Act, 1996, both the contesting parties,
namely, the claimant and the respondent, are responsible to bear
the fees of arbitration in equal proportion. However, where either
party defaults, the responsibility to pay the fees falls on the other
party. A claimant is responsible for his own claims, and thus
responsible to pay his share of fees in respect of the same.
Likewise, the respondent is responsible to pay the share of fees for
his counter claims. This responsibility extends to bearing the other
Special Leave Petition (C) No. 10389 of 2025 Page 228 of 269
party’s share as well, if the latter declines to pay, at least insofar as
their claim or counter-claim, as the case may be, is concerned.
343. Since the appellants herein refused to pay the requisite fees for
their own claims, the arbitral tribunal was left with no other
alternative but to terminate the proceedings.
VI. FEW MEANINGFUL SUGGESTIONS
344. Before we close this matter, we deem it appropriate to refer to
handful of international arbitration frameworks and rules to look
at the practices adopted by international organisations and better
understand the shortcomings that exist in the UNCITRAL Model
and by extension in the Act, 1996.
A. International Perspective on the Framework on Termination of
Arbitral Proceedings.
i. Singapore International Arbitration Centre Rules, 2025 (SIAC
Rules).
345. The Singapore International Arbitration Centre Rules, 2025 (for
short, the “ SIAC Rules ”) constitute the procedural framework
Special Leave Petition (C) No. 10389 of 2025 Page 229 of 269
governing arbitrations administered by the Singapore
International Arbitration Centre. These rules operate as the
governing code where parties, by agreement, designate SIAC as
the institution for the resolution of their dispute.
346. The SIAC Rules regulate the initiation, conduct and termination of
proceedings, subject to the agreement of the parties and the
mandatory provisions of the law governing the seat of arbitration.
They are a self-contained procedural code for the limited purpose
of administering arbitrations under the institution that
supplement the substantive law applicable to the contract or the
curial law governing the arbitration agreement.
347. The SIAC Rules, although not entirely based on the UNCITRAL
Model Law, nevertheless draws conceptual guidance from the
principles underlying the Model Law and the key Articles
thereunder.
348.
Rule 43 of the SIAC Rules which is in substance similarly worded
to Article 32 of the UNCITRAL Model (Section 32 of the Act, 1996),
Special Leave Petition (C) No. 10389 of 2025 Page 230 of 269
contains the power of the arbitral tribunal to suspend or terminate
the proceedings. The said Rule reads as under: -
“ 43. Suspension, Settlement, and Termination
43.1 The Registrar or the Tribunal, as appropriate, may
suspend an arbitration in accordance with such terms as the
parties have agreed or as otherwise provided in these Rules.
The Registrar or the Tribunal may, after considering the
views of the parties, order the tolling of any timelines.
43.2 In the event of a settlement, the Tribunal shall issue an
order terminating the arbitration or, if the parties so request,
the Tribunal may record the settlement in the form of a
consent award on agreed terms. The Tribunal is not obliged
to provide reasons for a consent award or to include the
settlement terms in the consent award.
43.3 The Tribunal shall, after considering the views of the
parties, issue an order terminating the arbitration where:
(a) the Claimant withdraws its claim, unless the Respondent
objects thereto and the Tribunal recognises a legitimate
interest on the Respondent’s part in obtaining a final
settlement of the dispute or any orders as to costs;
(b) the parties agree on the termination of the arbitration;
(c) the Tribunal finds that the continuation of the arbitration
has become unnecessary or impossible; or
(d) the Registrar has deemed the relevant claims,
counterclaims, or cross-claims to be withdrawn for non-
payment of deposits in accordance with Rule 56.5(b).
43.4 Prior to the constitution of the Tribunal, the Registrar
shall have the power to terminate an arbitration in
accordance with these Rules.
43.5 An order of the Tribunal or the Registrar terminating
the arbitration under this Rule 43 shall be effective on the date
of such order, unless otherwise ordered by the Tribunal or the
Registrar.”
Special Leave Petition (C) No. 10389 of 2025 Page 231 of 269
349. Remarkably, in the entire framework of the SIAC Rules, each
provision where an arbitral tribunal has been permitted to
terminate the proceedings, a specific reference is made to the
aforesaid Rule 43. This is in order to obviate the possibility of any
confusion, that the power to terminate the proceedings is not
scattered across various provisions, rather contained solely in Rule
43 thereof.
350.
For instance, we may refer to Rule 44 of the SIAC Rules, which is
substantially similar to Section 25 of the Act, 1996 and Article 25
of the UNCITRAL Model.
351. Rule 44, more particularly sub-rule (1) which allows the arbitral
tribunal to terminate the proceedings where the claimant fails to
submit his Statement of Claim within the time specified, clearly
stipulates that such termination would take place by the passing
of an order to such effect in accordance with Rule 43. The said rule
reads as under: -
“ 44. Non-participation and Non-compliance
44.1 If the Claimant fails to submit a Statement of Claim
within the time specified by the Tribunal, the Tribunal may,
after considering the views of the parties, issue an order
terminating the arbitration in accordance with Rule 43,
unless there are remaining matters which require
determination.
Special Leave Petition (C) No. 10389 of 2025 Page 232 of 269
44.2 If the Respondent fails to submit a Statement of
Defence within the time specified by the Tribunal, or if at any
point any party fails to avail itself of the opportunity to
present its case in the manner directed by the Tribunal, the
Tribunal may proceed with the arbitration without treating
such failure in itself as an admission of any allegations.
44.3 If, without showing sufficient cause, any party fails or
refuses to comply with these Rules or with any direction,
decision, ruling, order, or award of the Tribunal, or to attend
any meeting or hearing, the Tribunal may proceed with the
arbitration. In these circumstances, the Tribunal may impose
such sanctions as it deems appropriate and make an award on
the evidence before it.”
(Emphasis supplied)
352. Similarly, Rule 56 of SIAC Rules, which is similarly in nature to
Section 38 of the Act, 1996, empowers the Registrar of the SIAC to
determine and direct the deposit of a certain sum towards the cost
of the arbitration. Rule 56.5 provides that where a party fails to
pay the deposits as required, the proceedings may be suspended
or deemed to be withdrawn without prejudice. The said rule reads
as under: -
“ 56. Deposits
56.1 The Registrar shall fix the deposits payable towards the
estimated costs of the arbitration calculated in accordance
with the amount in dispute under the Schedule of Fees.
Unless the Registrar otherwise directs, 50 percent of such
deposits shall be payable by the Claimant(s) and 50 percent
of such deposits shall be payable by the Respondent(s). The
Registrar may fix separate deposits for a claim, counterclaim,
or cross-claim.
Special Leave Petition (C) No. 10389 of 2025 Page 233 of 269
56.2 Where the amount in dispute is not quantifiable at the
time the deposits are due, the Registrar shall make a
provisional estimate of the costs of the arbitration and call for
the deposits thereon. This estimate may be adjusted upon the
quantification of the amount in dispute or in light of such
information as may subsequently become available.
56.3 The Registrar may at any time direct the parties to
make further or additional deposits towards the estimated
costs of the arbitration.
56.4 Parties are jointly and severally liable for the costs of
the arbitration. In the event that a party does not pay the
deposits as directed, the Registrar may direct the other party
to make payment of the deposits on its behalf.
56.5 If a party fails to pay the deposits as directed, the
Registrar may:
(a) direct the Tribunal and the SIAC Secretariat to suspend
the conduct and administration of the arbitration in
whole or in part; and/or
(b) set a time limit on the expiry of which the relevant claim,
counterclaim, or cross-claim shall be considered as
withdrawn on a without prejudice basis.
56.6 All deposits towards the estimated costs of the
arbitration shall be made to and held by SIAC. Any interest
which may accrue on such deposits shall be retained by SIAC.
56.7 If a party pays the deposits towards the estimated costs
of arbitration on behalf of another party, the Tribunal may
issue an order or award for the reimbursement of such
deposits paid.”
353. Rule 43 sub-rule (3) specifically stipulates that the arbitral tribunal
shall, after considering the views of the parties, issue an order for
terminating the proceedings where the claim or the counter-claim,
Special Leave Petition (C) No. 10389 of 2025 Page 234 of 269
as the case may be is deemed to be withdrawn due to non-
payment of deposits in accordance with Rule 56.5(b).
354. What emerges from the above is that Rule 43 of the SIAC Rules
encompasses and consolidates all the various modes of
termination that has been envisaged under the UNCITRAL Model
and the Act, 1996 into one single provision. The said rule
incorporates the following: -
(i) The power to terminate the proceedings on account of
default by the claimant in communicating its Statement of
Claims, as provided under Section 25(a) of the Act, 1996
(which corresponds to Article 25 of the UNCITRAL Model).
(ii)
The power to terminate the proceedings in the event the
parties arrive at a settlement, as stipulated under Section 30
of the Act, 1996 (which corresponds to Article 30 of the
UNCITRAL Model).
(iii) The power to terminate the proceedings in the event of
withdrawal of the claims, or pursuant to an agreement
between the parties to such effect, or where the proceedings
are rendered unnecessary or impossible, as envisaged by
Special Leave Petition (C) No. 10389 of 2025 Page 235 of 269
Section 32 of the Act, 1996 (which corresponds to Article 32
of the UNCITRAL Model).
(iv) The power to terminate the proceedings in case the parties
fail to pay the deposit required by the arbitral tribunal, as
stipulated under Section 38 of the Act, 1996.
355. Unlike the Act, 1996, where the “power” to terminate the
proceedings has been referred to in various provisions, the SIAC
Rules, more particularly Rule 43, make it abundantly clear, that
the power of the arbitral tribunal to either suspend or terminate
the proceedings, lies only under the said Rule.
356. The various grounds on which the proceedings can be terminated
under the Act, 1996, more particularly under Section(s) 25, 30, 32
and 38 thereof, have also been consolidated into one single
umbrella provision being Rule 43.
357. This consolidation of the various situations in which arbitral
proceedings may be terminated into a single simplified provision
eliminates the ambiguity surrounding the nature and legal effect
of such an order of termination.
Special Leave Petition (C) No. 10389 of 2025 Page 236 of 269
358. It removes the anomaly that still persists under the Act, 1996, more
particularly the divergence in view as regards the nature of
termination of proceedings under Section 25(a) and Section 32 of
the said Act.
359. Where on the one hand, the termination of proceedings in terms
of Section 25(a) has been construed to also mean the consequent
termination of the mandate of the arbitral tribunal in terms of
Section 32(2), as held in Datar Switchgear (supra) and PCL Suncon
(supra).
360. On the other hand, as per SREI Infrastructure (supra) and Sai
Babu (supra), the termination of proceedings under Section(s)
25(a), 32 and 38, have been construed as independent and distinct
provisions that empower the tribunal to terminate the
proceedings, as a consequence of which, the mandate of the
arbitral tribunal has been understood to terminate only where the
termination takes place in terms of Section 32(2), but not in cases
where the proceedings are terminated in terms of Section 25 or 38
of the Act, 1996.
Special Leave Petition (C) No. 10389 of 2025 Page 237 of 269
ii. London Court of International Arbitration Rules, 2020 (LCIA
Rules).
361. Similarly, the London Court of International Arbitration Rules,
2020 (for short the “ LCIA Rules ”) contains the procedural
framework governing arbitrations conducted at the Institution.
362. The LCIA Rules prescribe the manner in which arbitral
proceedings are to be commenced, the constitution of the arbitral
tribunal and the conduct of proceedings including the powers of
the tribunal to terminate the proceedings.
363.
Article 22 of the LCIA Rules enumerates the various powers of the
arbitral tribunal. Similar to the SIAC Rules, the power of the
arbitral tribunal to terminate the proceedings has been provided
in only one provision, namely, Article 22 sub-paragraph (xi). The
circumstances in which the proceedings can be terminated
thereunder are materially similar in nature to those contemplated
under Section 32(2) of the Act, 1996 ( pari-materia to Article 32 of the
UNCITRAL Model). The said provision reads as under: -
“Article 22 Additional Powers
22.1 The Arbitral Tribunal shall have the power, upon the
application of any party or (save for sub- paragraph (x)
below) upon its own initiative, but in either case only after
giving the parties a reasonable opportunity to state their
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views and upon such terms (as to costs and otherwise) as the
Arbitral Tribunal may decide:
(i) to allow a party to supplement, modify or amend any
claim, defence, counterclaim, cross-claim, defence to
counterclaim, defence to cross-claim and reply,
including a Request, Response and any other written
statement, submitted by such party;
(ii) to abridge or extend (even where the period of time has
expired) any period of time prescribed under the
Arbitration Agreement, any other agreement of the
parties or any order made by the Arbitral Tribunal;
(iii) to conduct such enquiries as may appear to the Arbitral
Tribunal to be necessary or expedient, including
whether and to what extent the Arbitral Tribunal
should itself take the initiative in identifying relevant
issues and ascertaining relevant facts and the law(s) or
rules of law applicable to the Arbitration Agreement,
the arbitration and the merits of the parties' dispute;
(iv) to order any party to make any documents, goods,
samples, property, site or thing under its control
available for inspection by the Arbitral Tribunal, any
other party, any expert to such party and any expert to
the Tribunal;
(v) to order any party to produce to the Arbitral Tribunal
and to other parties documents or copies of documents
in their possession, custody or power which the
Arbitral Tribunal decides to be relevant;
(vi) to decide whether or not to apply any strict rules of
evidence (or any other rules) as to the admissibility,
relevance or weight of any material tendered by a party
on any issue of fact or expert opinion; and to decide the
time, manner and form in which such material should
be exchanged between the parties and presented to the
Arbitral Tribunal;
(vii) to decide the stage of the arbitration at which any issue
or issues shall be determined, in what order, and the
procedure to be adopted at each stage in accordance
with Article 14 above;
(viii) to determine that any claim, defence, counterclaim,
cross-claim, defence to counterclaim or defence to
Special Leave Petition (C) No. 10389 of 2025 Page 239 of 269
cross-claim is manifestly outside the jurisdiction of the
Arbitral Tribunal, or is inadmissible or manifestly
without merit; and where appropriate to issue an order
or award to that effect (an “Early Determination”);
(ix) to order compliance with any legal obligation or
payment of compensation for breach of any legal
obligation or specific performance of any agreement
(including any arbitration agreement or any contract
relating to land);
(x) to allow one or more third persons to be joined in the
arbitration as a party provided any such third person
and the applicant party have consented expressly to
such joinder in writing following the Commencement
Date or (if earlier) in the Arbitration Agreement; and
thereafter to make a single final award, or separate
awards, in respect of all parties so implicated in the
arbitration; and
(xi) to order the discontinuance of the arbitration if it
appears to the Arbitral Tribunal that the arbitration
has been abandoned by the parties or all claims and any
counterclaims or cross-claims have been withdrawn by
the parties, after giving the parties a reasonable
opportunity to state their views.
22.2 By agreeing to arbitration under the Arbitration
Agreement, the parties shall be treated as having agreed not
to apply to any state court or other legal authority for any
order available from the Arbitral Tribunal (if formed) under
Article 22.1, except with the agreement in writing of all
parties.
22.3 The Arbitral Tribunal shall decide the parties' dispute
in accordance with the law(s) or rules of law chosen by the
parties as applicable to the merits of their dispute. If and to
the extent that the Arbitral Tribunal decides that the parties
have made no such choice, the Arbitral Tribunal shall apply
the law(s) or rules of law which it considers appropriate.
22.4 The Arbitral Tribunal shall only apply to the merits of
the dispute principles deriving from "ex aequo et bono",
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"amiable composition" or "honourable engagement" where
the parties have so agreed in writing.
22.5 Subject to any order of the Arbitral Tribunal under
Article 22.1(ii), the LCIA Court may also set, abridge or
extend any period of time under the Arbitration Agreement
or other agreement of the parties (even where the period of
time has expired).
22.6 Without prejudice to Article 22.1(xi), the LCIA Court
may determine, after giving the parties a reasonable
opportunity to state their views, that the arbitration shall be
discontinued if it appears to the LCIA Court that the
arbitration has been abandoned by the parties or all claims
and any counterclaims or cross-claims have been withdrawn
by the parties.”
(Emphasis supplied)
364.
Article 22 sub-paragraph (xi) empowers the tribunal, after giving
the parties a reasonable opportunity of being heard, to order the
discontinuance of the arbitration proceedings if it appears that the
arbitration has been abandoned by the parties or that all claims
and counter-claims have been withdrawn.
365.
Thus, the LCIA Rules also contains one single source of the power
of the arbitral tribunal to terminate or discontinue the
proceedings, in the form of Article 22.
366. Article 24 of the LCIA Rules is also significant. It is in substance
similar to Section 38 of the Act, 1996, inasmuch as it empowers the
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LCIA Court to direct the parties to make advance payments
towards the cost of arbitration, as determined under the Rules. The
said provision reads as under: -
“ Article 24 Advance Payment for Costs
24.1 The LCIA Court may direct the parties, in such
proportions and at such times as it thinks appropriate, to
make one or more payments to the LCIA (the "Advance
Payment for Costs") in order to secure payment of the
Arbitration Costs under Article 28.1. Such payments by the
parties may be applied by the LCIA to pay any item of such
Arbitration Costs (including the LCIA’s own fees and
expenses) in accordance with the LCIA Rules.
24.2 The Advance Payment for Costs shall be the property
of the LCIA, to be disbursed or otherwise applied by the LCIA
in accordance with the LCIA Rules and invested having
regard to the interests of the LCIA. The parties agree that the
LCIA shall not act as trustee and its sole duty to the parties
in respect of the Advance Payment for Costs shall be to act
pursuant to these LCIA Rules.
24.3 In the event that, at the conclusion of the arbitration,
the Advance Payment for Costs exceeds the total amount of
the Arbitration Costs under Article 28.1, the excess amount
shall be transferred by the LCIA to the parties in such
proportions as the parties may agree in writing or, failing
such agreement, in the same proportions and to the same
parties as the Advance Payment for Costs was paid to the
LCIA, subject to any order of the Arbitral Tribunal.
24.4 The LCIA will make reasonable attempts to contact the
parties in order to arrange for the transfer of the excess
amount, using the contact details provided to the LCIA
during the proceedings. If a response is not received from a
party so contacted within 30 days, the LCIA will provide that
party with written notice of its intention to retain the excess
amount. If no response is received within a further 60 days,
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the party will be deemed irrevocably to have waived any right
to claim and/or receive the excess amount.
24.5 Save for exceptional circumstances, the Arbitral
Tribunal should not proceed with the arbitration without
having ascertained from the Registrar that the LCIA is or will
be in requisite funds as regards outstanding and future
Arbitration Costs.
24.6 In the event that a party fails or refuses to make any
payment on account of the Arbitration Costs as directed by
the LCIA Court, the LCIA Court may direct the other party
or parties to effect a further Advance Payment for Costs in an
equivalent amount to allow the arbitration to proceed (subject
to any order or award on Arbitration Costs).
24.7 In such circumstances, the party effecting the further
Advance Payment for Costs may request the Arbitral
Tribunal to make an order or award in order to recover that
amount as a debt immediately due and payable to that party
by the defaulting party, together with any interest.
24.8 Failure by a claiming, counterclaiming or cross-
claiming party to make promptly and in full any required
payment may be treated by the LCIA Court or the Arbitral
Tribunal as a withdrawal from the arbitration of the claim,
counterclaim or cross-claim respectively, thereby removing
such claim, counterclaim or cross-claim (as the case may be)
from the scope of the Arbitral Tribunal’s jurisdiction under
the Arbitration Agreement, subject to any terms decided by
the LCIA Court or the Arbitral Tribunal as to the
reinstatement of the claim, counterclaim or cross-claim in the
event of subsequent payment by the claiming,
counterclaiming or cross-claiming party. Such a withdrawal
shall not preclude the claiming, counterclaiming or cross-
claiming party from defending as a respondent any claim,
counterclaim or cross-claim made by another party.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 243 of 269
367. In the event the parties default in making the necessary payments
towards the cost of arbitration, as directed, then as per Article 24.5
the arbitral tribunal is mandated to not proceed any further with
the arbitration until the requisite payments are made.
368. Furthermore, as per Article 24.8, the failure of the parties to make
the requisite payment towards the cost of arbitration may be
treated as a withdrawal of its claims or counter-claims as the case
may be.
369. Where any claim or counter-claim is deemed to be withdrawn on
account of default in payment of costs, the LCIA Court or the
arbitral tribunal may stipulate any terms including the prescribing
of a specific period within which if the necessary payment is made,
the claim or the counter-claim, as the case may be would stand
reinstated.
370. Thus, where all the claims (including the counter-claims) are
deemed to be withdrawn account of non-payment of costs in terms
of Article 24.8, the LCIA Court or the arbitral tribunal, as the case
Special Leave Petition (C) No. 10389 of 2025 Page 244 of 269
may be, would be empowered to resort to its powers under Article
22 and order the discontinuance of the proceedings.
371. Similarly, the LCIA Rules do not stipulate the consequences that
would ensue if the claimant fails to file his statement of claims
within the specified period. The LCIA Rules leaves it to the
wisdom of the arbitral tribunal to decide whether such failure to
file the statement of claims amounts to abandonment of its claim
or not.
372. This is because of the wide scope of Article 22 sub-paragraph (ix)
which confers the arbitral tribunal with extensive powers and
flexibility for terminating the arbitral proceedings. A failure to file
the statement of claims can always be treated as an abandonment
of claim in terms of Article 22(ix), and the arbitral tribunal in such
circumstances would be empowered to terminate the proceedings.
373. Article 22 takes into account the various scenarios in which the
proceedings may be terminated as envisaged by the different
provisions of the UNCITRAL Model, as a whole.
Special Leave Petition (C) No. 10389 of 2025 Page 245 of 269
374. Thereby avoiding the conundrum that exists in the UNCITRAL
Model and the Act, 1996, more particularly the multiplicity of
provisions pertaining to the power to terminate the proceedings,
and the consequent confusion in regards to the nature and scope
of each of those provisions.
375. One another vital feature of the LCIA Rules, more particularly
Article 24.8 is that it enables the arbitral tribunal and the LCIA
Court, as the case may be, to outline the consequences of a claim
or counter-claim being deemed withdrawn. It allows the tribunal
or the court to stipulate such terms as it thinks fit, for the
reinstatement of the claims or counter-claims later in the
proceedings, unlike the UNCITRAL Model and the Act, 1996,
which leaves the consequences of a termination in ambiguity and
up to imagination.
iii. Hong Kong International Arbitration Centre Rules, 2024
(HKIAC Rules).
376. The 2024 Administered Arbitration Rules of the Hong Kong
International Arbitration Centre Rules (for short, the “ HKIAC
Rules ”) stipulates the procedural framework governing
arbitrations conducted at the Institution.
Special Leave Petition (C) No. 10389 of 2025 Page 246 of 269
377. The HKIAC Rules are of vital significance inasmuch as most of its
substantive procedural framework have been devised along the
lines of the UNCITRAL Model.
378. Article 37 of the HKIAC Rules in particular, mirrors Article(s) 30
and 32 of the UNCITRAL Model (corresponding to Section(s) 30
and 32 of the Act, 1996, respectively). The said provision reads as
under: -
Article 37 – Settlement or Other Grounds for
“
Termination
37.1 If, before the arbitral tribunal is constituted, a party
wishes to terminate the arbitration, it shall communicate this
to all other parties and HKIAC. HKIAC shall set a time limit
for all other parties to indicate whether they agree to
terminate the arbitration. If no other party objects within the
time limit, HKIAC may terminate the arbitration. If any
party objects to the termination of the arbitration, the
arbitration shall proceed in accordance with the Rules.
37.2 If, after the arbitral tribunal is constituted and before the
final award is made:
(a) the parties settle the dispute, the arbitral tribunal shall
either issue an order for the termination of the arbitration
or, if requested by the parties and accepted by the arbitral
tribunal, record the settlement in the form of an arbitral
award on agreed terms. The arbitral tribunal is not
obliged to give reasons for such an award.
(b) continuing the arbitration becomes unnecessary or
impossible for any reason not mentioned in Article
37.2(a), the arbitral tribunal shall issue an order for the
termination of the arbitration. The arbitral tribunal shall
issue such an order unless a party raises a justifiable
Special Leave Petition (C) No. 10389 of 2025 Page 247 of 269
objection, having been given a reasonable opportunity to
comment upon the proposed course of action.
37.3 The arbitral tribunal shall communicate copies of the
order to terminate the arbitration or of the arbitral award on
agreed terms, signed by the arbitral tribunal, to HKIAC.
Subject to any lien, HKIAC shall communicate the order for
termination of the arbitration or the arbitral award on agreed
terms to the parties. Where an arbitral award on agreed terms
is made, the provisions of Articles 35.2, 35.3, 35.5 and 35.6
shall apply.
(Emphasis supplied)
379. Article 37 sub-clause (2) envisages two circumstances in which the
arbitral tribunal may issue an order for termination of the
First,
proceedings. where the parties arrive at a settlement in
respect of the dispute, which is akin to Article 30 of the
UNCITRAL Model and Section 30 of the Act, 1996. Secondly,
where the continuation of the proceedings becomes unnecessary
or impossible for any other reason, which is akin to Article 32 of
the UNCITRAL Model and Section 32(2)(c) of the Act, 1996.
380. Interestingly, unlike the SIAC Rules or the LCIAC Rules, where
the power of the arbitral tribunal to terminate the proceedings has
been enshrined in one single provision, the HKIAC has several
other provisions apart from the aforesaid Article 37, that enables
Special Leave Petition (C) No. 10389 of 2025 Page 248 of 269
the tribunal to terminate the proceedings, similar to the
UNCITRAL Model and the Act, 1996.
381. Article 41 which is closely linked to Section 38 of the Act, 1996,
empowers the arbitral tribunal to determine and direct the parties
to pay an advance for the costs of the arbitration. The said
provision reads as under: -
“ Article 41 – Deposits for Costs
41.1 As soon as practicable after receipt of the Notice of
Arbitration by the Respondent, HKIAC shall, in principle,
request the Claimant and the Respondent each to deposit with
HKIAC an equal amount as an advance for the costs referred
to in Article 34.1(a), (b), (c) and (f). HKIAC shall provide a
copy of such request to the arbitral tribunal.
41.2 Where the Respondent submits a counterclaim or cross-
claim, or it otherwise appears appropriate in the
circumstances, HKIAC may request separate deposits.
41.3 During the course of the arbitration, HKIAC may
request the parties to make supplementary deposits with
HKIAC. HKIAC shall provide a copy of such request to the
arbitral tribunal.
41.4 If the required deposits are not paid in full to HKIAC
within 30 days after receipt of the request, HKIAC shall so
inform the parties in order that one or another of them may
make the required payment. If such payment is not made:
(a) where the arbitral tribunal is not yet constituted, HKIAC
may suspend or cease to administer the arbitration;
(b) the arbitral tribunal may order the suspension or
termination of the arbitration or continue with the
arbitration on such basis and in respect of such claim or
counterclaim as the arbitral tribunal considers fit.
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41.5 If a party pays the required deposits on behalf of another
party, the arbitral tribunal may, at the request of the paying
party, make an award for reimbursement of the payment.
41.6 When releasing the final award, HKIAC shall render an
account to the parties of the deposits received by HKIAC.
Any unexpended balance shall be returned to the parties in
the shares in which it was paid by the parties to HKIAC, or
as otherwise instructed by the arbitral tribunal.
41.7 HKIAC shall place the deposits made by the parties in
an account at a reputable licensed deposit-taking institution.
In selecting the account, HKIAC shall have due regard to the
possible need to make the deposited funds available
immediately.”
(Emphasis supplied)
382. In the event the aforesaid costs are not paid by the parties, Article
41.4 empowers the HKIAC, where the tribunal is yet to be
constituted, or the arbitral tribunal, if so constituted, to either
suspend or terminate the proceedings, in terms of clause (a) and
(b), respectively.
383. Thus, the HKIAC Rules treats the power to terminate the
proceedings for non-deposit of fees to be separate and distinct
from a termination of proceedings under Article 37.2, on account
of the proceedings being rendered unnecessary or impossible.
384. The above approach is similar to how Section(s) 32 and 38 of the
Act, 1996 have been understood by the Delhi High Court in
Special Leave Petition (C) No. 10389 of 2025 Page 250 of 269
Sushila Kumari (supra) and by this Court in Lalitkumar V
Sanghvi (supra).
385. Similarly, Article 26 of the HKIAC Rules is to a large extent in
consonance with Section 25 of the Act, 1996 and corresponding
Article 25 of the UNCITRAL Model. The said provision reads as
under: -
“ Article 26 – Default
26.1 If, within the time limit set by the arbitral tribunal, the
Claimant has failed to communicate its written statement
without showing sufficient cause for such failure, the arbitral
tribunal may terminate the arbitration unless another party
has brought a claim and wishes the arbitration to continue,
in which case the arbitral tribunal may proceed with the
arbitration in respect of the other party’s claim.
26.2 If, within the time limit set by the arbitral tribunal, the
Respondent has failed to communicate its written statement
without showing sufficient cause for such failure, the arbitral
tribunal may proceed with the arbitration notwithstanding
such failure.
26.3 If any of the parties, duly notified under these Rules,
fails to present its case in accordance with these Rules
including as directed by the arbitral tribunal without
showing sufficient cause for such failure, the arbitral tribunal
may proceed with the arbitration and make an award on the
basis of the evidence before it. ”
(Emphasis supplied)
386. Article 26.1 empowers the arbitral tribunal, in addition to its
powers under Article(s) 37 and 41.4 of the HKIAC Rules, to
terminate the proceedings, in the event the claimant, without
Special Leave Petition (C) No. 10389 of 2025 Page 251 of 269
sufficient cause, fails to communicate his Statement of Claims,
within the time specified.
387. What can be discerned from the above is that the HKIAC Rules
similar to the UNCITRAL Model and the Act, 1996, contains
various provisions that empower the arbitral tribunal to terminate
the proceedings, in the different circumstances envisaged therein.
388. However, despite the aforesaid approach, the HKIAC Rules avoid
the pitfalls that are present in the UNCITRAL Model and by
extension in the Act, 1996, insofar as termination of proceedings is
concerned.
389.
Unlike Section 32 of the Act, 1996 and Article 32 of the UNCITRAL
Model that has led to a divergence in view, as regards the source
of the power of the arbitral tribunal to terminate the proceedings
by use of the expression “ The arbitral proceedings shall be terminated
by the final arbitral award or by an order of the arbitral tribunal under
sub-section (2)” , none of the provisions which pertain to
termination of proceedings employ the vague expression that has
been used in Article 32 of the UNCITRAL Model, to connote that
Special Leave Petition (C) No. 10389 of 2025 Page 252 of 269
the proceedings can be terminated only by virtue of an order
under a particular provision.
390. The HKIAC Rules embrace the possibility that the proceedings can
be terminated by the arbitral tribunal in exercise of its powers
under the various provisions contained therein.
391. It furthermore avoids the biggest blunder that exists in the
UNCITRAL Model. The UNCITRAL Model for reasons not
known to us, uses the expression “ subject to section 33 and sub-
section (4) of section 34, the mandate of the arbitral tribunal shall
terminate with the termination of the arbitral proceedings ” for the
termination of proceedings under Section 32, but omits the same
insofar as the proceedings are terminated under the other
provisions.
392.
No reason whatsoever is discernible for why the aforesaid
expression has been used in some provision and omitted in the
other. This oversight has single handedly resulted in a huge mess
and the contradictory views that have been expressed by several
decisions of this Court and the various High Court. It has led to an
interpretative dichotomy, where the nature and effect of
Special Leave Petition (C) No. 10389 of 2025 Page 253 of 269
termination of proceedings are construed to be different,
depending upon the provision under which the proceedings
happen to be terminated.
393. The HKIAC Rules avoids the above oversight. None of the various
provisions contained in the rules that pertain to the termination of
proceedings use the aforesaid expression. The Rules do not specify
different consequences that would ensue upon the termination of
the arbitral proceedings under the various provisions contained
therein. Rather, the termination of proceedings is construed to
have only one single effect, that being the end of arbitration,
irrespective of the specific rule in lieu of which the termination
happens to take place.
B. Suggestions for the Arbitration and Conciliation Bill, 2024.
394. Before we close this matter, we would like to say something as
regards the litigation which has unfolded before us.
395. The Arbitration Act that came into force in 1940, was the first
legislative enactment that dealt with arbitration. Fifty years later,
Special Leave Petition (C) No. 10389 of 2025 Page 254 of 269
the aforesaid legislation was replaced by the Arbitration and
Conciliation Act, 1996.
396. The Act, 1996 has remained in force for almost thirty-years since
its enactment. Various amendments to the Act, 1996 have been
made over the years so as to ensure that arbitration proceedings
are conducted and concluded expeditiously.
397.
It is indeed very sad to note that even after these many years,
procedural issues such as the one involved in the case at hand,
have continued to plague the arbitration regime of India.
398. The Department of Legal Affairs has now, once again proposed to
replace the existing legislation on arbitration with the Arbitration
and Conciliation Bill, 2024. Unfortunately, even the new Bill has
taken no steps whatsoever to ameliorate the position of law as
regards the termination of proceedings by the arbitral tribunal.
399. The problem which originated forty years ago when the
UNCITRAL Model Law on International Commercial Arbitration
was first adopted in 1985, and thereafter continued to persist
within the Act, 1996 that was drafted in accordance with the
Special Leave Petition (C) No. 10389 of 2025 Page 255 of 269
Model Law, is still present in the new he Arbitration and
Conciliation Bill, 2024.
400. As observed in Gayatri Balasamy v. M/s ISG Novasoft
Technologies Ltd. reported in 2025 INSC 605 “ any uncertainty in the
law of arbitration would be an anathema to business and commerce ”.
401. It is high time, that the uncertainty surrounding the power of the
arbitral tribunal to terminate the proceedings under the various
provisions of the Act, 1996 are either consolidated into a single
provision like the SIAC Rules and the LCIA Rules, or the
contradictory phraseology used in the various provisions are
tweaked to make the provisions consistent.
402. The Arbitration and Conciliation Bill, 2024 should explicitly
provide the nature and effect of the termination of proceedings
insofar as the authority of the arbitral tribunal is concerned to
entertain a recall application. A proper remedy against an order
terminating the proceedings is the need of the hour.
403. The Arbitration and Conciliation Bill, 2024 should make an effort
to recognise the power of the arbitral tribunal to review its own
Special Leave Petition (C) No. 10389 of 2025 Page 256 of 269
orders and should clearly delineate the extent and contours of
such power.
404. The Parliament in its wisdom, should also consider the option of
providing a statutory appeal in Section 37 of the Arbitration and
Conciliation Bill, 2024 against an order terminating the
proceedings, similar to an order passed by the arbitral tribunal
under Section 16 when it accedes to a plea of lack of jurisdiction.
405. It will also be worthwhile, if the Arbitration and Conciliation Bill,
2024 delineates the future course of action that may be available to
an aggrieved party, in the event the order for termination of
proceedings is upheld.
406. The Parliament should take a policy decision whether a belligerent
or erring party, who wilfully allows the proceedings to terminate
due to its own contumacious conduct should be allowed to have a
second bite at the cherry and reinitiate arbitration once again and
whether the same claims can be reinstated or reintroduced in
another proceeding.
Special Leave Petition (C) No. 10389 of 2025 Page 257 of 269
407. Gary Born in his book the International Commercial Arbitration
rd
(3 Edition) explained “ the legal effect of an order terminating arbitral
proceedings, and the permissibility of re-instituting arbitration in respect
of the same dispute, are matters ultimately regulated by the applicable
national laws, rather than by any transnational principle of arbitral
procedure ”.
408. Thus, the question of whether a party should be allowed to
reinitiate arbitration after its termination has to be answered by
the national laws of a particular country.
409. In this regard, the provisions of the Code of Civile Procedure, 1908
may be significant. Though such termination does not partake the
character or res-judicata, it may still operate as constructive res-
judicata, inasmuch as the majority provisions of the stipulates that
a party aggrieved by the dismissal of its suit has to ordinarily
move the same court for seeking its restoration, and that the filing
of a fresh suit, save for a limited circumstances is otherwise barred.
410. In our opinion, a party who has allowed the proceedings to
terminate by its own obdurate stance, should ordinarily be not
allowed to once again re-initiate arbitration.
Special Leave Petition (C) No. 10389 of 2025 Page 258 of 269
411. To allow the same would lead to a chilling effect, where a devious
party, if it finds that the proceedings are not progressing
favourably towards his claims, could mischievously let the same
terminate by its own actions and then re-initiate arbitration. It
would allow mischievous parties a license to forum shop without
fear.
412.
At the same time, arbitration is not infinite. Every arbitration
initiated under the Act, 1996 comes at the expense of several
precious hours of the judicial time and resources. The pendency of
arbitration proceedings due to unavailability of arbitrators is
already alarming. If we are to add more unnecessary proceedings
on top of this already overburdened system, then that, in our
opinion would be the death knell of arbitration.
413. The final call however in regards to aforesaid lacunae in the Act,
1996 has to be ultimately taken by the Parliament.
414. In view of the aforesaid, we urge the Department of Legal Affairs,
Ministry of Law and Justice to take a serious look at the arbitration
regime that is prevailing in India and bring about necessary
Special Leave Petition (C) No. 10389 of 2025 Page 259 of 269
changes while the Arbitration and Conciliation Bill, 2024 is still
being considered.
VII. CONCLUSION AND THE FINAL ORDER
A. Summary of our legal discussion.
415. A conspectus of our legal discussion is as under: -
(I) Section 32 of the Act, 1996 is exhaustive and covers all cases
of termination of arbitral proceedings under the Act, 1996.
The power of the arbitral tribunal to pass an order to
terminate the proceedings under the scheme of the Act, 1996
lies only in Section 32(2).
(II) Sections 25, 30 and 38 of the Act, 1996 respectively, only
denote the circumstances in which the tribunal would be
empowered to take recourse to Section 32(2) and thereby,
terminate the proceedings.
(III) The use of the expression “ the mandate of the Arbitral Tribunal
shall terminate” in Section 32 of the Act, 1996 and its
omission in Section(s) 25, 30 and 38 of the said Act, cannot
be construed to mean that the nature of termination under
Section 32(2) is distinct from a termination under the other
aforesaid provisions of the Act, 1996.
Special Leave Petition (C) No. 10389 of 2025 Page 260 of 269
(IV) The expression “ mandate of the Arbitral Tribunal” is merely
descriptive of the function entrusted to the tribunal,
namely, the authority and duty to adjudicate the disputes
before it. It refers to the obligation of the arbitral tribunal to
administer the arbitration by conducting the proceedings in
order to adjudicate upon the disputes referred to it.
(V) Irrespective of whether the proceedings are terminated on
account of the passing of a final award, or by the
withdrawal of claims, or on account of default by the
claimant, or the intervention of any impossibility in the
continuation of the proceedings, the legal effect remains the
same, inasmuch as the arbitral tribunal thereafter stands
divested of its authority to act in the reference.
(VI) The common thread that runs across Sections 25, 30 32 and
38 of the Act, 1996 respectively is that although the arbitral
proceedings may get terminated for varied reasons, yet the
consequence of such termination remains the same i.e., the
arbitral reference stands concluded and the authority of the
tribunal stands extinguished.
Special Leave Petition (C) No. 10389 of 2025 Page 261 of 269
(VII) There is a clear distinction between a procedural review and
a review on merits. The arbitral tribunal possesses the
inherent procedural power to recall an order terminating
the proceedings as such power is merely to correct an error
apparent on the face of the record or to address a material
fact that was overlooked. It does not tantamount to
revisiting the findings of law or reappreciating the
substantive issues already decided.
(VIII) Where an arbitral tribunal passes an order for terminating
the proceedings under the Act, 1996, the appropriate
remedy available to the parties would be to first file an
application for recall of such order before the arbitral
tribunal itself. The arbitral tribunal would then in turn be
required to examine whether the order does or does not
deserve to be recalled.
(IX) If a favourable order is passed for recommencing arbitration
proceedings, the only option available to a party aggrieved
therefrom, would be to participate in the proceedings and
thereafter, challenge the final award under Section 34 of the
Act, 1996.
Special Leave Petition (C) No. 10389 of 2025 Page 262 of 269
(X) If, however, the recall application is dismissed, the party
aggrieved therefrom, would be empowered to approach the
court under Section 14(2) of the Act, 1996. The court would
then in turn examine whether the mandate of the arbitrator
stood legally terminated or not. If it finds that the
proceedings were not terminated in accordance with the
law, it would be empowered to either set-aside the order of
termination of proceedings and remand the matter to the
arbitral tribunal, or, if the circumstances so require, proceed
to appoint a substitute arbitrator in terms of Section 15 of
the Act, 1996.
B. Final Order.
416. In the present case, the fees of the entire arbitration had been
determined by the Sole Arbitrator in accordance with the Fourth
Schedule of the Act, 1996, with the consent of the appellants and
the respondent herein.
Special Leave Petition (C) No. 10389 of 2025 Page 263 of 269
417. As discussed in the earlier parts of this judgment, the decision of
this Court in Afcons (supra) held that the fees stipulated in the
Fourth Schedule is the model fee schedule, and is binding on all
parties. When an arbitral tribunal fixes the fees in terms of the
Fourth Schedule, the parties are not permitted to object to the
same. At the cost of repetition, we again reproduce the relevant
observations: -
“105 Conscious and aware as we are that (i) Arbitration
proceedings must be conducted expeditiously; (ii) Court
interference should be minimal; and (iii) Some litigants
would object to even a just and fair arbitration fee, we would
like to effectuate the object and purpose behind enacting the
model fee schedule. When one or both parties, or the parties
and the arbitral tribunal are unable to reach a consensus, it
is open to the arbitral tribunal to charge the fee as stipulated
in the Fourth Schedule, which we would observe is the model
fee schedule and can be treated as binding on all.
Consequently, when an arbitral tribunal fixes the fee in terms
of the Fourth Schedule, the parties should not be permitted to
object the fee fixation. It is the default fee, which can be
changed by mutual consensus and not otherwise.”
418. Once the fees had been determined by the Sole Arbitrator in
accordance with the Fourth Schedule of the Act, 1996, and the
appellants herein had given their consent to the same, it was no
longer open for them to refuse to deposit the said amount.
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419. If at all, the appellants were facing any financial difficulty, the
correct approach should have been to request the arbitrator to
suspend the proceedings in terms of Section 38 sub-section (2) of
the Act, 1996 till the time they could arrange the requisite sum.
420. We also do not approve the stance of the appellants insofar as they
submitted that they were not in a position to pay the arbitral fees
for both the claim and the counter-claim, and could pay their share
of the fees in respect of the claim alone. This is particularly in view
of the fact that the respondent herein was willing to pay his share
of the arbitral fees for both the claim and the counter claim.
421. As per Section 38 of the Act, 1996, both the contesting parties,
namely, the claimant and the respondent, are responsible to bear
the fees of arbitration in equal proportion. However, where either
party defaults, the responsibility to pay the fees falls on the other
party.
422. Arbitration being a consensual mode of alternative dispute
resolution, is built upon procedural self-responsibility. Section 38
enshrines this principle, by stipulating that each party would be
responsible for paying the fees of arbitration for their own claims.
Special Leave Petition (C) No. 10389 of 2025 Page 265 of 269
423. A claimant is responsible for his own claims, and thus responsible
to pay his share of fees in respect of the same. Likewise, the
respondent is responsible to pay the share of fees for his counter-
claims. This responsibility extends to bearing the other party’s
share as well, if the latter declines to pay, at least insofar as their
claim or counter-claim, as the case may be, is concerned.
424.
In the present case, since the appellants herein refused to pay the
requisite fees for their own claims, the arbitral tribunal was left
with no other alternative but to terminate the proceedings.
Without the requisite deposits being made, there was no possible
way for the arbitral tribunal to effectively conduct the hearings.
We, therefore, find no infirmity in the order passed by the arbitral
tribunal terminating the proceedings.
425. However, we take note of the fact that the present dispute arose
all the way back in the year 2020. Five years have gone by. When
the proceedings came to be terminated, the position of law as
regards the manner in which the fees are to be determined, was in
a state of flux and uncertainty.
Special Leave Petition (C) No. 10389 of 2025 Page 266 of 269
426. The aforesaid is evident from the fact that after the arbitral
proceedings came to be terminated for the non-deposit of fees, the
appellants promptly preferred a writ petition before the High
Court of Punjab and Haryana challenging the validity of the
Fourth Schedule of the Act, 1996 and the determination of fees by
the Sole Arbitrator in lieu thereof.
427. Even the position of law as regards the termination of proceedings
under the Act, 1996 and the consequences that flow therefrom,
largely remained uncertain.
428. Had the appellants known beforehand, the sanctity and binding
nature of the Fourth Schedule of the Act, 1996 and the finality that
is attached to an order terminating the arbitral proceedings,
perhaps their stance would have been different before the arbitral
tribunal.
429. Thus, in view of the peculiar facts and circumstances of this case,
and in order to ensure that the parties are not deprived of any
means of adjudication of their dispute, we are inclined to extend
Special Leave Petition (C) No. 10389 of 2025 Page 267 of 269
one last opportunity to the appellants herein to resolve the same
through one another round of arbitration.
430. It has been more than three-years, that the order for termination
of the proceedings came to be passed by the Sole Arbitrator. In
such circumstances, we are of the view, that this is a fit case for the
appointment of a substitute arbitrator to look into both the claims
and the counter-claims filed by the appellants and the respondent,
respectively.
431. The substitute arbitrator would be at liberty to conduct the
hearings de novo , with the consent of both the parties, and having
regard to the lapse of a considerable amount of time, permit the
parties to amend their claims or counter-claims, as the case may
be, if so required.
432.
In the result, this appeal is partly allowed. The matter is remanded
to the High Court for the appointment of a substitute arbitrator.
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433. The High Court shall undertake the exercise for appointing an
arbitrator within a period of two weeks from the date of receipt of
this order.
434. Pending application(s), if any, shall stand disposed of.
435. The Registry shall forward one copy each of this judgment to all
the High Courts and one copy shall also be forwarded to the
Department of Legal Affairs, Ministry of Law & Justice,
Government of India.
............................................. J.
(J.B. Pardiwala)
............................................. J.
(R. Mahadevan)
New Delhi;
th
08 December, 2025.
Special Leave Petition (C) No. 10389 of 2025 Page 269 of 269
2025 INSC 1400
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 14630 OF 2025
[Arising out of Special Leave Petition (Civil) No. 10389 of 2025]
HARSHBIR SINGH PANNU AND ANR. …APPELLANT(S)
VERSUS
JASWINDER SINGH …RESPONDENT(S)
J U D G M E N T
Signature Not Verified
Digitally signed by
VISHAL ANAND
Date: 2025.12.09
10:19:12 IST
Reason:
J.B. PARDIWALA, J.:
For the convenience of exposition, this judgment is divided into the
following parts: -
INDEX
I. FACTUAL MATRIX ................................................................................. 6
A. Proceedings before the Sole Arbitrator. ............................................. 9
B. Proceedings before the High Court. .................................................. 18
II. IMPUGNED ORDER ............................................................................. 19
III. SUBMISSIONS ON BEHALF OF THE APPELLANTS ................... 24
IV. ISSUES FOR DETERMINATION ....................................................... 31
V. ANALYSIS................................................................................................ 31
A. Termination of Arbitral Proceedings under the Act, 1996. ........... 37
i. Statutory Provisions pertaining to Termination of Proceedings. . 37
ii. What is the source of the Arbitral Tribunal’s power to terminate the
proceedings under the Scheme of the Act, 1996? ........................... 55
a. Contradictory Views on the subject. ....................................... 56
I . Decisions reading Termination under Section(s) 25, 30 or 38
respectively with Section 32 sub-section (2) of the Act, 1996. .. 57
II . Decisions reading Termination under Section(s) 25, 30 or 38
respectively, to be independent from that under Section 32 sub-
section (2) of the Act, 1996. ............................................................ 82
b. Interplay between Section(s) 25, 30 38 and the termination of
proceedings under Section 32 of the Act, 1996. ................... 107
Special Leave Petition (C) No. 10389 of 2025 Page 2 of 269
I . History of the Working Group on the UNCITRAL Model Law
on International Commercial Arbitration. ................................ 112
II . Section 32 of the Act, 1996 and the import of the expression
“Mandate of Arbitral Tribunal”.................................................. 150
B. Remedy under the Act, 1996 against an order terminating the
arbitral proceedings. ........................................................................... 172
a. Contradictory Views on the subject. ..................................... 177
C. Whether the order for termination of proceedings passed by the
Sole Arbitrator could be said to be contrary to the decision of this
Court in Afcons (supra). ..................................................................... 214
VI. FEW MEANINGFUL SUGGESTIONS ........................................... 229
A. International Perspective on the Framework on Termination of
Arbitral Proceedings. .......................................................................... 229
i. Singapore International Arbitration Centre Rules, 2025 (SIAC
Rules). .............................................................................................. 229
ii. London Court of International Arbitration Rules, 2020 (LCIA
Rules). .............................................................................................. 238
iii. Hong Kong International Arbitration Centre Rules, 2024 (HKIAC
Rules). .............................................................................................. 246
B. Suggestions for the Arbitration and Conciliation Bill, 2024. ..... 254
VII. CONCLUSION AND THE FINAL ORDER ................................. 260
A. Summary of our conclusion. ............................................................. 260
B. Final Order. .......................................................................................... 263
Special Leave Petition (C) No. 10389 of 2025 Page 3 of 269
1. Leave granted.
“ Arbitration is often a friend in conferences but a foe in
practice. Its raison d’etre has always been to ease the burden
on courts and to ensure the expeditious resolution of
commercial disputes. Yet, this is not its only virtue. The true
advantage of arbitration lies in its freedom and flexibility,
with party autonomy as the cornerstone of the arbitral
process.
Parties enjoy the liberty to determine the strength and
composition of the tribunal, to appoint domain experts as
arbitrators, and to design procedures suited to the nature and
complexity of their disputes. This freedom allows them to
bring to the table expertise and insight that even a judge may
not be able to contribute.
However, parties often embrace arbitration in good times,
only to resist or manipulate it when disputes actually arise –
seeking either to wiggle out of arbitration altogether or to tilt
the process unfairly in their favour. In such situations,
judicial intervention becomes inevitable and rightly so to
safeguard fairness and the integrity of the arbitral process.
The evolution of the judicial role from that of a helicopter
parent to that of a guardian angel of arbitration has been
neither smooth nor uniform. Successive legislative
amendments, most notably those of 2015, 2019, and 2021,
have sought to curtail judicial interference and recalibrate the
delicate balance between autonomy and oversight. Yet, in
practice, arbitration has at times become more cumbersome
than civil litigation. Parties continue to exploit every
procedural avenue to delay proceedings, i.e., filing a maze of
applications before the arbitral tribunal, the High Court, and
even this Court, often on technical or jurisdictional
objections.
The present case is yet another instance where the fine
boundary between judicial oversight and arbitral
independence is tested. At its core, arbitration remains a
Special Leave Petition (C) No. 10389 of 2025 Page 4 of 269
creature of contract, founded on the twin pillars of party
autonomy and impartiality. Every act of interpretation
whether of the statute or of the contract must therefore be
guided by these two foundational principles.”
Hindustan Construction Company Ltd. v. Bihar Rajya
Pul Nirman Nigam Ltd. & Ors. 2025 INSC 1365
2. We are tempted to preface our judgment with the above quoted
observations of this Court made by one of us, R. Mahadevan J., as
the situation remains the same. The concerns articulated above
continue to resonate with an undiminishing force in the present
litigation as-well. The issues that have unfolded before us echo the
very same judicial disquiet. Even with the passage of time, the
challenges that beset the arbitral process persist in much the same
form and complexity.
3. The respondent although served with the notice issued by this
Court yet, has chosen not to remain present before this Court
either in person or through an advocate and oppose this appeal.
4.
This appeal arises from the judgment and order passed by the
High Court of Punjab and Haryana dated 07.01.2025 in ARB No.
357 of 2023 (O&M) (for short, the “ Impugned Judgment and
Order ”) by which the petition filed by the appellants herein for
Special Leave Petition (C) No. 10389 of 2025 Page 5 of 269
appointment of an arbitrator under Section(s) 11(5) and (6) of the
Arbitration and Conciliation Act, 1996 (for short, the “ Act, 1996 ”)
came to be rejected.
I. FACTUAL MATRIX
5. It appears from the materials on record that the appellant no. 2 and
the respondent herein, had entered into a partnership agreement
to form a partnership firm running in the name and style of ‘M/s
Amritsar Health & Hospitality Services’ vide a partnership deed
dated 31.03.2013. The said firm was engaged in the business of
providing health care and hospitality services as-well as the
operation of specialty care hospitals in Amritsar. Sometime
thereafter, the appellant no. 1 herein also came to be inducted as a
partner into the said firm by way of a fresh partnership agreement
entered between the parties vide a partnership deed dated
12.03.2014.
6. The aforesaid partnership deed, more particularly, Clause 13
provided that in the event of any dispute or difference arising out
of the said partnership agreement the same would have to be
resolved through arbitration alone. The said clause reads as under:
Special Leave Petition (C) No. 10389 of 2025 Page 6 of 269
“13. That in case of any misunderstanding, disagreement,
differences controversy, disputes or claim, if any arising out
of this Deed or relating to this contract or breach thereof, if
not settled mutually between the parties, the same shall be
referred to two arbitrators to be nominated mutually by all
the parties. The decision given by such arbitrators,
unanimously shall be binding on parties concerned. In case
of any disagreement between the said arbitrators, the natter
will be referred to any other Umpire, whose award given shall
be final and binding on all the parties.”
7. Sometime, in the year 2017, various disputes cropped up between
the appellants herein and the respondents in respect of the capital
contributions and the day-to-day management of the partnership
firm.
8. Accordingly, the appellants issued a legal notice dated 13.06.2018
to the respondent inter-alia for dissolution of the partnership firm
with immediate effect and to refer the disputes to arbitration, by
calling upon the respondent to mutually appoint an arbitrator in
terms of Clause 13 of the aforesaid partnership deed.
9. Since no reply was received from the respondent to the aforesaid
notice of invoking arbitration, the appellants herein filed a petition
being ARB No. 180 of 2019, for seeking appointment of an
arbitrator under Section 11 of the Act, 1996 before the High Court.
Special Leave Petition (C) No. 10389 of 2025 Page 7 of 269
10. The High Court vide its order dated 02.03.2020 passed in ARB No.
180 of 2019, allowed the aforesaid petition filed by the appellants
and thereby appointed a Sole Arbitrator to adjudicate the disputes
between the parties. Whilst passing the said order, the High Court
further directed that the fees payable to the Sole Arbitrator shall
be determined either in accordance with the Fourth Schedule of
the Act, 1996 or as may be mutually agreed upon by the parties.
The said order reads as under: -
“After hearing learned counsel for the parties and leaving
them to raise all their claims/defences/counter-claims which
may be available to them in law to be raised before the
arbitrator, Justice Ram Chand Gupta, a former Judge of this
Court is appointed as the sole Arbitrator. However, such
appointment would be subject to the declaration to be made
by Justice Ram Chand Gupta under Section 12 of the Act
with regard to his independence and impartiality to settle the
dispute between the parties.
The Arbitrator is requested to complete the proceedings
within the time limit specified under Section 29A of the Act.
The Arbitrator shall be paid fee in accordance with the Fourth
Schedule of the Act, as amended or as may be mutually settled
by the parties and the Arbitrator.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 8 of 269
A. Proceedings before the Sole Arbitrator.
11. Pursuant to the above, the arbitration proceedings were
commenced and the appellants herein filed their Statement of
Claim before the arbitral tribunal to the tune of Rs. 13,65,09,906/-.
12. Thereafter, vide the order dated 05.01.2021 passed by the Sole
Arbitrator, the Statement of Claim filed by the appellants herein
was taken on record. It further appears that the Sole Arbitrator on
the basis of the said Statement of Claim, determined the fees
payable in accordance with the Fourth Schedule to a sum of Rs.
17,01,655/- which was to be borne equally by both the parties i.e.,
Rs. 8,50,827/- by the appellants and respondent, respectively. The
said order reads as under: -
“ ORDER
Vide order dated 14.10.2020, parties were directed to
complete the pleading part through email as well as by filing
hard copies of the pleadings by post. In compliance of the said
order claim petition has been filed by the claimant.
Respondent has also confirmed on telephone that hardcopy of
the claim petition had been received by them. In view of the
same, respondent is directed to file written statement/counter
claim if any on or before 25.01.2021.
After going through the claim petition, the total claim
amount is Rs. 13,65,09,906/-. According to 4th Schedule of
Arbitration and Conciliation Act, 1996, tentative fee to be
paid to the Arbitrator comes to Rs. 17,01,655/- to be shared
equally by both the parties. Hence, both the parties are
Special Leave Petition (C) No. 10389 of 2025 Page 9 of 269
directed to pay Rs. Rs.8,50,827/- each in the Bank Account of
the undersigned on or before the next date of hearing. [...]”
(Emphasis supplied)
13. Although it is not forthcoming from the record whether the
consent of the parties was obtained whilst fixing the fees payable
to the arbitrator as per the Fourth Schedule of the Act, 1996, yet as
there was no objection from either party, we need not dwell any
further on this aspect.
14. Thereafter, the respondents filed their counter-claim to the tune of
Rs. 82,78,54,166/- and the total sum in dispute, together with the
claim and the counter-claim came to a sum of Rs. 96,43,64,072/-.
In view of the same, the Sole Arbitrator vide its order dated
23.04.2021 again revised the fees payable in terms of the Fourth
Schedule of the Act, 1996 to a sum of Rs, 37,50,000/-, to be borne
equally by both the parties. The said order reads as under: -
“ ORDER
[...] So far as fee payable to the Arbitrator is concerned,
tentative fee after going through the claim petition was
assessed vide order dated 05.01.2021. Total claim of the
claimants is Rs. 13,65,09,906/-. However, respondent has
also filed counter-claim claiming a total sum of Rs.
82,78,54,166/-. Hence, total sum in dispute comes to Rs.
96,43,64,072/-. The fee as calculated on the sum in dispute as
per IVth Schedule of the Arbitration and Conciliation Act,
1996 comes to much more and however in view of ceiling
Special Leave Petition (C) No. 10389 of 2025 Page 10 of 269
fixed under the said Schedule, fee payable to the Arbitrator is
fixed at Rs. 37,50,000/-. On the request of the parties, they
were permitted to pay the fee in installments vide order dated
02.02.2021. Parties were permitted to pay 50% of the fee
before completion of pleadings. However, despite repeated
orders, parties had paid only a part of first installment of even
the tentative fee as assessed vide order dated 05.01.2021.
However, as the fee has now been revised in view of the
counter-claim filed by the respondent, parties are again
directed to pay first installment of the fee so reassessed on or
before the next date of hearing.
[...] However, there is no dispute that claimants are liable to
pay their 50% share of fee of Arbitrator and however even
claimants have not paid first installment of the fee. It is
clarified that subject to decision on the application moved by
respondent, both the parties are now liable to pay Rs.
18,75,000/- each. 50% of the same is to be paid by both the
parties before completion of pleadings. Hence, both the parties
are directed to pay the same on or before the next date of
hearing.”
(Emphasis supplied)
15. Pursuant to the same, both the appellants and the respondent
herein, preferred an application raising certain objections to the
determination of fees by the Sole Arbitrator vide its order dated
23.04.2021.
16. The appellants inter-alia contended that the counter-claim filed by
the respondents was not only frivolous but was also an
exaggerated estimation of the amount claimed, and that the
appellants were not in a financial position to bear the arbitral fees
for the total amount in dispute.
Special Leave Petition (C) No. 10389 of 2025 Page 11 of 269
17. The respondent on the other hand, contended that he was liable to
pay only 25% of the total fees of arbitration as his share in the
partnership firm was only 25%.
18. In view of the aforesaid, the Sole Arbitrator adjourned the
proceedings for further hearing on the aspect of fees payable, and
directed the counsel appearing for the appellants and the
respondent to seek further instructions in this regard.
19. On the next date of hearing, the Sole Arbitrator vide its order dated
17.07.2021, dismissed the application filed by the respondents
contending that he was liable to pay only 25% of the total fees of
arbitration in view of his share in the partnership firm. The Sole
Arbitrator held that as per Section 38 of the Act, 1996, both the
contesting parties, namely, the claimant and the respondent, are
liable to bear the fees of arbitration in equal proportion i.e., both
the claimant and the respondent are liable to pay 50% of the total
fees assessed, respectively. The Sole Arbitrator further held that
the total sum of Rs. 37,50,000/-, payable towards the fees of
arbitration had been determined in accordance with the Fourth
Special Leave Petition (C) No. 10389 of 2025 Page 12 of 269
Schedule of the Act, 1996 and with the consent of both the parties.
The relevant observations read as under: -
“Second sitting by video-conference was conducted by
the Tribunal and the senior counsel for the claimant as well
as counsel for the respondent were duly heard. Detailed order
was passed fixing Arbitrator's fee as Rs. 37,50,000/-. It may
be mentioned here that the said order was passed with the
consent of counsel for both the parties.
An application filed by respondent that he is liable to
pay only 25% of the fee on the plea that his share in the
partnership firm concerned is only 25% was also decided
after hearing counsel for both the parties and it was held that
at this stage under Section 38 of the Act both the contesting
parties i.e., claimants and respondent are liable to pay 50%
each of the fee assessed. Both the counsel had agreed that both
the parties would pay Rs. l,00,000/- each by the next date of
hearing and regarding mode of payment of respective share of
fee of Arbitrator, they would seek instruction from their
respective clif.us and hence the matter was adjourned. ”
(Emphasis supplied)
20. Thereafter, it appears from the material on record that a total of six
hearings were conducted by the Sole Arbitrator. In all the said six
hearings, the learned counsel for the appellants remained absent,
as a result of which the matter had to be adjourned.
21. In the meantime, the appellants herein filed one affidavit before
the Sole Arbitrator expressing their inability to pay their share of
the arbitral fees, as determined earlier with the consent of the
Special Leave Petition (C) No. 10389 of 2025 Page 13 of 269
parties. Accordingly, the Sole Arbitrator in view of Section 38 of
the Act, 1996, enquired from the respondent, if he would be
willing to bear the claimant’s share of the arbitral fees, and
accordingly adjourned the matter for further hearing. The relevant
observations read as under: -
“Fourth physical hearing was conducted by the Tribunal on
25.02.3022 in Chandigarh Arbitration Centre. However on
that date as well though respondent was present, clerk of Mr.
Ripudaman Sidhu, Advocate appeared and sought
adjournment on the plea that the counsel could not, be
present due to prior engagement. However on that date
affidavit regarding admission/denial of documents in
compliance with order dated 12.09.2021 was filed by clerk of
Mr. Ripudaman Sidhu, Advocate. Another affidavit of
claimant was filed that claimant is not in a position to pay
his share of pay of Arbitrator as assessed vide order dated
17.07.2021 with the consent of counsel for the parties.
However in view of Section 38 of the Act, respondent was
given an opportunity, as to whether he was ready to pay
arbitrator's fee of the share of the claimant as well. As neither
claimant nor counsel for the respondent was present on that
date, in the interest of justice, matter was adjourned to
17.03.2022.”
(Emphasis supplied)
22. On 28.03.2022, the matter was again taken up by the Sole
Arbitrator on the issue of termination of arbitral proceedings for
non-payment of fees of arbitration in terms of Section 38 of the Act,
1996. The appellants herein once again reiterated their stance that
they were not in a position to pay the arbitral fees for both the
Special Leave Petition (C) No. 10389 of 2025 Page 14 of 269
claim and the counter-claim, and could pay only their share of the
fees in respect of the claim. The respondent on the other hand,
submitted that although he was willing to pay the arbitral fees for
both the claim and the counter-claim, yet he was not ready to bear
the claimant’s share of the fees payable.
23. In such circumstances referred to above, the Sole Arbitrator vide
its order dated 28.03.2022 terminated the arbitral proceedings. The
Sole Arbitrator observed that as per Section 38 of the Act, 1996,
where one party fails to pay his share of the arbitral fees, the other
party may pay that share. However, in the event the other party
also declines to pay the said share of the arbitral fees, the arbitral
tribunal may suspend or terminate the arbitral proceedings.
Accordingly, since neither party was willing to pay the arbitral
fees in respect of either the claim or the counter-claim, the arbitral
proceedings came to be terminated by the Sole Arbitrator. The
relevant observations read as under: -
“[...] the matter was adjourned for today for hearing the
parties regarding termination of proceedings under Section
38 of the Act.
Special Leave Petition (C) No. 10389 of 2025 Page 15 of 269
15. It has been stated by learned counsel for the claimant that
claimant is not in a position to pay his share of Arbitrator's
fee as assessed vide order dated 17.07.2021 as he has suffered
losses in the businesss and he is not in a position to pay the
said fees. He has further stated that claimant is ready to pay
only 50% of the fee of his claim i.e. 50% of Rs. 17,01,855/-
i.e. Rs. 8,50,827/-. However when query was put to him by
the Tribunal as to when he would pay the said amount, he
stated that he would pay the same as and when his business
earning would improve and he receives the possession of the
hospital.
16. It has been stated by learned counsel for the respondent
as well as respondent who is also present in person that he is
ready to pay his share of the fee as assessed vide order dated
17.07.2021 and he is not ready to pay the share of claimant
as well.
17. Parties were directed to pay their respective share of
Arbitrator's fee as assessed vide order dated 17.07.2021 as
provided under Section 38 of the Act which is reproduced as
under:
“38. Deposits.—
(1) The arbitral tribunal may fix the amount of the
deposit or supplementary deposit, as the case may
be, as an advance for the costs referred to in sub-
section (8) of section 31, which it expects will be
incurred in respect of the claim submitted to it:
Provided that where, apart from the claim, a
counter-claim has been submitted to the arbitral
tribunal, it may fix separate amount of deposit for
the claim and counter-claim.
(2) The deposit referred to in sub-section (1) shall
be payable in equal shares by the parties: Provided
that where one party fails to pay his share of the
deposit, the other party may pay that share:
Special Leave Petition (C) No. 10389 of 2025 Page 16 of 269
Provided further that where the other party also
does not pay the aforesaid share in respect of the
claim or the counter-claim, the arbitral tribunal
may suspend or terminate the arbitral proceedings
in respect of such claim or counter-claim, as the
case may be.
(3) Upon termination of the arbitral proceedings,
the arbitral tribunal shall render an accounting to
the parties of the deposits received and shall return
any unexpended balance to the party or parties, as
the case may be.”
18. As is dear from the aforementioned provision of the Act,
where one party fails to pay his share of the fee, the other party
may pay that, share and however if other party also does not
pay the aforesaid share in respect of claim or the counter-
claim, the Arbitral Tribunal may suspend or terminate the
Arbitral proceedings in respect of such claim or counter-
claim as the case may be. As is clear from the aforementioned
facts, I had been conducting proceedings in this matter for the
last about two years and had been making efforts to decide the
same expeditiously even during COVID-19 pandemic. Four
hearings by video-conference were also conducted at my
residence. Five physical hearings were also conducted at
Chandigarh Arbitration Centre. However claimant was not
interested in getting this matter decided expeditiously as is
clear by various orders passed by the Tribunal. He is not
ready to pay his share of the Arbitrator's fee on the plea that
he is not in position to pay the same as he suffered losses in
the business and possession of the hospital has also been taken
away. Hence in view of these facts, I have no other alternative
but to terminate the further proceedings of the Tribunal in
this matter. I hereby order for termination of the present
proceedings under Section 38 of the Act.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 17 of 269
B. Proceedings before the High Court.
24. Aggrieved by the aforesaid, the appellants preferred a petition
under Article 227 of the Constitution being CWP No. 6182 of 2022
before the High Court of Punjab and Haryana inter-alia assailing,
first , the order dated 28.03.2022 passed by the Sole Arbitrator
terminating the arbitral proceedings, secondly , the constitutional
vires of the Fourth Schedule of the Act, 1996 and lastly , the
determination of fees by the Sole Arbitrator in consequence
thereof.
25. During the pendency of the aforesaid proceedings, this Court in
its decision in Oil and Natural Gas Corporation Ltd. v. Afcons
Gunanusa JV reported in 2022 SCC OnLine SC 1122 , upheld the
constitutional validity of the Fourth Schedule of the Act, 1996.
26. Since the principal contention advanced by the appellants in the
aforesaid writ petition for assailing the termination of the arbitral
proceedings was on the ground that the Fourth Schedule of the
Act, 1996 was arbitrary and thus, the Sole Arbitrator could not
have determined the fees in accordance thereof. High Court vide
its order dated 15.02.2023, dismissed the writ petition in view of
the ratio laid down by this Court in Afcons (supra). However, the
Special Leave Petition (C) No. 10389 of 2025 Page 18 of 269
High Court left it open for the appellants to avail any other remedy
that may be available to them in law, against the termination of
arbitral proceedings. The relevant observations read as under: -
“ The issue(s) raised in this petition has already been decided
by the Supreme Court in the case of Oil and Natural Gas
Corporation Ltd. Vs. Afcons Gunanusa JV, 2022 SCC
OnLine SC 1122. Therefore, the petition is disposed of, in
terms of the said decision. However, the petitioner would be
at liberty to avail the remedies, if any, available in law. ”
II. IMPUGNED ORDER
27. Pursuant to the aforesaid, the appellants filed one another petition
under Section 11 sub-section(s) (5) and (6) of the Act, 1996 before
the High Court of Punjab and Haryana, being ARB No. 357 of 2023
(O&M), seeking appointment of an arbitrator afresh.
28. The High Court vide its impugned judgment and order dated
07.01.2025 declined to entertain the second petition filed by the
appellants under Section 11 of the Act, 1996 on the ground that the
same was not maintainable. The said decision is in three parts: -
(i)
First, the High Court placing reliance on the decision of the
High Court of Delhi in M/s Chemical Sales Cooperation &
Ors. v. M/s A Laxmi Sales and Services Pvt. Ltd. & Ors.
reported in 2011 SCC OnLine Del 3487 held that there lies
Special Leave Petition (C) No. 10389 of 2025 Page 19 of 269
a distinction between termination of arbitral proceedings
and termination of mandate of the arbitral tribunal.
Termination of proceedings simpliciter under Section 38 of
the Act, 1996 does not automatically mean the termination
of the mandate of the arbitrator in terms of Section 32 sub-
section (2)(c) of the Act. The relevant observations read as
under: -
“13. Section 32 of the Arbitration Act provides for the
termination of the proceedings. This provision came
up for interpretation before the Delhi High Court in
M/s. Chemical Sales Corporation and others Versus
M/s. A & A Laxmi Sales and Service Private Limited
and others. 20} J SCC OnLine Delhi 3847. The Court
proceeded to notice the statutory provision and
observed as under:
xxx xxx xxx
11. The aforesaid provision specified the
circumstances under which arbitral
proceedings shall be terminated. It provides
that arbitral proceedings shall stand
terminated on Arbitral Tribunal making an
award. Besides that, arbitral proceedings can
also be terminated in case (a) claimant
withdraws his claim (b) parties agree on the
termination of the proceedings. For example, if
parties arrive at a settlement and agree for
termination of proceedings, in such an
eventuality also, arbitral proceedings shall
stand terminated (c) if Arbitral Tribunal finds
that continuation of the proceedings have
become unnecessary or impossible for any other
reason. In other words, if the arbitral tribunal
finds, for any reason which includes non-
Special Leave Petition (C) No. 10389 of 2025 Page 20 of 269
cooperation of the parties, making the
continuation of the proceedings impossible,
then it can make an order for termination of the
arbitral proceedings. In case of termination of
the proceedings, the mandate of Arbitral
Tribunal shall also stand terminated as
envisaged under Sub-Section 3 of Section 32 of
the Act except in cases where Section 33 and
Section 34(4) of the Act are attracted. Arbitral
Tribunal has power to terminate the arbitral
proceedings under Section 25(a) upon default
of the claimant to communicate his statement
of claim; under Section 30(2) upon settlement
of dispute by the parties and under Section
38(2) upon failure of the parties to pay the
amount of deposit fixed by the Arbitral
Tribunal. The termination of arbitral
proceedings is different from termination of the
mandate of arbitrator. The mandate of
arbitrator, depending upon the facts and
circumstances of a case, may come to an end
but not the arbitral proceedings. For example,
if the parties to the arbitration agreement had
fixed a period of six months for completion of
arbitral proceedings and making of an award
by the Arbitral Tribunal and the Arbitral
Tribunal fails to do so on or before expiry of six
months, the mandate of Arbitral Tribunal shall
come to an end but not the arbitration
proceedings and in such an eventuality, if a
substitute arbitrator is appointed than he shall
have to continue with the arbitration
proceedings from the stage the same had been
left by the earlier arbitrator. However, in case
arbitration proceedings are terminated within
the meaning of Section 32 of the Act resulting
in termination of mandate of arbitrator, the
same cannot continue merely by appointing
another arbitrator. In such a scenario, first of
all, the arbitration proceedings have to be
Special Leave Petition (C) No. 10389 of 2025 Page 21 of 269
revived after setting aside the order of Arbitral
Tribunal terminating the arbitral proceedings.
12. In view of the above discussions, I do not
find any force in the contention of learned
senior counsel for the petitioner that the
termination of arbitral proceedings, in this case
on the ground of alleged non-cooperation of the
claimant including the ground of non-payment
of fee, tantamount to withdrawal by the
arbitrators resulting in termination of mandate
of Arbitral Tribunal, within the meaning of
Section 15(1)(a) of the Act thereby attracting
sub-Section 2 of Section 15 of the Act. In this
case, arbitrators have not withdrawn from
office for any reason as stipulated in Section 14
or 15 of the Act but have, in fact, terminated
the arbitral proceedings under Section 32
(2)(c). Thus, in my view, sub Section 2 of
Section 15 of the Act is not attracted in the facts
of this case.”
14. The above reproduced observaiions of the Delhi
High Court clearly amplify that the termination of the
arbitral proceedings is different from the termination
of the mandate of the Arbitrator. [...]”
(ii) Secondly, the High Court observed that, the Sole Arbitrator
in the present case had terminated the arbitral proceedings
on account of the failure of the parties to pay the arbitral
fees. Since under Section 38, the Sole Arbitrator is
empowered to do so, he can neither be said to have
withdrawn from office nor otherwise rendered incapable of
Special Leave Petition (C) No. 10389 of 2025 Page 22 of 269
acting as an arbitrator. As such there was no occasion for
seeking substitution of the arbitrator in terms of Section 11
read with Section 15 sub-section (2) of the Act, 1996. The
relevant observations read as under: -
“12. It is evident from the perusal of the above
reproduced order that the Arbitrator had proceeded to
terminate the proceedings on account of the attitude of
the parties, who failed to fulfil their commitment and
pay the arbitral fee. The order passed by the learned
Arbitrator fell within the four corners of Section 38(2)
of the Arbitration Act, which he was fully empowered
to pass. Petitioners remained unsuccessful in a
challenge to the said order when a writ petition filed
by them was disposed off by this Court on 15.02.2023
[...]
xxx xxx xxx
14. [...] The termination of the arbitral proceedings can
be on account of the non-cooperative attitude of the
parties, including the non-deposit of the arbitral fee, as
is this situation in the present case. In such
circumstances, there is no occasion for filing of a fresh
petition for appointment of an Arbitrator [...] The
judgments relied upon by the counsel for the petitioner
are not attracted lo the facts of the present case and in
both the cases a substitute arbitrator was appointed
under Section 15 of the Arbitration Act as the previous
arbitrator had resigned/withdrawn from the
proceedings.”
(iii) Thirdly, according to the High Court the appropriate
remedy against such order of termination of proceedings
under Section 38 of the Act, 1996 ought to have been either
Special Leave Petition (C) No. 10389 of 2025 Page 23 of 269
by way of filing an application for recall of the order of
termination before the Sole Arbitrator or by challenging the
legality of the termination under Section 14(2) of the said
Act. In this regard reliance was placed on the decisions of
this Court in SREI Infrastructure Finance Ltd. v. Tuff
Drilling reported in (2018) 11 SCC 470 and Lalitkumar
Sanghavi v. Dharmdas Sanghvi reported in (2014) 7 SCC
255
, respectively. The relevant observations read as under:
-
“14. [...] rather the remedy for the party concerned is
either to file an application for recall of the order as has
been held by the Supreme Court in Srei Infrastructure
Finance Limited's case (supra) or lo challenge the
legality of the order under Section 14(2) as observed by
the Apex Court in Lalitkumar's case (supra). [...]”
29. In such circumstances referred to above, the appellants are here
before this Court with the present appeal.
III. SUBMISSIONS ON BEHALF OF THE APPELLANTS
30. Mr. Nakul Dewan, the learned Senior counsel and Mr. Samarth
Sagar, the learned counsel, appearing for the appellants, in their
written submissions have stated thus: -
“The Hon’ble High Court while dismissing the application of
the Petitioners has passed the impugned order on 3 principal
Special Leave Petition (C) No. 10389 of 2025 Page 24 of 269
premises: 1. That an order terminating arbitral proceedings
on the ground of non payment of Arbitrator’s fees falls within
the parameters of Section 38(2) and the Arbitrator is fully
empowered to pass such an order. 2. The only remedy
available to an aggrieved party is to either file an application
for recall before the same Arbitrator. 3. The other remedy is
to challenge the order terminating the arbitral proceedings
under Section 14(2). It is submitted that all the 3 premises on
which the impugned judgment is based are wholly erroneous
and in ignorance of the settled jurisprudence on this issue.
I. Termination of Arbitral Proceedings on ground of
non-payment of fees can be passed by the
Arbitrator under Section 38(2)
The finding of the arbitrator on this aspect is absolutely
erroneous, both legally and factually. It is contrary to settled
jurisprudence on this issue. The Supreme Court in the case
of Laliltkumar Sanghavi v. Dharamdas Sanghvi, (2014) 7
SCC 255 has clearly traced the source of this power to only
Section 32(2)(c). The ratio is extremely specific and clear.
Therefore, the finding of the High Court is totally contrary to
judgment in Lalitkumar Sanghavi’s case (supra), which has
consistently been followed by High Courts also.
Secondly, the recent judgment of this Hon’ble Court
judgment in the case of ONGC Ltd. v. Afcons Gunanusa JV,
(2024) 4 SCC 481 also vitiates the finding of the Hon’ble
High Court as perverse and unsustainable. This Hon’ble
Court in the Afcons Gunanusa JV case (supra) while
examining the provisions of Sections 31, 31A, 38 and 39 has
clearly held that the power of the Arbitral Tribunal to fix its
own fees is subject to the consent of the parties. It has further
been held that an Arbitral Tribunal does not have the power
or jurisdiction to pass any binding direction to the parties on
the aspect of its fees.
This ratio assumes importance as in the present case, the Sole
Arbitrator, vide its procedural order dated 23.04.2021
(Annexure P-13) had enhanced its fees in accordance with the
Fourth Schedule without taking the consent of the parties.
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This is also evident from the procedural order 24.05.2021
(Annexure P-14) wherein the Petitioners’ raise their
objection to the said enhancement, which the Petitioners
further strengthened by filing a writ petition (Annexure P-
15) in the High Court against the determination of fees by the
Sole Arbitrator.
It is submitted that the order dated 28.03.2022 (Annexure P-
9, Pg. 61 of SLP) terminating the arbitral proceedings on
ground of non-payment of fees has the effect of binding the
parties to the arbitration to the determination of fees made by
the Arbitrator, while the issue was pending before the High
Court. Furthermore, this order also imposes the unfortunate
consequence of extinguishing the lis between the parties,
which is completely disproportionate and unwarranted.
According to the judgment in Afcons Gunanusa JV case
(supra) the Arbitral Tribunal clearly did not have the power
or jurisdiction to do so.
II. Power of recall of an Arbitrator of an order
passed under Section 32(2)
The High Court fell into a grievous and manifest error of law
in holding that first remedy available to the petitioners is to
file an application for recall of the order of termination of
proceedings before the Sole Arbitrator. The High Court relied
on the case of SREI Infrastructure Finance Ltd. v. Tuff
Drilling Pvt. Ltd., (2018) 11 SCC 470 to come to the said
conclusion.
It is submitted that the High Court has completely misread
and misunderstood the judgment in the case of SREI
Infrastructure Finance Ltd. (supra). The Hon’ble Supreme
Court has read the power of recall and review on procedural
aspects into Section 25 only and not Section 32. Infact, this
Hon’ble Court had specifically noticed the differences in the
language of Section 25 and 32 and while distinguishing the
scope of the two provisions, refrained from reading the said
power into Section 32.
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It is submitted that the entire premise of the finding arrived
at by the Hon’ble High Court is based on a complete
misreading and misappreciation of the actual ratio decidendi
of the judgment in the case of SREI Infrastructure Finance
Ltd. (supra) and such liable to be set aside and rejected.
III. Challenge to order terminating arbitral
proceedings under Section 14(2).
It is submitted that the finding of the High Court that the
other option available to the petitioners is to challenge the
termination of mandate under Section 14(2) is again based
on a complete misreading of the provisions of the Arbitration
and Conciliation Act, 1996, as well as the law on the said
issue.
In the facts of the present case, the question of challenging the
termination of mandate would arises when a party wants to
dispute the facts leading to the termination of mandate and
the termination of mandate. In the present case, the
petitioners are not disputing the termination of the mandate.
They are rather challenging the termination of proceedings.
According to petitioners, this present case concededly results
in termination of mandate of the Sole Arbitrator, but not the
termination of proceedings.
In such a case, the appropriate remedy is Section 15(2) and
not Section 14(2). Reference is invited to the judgment in the
case of Swadesh Kumar Goyal v. Dinesh Kumar Agarwal &
ors., (2018) 11 SCC 470.
Furthermore, Section 15(2) is an enabling provision, which
enables a party to seek the appointment of a substitute
arbitrator in accordance with the ‘rules applicable to the
appointment of the arbitrator being replaced’, which this
court has held to include the arbitration agreement and
statutory provisions applicable when the mandate of
arbitration agreement is not fulfilled, i.e. Section 11(6).
Section 15(2) is merely a substantive provision, which gets
implemented through the machinery and procedural
provision of Section 11(6). Therefore, the Petitioners’
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application under Section 11(6) was fully maintainable.
Reference is invited to the judgment in the cases of:
▪ Yashwith Constructions (P) Ltd. v. Simplex Concrete
Piles India Ltd., (2006) 6 SCC 204;
▪
Shailesh Dhairyawan v. Mohan Balakrishna Lulla,
(2016) 3 SCC 619
▪
C.G. Govardhan v. R.K. Estates & ors., 2019 SCC Online
Kar. 4293
And all other judgments in Compilation Vol.2 submitted by
the Petitioners.
IV. Submissions on reconsideration of the law in
relation to power to terminate arbitral
proceedings for non-payment of fees
It is humbly submitted that the principal basis for rooting the
power of the Arbitrator to terminate the arbitral proceedings
on account of non payment of fees is a result of the nebulous
provisions of Sections 32(2)(c) and 38(2).
Section 38 relates to deposits, which the arbitral tribunal may
demand as an advance for the costs referred to in Section
31(8). Costs, as defined and explained in Section 31(8) indeed
include the fees of the arbitrator. However, as explained and
held by the Supreme Court in ONGC Ltd. v. Afcons
Gunanusa JV, (2024) 4 SCC 481, the provisions of Section
31 and 32 and 38 cannot clothe the Arbitral Tribunal with
the power to bind the parties to a unilateral determination of
fees by the Arbitral Tribunal. Determination of fees has to
always be subject to the consent of the parties.
It is submitted that the Supreme Court in the case of
Laliltkumar Sanghavi v. Dharamdas Sanghvi, (2014) 7 SCC
255 had traced the power to terminate the arbitral
proceedings under this ground to Section 32(2)(c) alone.
However, there is cause to question the correctness of this
position of law. This is because of the following reasons:
1. The language of Section 32(2)(c) itself suggests that the
ground of non-payment of fees will not be covered by it.
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Section 32(2)(c) allows the arbitral tribunal to terminate
the arbitral proceedings if “the continuation of the
proceedings has for any reason become unnecessary or
impossible.” It is submitted that the phrase “unnecessary
or impossible” signifies circumstances that render the
performance of the adjudicatory function futile or
incapable of being performed. They relate to circumstances
which are involuntary and outside the control of the
Arbitral Tribunal, which the Arbitral Tribunal must yield
to. They do not relate to circumstances which the Arbitral
Tribunal can voluntarily waive, like agreeing to fees
acceptable to the parties. It is submitted that non-payment
of fees can never become a ground for termination of
proceedings itself, which is a very serious consequence
bringing an end to the life of the lis itself. This lacuna has
been noticed by the judgment of the Delhi High Court also
in the case of Shushila Kumari & anr. v. Bhayana Builders
Pvt. Ltd., 2019 SCC Online 7243.
2. The above lacuna has further been strengthened by a
recent judgement of this Hon’ble Court on the scope of
Section 32(2)(c) in the case of Dani Wooltex v. Sheil
Properties Ltd., (2024) 11 SCC 1. The Supreme Court
while examining the scope of Section 32(2)(c) has
underscored the peculiar characteristics of the phrase
“unnecessary or impossible” as relating to the futility of
performing the adjudicatory function in light of
abandonment of claim by the party. This judgment again
highlights the peculiar limitation of the circumstances in
which power under Section 32(2)(c) can be invoked, which
clearly shows that power to terminate proceedings on
ground of non-payment of fees cannot be related to Section
32(2)(c).
3. The doctrine of proportionality also occasions a rethink of
the present state of law on the ground that the inability of
the parties to pay the fees determined by the arbitral
tribunal, on grounds of economic capacity, ought not to
be used against the parties as a penal measure entailing
extinguishment of their dispute. This is especially so when
the Arbitration and Conciliation Act, 1996 provides
Special Leave Petition (C) No. 10389 of 2025 Page 29 of 269
sufficient mechanisms to the Arbitral tribunal to arrive at
a reasonable amount of fees and secure the same by:
a. Determining the reasonable amount of costs
(including fees) by disregarding frivolous claims made
to frustrate arbitral proceedings under Section
31A(3)(c),
b. Directing payment of the defaulting party’s share by
the first party under Section 31A(4),
c. Terminating the proceedings only qua the claim for
which fees have not been paid, and not the other claims
for which deposits have been paid, under the second
proviso to Section 38(2).
4. Section 39 of the Arbitration Act, which prescribes a lien
of the Arbitral Tribunal on the award till the time unpaid
costs of arbitration are paid also provides sufficient
security to the Arbitral Tribunal in case the fees agreed
between the Tribunal and parties is not paid.
All these circumstances show that the consequence of non-
payment of fees of the arbitral tribunal, ought not to be the
termination of proceedings, which is a disproportionately
prejudicial consequence being visited upon the parties to the
dispute.
It is submitted that in case, the Arbitral Tribunal is not
amenable to the fees agreed to upon by the parties, the
appropriate course of action is not to terminate the
proceedings under Section 32(2)(c) which will end up
extinguishing the lis between the parties, but rather to
terminate their mandate by withdraw under Section 15(2)(a),
which can then enable to parties to seek appointment of a
substitute arbitrator under Section 15(2).
It is submitted that the above interpretation provides a
reasonable solution to the lacunae present in the statute as of
now and renders unnecessary complications suitably
redressed.”
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IV. ISSUES FOR DETERMINATION
31. Having heard the learned counsel appearing for the appellants
and having gone through the materials on record, the following
questions fall for our consideration: -
I) What meaning should be ascribed to the words
“termination of the arbitral proceedings” figuring in the
different provisions of the Act, 1996? Is the phrase
susceptible to only one meaning?
II) What is the meaning and effect of the termination of arbitral
proceedings contemplated under Section 38 of the Act,
1996? Is it the same as the termination of arbitral
proceedings contemplated under Section 32?
III) What is the remedy available to a party aggrieved by an
order passed by an arbitral tribunal terminating the
proceedings?
V. ANALYSIS
32. Mr. Nakul Dewan, the learned Senior counsel appearing on behalf
of the appellants vehemently submitted that the order dated
28.03.2022 passed by the Sole Arbitrator terminating the arbitral
Special Leave Petition (C) No. 10389 of 2025 Page 31 of 269
proceedings could be said to be contrary to the scheme of the Act,
1996.
33. His submission is two-fold, which we shall try to understand.
34. He submitted that under the Act, 1996, the power of the arbitrator
to order the termination of arbitral proceedings is contained only
in Section 32 of the said Act. He would submit that, any order of
termination of arbitral proceedings, even on grounds of non-
payment of fees as stipulated in Section 38 of the Act, 1996, would
essentially be an order under Section 32 of the said Act.
35. To fortify his above noted submission, the learned Senior counsel
placed reliance on the decision of this Court in Lalitkumar V.
Sanghavi (supra), wherein, according to him, this Court “ traced the
source of this power to only Section 32(2)(c)” .
36. He further submitted that any order of termination of arbitral
proceedings under Section 32(2)(c), would automatically result in
the termination of the mandate of the arbitrator as-well, and that
the ratio of Lalitkumar V. Sanghavi (supra) “is extremely specific and
clear” in this regard.
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37. He would next submit that, although the Sole Arbitrator is well
within his powers empowered to terminate the arbitral
proceedings in terms of Section 32 of the Act, 1996, yet in the
present case, the Sole Arbitrator could not have terminated the
proceedings on the ground of non-payment of fees in view of the
decision of this Court in Afcons (supra).
38. Since, the Sole Arbitrator, whilst revising the fees of arbitration in
terms of the “ inflated” counter-claim of the respondents, failed to
obtain the consent of the parties for the same, any such
determination of the fees stood vitiated.
39. As a consequence, an order of termination of proceedings for the
non-payment of such fees would also stand vitiated. In this regard,
he once again drew our attention to Afcons (supra), which held
that “ that the power of the Arbitral Tribunal to fix its own fees is subject
to the consent of the parties ”.
40. He further submitted that, however, since an order of termination
of arbitral proceedings also results in the termination of the
mandate of the arbitrator, even if such termination is on any
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ground which is untenable in the eye of law, the same cannot be
challenged under Section 14 of the Act, 1996.
41. According to him, the High Court whilst passing the Impugned
Judgment and Order committed an egregious error in holding that
the appropriate remedy against an order of termination of arbitral
proceedings for non-payment of fees, would be to challenge the
termination of the mandate of the arbitrator under Section 14 of
the Act, 1996.
42. He would submit that Section 14 of the Act, 1996 only deals with
termination of the mandate of the arbitrator, and not termination
of arbitral proceedings under Section 32 of the said Act. Since, in
the present case the mandate of the arbitrator was terminated due
to the termination of the arbitral proceedings, Section 14 would
not be attracted.
43. According to him, “ the question of challenging the termination of the
mandate” would arise “ when a party wants to dispute the facts leading
to the termination of mandate” or “ the termination of the mandate”
itself . “ In the present case, the petitioners are not disputing the
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termination of the mandate. They are rather challenging the termination
of proceedings. ”
44. To put it simply, according to the learned Senior counsel, the
appellants herein are not aggrieved with the termination of the
mandate of the arbitrator, but the termination of the proceedings
itself. The termination of mandate of the arbitrator is only an
incidental consequence of the termination of the arbitral
proceedings.
45. However, since under the Act, 1996, there is no provision for
challenging an order of termination of the arbitral proceedings
under Section 32, the only available remedy is by way of
appointment of a substitute arbitrator. In this regard, reliance was
once again placed on the decisions of this Court in Lalitkumar V.
Sanghavi (supra), which held that in case of termination of the
arbitral proceedings “ the appropriate remedy is Section 15(2) and not
Section 14(2) ” .
46. In the last, he would submit that since consent of the parties was
sine qua non for determining the fees of arbitration, the termination
of the proceedings on non-payment thereof was bad in law, and
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thus, a substitute arbitrator could have been appointed in terms of
Section 11 read with Section 15(2) of the Act, 1996.
47. What we have been able to discern from the above, is that the
appellants want to put forward the following proposition of law:
(i) First, an arbitral tribunal is empowered under the Act, 1996
to terminate the arbitration proceedings for non-payment of
fees, and the source of such power is Section 32 as per
Lalitkumar V. Sanghavi
(supra).
(ii) Secondly, where such termination of proceedings is
erroneous or contrary to law, the remedy to challenge the
same, in the absence of any specific provision under the Act,
1996, would invariably lie under Section 15, more
particularly by appointment of a substitute arbitrator. It is
inconsequential that such termination of proceedings
automatically results in termination of the mandate of the
arbitrator, insofar as the question of the appropriate remedy
is concerned.
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A. Termination of Arbitral Proceedings under the Act, 1996.
i. Statutory Provisions pertaining to Termination of Proceedings.
48. Before we proceed to consider whether the order of termination of
the arbitral proceedings for non-payment of fees passed by the
Sole Arbitrator could be said to be contrary to law, more
particularly, the decision of this Court in Afcons (supra), we must
first try to understand what is the meaning and effect of
“ termination of arbitral proceedings ” under the Act, 1996.
49. The Act, 1996 nowhere defines the expression “ termination ” or
“ termination of arbitral proceedings ”. However, these expressions
are referred to in numerous instances within the Act, which we
shall outline hereinafter.
50. Under the Act, 1996 there are only four provisions which speak of
termination of arbitral proceedings by an arbitrator, those being,
Section 25 sub-section (a), Section 30 sub-section (2), Section 32 and
Section 38, respectively.
51. We must first look into Section 25 of the Act, 1996. The same reads
as under: -
“ 25. Default of a party.—
Unless otherwise agreed by the parties, where, without
showing sufficient cause,—
Special Leave Petition (C) No. 10389 of 2025 Page 37 of 269
(a) the claimant fails to communicate his statement of claim
in accordance with sub-section (1) of section 23, the
arbitral tribunal shall terminate the proceedings;
(b) the respondent fails to communicate his statement of
defence in accordance with sub-section (1) of section 23,
the arbitral tribunal shall continue the proceedings
without treating that failure in itself as an admission of
the allegations by the claimant and shall have the
discretion to treat the right of the respondent to file such
statement of defence as having been forfeited.
(c) a party fails to appear at an oral hearing or to produce
documentary evidence, the arbitral tribunal may
continue the proceedings and make the arbitral award on
the evidence before it.”
52.
Section 25 sub-section (a) of the Act, 1996, provides for the
termination of arbitral proceedings by an arbitrator on the ground
of default on the part of the claimant. It stipulates that, where a
claimant fails to provide a statement of his claim(s) in terms of
Section 23, without showing any sufficient cause for such failure,
the arbitral tribunal shall terminate the proceedings.
53. Section 25 sub-section(s) (b) and (c) further clarify that, any default
in filing of the statement of defence by the respondent or a default
in appearance or production of any evidence, respectively, shall
not constitute a ground for termination of the arbitral proceedings.
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54. The expression “ the arbitral tribunal shall terminate the proceedings ”
used in sub-section (a) Section 25 indicates that in the absence of
any agreement to the contrary, it would be mandatory for the
arbitral tribunal to terminate the arbitral proceedings, where the
claimant defaults in either filing or communicating its statement
of claim(s) in the manner provided under Section 23 of the Act,
1996.
55.
On the other hand, the words “ the arbitral tribunal shall continue the
proceedings ” employed in sub-section (b) of Section 25 indicates
that, if the respondent fails to either file or communicate its
statement of defence, the same shall not be ground to terminate
the proceedings, and the arbitral tribunal would be mandatorily
required to continue the proceedings.
56. Whilst continuing with the proceedings, it would be within the
discretion of the arbitral tribunal to either forfeit the right of the
respondent to file its statement of defence, or to permit the filing
of the same by condoning the default, if sufficient cause is shown.
However, any failure in filing of the statement of defence, shall not
be treated as an admission of the allegations by the claimant.
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57. The purport behind requiring the arbitral tribunal to continue
with the proceedings, even when the respondent chooses to not
file its statement of defence, is to ensure that the arbitral
proceedings are not frustrated by any devious respondent, who
may not be inclined to have the adjudication reach its logical
conclusion. It is to prevent the arbitration process from being
abused and subverted by a party who, through deliberate inaction,
seeks to impede its culmination.
58. Lastly, Section 25 sub-section (c) deals with a situation, where any
party either fails to appear before the arbitral tribunal or produce
any documentary evidence, that may be required by the arbitral
tribunal. In such a scenario, the said provision empowers the
arbitral tribunal to continue with the proceeding, and pass an
award based on the evidence before it, irrespective of the non-
appearance of any party or the non-production of any evidence.
59. The use of the expression “ may continue the proceedings and make the
arbitral award ” in Section 25 sub-section (c) is particularly
noteworthy.
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60. Unlike sub-section(s) (a) and (b), which expressly provide the
consequence of any default by the parties in complying with the
requirements laid down therein, namely, that the arbitral
proceedings shall terminate and shall not terminate, respectively,
Section 25 sub-section (c) is conspicuously silent on any such
consequence.
61. Even though Section 25 sub-section (c), by use of the word “ may ”,
leaves it to the wisdom of the arbitral tribunal to continue the
proceedings and make an award, it nowhere empowers the
arbitral tribunal to terminate the proceedings, where it chooses to
not continue the proceedings and make an award.
62. This nuanced distinction between Section 25 sub-section(s) (a) and
(b) on one hand, and sub-section (c) on the other, is of vital
importance for the purpose of understanding the scope of Section
32 of the Act, 1996, more particularly, sub-section (2)(c), thereof.
63. How this plays out vis-á-vis the legislative scheme of Act, 1996,
particularly in respect of ‘termination of proceedings’ shall be
discussed in more detail, in the latter parts of this judgement.
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64. The substantive part of Section 25 stipulates that the rigours of the
said provision are subject to any agreement by the parties in this
regard, or the existence of any sufficient cause for a default in
either the filing of a statement of claim or defence, the production
of any evidence or in appearing before the arbitral tribunal.
65. In other words, under Section 25, it is open for the parties to agree
on the procedure or course of action which is to be followed by the
arbitral tribunal, in the event of any default on part of either
parties, in the filing, production or appearance before the arbitral
tribunal.
66. The parties, by an agreement in this regard, may choose that the
non-filing of a statement of claim shall not be a ground for
termination of arbitral proceedings, or vice-versa, that a default in
the same even if it has occasioned by a sufficient cause, shall be a
ground for termination of the proceedings.
67. However, in the absence of any such agreement, the rigours of
Section 25, in the even of any default by the parties in complying
with the requirements laid down therein, will only spring into
action where such default is “ without sufficient cause ”.
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68. We say so because, the substantive part of Section 25 opens with
the words “ where, without showing sufficient cause,— ". A plain
reading of the aforesaid expression indicates that it governs the
entire scheme of Section 25 of the Act, 1996.
69. There is nothing in the bare text of Section 25 to suggest that the
condition of an ‘absence of a sufficient cause’, stipulated in the
substantive portion is confined in its application to only some sub-
section(s) of Section 25 and not to the provision as a whole.
70. This requirement of first, ascertaining, whether a sufficient cause
exists for any default by a party in terms of Section 25, is
indispensable. It applies equally to all sub-section(s) of Section 25.
The arbitral tribunal is required to satisfy itself of the absence of a
sufficient cause, before it can proceed to take recourse under any
of the sub-section(s) of Section 25, as the case may be.
71. Thus, in the absence of any agreement, the yardstick or test for the
exercise of the limited discretion conferred upon the arbitral
tribunal under Section 25, would be to see, if any sufficient cause
existed for the default.
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72. An arbitral tribunal may exercise its power to either terminate the
proceedings, or forfeit the right to file a statement of defence or
pass an award ex-parte or sans the production of any piece of
evidence, under Section 25 sub-section(s) (a), (b) and (c),
respectively, upon its satisfaction that no sufficient cause existed
for such default.
73. We shall now look into Section 30 of the Act, 1996, which reads as
under: -
30. Settlement.—
“
(1) It is not incompatible with an arbitration agreement for
an arbitral tribunal to encourage settlement of the dispute
and, with the agreement of the parties, the arbitral tribunal
may use mediation, conciliation or other procedures at any
time during the arbitral proceedings to encourage settlement.
(2) If, during arbitral proceedings, the parties settle the
dispute, the arbitral tribunal shall terminate the proceedings
and, if requested by the parties and not objected to by the
arbitral tribunal, record the settlement in the form of an
arbitral award on agreed terms.
(3) An arbitral award on agreed terms shall be made in
accordance with section 31 and shall state that it is an arbitral
award.
(4) An arbitral award on agreed terms shall have the same
status and effect as any other arbitral award on the substance
of the dispute.”
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74. Section 30 of the Act, 1996, inter-alia provides the manner in which
the parties, after the commencement of the arbitral proceedings,
may arrive at a settlement in respect of the dispute between them.
75. The provision embodies the cardinal principle of consent being the
cornerstone of arbitration, by recognizing the autonomy of the
parties to settle their dispute at any point in time during the
arbitration proceedings. It fortifies that the commencement of
arbitration does not take away such autonomy, and the pendency
of proceedings, will not be fatal to any outside settlement.
76. The other foundational pillar of arbitration, namely, the resolution
of disputes, fairly and effectively, has been enshrined in sub-
section (1) of Section 30. Under this provision, a positive duty has
been cast upon the arbitral tribunal to encourage and facilitate a
settlement between the parties.
77. The provision elaborates, that this duty may be discharged by the
arbitral tribunal through mediation, conciliation or any other
process, that it considers expedient for meeting the ends of justice
and facilitating a settlement between the parties.
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78. Sub-section (2) of Section 30 is of particular importance for our
discussion. It provides that where the parties arrive at a settlement
in respect of the dispute, the arbitral tribunal shall terminate the
proceedings. It further states, that if the parties so request, the
arbitral tribunal, if it has no objection, shall record the terms of the
settlement in the form of an award.
79. What would be the form and manner in which the award
recording the settlement arrived at by the parties is to be made, as-
well as the effect of such an award, have been delineated in the
subsequent sub-sections.
80. Section 30 sub-section(s) (3) and (4), stipulates that the contents of
the award must conform to the parameters laid down in Section
31 and that it shall have the same status and effect as any other
award, under the Act, 1996, respectively.
81. As per Section 30 of the Act, 1996, more particularly sub-section
(2), the arbitral tribunal is required to terminate the proceedings,
upon the settlement of the dispute by the parties. This is because,
once the dispute between the parties stands settled, nothing
remains for the arbitral tribunal to adjudicate upon.
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82. Before we proceed to look into Section 32 of the Act, 1996, it would
be apposite to first understand when an arbitral tribunal would be
empowered to terminate the arbitral proceedings as per Section 38
of the said Act.
83. Section 38 of the Act, 1996 reads as under: -
“ 38. Deposits.—
(1) The arbitral tribunal may fix the amount of the deposit or
supplementary deposit, as the case may be, as an advance for
the costs referred to in sub-section (8) of section 31, which it
expects will be incurred in respect of the claim submitted to
it:
Provided that where, apart from the claim, a counter-
claim has been submitted to the arbitral tribunal, it may fix
separate amount of deposit for the claim and counter-claim.
(2) The deposit referred to in sub-section (1) shall be payable
in equal shares by the parties:
Provided that where one party fails to pay his share of
the deposit, the other party may pay that share:
Provided further that where the other party also does
not pay the aforesaid share in respect of the claim or the
counter-claim, the arbitral tribunal may suspend or
terminate the arbitral proceedings in respect of such claim or
counter-claim, as the case may be.
(3) Upon termination of the arbitral proceedings, the arbitral
tribunal shall render an accounting to the parties of the
deposits received and shall return any unexpended balance to
the party or parties, as the case may be.”
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84. The provision of Section 38 deals with deposit of “costs”. The term
“costs” refers to the expenses incurred in conducting and
facilitating the arbitral proceedings. Such costs are determined by
the arbitral tribunal in accordance with Section 31A of the Act,
1996. Sub-Section(s) (3) and (4) of Section 31A enumerate the
circumstances which may be taken into account by the arbitral
tribunal for determining such costs.
85.
The Explanation appended to Section 31A of the Act, 1996, further
states that the term “costs” means the reasonable costs relating to,
the fees of the arbitrators, the administrative outlays of the
tribunal, the legal fees and charges, and any other expenses
incurred in connection with the arbitral proceedings and the
Award.
86. Section 38 sub-section (1), empowers the arbitral tribunal to direct
the deposit of a certain portion of these “costs” by the parties, in
the form of an advance towards the immediate expenses, the
tribunal expects to likely incur for the continuation of the arbitral
proceedings in respect of the claim(s) before it.
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87. Where a counter-claim is also filed, the arbitral tribunal is further
empowered, under the Proviso to sub-section (1) of Section 38 to
fix separate amounts of deposit for the claim and the counter-
claim, as the case may be.
88. Section 38 sub-section (2) embodies the general rule, that any
deposit, which may be required by the arbitral tribunal, shall be
payable by the parties in equal proportions. In other words, both
the claimant and the respondent are ordinarily responsible to pay
50% of the deposit, respectively.
89. The First Proviso to Section 38 sub-section (2), further stipulates
that, where either party defaults paying his share of the deposit,
then the same may be paid by the other party.
90.
The Second Proviso to Section 38 sub-section (2) is of particular
importance. It provides that, in the event the other party also
declines to pay the aforesaid share of the deposit, the arbitral
tribunal may either suspend or terminate the proceedings in
respect of such claim or counter-claim, as the case may be.
91.
To put it simply, where both the parties fail to make the deposit as
required by the arbitral tribunal in respect of a claim or a counter-
Special Leave Petition (C) No. 10389 of 2025 Page 49 of 269
claim then in such a situation, the tribunal would be empowered
to either suspend or terminate the proceedings qua such claim or
counter-claim.
92. Lastly, Section 38 sub-section (3), provides that once the
proceedings stand terminated, the arbitral tribunal shall furnish
the account of all the deposits received by it, and return any
unexpended balance to the parties.
93. Both Section(s) 25 and 30 of the Act, 1996 respectively, insofar as
termination of arbitral proceeding is concerned, are an exception
to the general rule contained in Section 32 sub-section (1) of the
Act, 1996.
94. We may now proceed to look into Section 32 of the Act, 1996. The
said provision reads as under: -
“ 32. Termination of proceedings.—
(1) The arbitral proceedings shall be terminated by the final
arbitral award or by an order of the arbitral tribunal under
sub-section (2).
(2) The arbitral tribunal shall issue an order for the
termination of the arbitral proceedings where—
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(a) the claimant withdraws his claim, unless the respondent
objects to the order and the arbitral tribunal recognises a
legitimate interest on his part in obtaining a final
settlement of the dispute,
(b) the parties agree on the termination of the proceedings, or
(c) the arbitral tribunal finds that the continuation of the
proceedings has for any other reason become unnecessary
or impossible.
(3) Subject to section 33 and sub-section (4) of section 34, the
mandate of the arbitral tribunal shall terminate with the
termination of the arbitral proceedings. ”
95. A bare perusal of the aforesaid provision, particularly, Section 32
sub-section (1), reveals that, the termination of arbitral
proceedings under the Act, 1996, may occur in two distinct ways;
first, through the passing of the final award, or secondly by an
order of the arbitral tribunal under sub-section (2), thereof.
96. Section 32 sub-section (2) of the Act, 1996 warrants a careful
examination. The said provision sets out the three situations in
which an arbitral tribunal may, without rendering the final award,
terminate the arbitral proceedings by passing an order to that
effect. The arbitral tribunal may, by an order, terminate the
proceedings where: -
Special Leave Petition (C) No. 10389 of 2025 Page 51 of 269
(i) First, as per sub-clause (a), if the claimant withdraws his
claim, and the respondent has no objection to the
withdrawal. However, if the respondent raises an objection
to the withdrawal, on the ground that it may impede the
dispute from being finally resolved, the arbitral tribunal
may refuse to terminate the proceedings. What is sought to
be conveyed by the phrase “ the arbitral tribunal recognises a
legitimate interest on his part in obtaining a final settlement of
the dispute ” used in sub-clause (a) is that, the objection to the
withdrawal by the respondent, must be founded upon a
genuine interest on his part, in having the dispute resolved.
Where such objections are motivated by any extraneous
considerations, such as an intent to either delay or protract
the dispute or to vexatiously harass the claimant through
the continuation of the proceedings, the arbitral tribunal
may decline to entertain such objections., and proceed to
order a termination of the proceedings.
Where any objection has been raised by the respondent, the
arbitral tribunal, before passing an order for termination of
the proceedings, is required to make a finding, that the
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objections raised, are not bona-fide insofar as the resolution
of the dispute is concerned.
Insofar, as the question when such a respondent could be
said to have a legitimate interest in securing the final
settlement of dispute is concerned, it is not possible to lay
down any straitjacket formula or prescribe any exhaustive
list. The answer must invariably turn upon the peculiar
facts and attendant circumstances of each case. Each case
would have to be assessed, keeping in mind the nature of
the claims, the stage of the proceedings, the evidence on
record, and the preliminary findings already made by the
arbitral tribunal. We shall discuss this in more detail in the
latter parts of this judgment.
(ii) Secondly, as per sub-clause (b), where both the parties agree
to the termination of the arbitral proceedings, the arbitral
tribunal shall pass an order to such effect.
(iii) Thirdly, as per sub-clause (c), where the arbitral tribunal
finds that the continuation of the proceedings has “ for any
other reason ” become unnecessary or impossible, the arbitral
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proceedings shall pass an order terminating the
proceedings.
97. We shall discuss sub-section (2) of Section 32, particularly, the
scope and extent of the arbitral tribunal’s authority to pass an
order for termination of proceedings thereunder, in more detail in
the subsequent parts of this judgment.
98. Lastly, sub-section (3) of Section 32 stipulates what would be the
legal effect of the termination of arbitral proceedings under the
Act, 1996. It provides that, subject to the provisions of Section(s)
33 and 34(4), the termination of the arbitral proceedings, shall in
consequence also terminate the “ mandate of the arbitral tribunal ”.
99. To put it simply, upon termination of the arbitral proceedings,
either by way of a final award or an order to that effect, as the case
may be, the arbitral tribunal, save and except the exercise of the
limited powers conferred upon it by Section(s) 33 and 34(4)
respectively, shall cease to have any further power or function,
under the Act, 1996.
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100. Thus, apart from the power to correct or interpret an award and
eliminating the grounds for setting aside the arbitral award, in
terms of Section(s) 33 and 34(4) respectively, the arbitral tribunal,
upon the termination of the proceedings, is divested of all other
powers, and no longer has any jurisdiction, in respect of the
dispute.
ii. What is the source of the Arbitral Tribunal’s power to terminate
the proceedings under the Scheme of the Act, 1996?
101.
What can be discerned from the above is that, Section(s) 25, 30 and
38 of the Act, 1996 respectively, empower the arbitral tribunal to
terminate the proceedings on different grounds, stipulated
therein.
102. Although, Section 32 sub-section (1) provides that an arbitral
proceeding shall be terminated either by a final award or by an
order under sub-section (2) thereof, yet the situations in which the
tribunal may pass such an order do not explicitly encompass the
situations contemplated under Section(s) 25, 30 and 38 of the Act,
1996 respectively.
Special Leave Petition (C) No. 10389 of 2025 Page 55 of 269
103. It was argued on behalf of the appellants herein, that any order of
termination has to be traced back to Section 32 sub-section (2) of
the Act, 1996, more particularly, the residual provision contained
in sub-clause (c).
104. Section 32(2)(c) empowers the arbitral tribunal to pass an order of
termination, where it finds that the proceedings has for any other
reason become “ unnecessary or impossible ”.
105.
According to the proposition of law, put forth by the appellants,
this expression is wide enough to encompass the different
scenarios under which proceedings may be terminated in terms of
Section(s) 25, 30 or 38 of the Act, 1996, respectively.
a. Contradictory Views on the subject.
106. Before we proceed to answer the aforesaid contention canvassed
on behalf of the appellant, it would be apposite look into the
various decisions on the subject, and the cleavage of opinion
expressed as regards the scope and power of an arbitral tribunal
to terminate the proceedings under the Act, 1996.
Special Leave Petition (C) No. 10389 of 2025 Page 56 of 269
I. Decisions reading Termination under Section(s) 25, 30 or 38
respectively with Section 32 sub-section (2) of the Act, 1996.
107. The question as to when the arbitral tribunal would be
empowered to either suspend or terminate the proceedings under
the various provisions of the Act, 1996, came to be examined for
the first time in Maharashtra State Electricity Board v. Datar
Switchgear Ltd. reported in 2002 SCC OnLine Bom 983 .
108. The decision of the High Court of judicature at Bombay in Datar
Switchgear (supra), is significant. The facts of the case are not
relevant for the present discussion. To put it succinctly, the
question that came up before the High Court was, whether an
arbitral tribunal is empowered to suspend or terminate the
proceedings on account of the failure of the respondent therein to
comply with its interim order directing the deposit of a specified
amount, in terms of the contract. The relevant paragraphs read as
under: -
“2. The question which this Court is called upon to decide in
these proceedings is whether an Arbitral Tribunal
constituted under the Arbitration and Conciliation Act, 1996
is empowered by the provisions of the Act to suspend the
hearing of the arbitral proceedings and, in the alternate,
whether the Court exercising jurisdiction under section 9 can
issue a direction to that effect. Shorn at this stage of all the
details to which it would nevertheless become necessary to
advert during the course of the judgment, the Arbitral
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Tribunal by an interim direction, directed the petitioner
(“MSEB”) to deposit certain amounts which were permitted
to be withdrawn by the respondent (“DSL”) against Bank
Guarantees. The Bank which had issued the Bank Guarantees
extended the guarantees from time to time but then declined
to renew them any further. The Guarantees were not invoked
by the MSEB before expiry, as a result of a clause in the
guarantees which made invocation conditional upon
permission being granted by the Arbitral Tribunal to MSEB.
DSL has, in the meantime, been declared a sick industrial
undertaking under the Sick Industrial Companies (Special
Provisions) Act, 1985 and pleads that it is unable financially
to secure any alternative Bank Guarantee at this stage. On
an application moved by MSEB, the Arbitral Tribunal has
ordered DSL to bring back the moneys which were
withdrawn and to this order, DSL has submitted itself. The
Arbitral Tribunal has declined to accede to the prayer of
MSEB that the arbitral proceedings be suspended in their
entirety (including the hearing of the counter claim of
MSEB) until the moneys are brought back. That decision is
challenged by MSEB. Of the three arbitrators constituting
the Arbitral Tribunal, Mr. Justice V.D. Tulzapurkar has
expressed the view that he was doubtful as to whether the
Tribunal had the power to suspend the proceedings, but, that
in any case, no case for suspension has been made out since
the conduct of DSL was neither deliberate, nor contumacious.
The second learned arbitrator Mr. Justice M.L. Pendse has
held that there was no power in the Arbitral Tribunal to
suspend its proceedings and to grant a stay as prayed but,
that in any event, in view of the fact that the arbitral
proceedings have proceeded to a considerable extent and
evidence has been substantially recorded, it would not be
appropriate for the Tribunal to accede to the prayer. A
dissenting view has, however, been expressed by Mr. Justice
S.C. Pratap, who has held that there is a power in the Arbitral
Tribunal to grant a stay of proceedings and a sufficient
ground has been made out before the Tribunal to do so in the
facts of the present case, since the conduct of DSL is
contumacious. The dissenting member of the Tribunal has,
however, directed that the hearing of the counter claim
preferred by MSEB must proceed though, as already noted
Special Leave Petition (C) No. 10389 of 2025 Page 58 of 269
earlier, the prayer of MSEB was that the entire proceedings
including hearing of the counter claim ought to be stayed.
The Arbitral Tribunal has thus by a majority declined to stay
the proceedings before it. In these proceedings, MSEB has
moved the Court both in the exercise of its appellate
jurisdiction under section 37 of the Act, treating the order
passed by the Arbitral Tribunal as one under section 17
declining to grant an interim measure of protection and in
the alternative under section 9, contending that even if the
appeal is held not to be maintainable, this Court has the power
and jurisdiction to suspend the arbitral proceedings as
prayed. The issues which, therefore, arise before the Court,
relate to (i) whether the Arbitral Tribunal has the power to
stay or suspend its proceedings under the Act; (ii) whether
the Court has the power to do so in a proceeding under section
9; and (iii) whether a case for the exercise of power in the
present case has been made out.”
(Emphasis supplied)
109. The High Court speaking through Dr. D.Y. Chandrachud J. (as his
Lordship then was), answered the aforesaid in a negative, with the
following pertinent observations on the power of the arbitral
tribunal to terminate the arbitral proceedings: -
(i) First, the High Court held that the termination of the
mandate of the arbitrator is not co-terminus with the
termination of the arbitral proceedings. In the former, the
arbitrator merely withdraws from office, thereby
permitting the appointment of a substitute arbitrator to
continue the proceedings. In the latter, however, the arbitral
Special Leave Petition (C) No. 10389 of 2025 Page 59 of 269
tribunal itself collapses. In this regard, the High Court gave
an illustration that where the tribunal, under Section 16 of
the Act, 1996, holds that there is no valid arbitration
agreement, the same would result in the termination of
proceedings, and with it, ipso facto, the tribunal itself. The
relevant observations read as under: -
“36. [...] The termination of a mandate of the
arbitrator is not co-terminus with the termination of
arbitral proceedings because when the mandate of the
arbitrator terminates when he withdraws from the
office or by agreement between the parties, a substitute
arbitrator is to be appointed according to the same
rules that were originally applicable to the
appointment of the arbitrator.
“37. [...] A determination by the Arbitral Tribunal on
the question of the jurisdiction or on the existence or
validity of the arbitration agreement has important
consequences in terms of the continuance or, as the
case may be, the cessation of proceedings. A ruling by
the Arbitral Tribunal that it has no jurisdiction or, as
the case may be, that there is no valid or existing
arbitration agreement will result in a termination of
proceedings by the Arbitral Tribunal. The power to
make that determination has specifically been
entrusted to the Arbitral Tribunal.”
(Emphasis supplied)
(ii) Secondly, although Section 25 of the Act, 1996 contemplates
three distinct scenarios of default by a party, yet the
authority of the arbitral tribunal to order a termination of
Special Leave Petition (C) No. 10389 of 2025 Page 60 of 269
the proceedings arises in only one of those scenarios,
namely where the claimant fails to communicate his
statement of claim in terms of Section 23. In all other cases
of default by a party, such as the failure to file a statement
of defence, to appear during a hearing or to produce any
evidence required, it would attract only the imposition of
certain penalties. The tribunal may forfeit the right to file
the statement of defence, or seek the assistance of the court
under Section 27 to obtain the evidence, by which the party
in default may be held in contempt, or it may proceed to
pass an ex-parte award. However, the tribunal in these
situations is not empowered to terminate the proceedings
unlike Section 25(a), and must continue with the arbitration.
The relevant observations read as under: -
“ 42. As a part of Chapter V, certain provisions have
been enacted to deal with the case of defaults by a
party. Section 25 envisages a situation where without
sufficient cause, (i) the claimant fails to communicate
his statement of claim within the period prescribed, (ii)
the respondent fails to communicate his statement of
defence or (iii) a party fails to appear or produce
documentary evidence. In a case where the claimant
fails to communicate his statement of claim, the
Arbitral Tribunal shall terminate the proceedings.
Where the respondent fails to communicate his
statement of defence, the Tribunal shall continue the
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proceedings without treating that failure in itself as an
admission of the allegations made by the claimant. The
third possibility which is envisaged by section 25 is
where a party fails to appear at an oral hearing or to
produce documentary evidence, in which case, the
Tribunal shall continue the proceedings and make the
Arbitral Award on the evidence before if.
43. The Arbitral Tribunal can apply to the Court for
assistance in taking evidence and the procedure in this
regard its regulated by sub-sections (1) to (4) of section
27. Sub-section (5) of section 27 lays down that
persons failing to attend in accordance with a process
issued by the Court for the recording of evidence before
the Arbitral Tribunal or making any other default, or
refusing to give their evidence, or being “guilty of any
contempt of the Arbitral Tribunal during the conduct
of arbitral proceedings shall be subject to the like
disadvantages, penalties and punishments by order of
the Court on the re-presentation of the Arbitral
Tribunal as they would incur for the like offences in
suits tried before the Court”. The power to punish for
any contempt of the Arbitral Tribunal has been vested
with the Court. ”
(Emphasis supplied)
(iii) Thirdly, the termination of arbitral proceedings may take
place as per Section 30 sub-section (2) of the Act, 1996 if the
parties settle the dispute, during the course of the arbitral
proceedings. The relevant observations read as under: -
“45. Chapter VI of the Act is entitled “Making of
Arbitral Award and termination of proceedings”. The
termination of proceedings can take place under
section 30(2) if the parties settle the dispute, during
the course of arbitral proceedings and if a request to
that effect is made by the parties before the Arbitral
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Tribunal. That settlement then culminates in an
agreed Arbitral Award. Section 31 deals with the form
and contents of the Arbitral Award and sub-section (6)
thereof provides that the Arbitral Tribunal may, at any
time during the arbitral proceedings, make an interim
Arbitral Award on any matter with respect to which it
may make a final Arbitral Award.”
(iv) Fourthly, under Section 38 of the Act, 1996 the arbitral
tribunal is empowered to fix the amount of deposit as an
advance towards costs which includes the fees and
expenses of the arbitrator, witnesses, and the tribunal itself.
Such deposits are payable in equal shares by the parties, but
where one party fails to pay his share of the deposit, the
other party may pay that share. However, where the other
party also does not pay the aforesaid share in respect of a
claim or the counter claim, the arbitral tribunal under the
Second Proviso to Section 38 sub-section (2) may suspend
or terminate the proceedings in respect of such claim or
counter-claim as the case may be. The relevant observations
read as under: -
“49. Chapter IX of the Act is entitled “appeals” and in
so far as the present case is concerned, it is material to
note that an appeal lies against an order of the Arbitral
Tribunal granting or refusing to grant an interim
measure under section 17. Chapter X of Part-I makes
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miscellaneous provisions and section 38 thereof deals
with deposits. Sub-section (1) of section 38 empowers
the Arbitral Tribunal to fix the amount of deposit as
an advance for costs referred to in sub-section (8) of
section 31. Sub-section (8) of section 31 provides for
costs including the fees and expenses of the arbitrator
and witnesses, legal fees and expenses, administrative
fees of the institution supervising the arbitration and
other expenses incurred in connection with the arbitral
proceedings and Award. Sub-section (2) of section 38
provides that the deposit is to be payable in equal
shares by the parties, but where one party fails to pay
his share of the deposit, the other party may pay that
share. The second proviso to sub-section (2) enunciates
that where the other party also does not pay the
aforesaid share in respect of the claim or the counter
claim, the Arbitral Tribunal may suspend or terminate
the arbitral proceedings in respect of such claim or
counter-claim as the case may be. A provision thus has
been enacted for the suspension of the proceedings by
the Arbitral Tribunal where costs have not been
deposited. ”
(Emphasis supplied)
(v)
Fifthly, Section 32 sub-section (1) of the Act, 1996, stipulates
that the arbitral proceedings shall be terminated by the final
award or by an order under sub-section (2) thereof. Sub-
section (2) contemplates three situations where the tribunal
is vested with the power to the arbitral proceedings,
namely, (i) when the claimant withdraws his claim, (ii)
when the parties agree and (iii) when the Tribunal finds that
continuation of the proceedings has for any other reason
Special Leave Petition (C) No. 10389 of 2025 Page 64 of 269
become unnecessary or impossible. The termination of
proceedings results in the termination of the mandate of the
tribunal. The relevant observations read as under: -
“46. Section 32 is entitled “Termination of
proceedings” and sub-section (1) provides that the
arbitral proceedings shall be terminated by the final
Arbitral Award or by an order of the Arbitral Tribunal
under sub-section (2). Sub-section (2) of section 32 is
important for the purposes of the present proceedings
[...]
“47. Sub-section (2), therefore, contemplates three
situations where the Arbitral Tribunal is vested with
the power to terminate the arbitral proceedings,
namely, (i) when the claimant withdraws his claim, (ii)
when the parties agree and (iii) when the Tribunal
finds that continuation of the proceedings has for any
other reason become unnecessary or impossible. The
mandate of the Arbitral Tribunal terminates with the
termination of the arbitral proceedings. (Sub-section
(3) of section 32). [...]
(Emphasis supplied)
(vi) Sixthly, the High Court observed that clause (c) of Section
32(2) vests a residuary power in the arbitral tribunal to
terminate the proceedings where it finds that a continuation
thereof has for any other reason become unnecessary or
impossible. As no straitjacket formula could be laid down
as to when the proceedings would become either
unnecessary or impossible the legislature has left it for the
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arbitral tribunal to determine the same. Yet the expression
“unnecessary” must be construed to mean a situation where
the proceedings are rendered infructuous or where the
dispute itself does not survive, or the adjudication thereof
is unnecessary as a result of any valid reason (emphasis).
Similarly, impossibility is not to be construed to mean a
mere physical impossibility of an adjudication. A consistent
course of conduct of the party can also render the
continuation of the proceedings impossible. However, the
High Court cautioned that an arbitral tribunal should be
weary of not permitting a party to take the benefit of its own
contumacious conduct and seek the termination of
proceedings. The relevant observations read as under: -
“[...] 47. Clause (c) of sub-section (2) of section 32 has
vested a residuary power in the Arbitral Tribunal to
terminate the proceedings where it finds that a
continuation thereof has for any other reason become
unnecessary or impossible. The legislature has
advisedly left it to the Tribunal to determine as to
when the continuation of the proceedings has become
unnecessary or impossible. The expression
“unnecessary” may for instance involve a situation
where proceedings are rendered infructuous. A
situation may have arisen as a result of which an
adjudication into the dispute has become unnecessary
either as a result of the fact that the dispute does not
survive or for any other valid reason. Situations may
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also arise where a continuation of proceedings is
rendered impossible. Impossibility is not merely to be
viewed from the point of view of a physical
impossibility of an adjudication, but may conceivably
encompass a situation where a party by a consistent
course of conduct renders the very continuation of the
arbitral proceedings impossible. Then again a party
which has been guilty of contumacious conduct cannot
be heard to seek the benefit of its conduct to seek
termination. It is impossible to catalogue the
circumstances in which the Arbitral Tribunal may
hold that it is either unnecessary or impossible to
continue the arbitral proceedings.”
(Emphasis supplied)
110. Accordingly, the Bombay High Court in Datar Switchgear (supra)
held that under the scheme of the Act, 1996, the arbitral tribunal is
not empowered to either suspend or terminate the proceedings for
the purpose of aiding or securing the execution or compliance of
any interim order passed by it under Section 17 of the Act, 1996.
111. However, in arriving at the aforesaid conclusion, the Bombay
High Court made some pertinent observations as regards the
interplay between Section(s) 25, 30, 32 and 38 of the Act, 1996
respectively. To understand the same, paragraph 44 has to be read
in conjunction with paragraphs 50, 55 and 57 respectively. They
read as follows: -
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“44. These statutory provisions enacted by Parliament are
extremely material for, they reveal the scheme of the
legislation. The legislature has envisaged a default of a certain
specified nature and character in section 25 of the Act and
has authorised the Arbitral Tribunal to terminate the
proceedings where a claim has not been filed within the period
prescribed by the Tribunal. Other kinds of defaults including
a default in failing to attend for giving evidence in accordance
with the process issued by the Court or contempt of the
Arbitral Tribunal during the conduct of arbitral proceedings
are subject to the imposition of disadvantages, penalties and
punishments by order of the Court on the re-presentation of
the Tribunal. The canvass of Chapter V is in relation to the
conduct of arbitral proceedings. Chapter V does not
encompass the termination of arbitral proceedings by the
Arbitral Tribunal save and except for the reference to
termination in section 25(a).
xxx xxx xxx
50. A reading of the provisions contained in Part-I of the
Arbitration and Conciliation Act, 1996 would, therefore, in
my view, leave no manner of doubt that the Arbitral Tribunal
does not have the power to suspend the arbitral proceedings
before it as a step in aid of the execution of an interim order
passed by the Arbitral Tribunal. While consolidating and
amending the law relating to domestic and international
commercial arbitration, the legislature has made specific
provisions for the termination or, as the case may be, for
suspension of arbitral proceedings. The Arbitral Tribunal is
empowered to rule on its jurisdiction and to determine a
challenge to the existence or the validity of an arbitration
agreement. In such a situation, the recent decision of three
learned Judges of the Supreme Court in (Bhatia
2
International v. Bulk Trading S.A.) , (2002) 4 SCC
105 holds that applications for stay of arbitral proceedings or
to challenge the existence or validity of the arbitration
agreement or involving the jurisdiction of the Arbitral
Tribunal have to be made to the Arbitral Tribunal under the
Act. Such applications cannot be made to the Court under
section 9. Where there is a challenge to the jurisdiction of the
Arbitral Tribunal or the existence or validity of the
arbitration agreement is questioned, an application can only
Special Leave Petition (C) No. 10389 of 2025 Page 68 of 269
lie before the Arbitral Tribunal to have these issues
adjudicated. As an incident of its power to adjudicate on its
jurisdiction, the Arbitral Tribunal may entertain an
application for stay or as a consequence of its determination
upholding a challenge to its jurisdiction or to the existence or
validity of the agreement on arbitration, terminate
proceedings. In so far as defaults are concerned, the
legislature has made specific provisions which envisage
specific instances of default and provide clear cut
consequences of those defaults. Among these circumstances,
as already noted, are those envisaged in sections 25, 27(5) and
38 of the Act. Provisions have been made in section 32 for
termination of proceedings. That being the position, it would
be impermissible to read into sub-section (3) of section 19 a
power to suspend arbitral proceedings or to terminate arbitral
proceedings as an incident of the enforcement of an interim
order.
xxx xxx xxx
[...] The circumstances in which arbitral proceedings can be
terminated, or as the case may be, can be suspended are
defined by the Act. The Act has consolidated and amended the
law relating to domestic and international commercial
arbitration. The legislation envisages defaults and enunciates
the consequences of those defaults. [...]
xxx xxx xxx
57. [...] The power of the Arbitral Tribunal contrariwise is a
power which the Arbitral Tribunal has during the pendency
of arbitral proceedings before it to order an interim measure
of protection. In so far as the Arbitral Tribunal is concerned,
the proceedings terminate upon a final Arbitral Award or on
an order passed under sub-section (2) of section 32. [...]”
(Emphasis supplied)
112. According to the High Court, the legislature recognizes the
termination or, as the case may be, the suspension of the arbitral
proceedings for only defaults of a certain specified nature and
Special Leave Petition (C) No. 10389 of 2025 Page 69 of 269
character, and has thus, made specific provisions. It observed that
Section(s) 25 and 38 of the Act, 1996 respectively, envisage such
instances, where the consequence of a default would be
termination of the proceedings. Section 32 of the Act, 1996, more
particularly sub-section (2) is the provision which provides for the
termination of the proceedings.
113. Thus, as per Datar Switchgear (supra), Section(s) 25, 31 and 38 of
the Act, 1996 respectively, merely enumerate the instances in
which the arbitral proceedings may be terminated. However, the
order for effecting such termination is not passed under any of the
aforesaid provisions. The provision under which the arbitral
tribunal passes an order for termination of the proceedings is
Section 32 sub-section (2) of the Act, 1996.
114. To put it simply, Section(s) 25, 31 and 38 of the Act, 1996
respectively, merely envisage the situations where an arbitral
tribunal would be empowered to terminate the proceedings.
However, the power to pass an order for the termination of the
proceedings lies under Section 32 sub-section (2) of the Act, 1996
alone, even if such termination is pursuant to the aforesaid
provisions of Section(s) 25, 31 and 38 of the Act, 1996 respectively.
Special Leave Petition (C) No. 10389 of 2025 Page 70 of 269
115. Datar Switchgear (supra) expressly observes in the context of
Section 25 of the Act, 1996 that the same “ does not encompass the
termination of arbitral proceedings by the Arbitral Tribunal save and
except for the reference to termination in section 25(a)”. Thus,
according to it, the use of the words “ terminate the proceedings ” in
Section(s) 25, 31 and 38 of the Act, 1996 respectively, is only a
reference to the power of termination, that is enshrined in Section
32(2) of the Act, 1996.
116. The provision of Section 32 of the Act, 1996, first fell for the
consideration of this Court in Lalitkumar V. Sanghavi (supra). In
the said case, the arbitrator expressed his anguish at the dispute
having remained pending for nearly four-years. During this
period, the claimant had shown no interest in pursuing the
arbitration, and had even failed to pay the fees as directed.
Accordingly, the arbitral proceedings came to be terminated. The
relevant observations read as under: -
“5. By his order dated 29-10-2007, the presiding arbitrator
informed the appellants that the arbitration proceedings stood
terminated. The relevant portion of the order reads as follows:
“The matter is pending since June 2003 and
though the meeting was called in between June
2004 and 11-4-2007, the claimant took no interest
Special Leave Petition (C) No. 10389 of 2025 Page 71 of 269
in the matter. Even the fees directed to be given is
not paid.
In these circumstances please note that the
arbitration proceedings stand terminated. All
interim orders passed by the Tribunal stand
vacated.”
(Emphasis supplied)
116.1 In appeal, this Court inter-alia held that under the Act, 1996, more
particularly Section 32, an arbitral proceeding can be terminated in
only two ways. Either by the making of the final award, or by
passing an order of termination of proceedings under sub-section
(2) of Section 32. Sub-section (2) of Section 32, further provides
three contingencies, where the proceedings may be terminated.
Any such order of termination of proceedings would also
terminate the mandate of the arbitral tribunal. Accordingly, it held
that the order passed by the arbitrator terminating the proceedings
on the ground of failure to pay the fees and want of prosecution on
the part of claimant could have only fallen within the scope of
clause (c) of Section 32(2) i.e., where the continuation of the
proceedings has become impossible. The relevant observations
read as under: -
“11. Section 32 of the Act on the other hand deals with the
termination of arbitral proceedings. From the language of
Special Leave Petition (C) No. 10389 of 2025 Page 72 of 269
Section 32, it can be seen that arbitral proceedings get
terminated either in the making of the final arbitral award or
by an order of the Arbitral Tribunal under sub-section (2).
Sub-section (2) provides that the Arbitral Tribunal shall
issue an order for the termination of the arbitral proceedings
in the three contingencies mentioned in clauses (a) to (c)
thereof.
12. On the facts of the present case, the applicability of
clauses (a) and (b) of Section 32(2) is clearly ruled out and
we are of the opinion that the order dated 29-10-2007 by
which the Tribunal terminated the arbitral proceedings could
only fall within the scope of Section 32, sub-section (2),
clause (c) i.e. the continuation of the proceedings has become
impossible. By virtue of Section 32(3), on the termination of
the arbitral proceedings, the mandate of the Arbitral Tribunal
also comes to an end. [...]”
(Emphasis supplied)
117. This Court in Lalitkumar V. Sanghavi (supra) further held that the
appropriate remedy against an order terminating the arbitral
proceedings lies by way of an application under Section 14 of the
Act, 1996. However, for the sake of clarity, the question as to
where the remedy against an order of termination of proceedings
should lie shall be addressed in the latter parts of this judgment.
118. Thus, as per Lalitkumar V. Sanghavi (supra) it appears that an
arbitral proceeding can be terminated under the Act, 1996 only by
the passing of an order under Section 32(2). Furthermore, any such
termination on the ground of non-payment of fees or
Special Leave Petition (C) No. 10389 of 2025 Page 73 of 269
disinclination to pursue the arbitration, would fall within the
scope of proceedings being rendered unnecessary or impossible in
terms of clause (c) of Section 32(2) of the Act, 1996.
119. We are conscious of the fact that in Lalitkumar V. Sanghavi
(supra), the termination of the arbitral proceedings by the tribunal
was not strictly on the ground of non-payment of the arbitral fees.
The arbitral tribunal had terminated the proceedings due to the
lack of interest on the part of the claimant therein.
120. In such circumstances, it could be argued that Lalitkumar V.
Sanghavi (supra) never held that a termination of proceedings
stricto-sensu for the failure to pay the deposit in terms of Section
38, would also fall under Section 32(2)(c) of the Act, 1996.
121.
We shall address this line of argument in more detail, once we
examine the various decisions of the High Courts which have
construed the power of termination of proceedings under Section
32(2) of the Act, 1996 to be distinct from that under Section(s) 25
and 38 of the Act, 1996 respectively.
122.
Nevertheless, whether the ratio of Lalitkumar V. Sanghavi (supra)
supports the above proposition of law can be discerned from the
Special Leave Petition (C) No. 10389 of 2025 Page 74 of 269
manner in which the various High Courts have understood and
applied the ratio of the said decision.
123. In this regard we may look into the decision of the Bombay High
Court in Neeta Lalitkumar Sanghavi v. Bakulaben Dharmadas
Sanghavi reported in 2019 SCC OnLine Bom 250 and the decision
of the Delhi High Court in PCL Suncon v. National Highway
Authority of India reported in 2021 SCC OnLine Del 313
respectively.
124. The controversy that arose in Lalitkumar V. Sanghavi (supra),
more particularly, the termination of proceedings once again
resurfaced before the Bombay High Court in Neeta Lalitkumar
Sanghavi (supra).
125.
Although the principal issue in Neeta Lalitkumar Sanghavi
(supra) was whether the remedy against the termination of
proceedings on the ground of failure to implead the legal heirs,
would lie under Section 14 or 34 of the Act, 1996, yet the decision
is significant for the purpose of gauging how the High Court
understood the ratio of Lalitkumar V. Sanghavi (supra).
126. The Bombay High Court from a combined reading of Section 32 of
the Act, 1996 and the ratio of Lalitkumar V. Sanghavi (supra),
Special Leave Petition (C) No. 10389 of 2025 Page 75 of 269
arrived at the same conclusion. It observed that as per Section 32,
the arbitral proceedings shall stand terminated by either the
pronouncement of the final arbitral award or by an order of the
arbitrator under sub-section (2) thereof. The relevant observations
read as under: -
“19. Section 32(1) stipulates that the arbitral proceedings
shall be terminated by the final arbitral award or by an order
of the arbitral tribunal under sub-section (2). Sub-section (2)
of Section 32 provides that the arbitral tribunal shall issue an
order for the termination of the arbitral proceedings where (a)
the claimant withdraws his claim, unless the respondent
objects to the order and the arbitral tribunal recognizes a
legitimate interest on his part in obtaining a final settlement
of the dispute, (b) the parties agree on the termination of the
proceedings, or (c) the arbitral tribunal finds that the
continuation of the proceedings has for any other reason
become unnecessary or impossible. Section 32(3) stipulates
that subject to section 33 and subsection (4) of section 34, the
mandate of the arbitral tribunal shall terminate with the
termination of the arbitral proceedings.
xxx xxx xxx
24. [...] Section 32 of the Act provides for the termination of
arbitral proceedings. It provides that the arbitral proceedings
shall stand terminated by pronouncement of the final arbitral
award or by an order of the arbitrator under sub-section (2)
of Section 32. In the facts of the present case, the Arbitral
Tribunal has terminated the proceedings by virtue of not
bringing the petitioners on record in the arbitral proceedings.
There is no pronouncement of a final arbitral award in the
facts of the present case as stipulated under Section 32(1).
Every order of the Tribunal terminating the arbitral
proceedings can never be terms as an award. This is clear
from an ex-facie reading of section 32. [...] ”
Special Leave Petition (C) No. 10389 of 2025 Page 76 of 269
(Emphasis supplied)
127. Similarly, in PCL Suncon (supra), the Delhi High Court held that
as per the decision of Lalitkumar V. Sanghavi (supra) Section 32
of the Act, 1996 is exhaustive and covers all cases of termination
of arbitral proceedings under the Act. It further held that even an
order terminating the proceedings for the failure to file the
statement of claims in terms of Section 25 would, in substance, be
an order under Section 32 sub-section (2) of the Act, 1996. The
relevant observations read as under: -
“25. Section 32 of the A&C Act also draws a clear distinction
between a final arbitral award and orders passed by an
Arbitral Tribunal. In terms of Sub-section (1) of Section 32
of the A&C Act, arbitral proceedings stand terminated by a
final award or by such orders as are specified under Sub-
section (2) of the said A&C Act.
xxx xxx xxx
37. The Supreme Court held the said order to be one
terminating the arbitral proceedings under Section 32(2)(c)
of the A&C Act as the said order would not qualify as an
order under Clauses (a) or (b) of Section 32(2) of the A&C
Act. The court proceeded on the basis that Section 32 of the
A&C Act is exhaustive and covers all cases of termination of
arbitral proceedings. This is implicit in paragraphs nos. 11
and 12 of the said decision, which read as under:
“11. Section 32 of the Act on the other hand deals
with the termination of arbitral proceedings. From
the language of Section 32, it can be seen that
arbitral proceedings get terminated either in the
making of the final arbitral award or by an order of
Special Leave Petition (C) No. 10389 of 2025 Page 77 of 269
the Arbitral Tribunal under sub-section (2). Sub-
section (2) provides that the Arbitral Tribunal
shall issue an order for the termination of the
arbitral proceedings in the three contingencies
mentioned in clauses (a) to (c) thereof.
12. On the facts of the present case, the
applicability of clauses (a) and (b) of Section 32(2)
is clearly ruled out and we are of the opinion that
the order dated 29-10-2007 by which the Tribunal
terminated the arbitral proceedings could only fall
within the scope of Section 32, sub-section (2),
clause (c) i.e. the continuation of the proceedings
has become impossible. By virtue of Section 32(3),
on the termination of the arbitral proceedings, the
mandate of the Arbitral Tribunal also comes to an
end. Having regard to the scheme of the Act and
more particularly on a cumulative reading of
Section 32 and Section 14, the question whether
the mandate of the arbitrator stood legally
terminated or not can be examined by the court “as
provided under Section 14(2)”.
xxx xxx xxx
39. An order terminating the proceedings on failure of the
claimant to file its Statement of Claims within the stipulated
time, is also in the nature of an order under Sub-section (2)
of Section 32 of the A&C Act and not an arbitral award
because such an order does not decide any of the points on
which the parties are in issue in the arbitration.”
(Emphasis supplied)
128. In yet another decision of the Delhi High Court in Gangotri
Enterprises Ltd. v. NTPC Tamil Nadu Energy Co. Ltd. reported in
2017 SCC OnLine Del 6560 , it was held that where the arbitrator
terminates the proceeding in terms of Section 25(a) of the Act,
Special Leave Petition (C) No. 10389 of 2025 Page 78 of 269
1996, the same would be a termination within the meaning of
Section 32(2)(c) of the said Act.
128.1 In the said case, the appellant was given more than five
opportunities to file its statement of claims, yet he failed to do so
each time. Consequently, the arbitrator in terms of Section 25(a)
of the Act, 1996, foreclosed the appellant’s right to file the
statement of claim.
128.2
However, the arbitrator did not terminate the proceedings in
view of the counter-claims filed by the respondent. Instead, the
appellant was directed to file his statement of defence in respect
of the same, failing which the proceedings would continue
without it.
128.3
Aggrieved by the aforesaid, the appellants moved the High Court
contending that the order passed by the arbitrator, closing their
right to file the statement of claims, had effectively terminated the
proceedings and the mandate of the tribunal in respect of the
claims, thereby entitling them to invoke the remedy under Section
14 of the Act, 1996.
128.4 However, the respondent therein contended that since the
proceedings had not been terminated, and the arbitrator was still
Special Leave Petition (C) No. 10389 of 2025 Page 79 of 269
continuing to adjudicate some of the disputes, there was no
termination of the mandate, and as a result the appellants were
not entitled to the relief under Section 14 of the Act, 1996.
128.5 The Delhi High Court observed that although the arbitrator did
not terminate the proceedings in its entirety yet by virtue of
closing the right of the appellants to file his statement of claim it
had, in effect terminated the proceedings.
128.6 Lalitkumar V. Sanghavi
Placing reliance on (supra) it held that
such an order had the effect of terminating both the proceedings
and the mandate of the tribunal terms of Section 32(2) of the Act,
1996 insofar as the claim is concerned, irrespective of the fact that
the proceedings were still in progress in respect of the counter-
claims, inasmuch as the final award that would be eventually
passed would not include the said claims.
128.7 The relevant observations read as under: -
“12. GEL, thereafter, sought time to file its statement of
claims but admittedly failed to do so. GEL's request for
extending the time to file the statement of claims was accepted
and the arbitrator extended time to file statement of claims on
more than five occasions. However, since GEL failed to do so,
the arbitrator passed the Interim Arbitral Order dated
28.04.2016 under Section 23 and 25 of the Act, in effect
closing the right of GEL to file the statement of claims. The
arbitrator, further directed GEL to file its response to the
counter claims filed by NTECL.
Special Leave Petition (C) No. 10389 of 2025 Page 80 of 269
15. Mr. Bharat Sangal, the learned counsel appearing for
NTECL submitted that the question of examining a
controversy as to whether the arbitrator is de jure or de
facto unable to act, would arise only in cases where the
proceedings are finally closed and not in cases where the
arbitrator is still continuing to adjudicate some of the
disputes. He submitted that the decision in the case of Lalit
Kumar v. Sanghavi (supra) would be applicable only in cases
where the mandate of the arbitrator is terminated on account
of final order terminating the proceedings in entirety.
xxx xxx xxx
22. The learned counsel for GEL has sought to place GEL's
case under Section 14(2) of the Act on the basis that the
arbitrator has terminated the proceedings and therefore, by
virtue of Section 32(3) of the Act, the mandate of the
arbitrator also stands terminated; consequently, falling
within the scope of Section 14(2) of the Act.
xxx xxx xxx
23. It is necessary to observe that by the order dated
28.04.2016, the arbitrator has not terminated the arbitral
proceedings in its entirety; he has terminated the
proceedings qua the claims of GEL by closing GEL's right to
file its claims. The arbitrator has therefore captioned the order
as “Interim Arbitral Order passed under Sec 23 & 25 of the
Arbitration and Conciliation Act 1996/2015
(Amendments)”. By the said order, he also directed GEL to
file a response to the counter-claims of NTECL and further
clarified that “the final award will be pronounced after the
adjudication of the counter claims”.
24. Having stated the above, Mr. Sangal's the contention
that the arbitrator's mandate has not terminated by the
impugned order dated 28.04.2016 as the arbitral proceedings
have not terminated, is erroneous. Clearly, the arbitral
proceedings qua the disputes raised by GEL were terminated
on account of its failure to file the statement of claims within
the time as specified. Undisputedly, the effect of the order of
28.04.2016 is that arbitrator's mandate for deciding the
claims intended to be raised by GEL stands terminated and
he is de jure or de facto unable to act as an arbitrator qua such
Special Leave Petition (C) No. 10389 of 2025 Page 81 of 269
claims even though his mandate to continue the proceedings
and adjudicate the counter claims has not come to an end.
26. The decision in the case of Lalitkumar V.
Sanghavi (supra) also turned on the principle that the
petitioner could not be rendered remediless on account of the
arbitrator terminating the proceedings. In that case no
recourse would be available to the petitioner under Section 34
of the Act and thus the question would have to be considered
within the scope of Section 14 of the Act. Thus, this decision
applies only in cases where the arbitral proceedings are
terminated by the arbitrator other than by making an award,
that is, under Section 32(2) of the Act; it is clearly not
applicable where the arbitral proceedings are terminated by
virtue of Section 32(1) of the Act, that is, by making of an
award.
27. Thus, the second question, whether the order dated
28.04.2016 closing the right of GEL to file its statement of
claims and thereby terminating the proceedings qua such
claims, is amenable to challenge under Section 14 of the Act,
is answered in the affirmative. In cases where the arbitrator's
mandate is terminated, a re-course to Section 14(2) of the Act
would be available provided a specific remedy is not provided
under the Act. In the present case, the arbitrator's mandate
to adjudicate any claims of GEL under the Agreement, stands
terminated. Concededly, the order dated 28.04.2016 as also
the final award that may be passed, in as much as it would
not include GEL's claim, would not be amenable to challenge
under Section 34 of the Act.”
(Emphasis supplied)
II. Decisions reading Termination under Section(s) 25, 30 or 38
respectively, to be independent from that under Section 32
sub-section (2) of the Act, 1996.
129. On the other hand, as discussed earlier, the power of the arbitral
tribunal to terminate the proceedings under Section(s) 25, 30 or 38
Special Leave Petition (C) No. 10389 of 2025 Page 82 of 269
of the Act, 1996 respectively, has been construed by various
decisions to be independent from the power to terminate the
proceedings under Section 32 of the said Act.
130. To put it simply, in several decisions the view has been taken that
the provisions of Section(s) 25, 30, 32 and 38 of the Act, 1996
respectively, or at-least some of these provisions, each
independently empower the arbitral tribunal to terminate the
proceeding in the circumstances contemplated therein.
131. Thus, according to the aforesaid proposition, the power to
terminate the proceedings under the Act, 1996 does not emanate
solely from Section 32 sub-section (2), but rather inheres in various
other provisions of the Act, that contemplate the termination of
proceedings.
132. One of the significant decisions in this regard is the judgment of
SREI Infrastructure (supra) rendered by a two-Judge Bench of this
Court. In the said decision, the arbitral tribunal terminated the
proceedings in terms of Section 25 of the Act, 1996 on account of
the claimant’s failure to file his statement of claim despite repeated
Special Leave Petition (C) No. 10389 of 2025 Page 83 of 269
reminders. The tribunal whilst terminating the proceedings
observed that the claimant appeared to be not interested in
pursuing the arbitration and that no explanation had been offered
for his failure to file the statement of claims.
133. Aggrieved by the same, the respondent preferred an application
before the arbitral tribunal seeking recall of the order terminating
the proceedings. The same came to be rejected on the ground that
the tribunal lacked the authority to recommence the proceedings
once they stood terminated. Against the same, a petition under
Article 227 was preferred before the High Court, which came to be
allowed. The High Court remitted the matter back to the tribunal
for fresh consideration on the issue of termination of the
proceedings.
134. In appeal, this Court observed that there was a legislative gap in
the context of the provisions of Section(s) 25(a), 32(2) and 34 of the
Act, 1996 respectively, that required to be resolved. Upon
examining the aforesaid provisions, this Court held that the
termination of proceedings envisaged under Section 25(a) of the
Special Leave Petition (C) No. 10389 of 2025 Page 84 of 269
Act, 1996 is markedly different from that under Section 32(2)(c) for
the following reasons: -
(i) First, it held that Section 25, more particularly clause (a)
provides that when the claimant fails to communicate his
statement of claim within the time as envisaged by Section
23, the arbitral tribunal has to terminate the proceedings.
Thus, the provision contemplates a situation where the
arbitral proceeding is yet to be started. The relevant
observations read as under: -
“20. In the present case, proceedings were terminated
vide order dated 12-12-2011 under Section 25(a).
After termination of proceedings, application to recall
the said order was filed by the claimant on 20-1-2012,
which was rejected by the Arbitral Tribunal on the
ground that it has no jurisdiction to recommence the
arbitration proceedings. Section 25 contemplates a
situation that when the claimant fails to communicate
his statement of claim within the time as envisaged by
Section 23, the Arbitral Tribunal has to terminate the
proceedings. This section thus contemplates a
situation where arbitration proceeding has not been
started. [...]”
(Emphasis supplied)
(ii) Secondly, that the proceedings in terms of Section 25(a) of the
Act, 1996 may be terminated only when the claimant is asked
to show cause as to why he failed to submit his claim within
Special Leave Petition (C) No. 10389 of 2025 Page 85 of 269
the time stipulated and the claimant fails to show any
sufficient cause for the same. Thus, it is the duty of the arbitral
tribunal to give an opportunity to the defaulting claimant to
show sufficient cause for his failure. Where a sufficient cause
is shown, either in response to the tribunal’s notice, or by the
claimant on his own, it is not obligatory for the arbitral
tribunal to terminate the proceedings. The relevant
observations read as under: -
“20. [...] The most important words contained in
Section 25 are “where without showing sufficient
cause—the claimant fails to communicate his
statement of claim”. Under Section 23(1), the claimant
is to state the facts supporting his claim within the
period of time agreed upon by the parties or determined
by the Arbitral Tribunal. The question of termination
of proceedings thus arises only after the time agreed
upon between the parties or determined by the Arbitral
Tribunal comes to an end. When the time as
contemplated under Section 23(1) expires and no
sufficient cause is shown by the claimant the Arbitral
Tribunal shall terminate the proceedings. The question
of showing sufficient cause will arise only when the
claimant is asked to show cause as to why he failed to
submit his claim within the time as envisaged under
Section 23(1) or the claimant, on his own, before the
order is passed under Section 25(a) to terminate the
proceedings comes before the Arbitral Tribunal
showing sufficient cause for not being able to submit
his claim within the time. In both the circumstances
i.e. when a show-cause notice is issued to the claimant
as observed above or the claimant of his own shows
cause for non-filing the claim within the time the
Special Leave Petition (C) No. 10389 of 2025 Page 86 of 269
Arbitral Tribunal shall take a call on terminating the
proceedings. It is easy to comprehend that in the
event, the claimant shows a sufficient cause, the
Arbitral Tribunal can accept the statement of
claim even after expiry of the time as envisaged
under Section 23(1) or grant further time to the
claimant to file a claim. Thus, on sufficient cause
being shown by a claimant even though time has
expired under Section 23(1), it is not obligatory
for the Arbitral Tribunal to terminate the
proceedings. The conjunction of the wordings
“where without showing sufficient cause” and
“the claimant fails to communicate his statement
of claim”, would indicate that it is a duty of the
Arbitral Tribunal to inform the claimant that he
has failed to communicate his claim on the date
fixed for that and requires him to show cause
why the arbitral proceedings should not be
terminated? [...]”
(Emphasis supplied)
(iii) Thirdly, under the scheme of Section 25, ordinarily, the
proceedings have to be terminated only when no sufficient
cause is shown by the claimant for his default in filing the
statement of claim. However, there is no impediment in the
provision for the claimant to show such sufficient cause even
after the termination of the proceedings. This is because the
occasion to show sufficient cause would arise only after the
claimant defaults in filing its statement of claims. Thus, even
after passing the order for terminating the proceedings, if
Special Leave Petition (C) No. 10389 of 2025 Page 87 of 269
sufficient cause is shown, the same can be accepted by the
tribunal. There is no lack of the jurisdiction in the arbitral
tribunal to recall the earlier order on sufficient cause being
shown. The relevant observations read as under: -
“20. [...] Opportunity to show sufficient cause for his
failure to communicate his claim statement can only
be given after he has actually failed to do so. Whether
in a case where the claimant failed to file a statement
of claim and has failed also to show cause before an
order of termination of proceedings is passed, the
claimant is entitled to show cause subsequent to the
termination, is the question which has fallen for
consideration.
21. When the Arbitral Tribunal without sufficient
cause being shown by the claimant to file the claim
statement can terminate the proceedings, subsequent
to termination of proceedings, if the sufficient cause is
shown, we see no impediment in the power of the
Arbitral Tribunal to accept the show cause and permit
the claimant to file the claim. The scheme of Section 25
of the Act clearly indicates that on sufficient cause
being shown, the statement of claim can be permitted
to be filed even after the time as fixed by Section 23(1)
has expired. Thus, even after passing the order of
terminating the proceedings, if sufficient cause is
shown, the claims of statement can be accepted by the
Arbitral Tribunal by accepting the show-cause and
there is no lack of the jurisdiction in the Arbitral
Tribunal to recall the earlier order on sufficient cause
being shown.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 88 of 269
(iv) Lastly, the occasion to terminate the proceedings under
Section 32(2)(c) arises only when the claim is not terminated
under Section 25(a), and the arbitration has proceeded further.
The words “unnecessary” or “impossible” in Section 32(2)(c)
have been used in a context different from that of the default
contemplated under Section 25(a). Furthermore, the use of the
phrase “ the mandate of the Arbitral Tribunal shall terminate ” in
Section 32, and the omission of it in Section 25, clearly indicates
that the nature of termination under the two provisions is
distinct from each other. The distinction being that under
Section 25(a), the proceeding can be recommenced even after
termination, if the claimant shows sufficient cause, but no such
revival is possible under Section 32(2)(c) of the Act, 1996. The
relevant observations read as under: -
“22. Section 32 contains a heading “Termination of
Proceedings”. Sub-section (1) provides that the
arbitral proceedings shall be terminated by the final
arbitral award or by an order of the Arbitral Tribunal
under sub-section (2). Sub-section (2) enumerates the
circumstances when the Arbitral Tribunal shall issue
an order for the termination of the arbitral
proceedings. The situation as contemplated under
Sections 32(2)(a) and 32(2)(b) are not attracted in the
facts of this case. Whether termination of proceedings
in the present case can be treated to be covered by
Section 32(2)(c) is the question to be considered.
Special Leave Petition (C) No. 10389 of 2025 Page 89 of 269
Clause (c) contemplates two grounds for termination
i.e. (i) the Arbitral Tribunal finds that the
continuation of the proceedings has for any other
reason become unnecessary, or (ii) impossible. The
eventuality as contemplated under Section 32 shall
arise only when the claim is not terminated under
Section 25(a) and proceeds further. The words
“unnecessary” or “impossible” as used in clause (c) of
Section 32(2), cannot be said to be covering a situation
where proceedings are terminated in default of the
claimant. The words “unnecessary” or “impossible”
has been used in different contexts than to one of
default as contemplated under Section 25(a). Sub-
section (3) of Section 32 further provides that the
mandate of the Arbitral Tribunal shall terminate with
the termination of the arbitral proceedings subject to
Section 33 and sub-section (4) of Section 34. Section
33 is the power of the Arbitral Tribunal to correct any
computation errors, any clerical or typographical
errors or any other errors of a similar nature or to give
an interpretation of a specific point or part of the
award. Section 34(4) reserves the power of the court to
adjourn the proceedings in order to give the Arbitral
Tribunal an opportunity to resume the arbitral
proceedings or to take such other action as in the
opinion of the Arbitral Tribunal will eliminate the
grounds for setting aside the arbitral award. On the
termination of proceedings under Sections 32(2) and
33(1), Section 33(3) further contemplates termination
of the mandate of the Arbitral Tribunal, whereas the
aforesaid words are missing in Section 25. When the
legislature has used the phrase “the mandate of the
Arbitral Tribunal shall terminate” in Section 32(3),
non-use of such phrase in Section 25(a) has to be
treated with a purpose and object. The purpose and
object can only be that if the claimant shows sufficient
cause, the proceedings can be recommenced.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 90 of 269
135. In Sai Babu v. M/s Clariya Steels Pvt. Ltd. [Civil Appeal No. 4956
of 2019] , another two-Judge Bench of this Court placing reliance
on SREI Infrastructure (supra), reiterated that the termination of
proceedings under Section 25(a) is distinct from that under Section
32(2)(c). As in the former, only the proceedings come to an end
whereas in the latter the mandate of the arbitral tribunal also gets
terminated. Thus, unlike Section 25(a), no option of recall would
lie in cases covered by Section 32 of the Act, 1996. The relevant
observations read as under: -
“The sole arbitrator who was appointed in this case
terminated proceedings under Section 32(2)(c) of the
Arbitration and Conciliation Act, 1996 (hereinafter referred
to as ‘Act’), by order dated 04.05.2017. However, on an
application dated 05.05.2017 to recall the aforesaid order, the
learned arbitrator passed an order on 18.05.2017 stating that,
as good reasons had been made out in the affidavit for recall,
he was inclined to recall the order even though under the Act,
in law, it may be difficult to do so. A revision filed against the
aforesaid order was dismissed by the High Court on
14.06.2017.
Having heard learned counsel for the parties, we are of the
view that the matter is no longer res integra. In SREI
Infrastructure Finance Limited v. Tuff Drilling Private
Limited’ [(2018) 11 SCC 470] [...]
xxx xxx xxx
It is clear, therefore, that a distinction was made by this Court
between the mandate terminating under section 32 and
proceedings coming to an end under section 25. This Court
Special Leave Petition (C) No. 10389 of 2025 Page 91 of 269
has clearly held that no recall application would, therefore, lie
in cases covered by section 32(3).”
(Emphasis supplied)
136. Thus, as per SREI Infrastructure (supra) and Sai Babu (supra)
respectively, the termination of proceedings in terms of Section
25(a) cannot be construed to mean an order of termination under
Section 32(2)(c), as both the provisions operate in different spheres
and context.
137. Hyderabad Metropolitan Development Authority & Anr. v.
In
Ramky Elsamex Hyderabad Ring Road Ltd. reported in 2023 SCC
OnLine TS 4416 , the question that came up for the consideration
of the Telangana High Court was whether an order of termination
pursuant to Section 38(2) would, in effect, constitute an order
under Section 32(2)(c) of the Act, 1996.
138.
The facts shorn of its details, are that the arbitral tribunal therein,
by its order had directed the parties to deposit the fees within a
specified time, failing which the proceedings would stand
terminated. The respondent-claimant therein deposited its share
of the fees, but the appellant defaulted. Notwithstanding the
Special Leave Petition (C) No. 10389 of 2025 Page 92 of 269
default, the tribunal proceeded to continue with the proceedings.
Aggrieved by the same, the appellants approached the High Court
of Telangana inter-alia contending that, since the order of the
arbitral tribunal had not been complied with, the proceedings
automatically stood terminated in terms of Section 32(2)(c) read
with Section 38(2) of the Act, 1996.
139.
The Telangana High Court held that the arbitral tribunal could not
have continued with the proceedings, as the same stood
terminated for the following reasons: -
(i) First, that as per Section 38(2) of the Act, 1996, the arbitral
tribunal is competent to terminate the proceedings where
both the parties fail to deposit the fees as directed. Such an
order of termination would be traceable to Section 32(2)(c)
of the Act, as the non-deposit of the requisite fees makes it
impossible for the tribunal to continue the proceedings. The
relevant observations read as under: -
“15. According to Section 31(8) Costs of arbitration
should be fixed by the Arbitral Tribunal in accordance
with Section 31-A. Section 31-A is about regime for
costs. Section 38 deals with deposits. According to
sub-section (1), the Tribunal is competent to fix the
amount of deposit or supplementary deposit as the case
Special Leave Petition (C) No. 10389 of 2025 Page 93 of 269
may be as advance for the costs referred to in Sub-
section (8) of section 31 which it would expect to incur
in respect of the claim submitted to it. Whenever there
is a counter claim, Arbitral Tribunal is competent to
fix separate amount of deposit for claim and counter
claim. According to Sub-section (2), deposit referred to
in Sub-section (1) should be payable in equal shares by
the parties. First proviso to Sub-section (2) enables one
party to pay the share of the other party also if the other
party fails to pay its share. According to second
proviso, where either party fails to pay share in respect
of claim or counter claim, the Arbitral Tribunal can
suspend or terminate the Arbitral proceedings in
respect of the claim or counter claim. Sub-Section (3)
enables rendering of accounts on such termination.
16. It is thus clear that according to second proviso to
Sub-section (2), the Tribunal is competent to
terminate Arbitral proceedings in case of failure of one
party or both parties to the dispute not paying the
deposit as directed by the Tribunal.
17. Section 32 of the Act, 1996 is in three parts. (i)
According to SubSection (1), Arbitral proceedings get
terminated when final arbitral award is passed or by
an order of the Arbitral Tribunal under Sub-section
(2). According to Sub-section (2), Arbitral Tribunal
shall issue an order for termination of the arbitral
proceedings where the claimant withdraws his claim,
unless respondent objects to such withdrawal; (ii)
where both parties agreed for termination of
proceedings; and (iii) where Arbitral Tribunal finds
that the continuation of the proceedings has for any
other reason becomes unnecessary or impossible.
xxx xxx xxx
22. Once proceedings are terminated traceable to
Section 38(2) read with Section 32(1)(c), the Arbitral
Tribunal has no competence to revive the arbitral
proceedings on the assumption that parties have never
Special Leave Petition (C) No. 10389 of 2025 Page 94 of 269
taken seriously the issue of termination of Arbitral
proceedings. When statute operates the field, the
understanding of the parties has no relevance. When
proceedings stood terminated and when the Arbitral
Tribunal has no competence to revive the Arbitral
proceedings, merely because the parties participated in
the subsequent proceedings has no legal consequence.
The parties cannot confer jurisdiction contrary to
statutory mandate.
23. In the case on hand, clause 32(2)(c) is attracted.
The Tribunal assumed that if parties do not make the
deposit within the time granted, they are not interested
in continuing the Arbitral proceedings. Though, the
Tribunal may not have used the
words unnecessary or impossible, the tone and tenor
of the order dated 10.09.2022 would clearly indicate
that it was impossible to continue the arbitral
proceedings. It is impossible to continue arbitral
proceedings if one of the parties are not keen in
participating in the arbitral proceedings by not
depositing the amount. Thus, having regard to the
conduct of one of the parties, petitioners herein, in not
depositing the fee directed to be paid by the Arbitral
Tribunal, it was impossible for the Arbitral Tribunal
to proceed with the case. It is not the case of the
respondent that he paid the fee payable by the
petitioners also as envisaged by first proviso to Section
38(2) of the Act, 1996. Therefore, reading together
second proviso to Section 38(2) and Section 32(2)(c),
the Arbitral proceedings stood terminated by virtue of
the orders of the Arbitral Tribunal dated 10.9.2022.
Once proceedings are terminated as per these clauses,
it is no more permissible for the Arbitral Tribunal to
commence or continue the Arbitral proceedings.”
(Emphasis supplied)
(ii) Secondly, the High Court by placing reliance on SREI
Infrastructure (supra) held that the termination of
Special Leave Petition (C) No. 10389 of 2025 Page 95 of 269
proceedings under Section 38(2) read with Section 32(2)(c)
is distinct from that under Section 25 of the Act, 1996. Unlike
Section 32(2)(c) where upon the termination of proceedings,
the mandate of the tribunal also comes to an end, Section 25
carves out an exception. This is because, under Section 25,
notwithstanding the termination of the proceedings, the
mandate of the tribunal continues, thereby, making it
permissible for the tribunal to revive the proceedings.
However, under the scheme formed by Section(s) 38(2) and
32(2)(c) no such revival is possible. The relevant
observations read as under: -
“24. Section 32(3) of the Act, 1996 clearly holds that
once Arbitral proceedings are terminated, the mandate
given to the Arbitral Tribunal also gets terminated. In
other words, the mandate comes to an end, the moment
Arbitral proceedings stood terminated. The scheme of
the Act does not envisage revival of Arbitral
proceedings once Arbitral proceedings are terminated.
Section 25 carves out an exception to scheme of
Sections 32 and 38 of the Act, 1996 as held by the
Hon'ble Supreme Court in SREI Infrastructure
Finance Ltd. According to law propounded by the
Hon'ble Supreme Court even if there was default of a
party as envisaged in Section 25, it is permissible for
the Arbitral Tribunal to continue proceedings.
Sections 32 and 38 of the Act, 1996 do not envisage
such course.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 96 of 269
140. Thus, according to the Telangana High Court in Hyderabad
Metropolitan Development Authority (supra), although an order
of termination in terms of Section 25(a) would not fall within the
scope of Section 32(2)(c) of the Act, 1996 as held by SREI
Infrastructure (supra), yet when an order of termination of
proceedings is passed in terms of Section 38(2), the same would
invariably constitute an order under Section 32(2)(c) of the said
Act.
141. In Sushila Kumari & Anr. v. Bhayana Builders Pvt. Ltd. reported
in 2019 SCC OnLine Del 7243 , the arbitral proceedings came to be
terminated on the ground that the claimant failed to quantify the
valuation of her claim. The arbitrator observed that despite several
requests, the claimant refused to quantify her claim because of
which the total arbitral fees could not be properly determined.
Accordingly, the arbitrator terminated the proceedings.
141.1 Aggrieved therefrom, the claimant approached the Delhi High
Court inter-alia contending that even though her claim was non-
monetary, she had already paid the requisite fees of the arbitrator,
and thus, the proceedings could not have been terminated. In
appeal, the Delhi High Court held as under: -
Special Leave Petition (C) No. 10389 of 2025 Page 97 of 269
(i) First, that the power to terminate the proceedings is available
to an arbitral tribunal under Section(s) 25 and 32 of the Act,
1996. It further held that the order passed by the arbitrator
terminating proceedings for the non-valuation of the claims
and thereby the fees payable, was in effect, an order under
Section 32(2)(c) of the Act, 1996. The relevant observations read
as under: -
“76. In this case, as noticed above, since the incumbent
Arbitrator via order dated 14.07.2017 has terminated
the arbitration proceedings without referring to any
provisions of 1996 Act, the same, as has been correctly
argued by Mr. Varma, would fall only under the
provisions of Section 32(2)(c) of the 1996 Act.
77. It is important to note that Subsection (1) of
Section 32 speaks about termination of arbitration
proceedings either upon a final award being rendered
in the matter or by virtue of an order passed by the
Arbitral Tribunal under Subsection (2) of the very
same section.
78. Under Subsection (2) of Section 32, an Arbitral
Tribunal can order termination of the Arbitral
proceedings under three situations as contemplated in
Subclauses (a) to (c) of the very same provision. 79.
Clause (a) of Sub-section (2) of Section 32 provides for
a situation where the claimant withdraws his claim
and the respondent does not object to the termination
of the arbitration proceedings. In case, the respondent
objects, then, the learned Arbitrator would have to
continue with the arbitration proceedings if it
recognizes that the respondent has a legitimate interest
in obtaining a final settlement of the dispute at hand.
Special Leave Petition (C) No. 10389 of 2025 Page 98 of 269
80. Clause (b) of Subsection (2) of Section 32 provides
for a circumstance where parties agree to the
termination of the proceedings.
81. Lastly, clause (c) of Subsection (2) of Section 32
provides that Arbitral Tribunal may terminate the
arbitration proceedings if it finds that the continuation
of the proceedings has for any other reason become
unnecessary or impossible.
xxx xxx xxx
87. As a matter of fact, the power to terminate the
arbitration proceedings is also available in Section 25
of the 1996 Act. ”
(Emphasis supplied)
(ii) Secondly, that despite the appellant’s obdurate refusal to
quantify her claims for the purpose of determining the
arbitrator’s fee, the same did not have the effect of rendering
the continuation of the arbitration proceedings impossible, and
thus, the same could not have been terminated in terms of
Section 32(2)(c) of the said Act. The relevant observations read
as under: -
“82. In the instant case, the substitute Arbitrator
terminated the arbitration proceedings as he found
that the petitioners were obdurate in their stand of not
valuing their claims and thereby enabling
ascertainment of the Arbitrator's fee.
Special Leave Petition (C) No. 10389 of 2025 Page 99 of 269
83. To my mind, the learned Arbitrator could not have
taken recourse to Section 32(1)(c) of the 1996 Act as,
however, unreasonable the learned Arbitrator found
the stand of the petitioners, it would still not be a
circumstance which vested him with the power of
terminating the arbitration proceedings. The reason I
say so is that under clause (c) of Section 32(2) of the
1996 Act, the learned Arbitrator could have
terminated the arbitration proceedings only if their
continuation had become either unnecessary or
impossible.”
(Emphasis supplied)
142. In Dani Wooltex Corpn. v. Sheil Properties (P) Ltd. reported in
(2024) 7 SCC 1 , the appellant therein contended that the
respondent had abandoned its claims, as the company, apart from
filing its statement of claims, never made any effort to convene a
hearing for the same. Accordingly, the arbitral proceedings came
to be terminated. In appeal, this Court held as under: -
(i) First, that under the Act, 1996, apart from Section 25(a), the
power to terminate the proceedings on the ground of
abandonment of claim is available only under Section 32(2)(c)
of the said Act. In the former, the proceedings can be
terminated if the claimant fails to file his statement of claim in
accordance with Section 23 of the Act, 1996. However, in the
latter, the proceedings can only be terminated if the reason is
such that it renders the continuation of the proceedings
Special Leave Petition (C) No. 10389 of 2025 Page 100 of 269
unnecessary or impossible. The relevant observations read as
under: -
“11. Clause (a) of Section 25 of the Arbitration Act
provides that on the failure of the claimants to
communicate the statement of claim in accordance
with sub-section (1) of Section 23, the Arbitral
Tribunal shall terminate the proceedings. Clause (b) of
Section 25 provides that if the respondent fails to
communicate his statement of defence in accordance
with sub-section (1) of Section 23, the Arbitral
Tribunal shall continue the proceedings. Clause (c) of
Section 25 provides that if a party fails to appear at an
oral hearing or to produce documents, the Arbitral
Tribunal may continue the proceedings and make the
arbitral award on the basis of whatever evidence is
available with it. The power to terminate arbitral
proceedings on the claimant's default to file a
statement of claim is the only provision under the
Arbitration Act to terminate the arbitral proceedings
apart from Section 32.
xxx xxx xxx
17. Therefore, clause (c) of sub-section (2) of Section
32 can be invoked for reasons other than those
mentioned in sub-section (1) of Section 32 and clauses
(a) and (b) of sub-section (2) of Section 32. Under
clause (c), the mere existence of a reason for
terminating the proceedings is not sufficient. The
reason must be such that the continuation of the
proceedings has become unnecessary or impossible. In
a given case, when a claimant files a claim and does
not attend the proceedings, clause (a) of Section 25
comes into operation, resulting in the learned
arbitrator terminating the proceedings.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 101 of 269
(ii) Secondly, that as per Section 25 sub-clause (b) and (c), where
a claimant, after the filing of his statement of claims, fails to
appear at an oral hearing or fails to produce documentary
evidence, the arbitral tribunal is empowered to continue with
the proceedings. This clearly indicated the legislative intent
that a claimant’s failure to appear or fix a hearing, cannot, by
itself, be a ground to hold that the proceedings have become
unnecessary or impossible. The relevant observations read as
under: -
“17. [...] If, after filing a claim, the claimant fails to
appear at an oral hearing or fails to produce
documentary evidence, it cannot be said that the
continuation of proceedings has become unnecessary.
If the claimant fails to appear at an oral hearing after
filing the claim, in view of clause (c) of Section 25, the
learned arbitrator can proceed with the arbitral
proceedings. The fact that clause (c) of Section 25
enables the Arbitral Tribunal to proceed in the absence
of the claimant shows the legislature's intention that
the claimant's failure to appear after filing the claim
cannot be a ground to say that the proceedings have
become unnecessary or impossible.”
(Emphasis supplied)
(iii) Thirdly, that under Section 32(2)(c), abandonment of claims
can be a reason to hold that the continuation of proceedings
has become unnecessary. However, in order to terminate the
Special Leave Petition (C) No. 10389 of 2025 Page 102 of 269
proceedings under the said provision, the abandonment of a
claim, either expressly or impliedly, must be clearly
established. The facts and the conduct of the party must be so
clinching and convincing that it leads only to one conclusion
that the claimant has given up his claim. Mere absence in
proceedings or failure to fix a date for the hearing does not
amount to abandonment of claim, as once the statement of
claims is filed, it is the arbitral tribunal’s duty under Section
25 to fix a date for hearing and continue with the proceedings.
The relevant observations read as under: -
“13. The order of termination passed by the learned
arbitrator, in this case, gives an impression that he was
of the view that unless parties move the Arbitral
Tribunal with a request to fix a meeting or a date for
the hearing, the Tribunal was under no obligation to
fix a meeting or a date for hearing. The appointment of
the Arbitral Tribunal is made with the object of
adjudicating upon the dispute covered by the
arbitration clause in the agreement between the
parties. By agreement, the parties can appoint an
arbitrator or Arbitral Tribunal. Otherwise, the Court
can do so under Section 11 of the Arbitration Act. An
arbitrator does not do pro bono work. For him, it is a
professional assignment. A duty is vested in the
learned arbitrator or the Arbitral Tribunal to
adjudicate upon the dispute and to make an award. The
object of the Arbitration Act is to provide for an
efficient dispute resolution process. An arbitrator who
has accepted his appointment cannot say that he will
not fix a meeting to conduct arbitral proceedings or a
Special Leave Petition (C) No. 10389 of 2025 Page 103 of 269
hearing date unless the parties request him to do so. It
is the duty of the Arbitral Tribunal to do so. If the
claimant fails to file his statement of claim in
accordance with Section 23, in view of clause (a) of
Section 25, the learned arbitrator is bound to terminate
the proceedings. If the respondent to the proceedings
fails to file a statement of defence in accordance with
Section 23, in the light of clause (b) of Section 25, the
learned arbitrator is bound to proceed further with the
arbitral proceedings. Even if the claimant, after filing
a statement of claim, fails to appear at an oral hearing
or fails to produce documentary evidence, the learned
arbitrator is expected to continue the proceedings as
provided in clause (c) of Section 25. Thus, he can
proceed to make an award in such a case.
xxx xxx xxx
18. Therefore, if the party fails to appear for a hearing
after filing a claim, the learned arbitrator cannot say
that continuing the arbitral proceedings has become
unnecessary. Abandonment by the claimant of his
claim may be grounds for saying that the arbitral
proceedings have become unnecessary. However, the
abandonment must be established. Abandonment can
be either express or implied. Abandonment cannot be
readily inferred. One can say that there is an implied
abandonment when admitted or proved facts are so
clinching and convincing that the only inference
which can be drawn is of the abandonment. Mere
absence in proceedings or failure to participate does
not, per se, amount to abandonment. Only if the
established conduct of a claimant is such that it leads
only to one conclusion that the claimant has given up,
his/her claim can an inference of abandonment be
drawn. Merely because a claimant, after filing his
statement of claim, does not move the Arbitral
Tribunal to fix a date for the hearing, it cannot be said
that the claimant has abandoned his claim. The reason
is that the Arbitral Tribunal has a duty to fix a date for
Special Leave Petition (C) No. 10389 of 2025 Page 104 of 269
a hearing. If the parties remain absent, the Arbitral
Tribunal can take recourse to Section 25.
(Emphasis supplied)
142.1 Accordingly, this Court in Dani Wooltex (supra) whilst setting
aside the order passed by the arbitral tribunal for termination of the
proceedings, summarized its conclusion as under: -
“ 25. To conclude:
25.1. The power under clause (c) of sub-section (2) of Section
32 of the Arbitration Act can be exercised only if, for some
reason, the continuation of proceedings has become
unnecessary or impossible. Unless the Arbitral Tribunal
records its satisfaction based on the material on record that
proceedings have become unnecessary or impossible, the
power under clause (c) of sub-section (2) of Section 32 cannot
be exercised. If the said power is exercised casually, it will
defeat the very object of enacting the Arbitration Act;
25.2. It is the Arbitral Tribunal's duty to fix a meeting for
hearing even if parties to the proceedings do not make such a
request. It is the duty of the Arbitral Tribunal to adjudicate
upon the dispute referred to it. If, on a date fixed for a
meeting/hearing, the parties remain absent without any
reasonable cause, the Arbitral Tribunal can always take
recourse to the relevant provisions of the Arbitration Act,
such as Section 25;
25.3. The failure of the claimant to request the Arbitral
Tribunal to fix a date for hearing, per se, is no ground to
conclude that the proceedings have become unnecessary; and
25.4. The abandonment of the claim by a claimant can be a
ground to invoke clause (c) of sub-section (2) of Section 32.
The abandonment of the claim can be either express or
implied. The abandonment cannot be readily inferred. There
is an implied abandonment when admitted or proved facts are
Special Leave Petition (C) No. 10389 of 2025 Page 105 of 269
so clinching that the only inference which can be drawn is of
the abandonment. Only if the established conduct of a
claimant is such that it leads only to one conclusion that the
claimant has given up his/her claim can an inference of
abandonment be drawn. Even if it is to be implied, there must
be convincing circumstances on record which lead to an
inevitable inference about the abandonment. Only because a
claimant, after filing his statement of claim, does not move
the Arbitral Tribunal to fix a date for the hearing, the failure
of the claimant, per se, will not amount to the abandonment
of the claim. ”
(Emphasis supplied)
143. This Court in SREI Infrastructure (supra) held that a termination
of proceedings under Section 32 of the Act, 1996, is wholly distinct
from a termination under Section 25. The reason behind this
distinction, as per SREI Infrastructure (supra) is in view of the use
of the expression “ mandate of the arbitral tribunal shall terminate with
the termination of the arbitral proceedings ” in Section 32 and the
omission thereof in Section 25 of the Act, 1996.
144. The expression “ mandate of the arbitral tribunal shall terminate with
the termination of the arbitral proceedings ” is unique to the provision
of Section 32. This phrase has not been used by the legislature in
any other provision of the Act, 1996. Even the other provisions in
Special Leave Petition (C) No. 10389 of 2025 Page 106 of 269
which termination of proceedings has been alluded to, such as
Section(s) 25 or 38 of the Act, 1996, the aforesaid phrase is absent.
b. Interplay between Section(s) 25, 30 38 and the termination of
proceedings under Section 32 of the Act, 1996.
145. Before we proceed to understand the framework of termination of
proceedings under Section(s) 25, 30, 32 and 38 of the Act, 1996
respectively, it would be apposite to understand the legislative
history that led to the enactment of these provisions.
146. Prior to the 1996 Act, three Acts governed the law of Arbitration
in India, namely, the Arbitration (Protocol and Convention) Act,
1937, which gave effect to the Geneva Convention; the Arbitration
Act, 1940 which dealt with domestic awards; and the Foreign
Awards (Recognition and Enforcement) Act, 1961 which gave
effect to the New York Convention of 1958 which dealt with
challenges to awards made which were foreign awards.
147. However, with the passage of time, the existing laws were felt to
have become outdated to address the economic reforms taking
place in the country and to keep pace with the emerging
Special Leave Petition (C) No. 10389 of 2025 Page 107 of 269
international standards governing the resolution of domestic and
international commercial disputes through arbitration.
148. Accordingly, the Act, 1996 was enacted by the Parliament inter-alia
to consolidate and amend the law relating to domestic arbitration,
international commercial arbitration, enforcement of foreign
arbitral awards, by taking into account the United Nations
Commission on International Trade Law’s Model law on
International Commercial Arbitration adopted in 1985 (for short,
the “ UNCITRAL Model ”).
149. The Statement of Objects and Reasons appended to the Act states
that although the UNCITRAL Model Law and Rules are intended
to deal with international commercial arbitration and conciliation,
yet the harmonised concepts on arbitration and conciliation
contained therein are universal in application and would serve as
a model legislation on domestic arbitration and conciliation.
150. The Statement of Objects and Reasons of the Act, 1996 reads as
under: -
Special Leave Petition (C) No. 10389 of 2025 Page 108 of 269
“ STATEMENT OF OBJECTS AND REASONS
The law on arbitration in India was substantially contained
in three enactments, namely - the Arbitration Act, 1940, the
Arbitration (Protocol and Convention) Act, 1937 and the
Foreign Awards (Recognition and Enforcement) Act, 1961.
The Arbitration Act, 1940 was widely felt to have become
outdated. The Law Commission of India, several
representative bodies of trade and industry and experts in the
field of arbitration had proposed amendments to this Act to
make it more responsive to contemporary requirements. It
was also felt that economic reforms taking place in India may
not become fully effective if the laws dealing with settlement
of both domestic and international commercial disputes
remains out of tune with such reforms. Conciliation, like
arbitration is also getting worldwide recognition as an
instrument for settlement of disputes.
The United Nations Commissions on International Trade
Law (UNCITRAL) adopted the Model law on International
Commercial Arbitration in 1985. The General Assembly of
the United Nations has recommended that all countries give
due consideration to the said Model Law in view of the
desirability of uniformity of the law of arbitral procedures and
the specific needs of international commercial arbitration
practice. The UNCITRAL also adopted a set of Conciliation
Rules in 1980. The General Assembly of the United Nations
has recommended the use of these Rules in cases where the
disputes arise in the context of international commercial
relations and the parties seek amicable settlement of their
disputes by recourse to conciliation. An important feature of
the said UNCITRAL Model Law and Rules is that they have
harmonised concepts on arbitration and conciliation of
different legal systems of the world and thus contain
provisions which are designed for universal application. The
UNCITRAL Model Law and Rules, though, are intended to
deal with international commercial arbitration and
conciliation, they could, with appropriate modifications,
serve as a model for legislation on domestic arbitration and
conciliation.
Special Leave Petition (C) No. 10389 of 2025 Page 109 of 269
In India, in order to consolidate and amend the law relating
to domestic arbitration, international commercial
arbitration, enforcement of foreign arbitral awards and to
define the law relating to conciliation, taking into account the
Model Law and Conciliation Rules adopted by the
UNCITRAL, the President of India promulgated on 16th
January, 1996, the Arbitration and Conciliation Ordinance,
1996 as the Parliament was not in session and the
circumstances existed which rendered it necessary to take
immediate action. The ordinance could not be replaced by an
Act as the Parliament session was prorogued without passing
the Bill. But in order to give further continued effect to the
provisions of the said Ordinance, the President promulgated
the Arbitration and Conciliation (Second) Ordinance, 1996
on 26th March, 1996 which could also not be passed by the
Parliament. On 21st June, 1996, the President promulgated
the Arbitration and Conciliation (Third) Ordinance, 1996.
To replace the Ordinance of 21st June, 1996, the Arbitration
and Conciliation Bill was introduced in the Parliament. The
Bill was passed by both the Houses of Parliament and
received the assent of the President on 16th August, 1996 and
was titled as the Arbitration and Conciliation Act, 1996.
The main objects of the Act are-
(i) to comprehensively cover international and
commercial arbitration and conciliation as also
domestic arbitration and conciliation;
(ii) to make provision for an arbitral procedure which is
fair, efficient and capable of meeting the needs of the
specific arbitration;
(iii) to provide that the arbitral tribunal gives reasons for
its arbitral award;
(iv) to ensure that the arbitral tribunal remains within the
limits of its jurisdiction;
(v) to minimise the supervisory role of courts in the
arbitral process;
(vi) to permit an arbitral tribunal to use mediation,
conciliation or other procedures during the arbitral
proceedings to encourage settlement of disputes;
(vii) to provide that every final arbitral award is enforced in
the same manner as if it were a decree of the court;
Special Leave Petition (C) No. 10389 of 2025 Page 110 of 269
(viii) to provide that a settlement agreement reached by the
parties as a result of conciliation proceedings will have
the same status and effect as an arbitral award on
agreed terms on the substance of the dispute rendered
by an arbitral tribunal; and
(ix) to provide that, for purposes of enforcement of foreign
awards, every arbitral award made in a country to
which one of the two international conventions
relating to foreign arbitral awards to which India as a
party applies, will be treated as a foreign award.”
(Emphasis supplied)
151. Thus, the Act, 1996 substantially adopts the UNCITRAL Model as
its framework. Several provisions in the said Act pertaining to
domestic arbitration draw heavy inspiration from the UNCITRAL
Model, with many provisions being in substance pari-materia to the
corresponding Article(s) contained in the UNCITRAL Model, with
marginal adaptations and tweaks.
152. Section(s) 25, 30 and 32 of the Act, 1996 in particular mirror
Article(s) 25, 30 and 32 of the UNCITRAL Model, respectively.
Thus, it would be apposite to first understand the underlying
object with which these provisions came to be introduced in the
Model Law.
Special Leave Petition (C) No. 10389 of 2025 Page 111 of 269
I. History of the Working Group on the UNCITRAL Model Law on
International Commercial Arbitration.
153. When the Working Group on International Contract Practices of
UNCITRAL commenced its work on the Model Law on
International Commercial Arbitration all the way back in 1982, the
idea of ‘termination of proceedings’ by the arbitral tribunal first
surfaced in the draft during the deliberations on the now Article
25 of the UNCITRAL Model Law in its Third Session. At that time,
the provisions of Article(s) 30 and 32 as we know now, had not yet
been conceptualised.
154. Article 25 earmarked the first instance where a reference was
made to the termination of arbitral proceedings by the arbitral
tribunal. However, what is particularly noteworthy is that, when
Article 25 was being discussed, the provision was never intended
to confer the arbitral tribunal with a general power to terminate
the proceedings.
155.
The discussions which followed the preparation of Article 25
largely revolved around addressing situations where a party
failed to participate in the arbitration. The authority to terminate
Special Leave Petition (C) No. 10389 of 2025 Page 112 of 269
the arbitral proceedings, was, at that time, understood as an
implied power vested in the arbitral tribunal in seisin of the
dispute. It was in this limited context that the termination of
proceedings by the arbitral tribunal was adverted to.
156. The Working Group in its Third Session recognised that some
jurisdictions were apprehensive to assign sanctity to decisions
rendered ex-parte . According to it, this was an issue that could
potentially allow a party to completely avoid arbitrations that
would result in awards not in their favour by not participating in
the proceedings. Such conduct would effectively leave the
claimant in a lurch, especially in jurisdictions where an ex-parte
award would not be enforceable.
157. Nevertheless, it was decided that the Model Law should explicitly
permit an arbitral tribunal to proceed in the absence of one party.
The Working Group resolved that a draft article be prepared by
the Secretariat to allow the arbitration to continue in a party’s
absence under certain conditions. This was the genesis for the now
Article 25 of the UNCITRAL Model. The relevant observations
read as under: -
Special Leave Petition (C) No. 10389 of 2025 Page 113 of 269
“7. Default
Question 4-13. If one of the parties fails to participate, would
the arbitral tribunal be empowered to go ahead with the
proceedings and make a binding award even without special
authorization by the parties, including reference to
arbitration rules which allow the arbitral tribunal to do so?
If such special authorization were to be required, should the
model law express1y recognize it as being effective, subject to
any restrictions envisaged under question4-l4?
71. There was general agreement that, in principle, the
arbitral tribunal should be empowered to continue the
proceedings even if one of the parties fails to communicate his
statement or to appear at a hearing. However, divergent
views were expressed as to whether the model law should
contain a provision to that effect which would set forth the
conditions for such continuation. under one view, an attempt
should be made to formulate the conditions for such
continuation. Minimum requirements for continuing the
proceedings and rendering an award in case of such _ failure
would be that the party had been given due advance notice
(possibly also requiring a statement of the legal consequences
of default) and that the party had not shown sufficient cause
for his failure. Under another view, it was not practical to
regulate this issue in the model law, since such regulation
might not be readily acceptable in some countries in view of
their general position on ex parte judgements. If, however,
there were to be a provision on this issue, one view was that
it could provide that a court would decide, in the
circumstances of each case, whether ex parte proceedings by
the arbitral tribunal were permissible. Another view
expressed concern over the delay and complications which
might result from such court involvement. The Working
Group decided to attempt to formulate the conditions that
must be met for permitting ex parte proceedings, and to
request the Secretariat to prepare draft provisions taking into
account the suggestions made during the discussion. If such
attempt proved to be fruitless, the issue would have to be left
for decision to the procedural law of each State.”
Special Leave Petition (C) No. 10389 of 2025 Page 114 of 269
(Emphasis supplied)
158. What is interesting is the discussion which immediately followed.
The Working Group decided that in addition to the aforesaid
procedural issues, certain other aspects were also required to be
dealt with in the Model Law. Amongst these was the issue on
termination of arbitral proceedings. The Working Group appears
to be cognizant of the fact that, any deliberation on the default of
one party to participate in the proceedings, would nevertheless
require discussion on the termination of proceedings as-well.
Accordingly, it decided that the Secretariat would prepare draft
provisions on these issues, with explanatory notes if appropriate.
“8. Further issues of arbitral procedure
72. The Working Group agreed that, in addition to the
procedural issues contained in questions 4-1 to 4-14, there
were other issues of arbitral procedure possibly to be dealt
with in the Model Law. The issues suggested for
consideration were: minimum contents of a statement of
claim and statement of defence (cf. arts. 18 and 19 of the
UNCITRAL Arbitration Rules); language to be used in
arbitration proceedings (cf. art. 17 of the UNCITRAL
Arbitration Rules); notice of arbitration (cf. art. 3 of the
UNCITRAL Arbitration Rules), and its effects on a
prescription period; and termination of arbitral proceedings
(cf. art. 34 of the UNCITRAL Arbitration Rules). The
Working Group requested the Secretariat to prepare for its
consideration draft provisions on these issues, with
explanatory notes if appropriate.”
Special Leave Petition (C) No. 10389 of 2025 Page 115 of 269
159. At its Fourth Session, the Working Group considered the aforesaid
issue on the default of a party and examined the draft Article 24
(which eventually became Article 25 of the UNCITRAL Model).
Two different variants of the draft Article 24 were presented to the
Working Group, being Alternative ‘A’ and Alternative ‘B’,
respectively. The relevant observations read as under: -
“Article 24
124. The text of article 24 as considered by the Working
Group was as follows:
Alternative A:
Article 24
(1) If, within the period of time fixed by the arbitral
tribunal, the claimant has failed to communicate
his statement of claim without showing sufficient
cause for such failure, the arbitral tribunal shall
issue an order for the termination of the arbitration
proceedings.
(2) If, within the period of time fixed by the arbitral
tribunal, the respondent fails to communicate his
statement of defence without showing sufficient
cause for such failure, the arbitral tribunal shall
order that the proceedings continue.
(3) If one of the parties, invited in writing at least
30 days in advance, fails to appear at a hearing
without showing sufficient cause for such failure,
the arbitral tribunal may proceed with the
arbitration; if the tribunal decides to do so, it shall
notify the parties in writing.
(4) If one of the parties, invited in writing to
produce documentary evidence within a specified
period of time of not less than 30 days, fails to do
Special Leave Petition (C) No. 10389 of 2025 Page 116 of 269
so, the arbitral tribunal may make the award on the
evidence before it; if the tribunal decides to do so, it
shall notify the parties in writing.
[(5) The defaulting party may, within 15 days after
issuance of the order referred to in paragraph (1) or
(2), or the notification referred to in paragraph (3)
or (4), request the Authority specified in article 17
to review the decision of the arbitral tribunal as to
whether the conditions laid down in the respective
paragraph of this article were fulfilled.]
Alternative B:
Article 24
If, without showing sufficient cause for the failure,
(a) the respondent fails to communicate
his statement of defence within the
period of time fixed by the arbitral
tribunal; or
(b) one of the parties, invited at least 30
days in advance, fails to appear at a
hearing; or
(c) one of the parties, invited in writing
to produce documentary evidence
within a specified period of time of not
less than 20 days, fails to do so,
the other party may request the
Authority specified in article 17 to
authorize [instruct] the arbitral tribunal
to proceed with the arbitration.
125. The Working Group supported the policy underlying
paragraphs (1) to (4) of Alternative A. It was generally
agreed that these provisions were subject to the contrary
agreement of the parties. It was noted that in paragraph (4)
of article 24 (Alternative A) the words "without showing
sufficient cause for such failure" had been erroneously
omitted and should be added after the words "fails to do so".
Special Leave Petition (C) No. 10389 of 2025 Page 117 of 269
126. It was agreed that paragraph (5) of Alternative A as well
as the entire text of Alternative B should be deleted since they
introduced a degree of court supervision of international
commercial arbitration which was neither necessary nor
desirable.
127. The view was expressed that this article should set forth
principles in a general way without detailed procedural rules.
128. The Working Group was in agreement that this article
should in its result preserve a balance of equality between the
parties. It was noted, however, that it was difficult to preserve
a formal equality since the parties were in different
situations. The claimant has every reason to pursue his claim
if he believes it is justified, since otherwise he will have
incurred expenses for no substantive purpose. On the other
hand, the respondent may fail to act in the arbitration so as
to impede its progress.
129. It was suggested that the parties might be in a situation
of greater equality if the failure of the defendant to
communicate his statement of defence was treated as a denial
of the claim. In such a case, even though the respondent was
in default in respect of the arbitral procedure, the claimant
would have to establish the merits of his case before the
arbitral tribunal.
130. It was suggested that the time-limits provided for in this
article might be too short, taking into account the distances
and possible delays in communications. It was also suggested
that a flexible approach in giving the arbitral tribunal some
discretion in setting time-limits might be appropriate.
131. The view was also expressed that it would be
appropriate to make clear in paragraph (3) that the arbitral
tribunal should give a party a period of time to show that he
had sufficient cause for his failure to appear at a hearing. ”
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160. The significant take-aways from the above discussion of the
Working Group, for the present issue at hand, emerge from the
draft version of Article 24 that was proposed and the general
object underlying the said provision highlighted by the Working
Group.
161. In the Alternative ‘A’ version of draft Article 24, more particularly
clause (5), a party was empowered to approach the authority
stipulated in the then draft Article 17 to pass a direction to the
arbitral tribunal, to continue with the proceedings. Similar
provision was also included in the Alternative ‘B’ version of draft
Article 24.
162. We shall discuss the vital importance of the aforesaid in the latter
parts of this judgment.
163. Suffice to say, for the present moment, the observations made by
the Working Group on the draft Article 24 at para 127 are
significant. The Working Group observed that the draft Article 24
should only “ set forth principles in a general way without detailed
procedural rules ” (emphasis).
Special Leave Petition (C) No. 10389 of 2025 Page 119 of 269
164. The above observations clearly show, that whilst drafting the now
Article 25, what was in the mind of the Working Group was only
to provide the general principles in respect of the consequences of
a party’s default and the power of the arbitral tribunal to continue
with the proceedings ex-parte in certain situations.
165. The Working Group never intended Article 25 to vest the arbitral
tribunal with the power to terminate the proceedings. The
authority of the arbitral tribunal to terminate the proceedings,
was, at that stage, always understood to be impliedly vested in the
arbitral tribunal.
166. We say so, because the Working Group felt the need to incorporate
a specific provision in respect of the power of the arbitral tribunal
to terminate the proceedings at a much later stage, and for very
different reasons, which we shall shortly discuss.
167. One another key provision which was introduced and deliberated
upon by the Working Group during its Fourth Session, was the
provision on settlement of disputes by the parties during the
course of proceedings.
Special Leave Petition (C) No. 10389 of 2025 Page 120 of 269
168. The Working Group examined the draft Article 33 prepared by the
Secretariat. The said draft provision inter-alia stipulated that where
the parties during the course of arbitration arrive at a settlement
of the dispute, the arbitral tribunal shall either issue an order for
termination of the proceedings or upon request from both parties,
record the settlement in the form of an award, if agreeable to the
tribunal. The said provision ultimately was adopted in the
UNCITRAL Model as Article 30 (corresponding Section 30 of the
Act, 1996). The relevant observations read as under: -
“Article 33
171. The text of article 33 as considered by the Working
Group vas as follows:
Article 33
Alternative A: (1) If, during the arbitration proceedings, the
parties agree on a settlement of the dispute, the arbitral
tribunal shall either issue an order for the termination of the
arbitration proceedings or, if requested by both parties and
accepted by the tribunal, record the settlement in the form of
an arbitral award on agreed terms.
A1ternative B: (1) If, during the arbitration proceedings, the
parties agree on a settlement of the dispute, the arbitral
tribunal shall, if requested by [both parties] [a party, unless
the arbitration agreement requires a request by both
parties1', record the settlement in the form of an arbitral
award on agreed terms, unless the arbitral tribunal has [good
and substantial compelling] reasons, in particular grounds of
international public polies , not to follow that request.
Special Leave Petition (C) No. 10389 of 2025 Page 121 of 269
(2) An award on agreed terms shall be made in accordance
with the provisions of articles 27 and 35 and shall state that
it is an award [On agreed terms]. Such an award has the same
status and executory force as] [shall be treated like any other
award on the merits of' the case.
172. There was general agreement that Alternative A of
paragraph (1) was preferable.
173. However, in this context a view was expressed that the
procedure for recording a settlement as an award on agreed
terms would not be necessary if the Model Law would provide
for the enforceability of the settlement agreement as such.
174. It was suggested that the arbitral tribunal should be
empowered to record a settlement in the form of an arbitral
award on agreed terms on the request of either party. It was
pointed out that it is often the case that only the party who is
to receive payment under the award has an interest in
converting the settlement into an award which can then be
enforced under the 1958 New York Convention.
175. On the other hand, it was noted that a settlement may
be ambiguous or subject to conditions that might not be
apparent to the arbitral tribunal. According to this view,
which received a majority of the support, there were fewer
dangers of injustice by requiring both parties to request an
award on agreed terms.
176. The Working Group was of the view that the arbitral
tribunal should have the right to decide whether it would
record the settlement in the form of an agreed award.”
169. This was the second instance where a reference to “ termination of
proceedings ” surfaced in the draft UNCITRAL Model. The
significance of the aforesaid lies in the discussions that followed
in the next session.
Special Leave Petition (C) No. 10389 of 2025 Page 122 of 269
170. Due to the reference to “ termination of proceedings ” in the various
draft provisions of the Model Law, more particularly, draft
Article(s) 24 and 33, respectively, an impending need was felt by
the Working Group to discuss a dedicated provision on the
termination of arbitral proceedings.
171.
Thus, in its Fifth session, the Working Group discussed the
possibility of a new provision pertaining to termination of
proceedings. The Working Group felt that, in light of the various
draft provisions that allude to the termination of proceedings, it
would be appropriate if the Model Law provided “ certainty in
respect of important consequences of the termination of arbitral
proceedings ”. The relevant observations read as under: -
“F. Termination of arbitral proceedings
38. The Working Group considered the question whether it
would be appropriate to include in the model law a provision
on termination of arbitral proceedings (on the basis of a note
by the Secretariat, WP.4l, paras. 38-41 and draft article F).
39. There was wide support in the Working Group for the
view that the model law should contain a provision on
termination of arbitral proceedings. Such a provision would
be useful because it would provide certainty in respect of
Special Leave Petition (C) No. 10389 of 2025 Page 123 of 269
important consequences of the termination of arbitral
proceedings.
40. The prevailing view was that there should be no
automatic termination of arbitral proceedings and that a
procedural decision by the arbitral tribunal was needed for
terminating the arbitral proceedings. However, it was
suggested that the wording should indicate that a special
order of termination was not always necessary, for example,
when the dispute was settled by an agreement of the parties
or by an award on the merits of the claim.
41. It was also suggested that the model law should contain a
rule empowering the arbitral tribunal to decide whether it
was appropriate to terminate the proceedings after the
tribunal gave suitable notice to the parties of its intention to
terminate the proceedings. ”
(Emphasis supplied)
172. The above discussion of the Working Group is significant. It
highlights the considerations that weighed with the Working
Group when it began to draft a dedicated provision on the
termination of arbitral proceedings.
173. The Working Group observed that, possibly in light of the draft
Article(s) 24 and 33 (now Article(s) 25 and 30 of the UNCITRAL
Model, respectively), in order to avoid the possibility of an
“ automatic termination of proceedings ”, a procedural decision by the
Special Leave Petition (C) No. 10389 of 2025 Page 124 of 269
arbitral tribunal should be required for the termination of
proceedings.
174. The instances specified by the Working Group, where such an
order would be required are also significant. It observed that such
an order should not be required where either the parties settle the
dispute or where a final award is rendered. The former was
suggested in light of the draft Article 33, which initially
empowered the tribunal to terminate the proceedings by issuing
an order to such effect or by passing an award recording the terms
of settlement.
175. In the Sixth Session, the Working Group considered both the draft
Article 33 and the provision on termination of proceedings, then
numbered as draft Article F, which later came to be adopted as
Article 32 of the UNCITRAL Model and corresponding Section 32
of the Act, 1996.
176.
The deliberations of the Working Group on draft Article F read as
under: -
“F. Termination of arbitral proceedings
Special Leave Petition (C) No. 10389 of 2025 Page 125 of 269
47. The text of article F as considered by the Working Group
was as follows:
“Article F
(1) The arbitral proceedings are terminated:
(a) by the [making/ [delivery] of the final
award which constitutes or completes
the disposition of all claims submitted
to arbitration; or
(b) by an agreement of the parties that
the arbitral proceedings are to be
terminated; or
(c) by an order of the arbitral tribunal in
accordance with paragraph (2) of this
article.
(2) After having given suitable notice to the
parties, the arbitral tribunal shall issue an order for
the termination of the arbitral proceedings when
the claimant withdraws his claim or if for any other
reason the continuation of the proceedings becomes
unnecessary or inappropriate.
The mandate of the arbitral tribunal is terminated
with the termination of the arbitral proceedings,
subject to the provisions of article XXIV.
General considerations
48. Some support was expressed for the deletion of this article
because it was not necessary to regulate in such detail the
ending of the mandate of the arbitral tribunal. However, the
view prevailed that the article should be retained since there
may be other cases where the moment of termination of
arbitral proceedings maybe important, like, for example, the
continuation of the running of a limitation period or the
possibility to institute legal proceedings before another forum
on the same dispute.
Paragraph (1)
49. The Working Group adopted sub-paragraph (a) with the
word "making" instead of the word "delivery".
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50. Regarding sub-paragraph (b) it was suggested that the
wording should define more clearly the moment of the
termination of the arbitral proceedings. It was also suggested
that sub-paragraph (b) should make clear whether an
agreement of the parties to terminate arbitral proceedings
covered only specific agreements to that effect or also cases
where the parties had agreed in advance on a deadline for
making the award.
51. Regarding sub-paragraph (c) it was suggested that, while
the arbitral tribunal should be under an obligation to issue an
order for the termination of the proceedings, in the absence of
such an order the interested party should have a possibility to
establish that the proceedings had terminated.
Paragraph (2)
52. The Working Group was of the view that the withdrawal
of a claim should not ipso facto terminate arbitra1
proceedings since the defendant might have a legitimate
interest in a final settlement of the dispute.
Paragraph (3)
53. There was general support for paragraph (3) of this
article. It was noted that this paragraph should include a
reference to article XXX (3) as suggested in foot-note 16 of
document A/CN.9/WG.II/WP.44.”
177. The Working Group then deliberated on the draft Article 33,
which was renumbered as ‘Article XXI’. The relevant observations
read as under: -
“Article XXI
105. The text of article XXI as considered by the Working
Group was as follows:
Article XXI
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(1) If, during the arbitration proceedings, the
parties agree on a settlement of the dispute, the
arbitral tribunal shall either terminate the
arbitration proceedings or, if requested by the
parties and accepted by the tribunal, record the
settlement in the form of an arbitral award on
agreed terms.
(2) An award on agreed terms shall be made in
accordance with the provisions of article XXII and
shall state that it is an award. Such an award has
the same status and executory force as any other
award on the merits of the case.
Paragraph (1)
106. The Working Group adopted this paragraph, subject to
improvement of its wording along the following lines: "If,
during arbitration proceedings, the parties settle the dispute,
the arbitral tribunal shall terminate the proceedings and, if
requested by the parties and not objected to by the arbitral
tribunal, record the settlement in the form of an arbitral
award on agreed terms". Paragraph (2).
107. The Working Group adopted this paragraph. It was
noted that the last sentence might later have to be modified in
order to qualify this statement as regards reasons for recourse
against such an award or its enforcement.”
178. What can be discerned from the above is that while the draft
Article 33 (now Article 30 of the UNCITRAL Model), which
empowers the arbitral tribunal to issue an order for termination of
proceedings under the said provision, was initially accepted by
the Working Group, yet the phraseology of the provision
underwent subtle changes in its Sixth Session. The words “ shall
Special Leave Petition (C) No. 10389 of 2025 Page 128 of 269
either issue an order for the termination of the arbitration proceedings ”
came to be omitted.
179. This occurred in light of the draft Article F (now Article 32 of the
UNCITRAL Model), which empowered the tribunal to issue an
order for the termination of proceedings. The scenario where the
proceedings would be terminated in light of settlement of the
disputes was consolidated into Article F sub-clause (1)(b).
180. The suggestion made in the Fifth Session that the provision on
termination of proceedings should not require any order to that
effect if the parties settle the dispute, was rejected. This was
because it felt that it should be the parties, rather than the arbitral
tribunal, who should have a say on whether the dispute has been
settled.
181. This change occurred in light of certain suggestions by the State
Members to the Working Group, who participated in the drafting
of the Model Law from the Fifth Session. The Commission had
decided “ to expand the membership of the Working Group to all States
members ” and a total of 36 States along with several international
Special Leave Petition (C) No. 10389 of 2025 Page 129 of 269
organisations participated and provided comments on the draft
provisions.
182. These comments were compiled and put before the Working
Group in its Fifth and Sixth Session as ‘Analytical compilation of
comments by Governments and International organizations on the draft
text of model law on international commercial arbitration ’ available in
the Report of the Secretary General.
183. On the draft Article 33, Austria and Mexico suggested the removal
of the discretionary power of the arbitral tribunal to record the
settlement as an award, as the same, in their view, unjustifiably
restricted party autonomy. The relevant observations read as
under: -
“ Austria and Mexico propose the deletion of the words ‘and
not objected to by the arbitral tribunal’ in article 30(1).
Austria considers that these words restrict the autonomy of
the parties in an unjustified way since, if the subject-matter
of the dispute is capable of being submitted to arbitration, the
parties are free to settle the dispute without any restrictions
by the arbitral tribunal. In the view of Mexico, the arbitral
tribunal should not be able to oppose the recording in the form
of an award of the settlement which the parties have reached .”
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184. Yugoslavia, on the other hand, stated that there could be certain
circumstances where the arbitral tribunal may have a reason to
object. It suggested that the Model Law should spell out the
criteria for such objection, such as where the settlement is
incompatible with public policy. The relevant observations read as
under: -
“ In the view of Yugoslavia, it would be necessary to
determine, at least by using general terms, the criteria on the
basis of which the arbitra1 tribunal would be empowered to
reject the parties' proposal to record their settlement in the
form of an arbitral award. Objections of the arbitral tribunal
should be limited to establishing that the stipulated
settlement is incompatible with the public order of the legal
system applicable to the arbitration .”
185. The Asian-African Legal Consultative Organization (AALCO)
suggested that where the parties settle the dispute, they must be
obliged to notify the arbitral tribunal of the same. It is only when
the arbitral tribunal is appropriately notified by both parties that
the dispute has been settled, should the proceedings be terminated
by the tribunal. The relevant observations read as under: -
“ 3. AALCC is of the view that if the parties settle the dispute
during the arbitral proceedings they must be obliged to notify
the arbitral tribunal, and the arbitral tribunal should
terminate the proceedings only upon receipt of such
notification. Paragraph (l) of article 30, therefore, needs to .be
amended accordingly.”
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186. Keeping in mind the above suggestions, the Working Group noted
the possibility that a settlement may be ambiguous or subject to
conditions which would be unacceptable to the tribunal.
Accordingly, it decided that there were fewer dangers of injustice
in requiring both parties to simply intimate the tribunal about the
settlement of the dispute, upon which the arbitral tribunal would
terminate the proceedings, and if it has no objection, proceed to
record the same by way of an award.
187. Thus, the expression “ shall issue an order for termination of
proceedings ” was omitted from the draft Article 33 / Article XXI
(now Article 30 of the UNCITRAL Model), and the concept of
termination of proceedings upon settlement of the dispute, came
to be incorporated in the draft Article F (now Article 32 of the
UNCITRAL Model), more particularly in clause (1)(b) thereof,
where the proceedings could be terminated pursuant to an
agreement between the parties in this regard.
188. The aforesaid indicates that the Working Group considered the
draft Article F (now Article 32 of the UNCITRAL Model) to be the
Special Leave Petition (C) No. 10389 of 2025 Page 132 of 269
sole provision under which the arbitral proceedings could be
terminated in terms of an order by the arbitral tribunal. The other
instances which allow the arbitral tribunal to terminate the
proceedings, only make a reference to the power of the tribunal to
terminate the proceedings enshrined in Article 32 of the
UNCITRAL Model.
189.
In the Seventh Session the draft provisions on the default of a
party, settlement of disputes and termination of proceedings were
put in their final placeholder numbers being Articles 25, 30 and 32
respectively of the UNCITRAL Model as it stands today. The
relevant discussions on the aforesaid provisions are as under: -
“Article 25
81. The text of article 25 as considered by the Working Group
was as follows:
Article 25.
Default of a party Unless otherwise agreed by the
parties, if, without showing sufficient cause.
(a) the claimant fails to communicate his
statement of claim in accordance with
article 23 (1), the arbitral proceedings
shall be terminated;
(b) the respondent fails to communicate
his statement of defence in accordance
with article 23 (1),
Special Leave Petition (C) No. 10389 of 2025 Page 133 of 269
Variant A: the arbitral proceedings shall continue;
Variant B: the arbitral tribunal shall continue the
proceedings without treating such failure as an
admission of the claimant's allegations;
Variant C: the arbitral tribunal shall treat this as a
denial of the claim and continue the proceedings;
(c) any party fails [to comply with a request by the
arbitral tribunal) to appear at a hearing, or to
produce documentary evidence, the arbitral
tribunal [may] [shall] continue the proceedings
[and may make the award on the evidence before it].
82. The Working Group adopted that article, including, in
subparagraph (b), the wording of variant B, and
subparagraph (c) in the following modified form:
"(c) any party fai1s to appear at a hearing, or to
produce documentary evidence, the arbitral
tribunal may continue the proceedings and make
the award on the evidence before it."
83. As regards the three variants presented in subparagraph
(b), the Working Group, after deliberation, adopted the
wording of variant B. That wording, while according certain
discretion to the arbitral tribunal, contained a limitation
which was considered useful in view of the fact that under
many national laws on civil procedure default of the
defendant in court proceedings was treated as an admission
of the claimant's allegations.
84. It was suggested that the provision should be more
elaborate and provide some guidance concerning certain
procedural issues (e.g., how to establish the default and in
what manner to conduct the proceedings and make the
award). The Working Group, after deliberation, was agreed
that a model law need not contain detailed procedural rules
in that respect.
Special Leave Petition (C) No. 10389 of 2025 Page 134 of 269
Article 30
109. The text of article 30 as considered by the Working
Group was as follows:
Article 30. Settlement
(1) If. during arbitral proceedings. the parties settle
the dispute, the arbitral tribunal shall terminate
the proceedings and. if requested by the parties and
not objected to by the arbitral tribunal. record the
settlement in the form of an arbitral award on
agreed terms.
(2) An award on agreed terms shall be made in
accordance with the provisions of article 31 and
shall state that it is an award. Such an award has
the same status and executory force as any other
award on the merits of the case.
110. The Working Group adopted that article. subject to the
replacement, in paragraph (2). of the words "executory force"
by the word "effect".
Article 32
113. The text of article 32 as considered by the Working
Group was as follows:
Article 32. Termination of proceedings
Variant A:
(1) The arbitral proceedings are terminated:
(a) by the making of the final award
which disposes of all claims
submitted to arbitration or
(b) by an agreement of the parties that
the arbitral proceedings are to be
terminated at a specified date [or after
expiry of a specified period of time); or
Special Leave Petition (C) No. 10389 of 2025 Page 135 of 269
(c) by an order of the arbitral tribunal in
accordance with paragraph (2) of this
article.
(2) After having given suitable notice to the
parties. the arbitral tribunal shall issue an order for
the termination of the arbitral proceedings
(a) when the claimant withdraws his
claim. unless the respondent objects
thereto and the arbitral tribunal
recognizes a legitimate interest on his
part in obtaining a final settlement of
the dispute or
(b) if for any other reason the
continuation of the proceedings
becomes unnecessary or
inappropriate.
[Where the arbitral tribunal fails to issue an order
of termination. any party may request from the
Court specified in article 6 a ruling on the
termination of the proceedings.]
(3) The mandate of the arbitral tribunal terminates
with the termination of the arbitral proceedings.
subject to the provisions of articles 33 and 34 (4).
Variant B:
(1) The arbitral proceedings are terminated either
by the final award or by agreement of the parties or
by an order of termination [by the arbitral tribunal]
[which the arbitral tribunal may issue when the
continuation of the proceedings appears
unnecessary or inappropriate].
(2) The mandate of the arbitral tribunal terminates
with the termination of the arbitral proceedings.
subject to the provisions of articles 33 and 34 (4).
Special Leave Petition (C) No. 10389 of 2025 Page 136 of 269
114. The Working Group adopted that article. based on
variant B. in the following modified form:
"(1) The arbitral proceedings are terminated either
by the final award or by agreement of the parties or
by an order of the arbitral tribunal in accordance
with paragraph (2) of this article.
"(2) The arbitral tribunal
(a) "shall issue an order for the
termination of the arbitral
proceedings when the claimant
withdraws his claim. unless the
respondent objects thereto and the
arbitral tribunal recognizes a
legitimate interest on his part in
obtaining a final settlement of the
dispute;
(b) “may issue an order of termination
when the continuation of the
proceedings becomes for any other
reason unnecessary or inappropriate.
"(3) The mandate of the arbitral tribunal
terminates with the termination of the arbitra1
proceedings, subject to the provisions of articles 33
and 34 (4)."
115. While there was some support for the more elaborate
draft provisions presented in variant A. the Working Group,
after deliberation. decided in favour of variant B. for the sake
of simplicity.
116. AI regards termination of the proceedings by an order of
the arbitral tribunal, the Working Group adopted the more
explicit wording "which the arbitral tribunal may issue when
the continuation of the proceedings appears unnecessary or
inappropriate" as well as the provision contained in
paragraph (2) (a) of variant A. in order to give some
indication of the reasons for an order of termination. ”
Special Leave Petition (C) No. 10389 of 2025 Page 137 of 269
190. In the Seventh Session several significant alterations were made to
the Article(s) 25, 30 and 32 of the UNCITRAL Model. The
expression “ shall issue an order for termination of proceedings” was
omitted from the Articles 25 and 30 respectively, and was
exclusively retained in Article 32.
191. Thereafter, the Article(s) 25 and 30 merely specified that the
proceedings shall terminate, if the claimant fails to communicate
its claims or the parties arrive at a settlement of the dispute,
respectively.
192. The Article 32 further allowed a party to approach the designated
national court having jurisdiction over the arbitral tribunal in the
event the tribunal fails to issue an order for the termination of
proceedings. Lastly, the expression – “ issue an order of termination
when the continuation of the proceedings becomes for any other reason
unnecessary or inappropriate ” was employed to confer a discretion
on the arbitral tribunal to terminate the proceedings.
Special Leave Petition (C) No. 10389 of 2025 Page 138 of 269
193. A slew of comments was received by the Commission on the
contours of the Article(s) 25, 30 and 32 of the UNCITRAL Model.
194. The Soviet Union suggested that instead of providing the
termination of arbitral proceedings by any agreement between the
parties on this behalf under clause (1) of Article 32, it would be
apposite if the same is placed under clause (2) that stipulates when
the tribunal would be empowered to issue an order for the
termination of proceedings.
195. According to the Soviet Union, the agreement of the parties to
terminate arbitration is only a ground on which the proceedings
can be terminated by the tribunal. The Soviet Union further
suggested that the word “ inappropriate ” be replaced from the
expression “ when the continuation of the proceedings becomes for any
other reason unnecessary or inappropriate ” in Article 32. According to
the Soviet Union, Article 32 should only specify the circumstances
or grounds on which the proceedings can be terminated rather
than conferring discretion to an arbitral tribunal to terminate the
proceedings by use of the word “ inappropriate ”. The relevant
observations read as under: -
Special Leave Petition (C) No. 10389 of 2025 Page 139 of 269
“ 1. The Soviet Union states that from the juridical and
technical point of view arbitral proceedings may be
terminated by an award or by an order of the arbitra1
tribunal, but not directly by an agreement of the parties. Such
agreement by the parties rather serves as a ground for an
order for the termination of proceedings. For this reason it is
proposed to move the reference to the agreement of the parties
from paragraph (1) to paragraph (2)(a) of article 32. ”
xxx xxx xxx
3. In the view of the Soviet Union, the reference in paragraph
(2)(b) to the case where the continuation of proceedings
becomes unnecessary or inappropriate is unclear. It is
proposed to replace the word "inappropriate", which gives too
much discretion to an arbitral tribunal, by the word
"impossible" (following the example of article 34(2) of the
UNCITRAL Arbitration Rules) or by the word "pointless"
or any similar word.”
196. The above suggestions, were ultimately accepted, and Article 32
was reformulated to only specify the grounds on which the
proceedings can be terminated by the arbitral tribunal.
197. Several more suggestions were also made by various State
Members on the wording of the Article 32. Despite the fact that
these suggestions were not accepted in entirety, yet the reasoning
given for the rejection of these suggestions in the travaux
préparatoires on the UNCITRAL Model are significant.
Special Leave Petition (C) No. 10389 of 2025 Page 140 of 269
198. Austria had suggested that the provision should define the criteria
for the “withdrawal of a claim” to avoid uncertainties insofar as
termination of proceedings is concerned.
“2. Austria suggests specifying in article 32(2)(a) criteria for
the withdrawal of a claim, in order to avoid uncertainty about
the termination of arbitral proceedings. The following
rewording of paragraph (2)(a) is proposed:
"(a) shall issue an order for the termination of the
arbitral proceedings when the claimant withdraws
his claim either before the communication of the
statement of defence by the respondent or with the
consent of the respondent if the latter has already
communicated his statement of defence or by
waiver of the claimant's rights to the subject-
matter;".
199. However, the aforesaid suggestion was rejected for the reasons
evident in the travaux préparatoires on the UNCITRAL Model. The
preparatory works on the UNCITRAL Model note that the
provision of Article 32 was intended to enumerate only the
circumstances that would automatically lead to a termination of
proceedings. It was incorporated to stipulate those situations and
circumstances that rendered the continuation of proceedings
impossible or unnecessary. The relevant observations read as
under: -
Special Leave Petition (C) No. 10389 of 2025 Page 141 of 269
“ Two variants were discussed and put to the table for
consideration. The first suggested enumerating all those
circumstances that would automatically lead the tribunal to
terminate proceedings, further noting that such
circumstances should be explicitly spelt out. The second
variant suggested limiting the termination of proceedings
only to those cases that rendered continuation of proceedings
impossible or unnecessary. All other circumstances would
not lead to termination. It was stated that: ‘If this approach
is taken, a special rule on termination of arbitral proceedings
may be regarded as superfluous because it would cover the
cases when termination is a self-evident consequence. A draft
article F was thus framed [...]”
(Emphasis supplied)
200. Thus, it was deemed not necessary to articulate the manner in
which a claim could be withdrawn. As long as such withdrawal
resulted in the proceedings becoming unnecessary or impossible,
it would suffice the requirements of Article 32.
201. This is the precise reason why the Working Group in its Seventh
Session, first , chose not to alter clause (a) of Article 32 and
secondly , substituted the word “may” in clause (b) (now clause
(c)) to make it obligatory for the arbitral tribunal to terminate the
proceedings where its continuation becomes impossible or
unnecessary. The relevant observations read as under: -
Special Leave Petition (C) No. 10389 of 2025 Page 142 of 269
“ 37. Article 32, paragraph 2, subparagraph·(b): The text
states that where the arbitral proceedings become
unnecessary or inappropriate, the arbitral tribunal "may"
order the termination of the proceedings. The word "may"
indicates a right and not an obligation. Consequently, despite
a conviction that the proceedings have become unnecessary
or inappropriate, the arbitral tribunal may, nevertheless,
order their continuation. On what grounds? To what
purpose? In whose interest? The text does not state. It is clear
that the continuation of such proceedings would be nothing
more than a waste of time, effort and money. We therefore
propose that paragraph 2 be amended as follows:
"2. The arbitral tribunal shall issue an order for the
termination of the arbitral proceedings when:
(a) The claimant withdraws (no change).
(b) The arbitral proceedings become, for
any other reason, unnecessary or
inappropriate."
202. Canada expressed concerns that the draft of provision of Article
32 gave unchecked discretion to the arbitral tribunal to terminate
the proceedings. Accordingly, it proposed that the provision
should enable the aggrieved party to seek a review of the decision
of the arbitral tribunal by the national courts having jurisdiction.
The relevant observations read as under: -
“1. Canada states that paragraph (2)(b) apparently gives the
arbitral tribunal complete discretion to terminate the
proceedings whenever it decides that the continuation of the
proceedings becomes "unnecessary or inappropriate". It
Special Leave Petition (C) No. 10389 of 2025 Page 143 of 269
might be desirable to provide that such a decision is
reviewable by the Court.
203. Yugoslavia also expressed similar concerns that the grounds
specified in the draft of Article 32 were too general and vague,
which could potentially result in wrongful terminations. The
relevant observations read as under: -
“2. In the view of Yugoslavia, the grounds for the termination
of arbitral proceedings specified in paragraph (2)(b) are too
general and vague and may result in terminating the
proceedings even where this is not in the interest of the
parties. Thes suggestion is that an attempt. be made to
identify some grounds more precisely.”
204. However, these concerns became irrelevant when the Working
Group in its Seventh Session accepted the suggestion put forth by
Egypt and curtailed the discretion of the arbitral tribunal to
terminate the proceedings under the draft of Article 32. The
relevant observations read as under: -
“ Egypt had set out its objection as regards the tribunal’s
potential permissive power to terminate proceedings that
were otherwise unnecessary or impossible. It was emphasised
that the tribunal should possess no discretion in the matter
as this was clearly a waste of time and money and was not in
the parties’ interest.9 This is sensible because despite the fact
that the parties possess the right to petition the courts on this
matter, a potentially discretionary power conferred upon the
tribunal may have led to an unnecessary and prolonged tug-
of-war. It was at the sixth session of Working Group II that
the provision began to finally resemble its existing
Special Leave Petition (C) No. 10389 of 2025 Page 144 of 269
manifestation. Draft article F stated, for the first time, that
proceedings shall be terminated also by a final award, in
addition to an agreement of the parties and through an order
by the tribunal on the grounds already explained in previous
sessions.10 At the seventh session, two alternative variants
were put forward, but these did not differ from each other in
any substantial way and are reflective of the final version of
article 32. However, two issues are worth highlighting. First,
a bracketed proposal was suggested in the f irst and most
elaborate variant whereby if the tribunal fails to issue a
termination order despite the existence of the situations set
out in article 32, then the parties are entitled to make a
request to the courts. As we already stated, the Egyptian
proposal definitively settled this matter by curtailing the
tribunal’s discretionary powers. Second, both variants
required that prior to the issuance of a termination order, the
tribunal provide appropriate notice to the parties.11 Neither
of these two considerations survived the final draft (despite
the latter’s existence in article 34 of the UNCITRAL
Arbitration Rules), although it is certainly good practice for
the tribunal to forewarn the parties about its intention to
terminate proceedings. At the end of the seventh session, the
final version of the article was adopted.12 The 2006 revision
of the Model Law did not affect article 32 .”
205. What can be discerned from the above discussion is that: -
(i)
First, Article 32 of the UNCITRAL Model, which is pari-
materia to Section 32 of the Act, 1996, was intended to be the
only provision pertaining to the power of the arbitral
tribunal to terminate the proceedings. The provision was
drafted due to the impending need felt by the Working
Group for a dedicated provision on the termination of
Special Leave Petition (C) No. 10389 of 2025 Page 145 of 269
proceedings that enumerates all the circumstances that
could lead to such termination and provide certainty in
respect of the important consequences flowing therefrom.
The relevant observations read as under: -
“38. The Working Group considered the question
whether it would be appropriate to include in the
model law a provision on termination of arbitral
proceedings (on the basis of a note by the Secretariat,
WP.4l, paras. 38-41 and draft article F).
39. There was wide support in the Working Group for
the view that the model law should contain a provision
on termination of arbitral proceedings. Such a
provision would be useful because it would provide
certainty in respect of important consequences of the
termination of arbitral proceedings.
xxx xxx xxx
41. It was also suggested that the model law should
contain a rule empowering the arbitral tribunal to
decide whether it was appropriate to terminate the
proceedings after the tribunal gave suitable notice to
the parties of its intention to terminate the
proceedings. ”
(ii) Secondly, that Article 32 was introduced in the Model Law
only after the provisions of Articles 25 and 30 respectively,
as the Working Group felt that the termination of
proceedings envisaged under the aforesaid two provisions
should not be automatic, rather it must require a specific
Special Leave Petition (C) No. 10389 of 2025 Page 146 of 269
order in that regard by the arbitral tribunal. The entire
purport behind drafting Article 32 stemmed from the
Working Group’s realisation that a separate provision was
required to supplement the “termination of proceedings”
envisaged under Articles 25 and 30 of the UNCITRAL
Model, respectively. The relevant observations read as
under: -
“40. The prevailing view was that there should be no
automatic termination of arbitral proceedings and that
a procedural decision by the arbitral tribunal was
needed for terminating the arbitral proceedings.
However, it was suggested that the wording should
indicate that a special order of termination was not
always necessary, for example, when the dispute was
settled by an agreement of the parties or by an award
on the merits of the claim.”
xxx xxx xxx
Despite the fact that this was not a controversial
provision, some concerns were voiced in the initial
stages of the drafting process as to whether or not a
provision concerning termination of proceedings was
really required. However, the majority view prevailed,
whereby this was felt to be important for the parties,
including for the calculation of limitation periods,
whether the tribunal could alter the award or issue an
additional award, as well as others. When the issue of
termination of arbitral proceedings was mooted in the
preparatory stages of the work of Working Group II,
reference was made to article 34 of the UNCITRAL
Arbitration Rules, without much elaboration.5 Draft
article 24(a) iterated the principle now found in article
Special Leave Petition (C) No. 10389 of 2025 Page 147 of 269
25(a) of the Model Law, whereby if the claimant fails
to communicate his statement of claim in due time
without showing sufficient cause, the tribunal shall
issue a termination order. It was only during the fifth
session of Working Group II that the issue was given
significant attention. Two variants were discussed and
put to the table for consideration. The first suggested
enumerating all those circumstances that would
automatically lead the tribunal to terminate
proceedings, further noting that such circumstances
should be explicitly spelt out. The second variant
suggested limiting the termination of proceedings only
to those cases that rendered continuation of
proceedings impossible or unnecessary. All other
circumstances would not lead to termination. It was
stated that: ‘If this approach is taken, a special rule on
termination of arbitral proceedings may be regarded as
superfluous because it would cover the cases when
termination is a self-evident consequence. A draft
article F was thus framed [...]”
(Emphasis supplied)
(iii) Lastly, the Working Group itself considered that the scheme
formed by Article(s) 25 and 30, insofar as they provide for
the termination of proceedings, has to be construed in light
of Article 32 of the UNCITRAL Model. Article(s) 25 and 30
of the UNCITRAL Model were only concerned with setting
forth the general principles and certain situations when the
proceedings could be terminated. In all such circumstances,
the termination would still nevertheless be governed by
Special Leave Petition (C) No. 10389 of 2025 Page 148 of 269
Article 32 of the UNCITRAL Model. The Working Group
noted in the context of Article 30, that in the event of a
settlement of the dispute by the parties, the proceedings
would be terminated in terms of Article 32 sub-clause (2).
Similarly, the travaux préparatoires on the UNCITRAL Model
notes that a default by the claimant in terms of Article 25(a)
would in essence attract the provision of Article 32(2)(c), i.e.,
it would render the proceedings unnecessary or impossible.
The relevant observations read as under: -
“127. The view was expressed that this article should
set forth principles in a general way without detailed
procedural rules.
xxx xxx xxx
Article 32. Termination of proceedings
Article 32 (l)
26. Mr. LEBEDEV (Union of Soviet Socialist
Republics) drew attention to his delegation's written
comment in document A/CN.9/263 (p. 44). The
Commission had already approved in article 30 (l) the
principle that if there was a settlement between the
parties, the proceedings should be terminated by the
arbitral tribunal. For the sake of consistency with that,
the reference to the agreement of the parties should be
transferred from paragraph (l) of article 32 to para-
graph (2). He thought that was only a drafting point.
Also, by describing the award as "final", the article
introduced a new concept.
xxx xxx xxx
Special Leave Petition (C) No. 10389 of 2025 Page 149 of 269
Paragraph 1 addresses the question as to which actions
of the tribunal serve to terminate arbitral proceedings.
Only two are mentioned, namely a final award or a
termination order issued by the tribunal as prescribed
in paragraph 2 of article 32. Although what
constitutes a final award is covered in several places in
the Model Law, it is instructive to set out some key
features here because there is no general definition
therein. The same applies as regards the construc tion
of the term ‘order’. The termination of arbitral
proceedings by means of an award is the normal
avenue that terminates proceedings, provided, of
course, that the award has indeed become final and is
not subject to further challenges under articles 33 and
34 of the Model Law, or other additional challenges
under the law of the seat. The termination of
proceedings other than through an order is exceptional
and is elaborated in paragraph 2 of article 32.
Paragraph 2 enumerates three situations whereby the
tribunal is obliged (with limited discretion in
subparagraph (b)) to terminate the proceedings. Some
Model Law jurisdictions, as is the case with section
608(2)(1) of the ZPO, expand on these, adding in the
case at hand a fourth situation, namely where the
claimant fails to file his claim. This situation is also
covered in article 25(a) of the Model Law. No doubt,
this may well be encompassed within subparagraph
2(c) of article 32 given its broad ambit.”
(Emphasis supplied)
II. Section 32 of the Act, 1996 and the import of the expression
“Mandate of Arbitral Tribunal”.
Special Leave Petition (C) No. 10389 of 2025 Page 150 of 269
206. The provision of Section 32 is contained in Chapter VI of the Act,
1996 which is titled “ Making of arbitral award and termination of
proceedings ”.
207. The marginal note appended to Section 32 of the Act, 1996 reads
“ Termination of proceedings ”. The marginal note along with the
expression “ The arbitral proceedings shall be terminated by the final
arbitral award or by an order of the arbitral tribunal under sub-section
(2) ” used in Section 32 sub-section (1) leaves little to imagination.
208.
The aforesaid expression clearly stipulates that the termination of
arbitral proceedings under the Act, 1996 can occur in only two
ways. The arbitral proceedings come to an end either through the
passing of the final award or by an order of the arbitral tribunal
under sub-section (2) of Section 32.
209. No other provision in the Act, 1996 except Section 32 empowers
the arbitral tribunal to pass an order of termination of
proceedings. Section(s) 25(a), 30 and 38 of the Act, 1996 only state
that the arbitral tribunal shall terminate the proceedings in the
circumstances enumerated therein.
Special Leave Petition (C) No. 10389 of 2025 Page 151 of 269
210. Section 25 clause (a) of the Act, 1996 stipulates that if the claimant
fails to communicate his statement of claim “ the arbitral tribunal
shall terminate the proceedings ”. Similarly, Section 30 sub-section (2)
provides that if the parties settle the dispute during the arbitral
proceedings “ the arbitral tribunal shall terminate the proceedings ”.
The Second Proviso to Section 38 also states that where none of the
parties pay the deposit as required by the arbitral tribunal, in
respect of a claim or a counter-claim, then “ the arbitral tribunal may
suspend or terminate the arbitral proceedings in respect of such claim or
counter-claim, as the case may be ”.
211.
This clearly indicates that any order for termination of
proceedings by the arbitral tribunal would squarely fall within the
provision of Section 32 sub-section (2). The use of the words
“shall” and “or” in the expression “ The arbitral proceedings shall be
terminated by the final arbitral award or by an order of the arbitral
tribunal under sub-section (2) ” clearly show that the arbitral
proceedings can come to an end in only two distinct ways, as
specified in sub-section (1).
Special Leave Petition (C) No. 10389 of 2025 Page 152 of 269
212. The Explanatory Notes on the UNCITRAL Model, more
particularly on Article 32 clearly states that only two actions by the
arbitral tribunal can result in the termination of proceedings,
namely, the passing of the final award or the issuance of an order
for termination of proceedings as prescribed in paragraph (2) of
the said provision. The termination of arbitral proceedings by
means of a final award is the general rule and whereas the
issuance of an order in terms of paragraph (2) is an exception. The
relevant observations read as under: -
“Paragraph 1 addresses the question as to which actions of
the tribunal serve to terminate arbitral proceedings. Only
two are mentioned, namely a final award or a termination
order issued by the tribunal as prescribed in paragraph 2 of
article 32. Although what constitutes a final award is covered
in several places in the Model Law, it is instructive to set out
some key features here because there is no general definition
therein. The same applies as regards the construction of the
term ‘order’. The termination of arbitral proceedings by
means of an award is the normal avenue that terminates
proceedings, provided, of course, that the award has indeed
become final and is not subject to further challenges under
articles 33 and 34 of the Model Law, or other additional
challenges under the law of the seat. The termination of
proceedings other than through an order is exceptional and is
elaborated in paragraph 2 of article 32 .”
(Emphasis supplied)
213. The provisions of Section(s) 25(a), 30 and 38 of the Act, 1996,
merely enumerate the different circumstances in which the
Special Leave Petition (C) No. 10389 of 2025 Page 153 of 269
arbitral tribunal would be empowered to pass an order for
termination of proceedings under sub-section (2) of Section 32.
214. This is further fortified from the marginal note to Section 32 of the
Act, 1996. It is trite to say that, in the absence of any inherent
conflict or contradiction between the marginal note and the
substantive parts of a particular provision, the marginal note may
be used to aid in the interpretation of the provision.
215. This is further evident from the discussions of the Working Group
on the UNCITRAL Model Law, which decided to adopt Article 32
(corresponding Section 32 of the Act, 1996) in order to ensure that
the arbitral proceedings should not terminate automatically unless
an order to that effect is passed by the arbitral tribunal.
216. At the time of preparation of the UNCITRAL Model, both the
Articles 25 and 30 respectively, had stipulated that the
proceedings shall terminate if the claimant does not file its
statement of claims or where the parties arrive at a settlement of
the dispute, respectively. The Working Group was concerned that,
there could be a situation where, even without the indulgence of
the arbitral tribunal, the proceedings could simpliciter come to an
Special Leave Petition (C) No. 10389 of 2025 Page 154 of 269
end as soon as the conditions stipulated in Article(s) 25 and 30
were fulfilled.
217. Accordingly, it decided to adopt a dedicated provision relating to
termination of proceedings that would explicitly require an
arbitral tribunal to issue a formal order to such effect in order to
bring the arbitral proceedings to an end. It was with this view that
Article 32 was incorporated in the UNCITRAL Model Law. At the
cost of repetition, the relevant observations are once again
reproduced below: -
“38. The Working Group considered the question whether it
would be appropriate to include in the model law a provision
on termination of arbitral proceedings (on the basis of a note
by the Secretariat, WP.4l, paras. 38-41 and draft article F).
39. There was wide support in the Working Group for the
view that the model law should contain a provision on
termination of arbitral proceedings. Such a provision would
be useful because it would provide certainty in respect of
important consequences of the termination of arbitral
proceedings.
40. The prevailing view was that there should be no
automatic termination of arbitral proceedings and that a
procedural decision by the arbitral tribunal was needed for
terminating the arbitral proceedings. [...]”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 155 of 269
218. One another reason for why the termination of proceedings in
terms of Sections 25, 30 or 38 of the Act, 1996 respectively, have to
be construed in terms of Section 32 of the said Act, is in view of the
Chapters under which the aforesaid provisions are contained.
219. Section 25 of the Act, 1996 is contained in Chapter V which deals
with the “ Conduct of arbitral proceedings ”. The discussions of the
Working Group on UNCITRAL Model, particularly Article 25
thereof, indicate that the considerations that weighed with it for
its enactment had nothing to do with empowering the arbitral
tribunal to terminate the proceedings. Rather it was due to the
apprehension that some jurisdictions were wary of decisions
rendered ex-parte .
220. The object underlying Article 25 of the UNCITRAL Model and the
corresponding Section 25 of the Act, 1996 is to ensure that a party
cannot thwart arbitration by simpliciter not participating in the
arbitral proceedings and thereby leaving the other party in a lurch.
It was enacted to expressly recognise the circumstances and the
manner in which an arbitral tribunal could continue with the
arbitral proceedings even in the absence of one party.
Special Leave Petition (C) No. 10389 of 2025 Page 156 of 269
221. Thus, Section 25 of the Act, 1996 only deals with the continuation
of the arbitral proceedings, more particularly the manner in which
the proceedings would progress in the absence of one party.
222. Likewise, Section 30 of the Act, 1996 also only stipulates the form
and manner in which the arbitral tribunal may pass an award
recording the settlement of dispute by the parties. It only goes to
the extent of laying down how the arbitral tribunal is expected to
proceed if the parties arrive at a settlement during the course of
the arbitral proceedings. It does not in itself empower the arbitral
tribunal to terminate the proceedings, rather only ascribes the
circumstances that could enable the tribunal to terminate the
proceedings in terms of Section 32(2) of the Act, 1996.
223. Similarly, Section 38 of the Act, 1996 is contained in Chapter X,
titled “ Miscellaneous ”. Sub-section (1) thereof, empowers the
arbitral tribunal to direct the deposit of a certain amount as
advance towards the cost it likely expects to incur in respect of the
continuation of the proceedings. The aforesaid provision is
omnibus in nature and applies to every stage of the arbitral
proceedings.
Special Leave Petition (C) No. 10389 of 2025 Page 157 of 269
224. Sub-section (3) of Section 38 is of significance. It stipulates that
once the proceedings stand terminated, the arbitral tribunal shall
furnish the account of all the deposits received by it, and return
any unexpended balance to the parties.
225. What is particularly noteworthy is that Section 38 sub-section (3),
insofar as its application is concerned, does not speak about the
termination of proceedings in certain circumstances. Irrespective
of the provision under which the proceedings come to be
terminated by the arbitral tribunal, the said provision would
require the arbitral tribunal to render the accounts to the parties.
226. To put it simply, irrespective of whether the proceedings are
terminated either under Section(s) 25, 30 or 32, the arbitral
tribunal, as per sub-section (3) of Section 38 is obliged to furnish
the account of all the deposits received by it and return any
unexpended balance to the parties.
227.
The statutory design of Section 38 of the Act, 1996 itself
acknowledges that the power to retain deposits is co-terminus
with the subsistence of arbitral proceedings. Once the proceedings
Special Leave Petition (C) No. 10389 of 2025 Page 158 of 269
stand terminated, sub-section (3) mandates the arbitral tribunal to
render accounts and return unspent deposits.
228. Thus, it would be logically inconsistent to say that although sub-
section (3) of Section 38 would be attracted where the proceedings
are terminated in terms of Section 32 sub-section (2), yet, when it
comes to the termination of proceedings on account of default of
the parties in paying the requisite costs, such termination would
be distinct, and not attract the provision Section 32 of the Act, 1996.
229. In the absence of anything to the contrary, one part of a provision
cannot be isolated and confined to a narrow field of operation by
giving it a restrictive or selective interpretation while the
remaining parts of the provision are read in an expansive manner
and construed to apply to the entirety of the Act, 1996.
230. A provision cannot be read in an inconsistent manner. It must be
read as a whole, every sub-section forming part thereof must be
given a harmonious, consistent and purposeful interpretation, so
as to give effect to the legislative intent underlying the enactment.
It is impermissible to dismember a provision and ascribe to it
Special Leave Petition (C) No. 10389 of 2025 Page 159 of 269
multiple meanings divorced from its textual and contextual
setting.
231. The Chapter in which the provision of Section 38 is contained
along with the general applicability of the sub-section(s) contained
therein, clearly suggests that the said provision does not vest a
separate and distinct power in the arbitral tribunal to terminate
the proceedings and rather only enumerates one another
circumstance in which the proceedings could be terminated by the
arbitral tribunal.
232. Viewed in this conspectus, it is not open to contend that
termination of proceedings arising out of non-payment of costs in
terms of Section 38 of the Act, 1996 stands on a different footing
from a termination under Section 32(2). The statute does not
recognise such a dichotomy, nor does the scheme of the Act, 1996
warrant such an interpretation.
233.
We may now look into the decision of this Court in SREI
Infrastructure (supra).
Special Leave Petition (C) No. 10389 of 2025 Page 160 of 269
234. A two - Judge Bench of this Court in SREI Infrastructure (supra)
held that the termination of proceedings under Section 25(a) of the
Act, 1996 was wholly distinct in nature from a termination under
Section 32(2) of the Act, 1996 for two reasons: -
(i) First, that Section 25(a) of the Act, 1996, more particularly
the termination that takes place in lieu thereof occurs at a
stage where the arbitral proceeding is yet to be started. The
use of the word “ sufficient cause ” in the said provision
indicates that the proceedings can be terminated only when
no sufficient cause is shown by the claimant for his default
in filing the statement of claim.
(ii) Secondly, that unlike Section 32 of the Act, 1996, the
legislature in its wisdom, consciously omitted the phrase
“ the mandate of the Arbitral Tribunal shall terminate ” in Section
25(a) of the Act, 1996. This clearly indicates that the nature
of termination under the two provisions is distinct from
each other.
235. Similarly, in Sai Babu (supra), another coordinate bench of this
Court reiterated that the omission of the expression “ the mandate
of the Arbitral Tribunal shall terminate ” in Section 25(a) clearly
Special Leave Petition (C) No. 10389 of 2025 Page 161 of 269
indicates that the termination of proceedings thereunder is
different in nature from that under Section 32(2) of the Act, 1996.
236. We are unable to agree with the views expressed by this Court in
SREI Infrastructure (supra) and Sai Babu (supra) insofar as they
hold that the termination of proceedings under Sections 25(a) and
32(2) of the Act, 1996 are distinct from one another.
237. This is because, it would be logically indefensible to say that the
termination of proceedings in terms of Section 25(a) takes place at
a different stage, more particularly prior to the commencement of
arbitral proceedings. We say so because Section 21 of the Act, 1996
clearly states that “ the arbitral proceedings in respect of a particular
dispute commence on the date on which a request for that dispute to be
referred to arbitration is received by the respondent ”. A claimant under
the scheme of the Act, 1996 is expected, rather required to
communicate its statement of claims only after the commencement
of the arbitral proceedings.
238. Furthermore, as far as the requirement of existence of a “ sufficient
cause ” is concerned for the termination of proceedings under
Special Leave Petition (C) No. 10389 of 2025 Page 162 of 269
Section 25(a), the said expression only indicates when the arbitral
tribunal would be empowered to terminate the proceedings. The
existence of a sufficient cause is only a rider on when it would be
permissible for the tribunal to terminate the proceedings. It does
not in any way alter the nature of the order for termination, once
passed by the arbitral tribunal. Moreover, the expression
“ sufficient cause ” used in the substantive part of Section 25, applies
to all sub-clauses of the said provision.
239. The Working Group on the UNCITRAL Model itself
acknowledged that the introductory sentence to Article 25, more
particularly the phrase “ sufficient cause ” governed all three sub-
paragraphs of the provision. The relevant observations read as
under: -
“ 32. The CHAIRMAN said that in his view there was no
contradiction, since the introductory sentence governed all
three subparagraphs. Under the Soviet Union proposal, the
tribunal would be bound to comply with a request for
continuation of the proceedings made by one of the parties
under subparagraph (c) only if the defaulting party had not
shown sufficient cause .”
240.
Thus, it is manifestly clear that the aforesaid expression has
nothing to do with the nature of the order for termination of
Special Leave Petition (C) No. 10389 of 2025 Page 163 of 269
proceedings. The provision only stipulates the circumstances in
which it would be permissible for the arbitral tribunal to terminate
the proceedings i.e., where the claimant fails to communicate its
statement of claims within the specified period without any
sufficient cause for such default.
241. The expression “ the mandate of the Arbitral Tribunal shall terminate”
is undoubtedly unique to the provision of Section 32 of the Act,
1996. However, the use of the said expression is in no manner
intended to convey that the nature of termination under Section
32(2) is distinct from the termination of proceedings under the
other provisions of the Act, 1996.
242. The expression “ mandate of the Arbitral Tribunal” only refers to the
obligation of the arbitral tribunal to administer the arbitration by
conducting the proceedings in order to adjudicate upon the
dispute referred to it. It is merely descriptive of the function
entrusted to the tribunal, namely, the authority and duty to
adjudicate the disputes before it.
Special Leave Petition (C) No. 10389 of 2025 Page 164 of 269
243. As such, the termination of mandate of the arbitral tribunal
signifies nothing more than the cessation of the authority of the
tribunal to proceed further in the reference. It denotes an end to
the tribunal’s jurisdiction over the subject matter of the arbitration
in that particular reference and cannot be construed as creating a
specialised form of termination distinct from the other provisions
of the Act, 1996.
244. Irrespective of whether the proceedings are terminated on account
of the rendition of a final award, or by the withdrawal of claims,
or on account of default by the claimant, or the intervention of any
impossibility in the continuation of the proceedings, the legal
effect remains the same, inasmuch as the arbitral tribunal
thereafter stands divested of authority to act in the reference.
245. When the arbitral proceedings are terminated on account of
default of a party in communicating its statement of claims as per
Section 25(a) of the Act, 1996, the consequence that flows from
such termination is no different from a termination in terms of
Section 32 of the said Act. In both scenarios, the tribunal ceases to
Special Leave Petition (C) No. 10389 of 2025 Page 165 of 269
possess any authority to adjudicate upon the dispute referred to
it.
246. Similarly, once the dispute stands resolved by agreement of the
parties and the tribunal either records such settlement in the form
of an arbitral award or otherwise orders the termination of
proceedings in terms of Section 30 of the Act, 1996, the duty of the
arbitral tribunal to adjudicate the dispute also comes to an end.
There remains no lis for adjudication by the tribunal and
consequently no function for it to discharge. The termination of
proceedings, by operation of Section 30 of the Act, 1996, thus
attains the same effect and finality as under Section 32 of the said
Act.
247. The aforesaid may be looked at from one another angle. The
omission of the expression “ the mandate of the Arbitral Tribunal shall
terminate” in Sections 25, 30 and 38 of the Act, 1996 respectively, is
for the simple reason that the said provisions do not pertain to the
manner in which the arbitral proceedings come to an end, rather
only prescribe the circumstances in which the proceedings may be
terminated. Section 32 of the Act, 1996 on the other hand, explicitly
Special Leave Petition (C) No. 10389 of 2025 Page 166 of 269
relates to the termination of proceedings, and thus, the legislature
in order to provide certainty as regards the consequences of such
termination, incorporated the aforesaid expression.
248. This is fortified from the deliberations of the Working Group that
led to the enactment of Article 32 of the UNCITRAL Model, as
already discussed aforesaid.
249. The other reason why this expression has been omitted may be
understood from Section 38 of the Act, 1996. The Second Proviso
to Section 38 sub-section (2) empowers the arbitral tribunal to
suspend or terminate the proceedings for a particular claim or
counter-claim in respect of which the requisite deposits have not
been made by the parties.
250. When the arbitral tribunal terminates the proceedings in respect
of a particular claim or counter-claim, it does not mean that the
entire proceedings have terminated, rather only signifies the end
of the proceedings for that particular claim or counter-claim, as the
case may be. There could be situations where the proceedings may
be terminated in respect of one particular claim, but in respect of
Special Leave Petition (C) No. 10389 of 2025 Page 167 of 269
the other claims and counter-claims, the proceedings could be
continuing. In such circumstances, the mandate of the arbitral
tribunal would also continue to survive de hors the termination in
respect of a particular claim or counter-claim, as the case may be.
251. Thus, the common thread that runs across Sections 25, 30 32 and
38 of the Act, 1996 respectively, is that although the arbitral
proceedings may terminate for varied reasons, yet the
consequence of such termination remains the same i.e., the arbitral
reference stands concluded and the authority of the tribunal
stands extinguished.
252. The termination of proceedings under Section(s) 25 and 38 of the
Act, 1996, is not a trivial procedural formality. It envisages a
situation where a claimant due to his own belligerence, fails to
communicate its statement of claims, without any sufficient cause
or does not pay the requisite costs required by the arbitral tribunal
to function.
253. Under the scheme of the Act, 1996, parties are empowered to refer
their disputes to an arbitral tribunal. The arbitral tribunal which
Special Leave Petition (C) No. 10389 of 2025 Page 168 of 269
in turn is in seisin of the dispute, has a positive duty to adjudicate
and resolve the dispute that has arisen between the parties.
254. This reference however, is singular, not perpetual. It ordains one
arbitral process, not an indefinite series of retry attempts. Once the
arbitral tribunal is seized of a dispute, the mechanism
contemplated under the Act, 1996 cannot be again reinvoked to
refer the same dispute to another tribunal.
255. Likewise, once the proceedings before the arbitral tribunal, come
to an end, either by way of a final award or an order for
termination of the proceedings in the situations envisaged under
the Act, 1996, the reference also comes to an end, and attains
finality.
256. We say so, because if the claimant is allowed a fresh arbitration, it
would reduce the entire mechanism into a farce. It would lead to
a situation where the claimant would have no incentive to pursue
the proceedings with diligence.
257. Arbitration is built on procedural self-responsibility. Its edifice is
the idea that each party must advance its case diligently, without
Special Leave Petition (C) No. 10389 of 2025 Page 169 of 269
dependence on judicial paternalism. Section(s) 25 and 38 of the
Act, 1996 respectively, insofar as they empower the termination of
proceedings on account of default by a party, crystalize this
principle.
258. The consequence of termination is not a trivial procedural
formality. It has been enshrined to penalise inertia and
recalcitrance of the parties.
259. To permit a party who by its own contumacious conduct allowed
the proceedings to be terminated in the first instance, to again set
the entire mechanism under the Act, 1996 in motion before another
set of arbitrators, would defeat the procedural self-responsibility
that the parties carry with themselves into arbitration. It would
give a license to the parties to proceed carelessly, miss deadlines,
cause disruption, and if the proceedings are terminated then
simply restart them once again.
260. Arbitration is not infinite. Arbitrator availability is scarce;
administrative capacity at institutions is finite; the arbitral process
itself is resource-sensitive. A claimant who can repeatedly initiate
Special Leave Petition (C) No. 10389 of 2025 Page 170 of 269
proceedings after default squanders the finite capital of the
arbitral system.
261. Allowing such default also runs the risk of opening the floodgates
of ‘Tribunal Hopping’. If a party senses the possibility of an
unfavourable outcome, it can simply let the proceedings get
terminated by his wilful conduct, and then re-initiate arbitration
before another tribunal.
262. Thus, it is imperative that the termination of proceedings either
under Section 25 or Section 38 of the Act, 1996 respectively, is
construed to be an order for the termination of proceedings within
the meaning of Section 32(2) of the Act, 1996.
263. An order terminating the proceedings on account of the claimant’s
failure to file the statement of claims or to deposit the requisite fees
in terms of Section(s) 25 and 38, is in essence an order under
Section 32(2) of the Act, 1996.
264. The decision of the Delhi High Court in PCL Suncon (supra) which
held that Section 32 of the Act, 1996 is exhaustive and covers all
Special Leave Petition (C) No. 10389 of 2025 Page 171 of 269
cases of termination of arbitral proceedings under the Act, 1996,
lays down the correct proposition of the law.
265. Similarly, the decision of the Bombay High Court in Datar
Switchgear (supra) insofar as it lays down that the power of the
arbitral tribunal to terminate the proceedings under the scheme of
the Act, 1996 lies only in Section 32(2) and that the use of the word
“termination” in Section(s) 25, 30 and 38, merely denotes the
consequence that would ensue in the circumstances envisaged
therein, is also correct.
266. The power of the arbitral tribunal to terminate the proceedings is
available only under Section 32(2) of the Act, 1996. The other
provisions, namely, Section(s) 25, 30 and 38 of the Act, 1996, only
denote the circumstances in which the tribunal would be
empowered to take recourse of Section 32(2) and thereby,
terminate the proceedings.
B. Remedy under the Act, 1996 against an order terminating the
arbitral proceedings.
Special Leave Petition (C) No. 10389 of 2025 Page 172 of 269
267. As discussed in the earlier parts of this judgment, this Court in
Lalitkumar V. Sanghvi (supra) and SREI Infrastructure (supra)
respectively, acknowledged that there was an apparent lacuna in
the scheme of the Act, 1996.
268. It observed that where the mandate of the arbitrator terminates,
either as a result of the arbitrator withdrawing from the office, or
upon agreement of the parties, the Act, 1996 stipulates the
recourse that would be available namely, to seek appointment of
a substitute arbitrator in terms of Section 15 of the Act, 1996.
269. However, in the event the arbitral proceedings are terminated
and, in consequence thereof, the mandate of the arbitral tribunal
also terminates, the Act, 1996 is completely silent on the remedy
that may be availed against the same. None of the provisions in
the Act, 1996 address the course of action that would be available
to a party against an order terminating the arbitral proceedings.
270.
A seven-Judge Bench of this Court in SBP & Co. v. Patel Engg.
Ltd. reported in (2005) 8 SCC 618 expressly disapproved the
approach of various High Courts entertaining challenges to the
Special Leave Petition (C) No. 10389 of 2025 Page 173 of 269
procedural orders passed by the arbitral tribunal under their
supervisory jurisdiction in terms of Article 227. This Court held
that the Act, 1996 is a complete code, and that unless a party
aggrieved by any order of the arbitral tribunal has statutory right
of appeal against such order under the Act, 1996, the party would
have no choice but to wait until the award is passed to raise its
grievances whilst assailing the final award. The relevant
observations read as under: -
“45. It is seen that some High Courts have proceeded on the
basis that any order passed by an arbitral tribunal during
arbitration, would be capable of being challenged under
Article 226 or 227 of the Constitution of India. We see no
warrant for such an approach. Section 37 makes certain
orders of the arbitral tribunal appealable. Under Section 34,
the aggrieved party has an avenue for ventilating his
grievances against the award including any in-between
orders that might have been passed by the arbitral tribunal
acting under Section 16 of the Act. The party aggrieved by
any order of the arbitral tribunal, unless has a right of appeal
under Section 37 of the Act, has to wait until the award is
passed by the Tribunal. This appears to be the scheme of the
Act. The arbitral tribunal is after all, the creature of a
contract between the parties, the arbitration agreement, even
though if the occasion arises, the Chief Justice may constitute
it based on the contract between the parties. But that would
not alter the status of the arbitral tribunal. It will still be a
forum chosen by the parties by agreement. We, therefore,
disapprove of the stand adopted by some of the High Courts
that any order passed by the arbitral tribunal is capable of
being corrected by the High Court under Article 226 or 227
Special Leave Petition (C) No. 10389 of 2025 Page 174 of 269
of the Constitution of India. Such an intervention by the
High Courts is not permissible.
46. The object of minimizing judicial intervention while the
matter is in the process of being arbitrated upon, will
certainly be defeated if the High Court could be approached
under Article 227 of the Constitution of India or under
Article 226 of the Constitution of India against every order
made by the arbitral tribunal. Therefore, it is necessary to
indicate that once the arbitration has commenced in the
arbitral tribunal, parties have to wait until the award is
pronounced unless, of course, a right of appeal is available to
them under Section 37 of the Act even at an earlier stage.”
271. Accordingly, this Court in SBP & Co. (supra) held that the
supervisory jurisdiction of the High Courts cannot be invoked to
interfere with the orders passed by an arbitral tribunal.
272. In Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd.
reported in (2022) 1 SCC 75 a three-Judge Bench of this Court held
that although the scheme of the Act, 1996 is a complete code in
itself without there being scope for any judicial interference
beyond what is permitted therein, yet, a legislative enactment by
itself cannot curtail a constitutional right, particularly that under
Article 227 of the Constitution. It held that in exceptional
circumstances an order passed by the arbitral tribunal would be
amenable to challenge under Article 227, if the party aggrieved
Special Leave Petition (C) No. 10389 of 2025 Page 175 of 269
therefrom is either left remediless under the statute or a clear “bad
faith” is shown by one of the parties. The relevant observations
read as under: -
“13. The Arbitration Act itself gives various procedures and
forums to challenge the appointment of an arbitrator. The
framework clearly portrays an intention to address most of
the issues within the ambit of the Act itself, without there
being scope for any extra statutory mechanism to provide just
and fair solutions.
xxx xxx xxx
18. In any case, the hierarchy in our legal framework,
mandates that a legislative enactment cannot curtail a
constitutional right. In Nivedita Sharma v. COAI, this
Court referred to several judgments and held : (SCC p. 343,
para 11)
“11. We have considered the respective
arguments/submissions. There cannot be any
dispute that the power of the High Courts to issue
directions, orders or writs including writs in the
nature of habeas corpus, certiorari, mandamus, quo
warranto and prohibition under Article 226 of the
Constitution is a basic feature of the Constitution
and cannot be curtailed by parliamentary
legislation — L. Chandra Kumar v. Union of
6
India . However, it is one thing to say that in
exercise of the power vested in it under Article 226
of the Constitution, the High Court can entertain
a writ petition against any order passed by or
action taken by the State and/or its
agency/instrumentality or any public authority or
order passed by a quasi-judicial body/authority,
and it is an altogether different thing to say that
each and every petition filed under Article 226 of
the Constitution must be entertained by the High
Court as a matter of course ignoring the fact that
Special Leave Petition (C) No. 10389 of 2025 Page 176 of 269
the aggrieved person has an effective alternative
remedy. Rather, it is settled law that when a
statutory forum is created by law for redressal of
grievances, a writ petition should not be
entertained ignoring the statutory dispensation.”
(emphasis supplied)
It is therefore, prudent for a Judge to not exercise discretion
to allow judicial interference beyond the procedure
established under the enactment. This power needs to be
exercised in exceptional rarity, wherein one party is left
remediless under the statute or a clear “bad faith” shown by
one of the parties. This high standard set by this Court is in
terms of the legislative intention to make the arbitration fair
and efficient.”
(Emphasis supplied)
a. Contradictory Views on the subject.
273. In Lalitkumar V. Sanghvi (supra) the appellants therein,
aggrieved by the order for termination of the arbitral proceedings,
preferred a fresh application under Section 11 of the Act, 1996 for
seeking appointment of a new arbitrator. The said application
came to be rejected by the High Court. The High Court had
observed that the appropriate remedy against the termination of
arbitral proceedings lies by way of a petition under Article 226
read with 227 of the Constitution and not Section 11. In appeal,
this Court made the following pertinent observations: -
Special Leave Petition (C) No. 10389 of 2025 Page 177 of 269
(i) First, placing reliance on SBP & Co. (supra), it was
reiterated that the supervisory jurisdiction of the High
Courts cannot be invoked to interfere with the orders
passed by an arbitral tribunal. It observed that under the
scheme of the Act, 1996 specific provisions have been
enacted enumerating the circumstances in which the order
passed by the arbitral tribunal may be challenged by way of
an appeal under Section 37. Except in these limited
circumstances in which a right of appeal has been provided,
a party aggrieved by an order of the arbitral tribunal cannot
challenge the same by invoking the writ jurisdiction. The
relevant observations read as under: -
“7. [...] That application came to be dismissed by the
order under appeal in substance holding that such an
application invoking Section 11 of the Act is not
maintainable—with an observation that “the remedy
of the applicant is by filing a writ petition not an
application under Section 11 of the Act”.
8 . Within a couple of weeks thereafter, the original
applicant died on 7-10-2012. The question is whether
the High Court is right in dismissing the application
as not maintainable. By the judgment under appeal,
the Bombay High Court opined that the remedy of the
appellant lies in invoking the jurisdiction of the High
Court under Article 226 of the Constitution. In our
view, such a view is not in accordance with the law
declared by this Court in SBP & Co. v. Patel Engg.
Special Leave Petition (C) No. 10389 of 2025 Page 178 of 269
Ltd. The relevant portion of the judgment reads as
under: (SCC p. 663, para 45)
“45. It is seen that some High Courts have
proceeded on the basis that any order passed by
an Arbitral Tribunal during arbitration, would
be capable of being challenged under
Article 226 or 227 of the Constitution [of
India]. We see no warrant for such an
approach. Section 37 makes certain orders of
the Arbitral Tribunal appealable. Under
Section 34, the aggrieved party has an avenue
for ventilating his grievances against the
award including any in-between orders that
might have been passed by the Arbitral
Tribunal acting under Section 16 of the Act.
The party aggrieved by any order of the
Arbitral Tribunal, unless has a right of appeal
under Section 37 of the Act, has to wait until
the award is passed by the Tribunal. This
appears to be the scheme of the Act. The
Arbitral Tribunal is, after all, a creature of a
contract between the parties, the arbitration
agreement, even though, if the occasion arises,
the Chief Justice may constitute it based on the
contract between the parties. But that would
not alter the status of the Arbitral Tribunal. It
will still be a forum chosen by the parties by
agreement. We, therefore, disapprove of the
stand adopted by some of the High Courts that
any order passed by the Arbitral Tribunal is
capable of being corrected by the High Court
under Article 226 or 227 of
the Constitution [of India]. Such an
intervention by the High Courts is not
permissible.””
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 179 of 269
(ii) Secondly, that merely because there is no provision under
the Act, 1996 for an appeal against an order terminating the
arbitral proceedings, does not mean that a fresh application
under Section 11 would be maintainable. It observed that
where any controversy arises regarding the termination of
the mandate of the arbitrator, Section 14(2) empowers the
court to decide on the same. Since the termination of
proceedings under Section 32 also brings the mandate of the
arbitrator to an end, this Court held that a cumulative
reading of Section 14 and Section 32 would indicate that the
question whether the mandate of the arbitrator stood
legally terminated or not can be examined by the court. The
relevant observations read as under: -
“8. [...] That need not, however, necessarily mean that
the application such as the one on hand is maintainable
under Section 11 of the Act.
xxx xxx xxx
10.3. Section 14 declares that “the mandate of an
arbitrator shall terminate” in the circumstances
specified therein. [...] Section 14(2) provides that if
there is any controversy regarding the termination of
the mandate of the arbitrator on any of the grounds
referred to in clause (a) then an application may be
made to the Court — “to decide on the termination of
the mandate”.
Special Leave Petition (C) No. 10389 of 2025 Page 180 of 269
12. On the facts of the present case, the applicability of
clauses (a) and (b) of Section 32(2) is clearly ruled out
and we are of the opinion that the order dated 29-10-
2007 by which the Tribunal terminated the arbitral
proceedings could only fall within the scope of Section
32, sub-section (2), clause (c) i.e. the continuation of
the proceedings has become impossible. By virtue of
Section 32(3), on the termination of the arbitral
proceedings, the mandate of the Arbitral Tribunal also
comes to an end. Having regard to the scheme of the
Act and more particularly on a cumulative reading of
Section 32 and Section 14, the question whether the
mandate of the arbitrator stood legally terminated or
not can be examined by the court “as provided under
Section 14(2)”.”
274. In SREI Infrastructure (supra) this Court drew a distinction
between the termination of arbitral proceedings under Section
25(a) and that under Section 32(2) of the Act, 1996. It held that in
the former, since there is no termination of the mandate of the
tribunal, a remedy by way of a recall application could lie. In other
words, the arbitral tribunal could entertain a recall application
against the termination of proceedings under Section 25(a), and if
the circumstances warrant, it would be empowered to revive the
said proceedings. However, where the proceedings are terminated
under Section 32(2) of the Act, 1996, the mandate of the tribunal
also ceases; hence there would be no scope for a recall application.
The relevant observations read as under: -
Special Leave Petition (C) No. 10389 of 2025 Page 181 of 269
“22. [...] Sub-section (3) of Section 32 further provides that
the mandate of the Arbitral Tribunal shall terminate with the
termination of the arbitral proceedings subject to Section 33
and sub-section (4) of Section 34. Section 33 is the power of
the Arbitral Tribunal to correct any computation errors, any
clerical or typographical errors or any other errors of a similar
nature or to give an interpretation of a specific point or part
of the award. Section 34(4) reserves the power of the court to
adjourn the proceedings in order to give the Arbitral
Tribunal an opportunity to resume the arbitral proceedings
or to take such other action as in the opinion of the Arbitral
Tribunal will eliminate the grounds for setting aside the
arbitral award. On the termination of proceedings under
Sections 32(2) and 33(1), Section 33(3) further contemplates
termination of the mandate of the Arbitral Tribunal, whereas
the aforesaid words are missing in Section 25. When the
legislature has used the phrase “the mandate of the Arbitral
Tribunal shall terminate” in Section 32(3), non-use of such
phrase in Section 25(a) has to be treated with a purpose and
object. The purpose and object can only be that if the claimant
shows sufficient cause, the proceedings can be recommenced.
xxx xxx xxx
26. There cannot be a dispute that the power exercised by the
Arbitral Tribunal is quasi-judicial. In view of the provisions
of the 1996 Act, which confers various statutory powers and
obligations on the Arbitral Tribunal, we do not find any such
distinction between the statutory tribunal constituted under
the statutory provisions or Constitution insofar as the power
of procedural review is concerned. We have already noticed
that Section 19 provides that the Arbitral Tribunal shall not
be bound by the rules of procedure as contained in the Civil
Procedure Code. Section 19 cannot be read to mean that the
Arbitral Tribunal is incapacitated in drawing sustenance
from any provisions of the Code of Civil Procedure.
xxx xxx xxx
33. We endorse the views of the Patna High Court, the Delhi
High Court and the Madras High Court as noted above,
Special Leave Petition (C) No. 10389 of 2025 Page 182 of 269
insofar as they have held that the Arbitral Tribunal after
termination of proceedings under Section 25(a) on sufficient
cause being shown can recall the order and recommence the
proceedings.”
(Emphasis supplied)
275. In Bharat Heavy Electricals Limited v. Jyothi Turbopower
Services Private Limited , reported in 2016 SCC OnLine Mad
4029 , one of us; Mahadevan J., held that there is a fine distinction
between the inherent power of review and the power of
procedural review. In the former, the power is exercised in respect
of a decision on merits. Whereas, in the latter, the power is
exercised in respect of the conduct of its own procedure. Under
the Act, 1996, an arbitral tribunal does not have the power to
review its own decision on merits, however, it does have the
implied power to procedural review, i.e., to recall an order for
termination of proceedings. The relevant observations read as
under: -
“ 18. The learned Arbitrator has also opined that an order
under Section 25(a) of the said Act cannot be construed to be
an award as there is no decision on merit and thus, it may not
be possible to maintain an appeal under Section 34 of the said
Act (reliance was placed on the decision of the Division Bench
of the Delhi High Court in ATV Projects
India v. IOC, (2013) 200 DLT 553). The learned Arbitrator
thus opined that since a party cannot be without a remedy,
what should be the remedy in such a situation needed to be
examined. The Tribunal, while accepting that there cannot be
Special Leave Petition (C) No. 10389 of 2025 Page 183 of 269
any power of review inherent in character, that proposition
would apply to decision on merits. However, with respect to
procedural review, the implied power is available with the
Tribunal to deal with petitions similar to the ones in the
present case. The observations made by the Hon'ble Supreme
Court in Grindlays Bank Ltd. v. The Central Govt.
Industrial Tribunal, reported in (1981) 2 SCC 150 : AIR
1981 SC 806, in latter part of para 13 were specifically
referred to, which are once again extracted as under:
“13. ………Furthermore, different considerations
arise on review. The expression ‘review’ is used in
the two distinct senses, namely (1) a procedural
review which is either inherent or implied in a
Court or Tribunal to set aside a palpably erroneous
order passed under a misapprehension by it, and
(2) a review on merits when the error sought to be
corrected is one of law and is apparent on the face
of the record. It is in the latter sense that the Court
in Patel Narshi Thakershi ase ((1971) 3 SCC
844 : AIR 1970 SC 1273) held that no review lies
on merits unless a statute specifically provides for
it. Obviously when a review is sought due to a
procedural defect, the inadvertent error committed
by the Tribunal must be corrected ex debito
justitiae to prevent the abuse of its process, and
such power inheres in every Court or Tribunal.”
19. The Division Bench's opinion of the Delhi High Court
in ATV Projects India Ltd. case (supra) was referred to to
support the conclusion where paras 17 and 18 of the
judgment read as under:
“17. We may in this regard also notice that the
legislature, in Section 25, has not provided for
termination of proceedings automatically on
default by a party but has vested the discretion in
the arbitral tribunal to, on sufficient cause being
shown condone such default. We are of the view
that no distinction ought to be drawn between
showing such sufficient cause before the
Special Leave Petition (C) No. 10389 of 2025 Page 184 of 269
proceedings are terminated and after the
proceedings are terminated. If the arbitral tribunal
is empowered to condone default on sufficient
cause being shown, it matters not when the same is
shown. It may well high be possible that the
sufficient cause itself is such which prevented the
party concerned from showing it before the
proceedings terminated. It would be a pedantic
reading of the provision to hold that the arbitral
tribunal in such cases also stands denuded. Once
the legislature has vested the arbitral tribunal with
such power, an order of termination cannot be
allowed to come in the way of exercise thereof.
18. There is another reason for us to hold so. The
emphasis of the Arbitration Act is to provide an
alternative dispute resolution mechanism. The
provisions of the Act ought to be interpreted in a
manner that would make such adjudication
effective and not in a manner that would make
arbitration proceedings cumbersome. A view that
the arbitral tribunal is precluded, even where
sufficient cause exists, from reviving the arbitral
proceedings and the only remedy available to a
party is a writ petition and which remedy is
available only in the High Court often situated at a
distance from the place where the parties are
located, would be a deterrent to arbitration. It is
also worth mentioning that Section 19(2) of the
Act permits the parties to agree on the procedure to
be followed by the arbitral tribunal. The parties
may, while so laying down the procedure, provide
for the remedy of review/revival of arbitral
proceedings and which agreement would be
binding on the arbitral tribunal. If the arbitral
tribunal in such a situation would be empowered
to, on sufficient cause being shown, revive the
arbitral proceedings, we see no reason to, in the
absence of such an agreement hold the arbitral
tribunal to be not empowered to do so. If it were to
be held that such power of review/recall is not
Special Leave Petition (C) No. 10389 of 2025 Page 185 of 269
available to an arbitral tribunal, the arbitral
tribunal would not be competent to set aside an
order under Section 25(b) also, compelling the
respondent against who, proceedings have been
continued, to file a writ petition, making the
continuation of proceedings before the arbitral
tribunal a useless exercise.”
xxx xxx xxx
21. Learned counsel for the petitioner, in support of his plea,
referred to the judgment of the Hon'ble Supreme Court
in Kapra Mazdoor Ekta Union v. Management of Birla
Cotton Spinning and Weaving Mills Ltd., (2005) 13 SCC
777. In the context of an award under the Industrial Disputes
Act, 1947, the scope of the two types of review, one procedural
and other on merits was examined. The question whether a
Tribunal was functus officio having earlier made an award
which was published by the appropriate Government was
examined and in that context, it was observed that the
jurisdiction of the Tribunal had to be seen on the date of the
application made to it and not the date on which it passed the
impugned order. On application of principles discussed, it
was held that where a Court or quasi-judicial authority
having jurisdiction to adjudicate on merits proceeds to do so,
the judgment or an order can be reviewed on merit only if the
Court or the quasi-judicial authority is vested with the power
of review by express provision or by necessary implication.
However, the procedural review belongs to a different
category. Illustratively, this situation is stated to arise where
the Court or quasi-judicial authority having jurisdiction to
adjudicate proceeds to do so, but in doing so, commits a
procedural illegality, which goes to the root of the matter and
invalidates the proceeding itself and consequently, the order
passed therein. There may also be cases where there may be
absence of notice to the opposite party or under a mistaken
impression that the notice has been served or the matter is
taken up on the date other than specified.
Special Leave Petition (C) No. 10389 of 2025 Page 186 of 269
26. The views of both the Delhi and the Calcutta High Courts
are consistent in this behalf that the appropriate course of
action to follow in such a situation would be to move the
Tribunal itself seeking recall of the order and the exercise of
power of such recall would be within the meaning of
procedural review. Whether, in the given facts of the case,
such a power is to be exercised favourably or not in favour of
the applicant would be a matter on the factual matrix of the
case and that stage has not even arisen in the present case.”
(Emphasis supplied)
276. The decision of Bharat Heavy Electricals (supra) further held that
the Act, 1996 is a complete code in itself. It held that the courts
have no power under Section 11 to entertain a second request for
appointment of an Arbitrator unless the order terminating the
proceedings is set aside. Similarly, the parties also cannot invoke
the writ jurisdiction of the High Court to challenge the order for
termination of the proceedings. The only recourse available to the
parties is to file an application for the recall of the order
terminating the proceedings. The relevant observations read as
under: -
“16. On the aspect as to what would be the remedy available
in case of the proceedings being terminated, learned counsel
for the petitioner submitted that it could only be by way of
another petition being filed under Section 11 of the said Act.
We may note here the submission of the learned counsel for
the first respondent/claimant that though this plea may
Special Leave Petition (C) No. 10389 of 2025 Page 187 of 269
prejudice his client, still what was sought to be contended by
the learned counsel for the petitioner would not be correct as
the arbitration clause provided for the mode of appointment
of the Arbitrator. The first respondent would, thus, be
required to once again invoke the arbitration clause giving a
right to the petitioner to appoint the Arbitrator before the
jurisdiction of the Court under Section 11 could be so
invoked. However, the impugned order has referred to the
judgment of the Bombay High Court in Dilnawaz
Kohinoory v. Boman Kohinoor, reported in holding that the
Court has no power under Section 11 of the said Act to deal
with a second request for appointment of an Arbitrator unless
the order closing the proceedings was set aside. Such a view
has also been adopted by the learned Judge of the Calcutta
High Court in NRP Projects Pvt Ltd. v. Hirat
Mukhapadhyay, reported in 2013 (1) Cal LJ 621 in para 71
of the judgment. The latter judgment also is good for the
proposition that an aggrieved party is not entitled to
maintain a writ petition under Article 226 of the
Constitution of India, a view also adopted by the Division
Bench of the Delhi High Court in Awasthi Construction
Co. v. Govt, of ACT of Delhi, reported in 2012 SCC online
Del 443.
xxx xxx xxx
27. We reject the plea of the learned counsel for the petitioner
that on termination of proceedings under Section 25(a) of the
said Act, the Arbitrator becomes functus officio, as he is a
persona designata. Both the methods of appointment of
Arbitrator are possible, i.e. by consent or through the process
of Court. The position would not be different in the two
situations. It is not as if there is a better sanctity to the
appointment of an Arbitrator which enlarges the power if he
is appointed by mutual consent, while there are abridged
powers if he is not appointed by the Court.
28. Thus, we conclusively hold that the appropriate remedy
in case of termination of proceedings under Section 25(a)
would require the Arbitral Tribunal itself to be moved, which
Special Leave Petition (C) No. 10389 of 2025 Page 188 of 269
would then examine the aspects on merits as to why the order
does or does not require to be recalled.
29. We are also in agreement with the views of both the
Calcutta and Delhi High Courts and in view of the aforesaid
finding, that the remedy under Article 226 of the
Constitution of India is not really available as the aforesaid is
the appropriate remedy. The invocation of jurisdiction of this
Court by the petitioner is, in turn, predicated on a belief that
either of the parties aggrieved have to approach this Court
under its extraordinary writ jurisdiction. However, we have
already explained the remedy available and any further
challenge to an order which may be passed in such application
would, in turn, depend on the fate of it. The said Act is a
complete code in itself and the basis is that there should not
be periodic judicial intervention in arbitration proceedings.
Were a favourable order to be passed commencing arbitration
proceedings, the option would only be to challenge the award,
if so advised, under Section 34 of the said Act. Similarly, if
the application was to be dismissed, the position would really
be no different.”
(Emphasis supplied)
277.
In M/s VAG Educational Services v. Aakash Educational Services
Ltd. reported in 2022 SCC OnLine Del 3401 , the Delhi High Court
held that a petition under Article 227 would be maintainable
against an order terminating the proceedings under Section 32(2)
of the Act, 1996.
278. In the said case, the respondent-claimant therein withdrew its
claims before the arbitral tribunal, consequent to which, the
proceedings came to be terminated by the arbitrator in terms of
Special Leave Petition (C) No. 10389 of 2025 Page 189 of 269
Section 32(2)(a) of the Act, 1996. Sometime thereafter, the
respondent-claimant, filed an application before the arbitrator
seeking recall of the order for termination of the proceedings. The
respondent-claimant stated that that his counsel had no
instruction to withdraw the claims, and the same had occasioned
due to an inadvertent miscommunication. Accordingly, the
arbitrator allowed the aforesaid recall application and restored the
proceedings. The relevant observations read as under: -
“ 3. The issue in controversy is brief. Arb. Case No. 110/18,
which was continuing between the petitioner and the
respondent before a learned sole arbitrator, was withdrawn
by the respondent, as the claimant in the arbitral proceedings
on 21-9-2019. [...]
4. Subsequently, the respondent, as the claimant in the
arbitral proceedings, moved an application seeking recall of
the afore-extracted order dated 21-9-2019. It was sought to
be contended, therein, that no consent, for withdrawal of the
arbitral proceedings, had been granted either by the
authorised representative or by the “proxy counsel” who was
present on behalf of the respondent claimant.
5. However, during the pendency of the said application, an
affidavit was filed by the counsel representing the respondent
claimant, adopting an entirely different stand. In the said
affidavit, it was sought to be contended that the learned
counsel had inadvertently signed the withdrawal order sheet
of the arbitral proceedings, as her instructions, from her
Senior Counsel were to withdraw another matter pending
before the same learned sole arbitrator.
Special Leave Petition (C) No. 10389 of 2025 Page 190 of 269
6. As such, the affidavit effectively gave up the plea, in the
application, that the order dated 21-9-2019, of the learned
sole arbitrator, terminating the arbitral proceedings as
withdrawn, was passed in error or without authorisation.
Learned counsel for the respondent claimant accepted
responsibility for having signed the withdrawal application,
but pleaded that it was owning to an inadvertent mistake.
7. By the impugned order dated 18-1-2020, the learned
arbitrator allowed the aforenoted application of the
respondent claimant and restored the arbitral proceedings,
observing that a party could not be permitted to be prejudiced
owing to fault of counsel. However, the learned arbitrator
took exception to the assertions in the application which, he
felt, questioned his impartiality in the proceedings. He,
therefore, recused from the proceedings and allowed parties
to appoint an alternate arbitrator.”
279.
Aggrieved by the aforesaid, the appellant therein challenged the
restoration of the arbitral proceedings before the High Court by
way of a petition under Article 227 of the Constitution. The High
Court held as under: -
(i) First, the High Court placing reliance on SBP & Co. (supra)
and Bhaven Construction (supra), held that ordinarily
procedural orders passed by the arbitral tribunal are not
amenable to challenge under Article 227 of the Constitution,
as the grounds for challenging the same can always be
raised by an aggrieved party while assailing the final award
Special Leave Petition (C) No. 10389 of 2025 Page 191 of 269
under Section 34 of the Act, 1996. The relevant observations
read as under: -
“9. I had initial misgivings regarding the
maintainability of the present petition, predicated on
the judgments of the Supreme Court in SBP &
Co. v. Patel Engg. Ltd. and Bhaven
Construction v. Sardar Sarovar Narmada Nigam
2
Ltd. However, having heard Ms Agarwal, learned
counsel for the petitioner and on a careful perusal of
the said decisions, the situation which obtained in
those cases appears distinguishable from that which
obtains in the present case. The position of law which
emerges from the decisions in SBP & Co.
1
case and Bhaven Construction case which has also
been adopted in earlier decisions rendered by me, is
that interlocutory orders passed during arbitral
proceedings cannot be challenged under Article 227 of
the Constitution of India, as the grounds on which
such orders are sought to be challenged would be
available as grounds to challenge the final award
which may come to be passed in the arbitral
proceedings. In such circumstances, the decisions
1
in SBP & Co. case and Bhaven Construction
case require the challenger to await the passing of final
award in the arbitral proceedings and to reserve the
grounds on which the interlocutory order is sought to
be challenged for being urged in the challenge to the
final arbitral award under Section 34 of
the Arbitration and Conciliation Act, 1996 Act (“the
1996 Act”), should such occasion arise.”
(ii) Secondly, the High Court observed that the revival of
proceedings by the arbitral tribunal after its termination in
terms of Section 32(2) of the Act, 1996, however, was a
distinct situation. Such an order for restoration of the
Special Leave Petition (C) No. 10389 of 2025 Page 192 of 269
proceedings would be amenable to challenge under Article
227. This according to the High Court was in view of Section
32 sub-section (3), which stipulates that once the
proceedings are terminated, the mandate of the arbitral
tribunal would also terminate with it. The arbitrator in such
a scenario becomes functus officio and ceases to have
jurisdiction to entertain any further applications or pass any
orders in the proceedings save for the limited power to pass
orders in terms of Section 33 of the Act, 1996. The relevant
observations read as under: -
“10. The situation that obtains in the present case is
clearly distinct. The court, in the present case, is seized
with the issue of whether an Arbitral Tribunal which
has terminated the arbitral proceedings as withdrawn
could, thereafter, entertain an application for recall of
the said order and revive the arbitral proceedings.
11. The legal position that emanates from the statute,
in this regard, appears fairly clear. Section 32 of
the 1996 Act deals with “termination of
proceedings” [...]
12. A case in which the claimant withdraws his claim
and, on that basis, the arbitral proceedings are
terminated, falls within Section 32(2)(a). Sub-section
(3) of Section 32 ordains that, with the termination of
the arbitral proceedings, the mandate of the arbitral
proceedings would also terminate. This is made subject
only to Sections 33 and 34(4) of the 1996 Act [...]
Special Leave Petition (C) No. 10389 of 2025 Page 193 of 269
xxx xxx xxx
15. By operation of Section 32(3), the mandate of the
learned sole arbitrator terminated on 21-9-2019. Once
the mandate of an arbitrator terminates, the arbitrator
is rendered functus officio. He has no jurisdiction,
thereafter, to entertain any application or pass any
orders in the proceedings. The limited orders which an
arbitrator, whose mandate stands terminated, may
pass, are restricted to orders under Section 33 of
the 1996 Act, which, as already noted, does not apply
in the present case.
(Emphasis supplied)
280. Accordingly, the High Court held that the arbitrator entertaining
a recall application after the termination of proceedings under
Section 32(2) of the Act, 1996 and subsequently, passing an order
for the restoration of the same was without jurisdiction, and was
thus set-aside and quashed. The relevant observations read as
under: -
“16. The sequitur is obvious. The learned arbitrator, at the
time of passing the impugned order, was coram non judice,
as his mandate stood terminated on 21-9-2019.
17. The impugned order, therefore, has been passed without
jurisdiction and, accordingly, cannot be allowed to remain.
Resultantly, the order dated 18-1-2020, passed by the learned
sole arbitrator is quashed and set aside. The order dated 21-
9-2019 shall revive.”
Special Leave Petition (C) No. 10389 of 2025 Page 194 of 269
281. What has been conveyed in so many words by the Delhi High
Court in VAG Educational Services (supra) is that any procedural
order passed by the arbitrator, even if the same terminates the
proceedings, will not be amenable to challenge under Article 227
of the Constitution. It is only in exceptional circumstances, where
the arbitrator passes an order, after being rendered functus officio,
would the remedy lie under Article 227.
282. To put it simply, the Delhi High Court in VAG Educational
Services (supra) entertained the petition under Article 227, not
because the Act, 1996 ostensibly provides no remedy against an
order for termination or restoration of proceedings, but solely for
the reason that the arbitral tribunal, after the termination of its
mandate, had acted without any jurisdiction.
283. Thus, both the Madras High Court in Bharat Heavy Electricals
(supra) and the Delhi High Court in VAG Educational Services
(supra), have held that the Act, 1996 is a complete code. Any
procedural order passed by the arbitral tribunal, terminating the
proceedings will not be amenable to challenge under Article 227
of the Constitution.
Special Leave Petition (C) No. 10389 of 2025 Page 195 of 269
284. However, the aforesaid two decisions take divergent views on the
power of the arbitral tribunal to entertain a recall application, after
the termination of the proceedings.
285. Bharat Heavy Electricals (supra) holds that the arbitral tribunal
does have the limited procedural power to review its own orders
insofar as the conduct of arbitral proceedings is concerned, albeit
in the context of a termination under Section 25(a) of the Act, 1996.
286. Whereas, VAG Educational Services (supra) holds that such
power to review is not available to an arbitral tribunal, atleast
insofar as termination of proceedings under Section 32(2) is
concerned. This is in view of Section 32 sub-section (3) of the Act,
1996, which stipulates that the termination of proceedings
consequently terminates the mandate of the arbitrator as-well, as
also held in SREI Infrastructure (supra).
287. However, in regards to the aforesaid proposition of law, the
observations made in one another decision of the Delhi High
Court in Future Coupons Pvt. Ltd. v. Amazon.Com NV Investment
Special Leave Petition (C) No. 10389 of 2025 Page 196 of 269
Holdings LLC reported in 2022 SCC OnLine Del 3890 are
significant.
288. In Future Coupons (supra) the petitioners therein filed an
application under Section 32(2)(c) of the Act, 1996, seeking
termination of the proceedings inter-alia on the ground that by
virtue of the subsequent developments, no dispute survived for
adjudication. The said application came to be rejected by the
arbitral tribunal. Aggrieved therefrom, the petitioners filed a
petition under Article 227 before the High Court. The relevant
observations read as under: -
th
“44. In the wake of the aforesaid order dated 17 December
2022 of the CCI, the petitioners applied, to the learned
Arbitral Tribunal, under Section 32(2)(c) of the 1996
Act, seeking termination of the arbitral proceedings.
Inasmuch as this Court is not entering into the merits of the
th
impugned order dated 28 June 2022, whereby the said
application was dismissed by the learned Arbitral Tribunal,
it would not be appropriate for this Court to detail the rival
contentions of the parties in that regard. Suffice it to state
that the petitioners' contention was that, with the approval
th
contained in the order dated 28 November 2019, granted by
the CCI to the Combination having been placed in abeyance
th
by the subsequent order dated 17 December 2021 of the CCI,
the FCSHA and FCSSA and FRSHA could no longer be
acted upon and that, therefore, that no dispute survived for
adjudication in the arbitral proceedings. In that view of the
matter, the petitioners contended that the arbitral
proceedings were required to be terminated under Section
32(2)(c) of the 1996 Act.
Special Leave Petition (C) No. 10389 of 2025 Page 197 of 269
45. Further, contended FRL, were the learned NCLT to admit
the application filed by Bank of India under Section 7 of the
IBC, a moratorium would invariably be put in place in terms
of Section 14(1) of the IBC. Any such moratorium, if put in
place, would render further continuance of the arbitral
proceedings illegal and impermissible. On this ground, too,
therefore, FRL sought termination of the arbitral proceedings
under Section 32(2)(c).
46. The learned Arbitral Tribunal has rejected the said
th
application by the impugned order dated 28 June 2022.
47. Though, till then, no moratorium in terms of Section
14(1) of the IBC had been put in place by the learned NCLT,
the learned Arbitral Tribunal, in para 161 of the impugned
th
order dated 28 June 2022, rejected FRL's submissions,
observing that, even if a moratorium under Section 14(1) of
the IBC were to be imposed by the learned NCLT, such a
moratorium would operate only against FRL and not against
the Biyanis who could continue to participate in the
proceedings. As such, the learned Arbitral Tribunal opined
that the imposition of such a moratorium would not amount
to an interdiction, on the learned Arbitral Tribunal,
concluding hearings and passing an Award, and would in
any case remain in force only till it was in place.
48. The learned Arbitral Tribunal further expressed the view
th
that the effect of the order dated 17 December 2021 of the
CCI on the FCSHA, FCSSA and FRSHA were matters which
are required to be examined in detail, and could not constitute
a justifiable basis to terminate the arbitral proceedings
midway under Section 32(2)(c). The CCI order dated
th
17 December 2021, according to the learned Arbitral
Tribunal, could not be said to have rendered the continuation
of the arbitral proceedings “unnecessary” or “impossible”,
being the only two exigencies statutorily envisaged by
Section 32(2)(c), in which the arbitral proceedings could be
terminated.
Special Leave Petition (C) No. 10389 of 2025 Page 198 of 269
xxx xxx xxx
55. These two petitions, under Article 227 of the
Constitution of India, as already noted, assail the aforesaid
th
order dated 28 June 2022, passed by the learned Arbitral
Tribunal on the petitioners' application under Section
32(2)(c) of the 1996 Act and the procedural order No. 10
th
dated 11 October 2022 passed by the learned Arbitral
Tribunal on Amazon's application under Section 23(3) of the
1996 Act.”
289. The High Court held that the petitioners therein could not have
invoked Article 227 to assail the procedural order passed by the
arbitrator refusing to terminate the proceedings for the following
reasons: -
(i) First, that as per the decisions of SBP & Co. (supra)
interlocutory orders passed in the arbitral proceedings,
except to the limited extent permitted under Section(s) 34
and 37 of the Act, 1996 are otherwise immune from
challenge under Article 227. Bhaven Construction (supra)
on the other hand carves out two exceptional circumstances
where such an order would be amenable to challenge under
Article 227. This being, where the order is assailed on the
ground of want of good faith or where if not for the remedy
Special Leave Petition (C) No. 10389 of 2025 Page 199 of 269
under Article 227, the aggrieved litigant would be left
remediless. The relevant observations read as under: -
“77. The ratio decidendi that emerges from para 45
of SBP is clear and unequivocal. Challenges to
orders/awards passed in arbitral proceedings have
either to be under Section 37(2) or under Section 34(1)
of the 1996 Act. [...]
81. SBP, thus, keeps, completely outside the reach of
Article 227 of the Constitution of India, interlocutory
arbitral orders.
82. Bhaven Constructions envisages, however, one
more circumstance in which an interlocutory order of
an Arbitral Tribunal could be challenged under Article
227 of the Constitution of India, which is where the
order is assailed on the ground of want of good faith.
Save and except for this limited caveat - which is
unlikely to apply in a majority of cases - Bhaven
Constructions reinforces the law enunciated in SBP,
by holding that Article 227 of the Constitution of India
would be available to a litigant aggrieved by an
interlocutory arbitral order only where, but for Article
227, the aggrieved litigant is remediless. Dealing with
a contention, advanced before it, that the 1996 Act,
being an instrument of parliamentary legislation,
could not curtail the constitutional remedy envisaged
by Article 227 [...]
83. Bhaven Constructions, therefore, in a sense
clarifies SBP by restricting the amenability to
challenge under Article 227 of the Constitution of
India, or interlocutory arbitral orders, to cases where,
either, want of good faith is pleaded, or the party is
otherwise remediless. ”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 200 of 269
(ii) Secondly, that the expression “remediless” used in Bhaven
Construction (supra) has to be construed in light of the
scheme of the Act, 1996. Any order or award passed by the
arbitral tribunal that can be challenged within the confines
of Section(s) 34 and 37 of the Act, 1996 would not be
amenable to challenge under Article 227, since a statutory
remedy has been already provided under the Act. Even
where no statutory remedy exists under the Act, 1996
against any order passed by the arbitral tribunal, the same
cannot be assailed by invoking Article 227, if the ground for
challenging such an order can be raised at the time of
seeking the setting aside of the final award under Section
34. The relevant observations read as under: -
“ 77. The ratio decidendi that emerges from para 45
of SBP is clear and unequivocal. Challenges to
orders/awards passed in arbitral proceedings have
either to be under Section 37(2) or under Section 34(1)
of the 1996 Act. Section 37(2) permits challenges
against orders passed at the interlocutory stage in the
arbitral proceedings either where a plea under Section
16(2) or (3) of the 1996 Act is allowed or where a
prayer for grant of interim measure under Section
17(1) is allowed or refused. In the first case, the appeal
would lie under Section 37(2)(a), whereas in the
second, the appeal would lie under Section 37(2)(b).
Special Leave Petition (C) No. 10389 of 2025 Page 201 of 269
78. An interlocutory order of an Arbitral Tribunal
would also be susceptible to challenge, under the 1996
Act, where it is an “interim award”, as the definition
of “arbitral award”, in Section 2(c) of the 1996 Act,
includes an “interim award”. [...]
79. Interim awards of Arbitral Tribunals are,
therefore, amenable to challenge under Section 34 of
the 1996 Act, without waiting for the final award to be
passed. Else, challenges to interlocutory orders have to
be restricted to clauses (a) and (b) of Section 37(2); the
former applying where the learned Arbitral Tribunal
has allowed an application under Section 16(2) or (3)
and the latter where it has refused to grant an interim
measure of protection under Section 17.
xxx xxx xxx
84. It is important to understand, in this context, what
the Supreme Court intended to convey by the use of
the word “remediless”, as it is often sought to be
contended - as has also been contended before me in the
present case - that, as the 1996 Act does not contain
any provision whereunder the impugned interlocutory
order could be challenged, the party is, in fact,
remediless. The mere fact that there is no statutory
provision under which, at that stage, the aggrieved
litigant could challenge the interim Award of the
Arbitral Tribunal, is not sufficient to regard the
litigant as remediless against the said
order. SBP and Bhaven Construction, read conjointly,
make it clear that, even if the challenge to the
impugned order can be made one of the grounds of
challenge to the final Award which may come to be
passed, that suffices as a remedy for the aggrieved
litigant. In such a case, the litigant has to wait till the
final Award is passed and, only thereafter, can vent his
grievances, both against the interlocutory as well as
against the final Award.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 202 of 269
(iii) Lastly, it held that insofar as orders passed under Section
32(2) of the Act, 1996 are concerned, where such an order
does not result in the termination of the arbitral
proceedings, no remedy would lie under Article 227. Any
party aggrieved therefrom would be required to wait for the
final award to be passed and then raise those grounds under
Section 34 of the Act, 1996, more particularly as to why the
proceedings ought to have been terminated. However,
where an order passed under Section 32(2) results in the
termination of the proceedings, the same may be challenged
under Article 227, as there is no other provision under the
Act, 1996 to otherwise challenge such an order. The relevant
observations read as under: -
“86. For the aforesaid reasons, and with all due respect
to Mr Rohatgi, the contention does not appear, to me,
to merit acceptance. What the argument overlooks is
that the impugned order does not allow an application
under Section 32(2). It dismisses it. The order does
not, therefore, terminate the arbitral proceedings. Had
it allowed the application of the petitioners under
Section 32(2), then, perhaps, Amazon might have had
a remedy under Article 227, on the ground that the
arbitral proceedings had come to an end, and there was
no provision in the 1996 Act, whereunder the order
could otherwise be challenged. In such a case, Amazon
would be “remediless”. Where, however, as in the
present case, the application of the petitioners, under
Special Leave Petition (C) No. 10389 of 2025 Page 203 of 269
Section 32(2)(c) of the 1996 Act has been dismissed,
the arbitral proceedings continue. The remedy under
Section 34, to challenge the final award in the arbitral
proceedings, therefore, subsists. Among the grounds of
challenge - if, assuming, the award was against the
petitioners and they chose to challenge it - could be
included the grounds on which the petitioners seek to
assail the impugned orders as well. Thus, the
petitioners are not “remediless”. They have a remedy,
but they have to bide their time.
87. Clipping of arbitral wings is against the basic ethos
of the 1996 Act. Allowing free flight to arbitration is
the very raison d'etre of the reforms that the
UNCITRAL arbitral model sought to introduce. The
1996 Act, founded as it is on the UNCITRAL model,
is pervaded by the same philosophy.
88. I have, in Easy Trip Planners, Siddhast
Intellectual Property Innovations and VRS
Natarajan, among others, consistently followed the
decisions in SBP and Bhaven to hold that an
interlocutory order in arbitral proceedings, which does
not terminate the arbitration or bring it to an end,
cannot be challenged under Article 227 of the
Constitution of India.
89. In Indian Agro Marketing Coop. Ltd., on which
learned Senior Counsel for the petitioners chose to
rely, only reinforces the position. the arbitral
proceedings were terminated by allowing of an
application filed under Section 16 of the 1996 Act. An
application, seeking recall of the said order, was also
dismissed by the learned Arbitral Tribunal. In that
case, as the arbitral proceedings did not survive any
further, and the order under challenge brought the
proceedings to an end, I had entertained a petition
under Article 227 of the Constitution of India.
90. Mr Rohatgi also cited my decision in MS Vag
Educational Services v. Aakash Educational Services
Special Leave Petition (C) No. 10389 of 2025 Page 204 of 269
Ltd.. That, again, was an extreme case, clearly
distinguishable on facts and in law. In the said
case, after terminating the arbitral proceedings, the
learned arbitrator, suo motu, recalled his order and
revived the proceedings. It was in these circumstances
that I held that, as the arbitral proceedings stood
terminated by the arbitrator himself, and as he had no
powers to recall such an order of termination, the case
merited interference under Article 227 of the
Constitution of India.
91. In the present case, the learned Arbitral Tribunal
has not terminated the arbitral proceedings; rather, it
has dismissed the petitioners' application for
terminating the proceedings. Vag Educational
Services, therefore, does not help the petitioners.
xxx xxx xxx
94. The orders under challenge are, plainly,
th
interlocutory orders. The order dated 28 June 2022,
forming subject matter of challenge in CM (M)
1141/2022, rejects the petitioners' application under
Section 32(2)(c) of the 1996 Act, seeking termination
of the arbitral proceedings. In case the arbitral
proceedings deserved to be terminated in law, it would
always be open to the petitioners to so urge, if ever an
occasion arose for them to invoke Section 34 against
any final Award that the learned Arbitral Tribunal
may come to pass.”
(Emphasis supplied)
290. Thus, there appears to be a cleavage of opinion expressed as
regards what would be the appropriate remedy available to a
party aggrieved by the order of termination of proceedings passed
by the arbitral tribunal.
Special Leave Petition (C) No. 10389 of 2025 Page 205 of 269
291. Although there are a plethora of other decisions by the various
High Courts expressing a divergence of opinion in this regard,
including some decisions that treat an order for termination of
proceedings to be an ‘award’ under the Act, 1996 and thus
amenable to challenge under Section 34 thereof, yet we do not
wish to dwell any further on this aspect, particularly in view of the
fact that such an order for termination of proceedings can by no
stretch of imagination be construed to be an award.
292. In this regard, we may only say, that the grounds on which an
award can be challenged under Section 34 of the Act, 1996 are
wholly incompatible with the conditions required to pass an order
for termination of proceedings under the Act, 1996, thereby
indicating that it cannot be termed as an ‘award’. Section 32 sub-
section (1) of the Act, 1996 also clearly delineates that the arbitral
proceedings terminate either by way of an award OR an order for
termination of proceedings, thereby indicating that the latter is not
an ‘award’. The various discussions of the Working Group on this
aspect are also unequivocal.
Special Leave Petition (C) No. 10389 of 2025 Page 206 of 269
293. Lalitkumar V. Sanghvi (supra) holds that Section 14(2) empowers
the court to decide on any controversy regarding the termination
of the mandate of the arbitrator, which would also include the
termination of the proceedings. A similar view has also been taken
in Dani Wooltex (supra), wherein this Court entertained an
application under Section 14 against an order terminating the
proceedings under Section 32(2) of the Act, 1996.
294. SREI Infrastructure (supra) hold that the arbitral tribunal can
entertain a recall application against the termination of
proceedings, albeit in the context of Section 25(a).
295. The Delhi High Court in Future Coupons (supra) held that an
order passed under Section 32(2) that results in the termination of
the proceedings could be challenged under Article 227 of the
Constitution.
296. Since the Act, 1996 provides no remedy against an order for
termination of proceedings, it would serve the ends of justice if a
purposive interpretation of the provision of Section 14 is adopted.
Special Leave Petition (C) No. 10389 of 2025 Page 207 of 269
297. We are of the considered opinion that Section 14 sub-section (2),
particularly the expression “ the Court to decide on the termination of
the mandate ” should be given an expansive meaning to include any
challenge to an order for termination of proceedings simpliciter.
We say so because, the termination of proceedings in essence
results in the arbitrator being absolved of its duty to administer
the arbitration.
298. As already discussed in the foregoing parts of this judgment, an
order for termination of proceedings has the effect of bringing the
mandate of the arbitral tribunal also to an end, which by extension
also terminates the mandate of the arbitrator.
299.
Thus, in our opinion, until this lacunae in the Act, 1996 is not
resolved, the parties aggrieved by an order of termination of
proceedings should be permitted to challenge the same before a
court under Section 14(2) of the Act, 1996.
300.
In this regard, we may once again refer to the discussions of the
Working Group on the draft Article 24 which later became Article
25 of the UNCITRAL Model.
Special Leave Petition (C) No. 10389 of 2025 Page 208 of 269
301. During the drafting stage, the Working Group discussed two
variants of Article 25. Both versions of the draft provision,
contained a provision which empowered a party approach the
‘Authority’ specified in the then draft Article 17 to pass a direction
to the arbitral tribunal to continue with the proceedings.
302. The underlying reason behind the inclusion of the aforesaid clause
was due to the earlier discussions of the Working Group in its
Third Session, wherein it was suggested that an arbitral tribunal
should proceed ex-parte only with the permission of the national
court having jurisdiction over the arbitral tribunal. At the cost of
repetition, the relevant observations are reproduced below: -
“71. [...] If, however, there were to be a provision on this
issue, one view was that it could provide that a court would
decide, in the circumstances of each case, whether ex parte
proceedings by the arbitral tribunal were permissible. [...]
303. The Working Group eventually decided to omit the aforesaid
clause from both versions of the draft Article 24 as it was felt that
this introduced an unnecessary degree of court supervision which
did not align with the Model Law’s principle of minimal judicial
interference. Ultimately it resolved to tweak the draft Article 24 to
Special Leave Petition (C) No. 10389 of 2025 Page 209 of 269
empower the arbitral tribunal directly to proceed ex-parte, in
certain situations of default of by a party, without the need for any
permission.
304. Although the aforesaid clause never made it into Article 25 of the
UNCITRAL Model, yet it is instructive in understanding the
remedy that was once contemplated for a party aggrieved in terms
of the situations envisaged under the now Article 25 of the
UNCITRAL Model and corresponding Section 25 of the Act, 1996.
305. The draft Article 17 referenced in the aforesaid clause defined the
authority that would exercise supervisory jurisdiction over the
arbitral tribunals. As per the said draft Article, the national courts
which were empowered to grant interim relief, appoint an
arbitrator and appoint substitute arbitrators in terms of Articles 9,
11, 14 and 15 of the UNCITRAL Model, respectively
(corresponding Sections 9, 11, 14 and 15, respectively) were
designated as the ‘Authority’.
306. What can be discerned from the aforesaid is that, the potential for
national courts to have supervisory powers over the arbitral
Special Leave Petition (C) No. 10389 of 2025 Page 210 of 269
tribunal in matters relating to the continuation of proceedings ex-
parte were once envisioned. Although the above suggestion was
omitted and the arbitral tribunals were themselves empowered to
proceed ex-parte, yet one cannot lose sight of the fact that, the
Working Group whilst omitting the above provision, never
discussed what would happen in a situation of wrongful
termination of proceedings by the arbitral tribunal.
307. Had the Working Group deliberated upon the above issue as-well,
one cannot help but reach a presumptuous conclusion, that the
Working Group might have allowed a party aggrieved by an order
passed by the arbitral tribunal, to approach the national courts, at
least insofar as it terminates the proceedings.
308. This to our minds, fortifies the view, that a remedy against the
termination of proceedings, should very well be available in the
form of a challenge under Section 14 of the Act, 1996.
309.
However, we must not lose sight of the overarching reason why
the Working Group had abandoned the idea of an aggrieved party
approaching the national courts against any order under Article
Special Leave Petition (C) No. 10389 of 2025 Page 211 of 269
25. The Working Group felt that the autonomy and wisdom of the
arbitral tribunal to decide the correct course of action in the event
of any default of the party should not be undermined. It opined
that the arbitral tribunal, being in seisin of the proceedings was
best suited to assess the conduct of the parties and then take an
appropriate decision in terms of the provision.
310.
What emerges from the aforesaid is that where an arbitral tribunal
passes an order for terminating the proceedings under the Act,
1996, the appropriate remedy available to the parties would be to
first file an application for recall of such order before the arbitral
tribunal itself.
311. It is no more res-integra that there is a clear distinction between a
procedural review and a review on merits as held in Hindustan
Construction Company (supra). When applied to the Act, 1996, the
irresistible conclusion that can be reached is that the power of
review is available to an arbitral tribunal to the limited extent of
curing a patent or procedural error. Thus, an arbitral tribunal has
the power to entertain an application for recall of an order
terminating the proceedings passed by it.
Special Leave Petition (C) No. 10389 of 2025 Page 212 of 269
312. Upon such application being preferred, the arbitral tribunal, as
held in Bharat Heavy Electricals (supra), would then be required
to examine whether the order does or does not deserve to be
recalled.
313. If a favourable order is passed for recommencing arbitration
proceedings, the only option available to a party aggrieved
therefrom, would be to participate in the proceedings and
thereafter challenge the final award under Section 34 of the Act,
1996.
314. If, however, the recall application were to be dismissed, as held in
Lalitkumar V. Sanghvi (supra), the party aggrieved therefrom,
would be empowered to approach the court under Section 14(2) of
the Act, 1996.
315. The court would then in turn examine whether the mandate of the
arbitrator stood legally terminated or not. If it finds that the
proceedings were not terminated in accordance with the law, it
would be empowered to either set-aside the order of termination
of proceedings and remit the matter back to the arbitral tribunal,
Special Leave Petition (C) No. 10389 of 2025 Page 213 of 269
or, if the circumstances so require, proceed to appoint a substitute
arbitrator in terms of Section 15 of the Act, 1996.
316. However, we make it abundantly clear that under no
circumstances, can a party file a fresh application under Section 11
of the Act, 1996 and initiate a second round of arbitration.
C. Whether the order for termination of proceedings passed by the
Sole Arbitrator could be said to be contrary to the decision of this
Court in Afcons (supra).
317. As discussed above, the Sole Arbitrator in the present case had
terminated the arbitral proceedings since neither party was
willing to pay the arbitral fees in respect of either the claim or the
counter-claim.
318. The Sole Arbitrator had initially determined the arbitral fees
payable on the basis of the Statement of Claim filed by the
appellants herein in accordance with the Fourth Schedule of the
Act, 1996. The said fees were to be borne equally by both the
parties.
Special Leave Petition (C) No. 10389 of 2025 Page 214 of 269
319. The appellants herein never objected to the aforesaid
determination of the fees by the Sole Arbitrator. Thereafter, when
the respondents herein filed their counter-claim, the Sole
Arbitrator revised the fees payable in terms of the Fourth Schedule
of the Act, 1996.
320. However, both the appellants and the respondent herein raised
certain objects to the revised arbitral fees determined by the Sole
Arbitrator. The appellants had contended that the counter-claim
filed by the respondents was an exaggerated estimation of the
amount claimed and that they were not in a financial position to
bear the arbitral fees for the total amount in dispute. The
respondent on the other hand, contended that he was liable to pay
only 25% of the total fees of arbitration.
321. Several hearings were conducted by the Sole Arbitrator on the
issue of the fees liable to be paid by the parties. The Sole Arbitrator
held that as per Section 38 of the Act, 1996, both the contesting
parties, namely, the claimant and the respondent, are liable to bear
the fees of arbitration in equal proportion. He further observed
Special Leave Petition (C) No. 10389 of 2025 Page 215 of 269
that the fees payable had been in accordance with the Fourth
Schedule of the Act, 1996 and with the consent of both the parties.
322. However, since neither party was willing to pay the arbitral fees
in respect of either the claim or the counter-claim, the Sole
Arbitrator terminated the proceedings by its order dated
28.03.2022.
323.
The appellants herein have contended that the order passed by the
Sole Arbitrator terminating the arbitral proceedings is contrary to
the decision of this Court in Afcons (supra). It was submitted that
the Sole Arbitrator had proceeded to revise the total arbitral fees
payable by the parties without their consent, and thus, could be
said to be bad in law.
324. In Afcons (supra), this Court was inter-alia called upon to examine
the constitutional validity of the Fourth Schedule of the Act, 1996,
and the manner in which the arbitral fees was required to be
determined in terms of the Act, 1996. This Court upholding the
validity of the Fourth Schedule of the Act, 1996 held that the fee
model proposed in the Fourth Schedule was not mandatory. It
held that the arbitral tribunal cannot unilaterally decide their own
Special Leave Petition (C) No. 10389 of 2025 Page 216 of 269
fees, and any such determination invariably requires the consent
of both the parties.
325. It held that in order to avoid unnecessary conflicts and litigation
between the parties and the arbitrators, the fees of the arbitrators
must be fixed in the very beginning of the arbitral proceedings. If
the parties or the arbitrator(s), as the case may be, are not able to
reach a consensus as regards the fees payable, then the arbitrator
in such a case must decline the assignment and withdraw as an
arbitrator. It held that once the terms of reference have been
finalised between the parties and the arbitrators, it would not be
open for anyone to vary or revise the same.
326.
However, it held the fees so determined by the parties and the
arbitrators would be amenable to revision as the arbitral
proceedings progress, but such revision must be with the consent
of all the parties. It clarified that the arbitral tribunal in no
circumstances can unilaterally revise the arbitral fees that was
initially agreed upon.
327. The relevant observations read as under: -
Special Leave Petition (C) No. 10389 of 2025 Page 217 of 269
“ C.2.4 Directives governing fees of arbitrators in ad hoc
arbitrations
101. Preliminary meetings in arbitration proceedings entail
a meeting convened by the arbitral tribunal with the parties
to arrive at a common understanding about how the
arbitration is to be conducted. It generally takes place at an
early stage of the dispute resolution process, prior to the
―written phase of the proceedings ‖ . Rules of certain
international arbitral institutions provide for convening a
preliminary meeting or case-management conference. The
fees and expenses are typically addressed at this stage. We
propose that this stage of having a preliminary hearing
should be adopted in the process of conducting ad hoc
arbitrations in India as it will provide much needed clarity
on how arbitrators are to be paid and reduce conflicts and
litigation on this issue.
102 These preliminary hearings should also be conducted
when the fees are specified in the arbitration agreement. The
arbitration agreement may have been entered into at an
earlier point in time, even several years earlier. It is possible
that at the time when the disputes between the parties arise,
the fees stipulated in the arbitration agreement may have
become an unrealistic estimate of the remuneration that is to
be offered for the services of the arbitrator due to the passage
of time. In the preliminary hearings, if all the parties and the
arbitral tribunal agree to a revised fee, then that fee would be
payable to the arbitrator(s). However, if any of the parties
raises an objection to the fee being demanded by the
arbitrator(s) and no consensus can be arrived at between such
a party and the tribunal or a member of the tribunal, then the
tribunal or the member of the tribunal should decline the
assignment. Since the relationship between the parties and
arbitrator(s) is contractual in nature, specifically with
respect to the payment of remuneration, there must be a
consensus on the fees to be paid.
103 It is possible that during the preliminary hearings, the
parties and the arbitral tribunal may be unsure about the
extent of time that needs to be invested by the arbitrator(s)
Special Leave Petition (C) No. 10389 of 2025 Page 218 of 269
and the complexity of the dispute. It is also possible that the
arbitral proceedings may continue for much longer time than
was expected. In order to anticipate such contingencies,
during the preliminary hearings, the parties and the
arbitrator(s) should stipulate that after a certain number of
sittings, the fee would stand revised at a specified rate. The
number of sittings after which the revision would take place
and the quantum of revision must be clearly discussed and
determined during the preliminary hearings through the
process of negotiation between the parties and the
arbitrator(s). There is no unilateral power reserved to the
arbitrator(s) to revise the fees on their own terms if they
believe that an additional number of sittings would be
required to settle the dispute. The fees payable to the arbitral
tribunal in an ad hoc arbitration must be settled between the
arbitral tribunal and the parties at the threshold during the
course of the preliminary hearings. Resolution of the fees
payable to the arbitral tribunal by mutual agreement during
the preliminary hearings is necessary. Failing such an
agreement, the arbitrator(s) who decline to accept the fee
suggested by the parties (or any of them) are at liberty to
decline the assignment. The fixation of arbitral fees at the
threshold will obviate the grievance that the arbitrator(s) are
arm-twisting parties at an advanced stage of the dispute
resolution process. In such a situation, a party who is not
agreeable to a unilateral revision of fees demanded by the
arbitral tribunal in the midst of the proceedings has a real
apprehension that its refusal may result in embarrassing
consequences bearing on the substance of the dispute.
104 We believe that the directives proposed by the amicus
curiae, with suitable modifications, would be useful in
structuring how these preliminary hearings are to be
conducted. Exercising our powers conferred under Article
142 of the Constitution, we direct the adoption of the
following guidelines for the conduct of ad hoc arbitrations in
India:
1. Upon the constitution of the arbitral tribunal,
the parties and the arbitral tribunal shall hold
preliminary hearings with a maximum cap of four
Special Leave Petition (C) No. 10389 of 2025 Page 219 of 269
hearings amongst themselves to finalise the terms
‖
of reference (the Terms of Reference ) of the arbitral
tribunal. The arbitral tribunal must set out the
components of its fee in the Terms of Reference
which would serve as a tripartite agreement
between the parties and the arbitral tribunal.
2. In cases where the arbitrator(s) are appointed by
parties in the manner set out in the arbitration
agreement, the fees payable to the arbitrators would
be in accordance with the arbitration agreement.
However, if the arbitral tribunal considers that the
fee stipulated in the arbitration agreement is
unacceptable, the fee proposed by the arbitral
tribunal must be indicated with clarity in the
course of the preliminary hearings in accordance
with these directives. In the preliminary hearings,
if all the parties and the arbitral tribunal agree to a
revised fee, then that fee would be payable to the
arbitrator(s). However, if any of the parties raises
an objection to the fee proposed by the arbitrator(s)
and no consensus can be arrived at between such a
party and the tribunal or a member of the tribunal,
then the tribunal or the member of the tribunal
should decline the assignment.
3. Once the Terms of Reference have been finalised
and issued, it would not be open for the arbitral
tribunal to vary either the fee fixed or the heads
under which the fee may be charged.
4. The parties and the arbitral tribunal may make a
carve out in the Terms of Reference during the
preliminary hearings that the fee fixed therein may
be revised upon completion of a specific number of
sittings. The quantum of revision and the stage at
which such revision would take place must be
clearly specified. The parties and the arbitral
tribunal may hold another meeting at the stage
specified for revision to ascertain the additional
number of sittings that may be required for the
Special Leave Petition (C) No. 10389 of 2025 Page 220 of 269
final adjudication of the dispute which number
may then be incorporated in the Terms of Reference
as an additional term.
5. In cases where the arbitrator(s) are appointed by
the Court, the order of the Court should expressly
stipulate the fee that arbitral tribunal would be
entitled to charge. However, where the Court
leaves this determination to the arbitral tribunal in
its appointment order, the arbitral tribunal and the
parties should agree upon the Terms of Reference
as specified in the manner set out in draft practice
direction (1) above.
6. There can be no unilateral deviation from the
Terms of Reference. The Terms of Reference being
a tripartite agreement between the parties and the
arbitral tribunal, any amendments, revisions,
additions or modifications may only be made to
them with the consent of the parties.
7. All High Courts shall frame the rules governing
arbitrators' fees for the purposes of Section 11(14)
of the Arbitration and Conciliation Act, 1996.
8. The Fourth Schedule was lastly revised in the
year 2016. The fee structure contained in the
Fourth Schedule cannot be static and deserves to be
revised periodically. We, therefore, direct the
Union of India to suitably modify the fee structure
contained in the Fourth Schedule and continue to
do so at least once in a period of three years. ”
(Emphasis supplied)
328. The principal contention raised on behalf of the appellants herein
is that the Sole Arbitrator in the present case had revised the fees
Special Leave Petition (C) No. 10389 of 2025 Page 221 of 269
without the consent of the parties, and as such the same is contrary
to Afcons (supra).
329. However, we are not impressed with the aforesaid submission
canvassed by the appellants herein. The Sole Arbitrator in the
present case at hand, did not unilaterally revise the arbitral fees
from what was initially agreed upon by the parties. The Sole
Arbitrator vide its order dated 23.04.2021 merely revised the
quantum payable in view of the counter-claim that was filed by
the respondents herein.
330. The fees matrix on the basis of which the quantum of the arbitral
fees was revised remained the same i.e., the determination of the
revised fees by the Sole Arbitrator was on the basis of the Fourth
Schedule of the Act, 1996, which the parties had initially agreed
upon.
331. The High Court whilst appointing the Sole Arbitrator in the
present case to adjudicate the disputes between the parties had
directed that the fees payable to the Sole Arbitrator shall be
Special Leave Petition (C) No. 10389 of 2025 Page 222 of 269
determined either in accordance with the Fourth Schedule of the
Act, 1996 or as may be mutually agreed upon by the parties.
332. Pursuant thereto, the Sole Arbitrator determined the arbitral fees
on the first hearing on the basis of the fees matrix in the Fourth
Schedule of the Act, 1996. Neither the appellants nor the
respondents raised any objections to the same at that stage. The
Sole Arbitrator keeping in mind the fee matrix determined the fees
payable on the basis of the claim amount filed by the appellants
herein.
333. Thereafter, when the respondents herein filed their counter-claim,
the Sole Arbitrator merely revised the quantum keeping in mind
the Fourth Schedule of the Act, 1996.
334. This Court in Afcons (supra) held that under the Act, 1996, more
particularly, Section 38 thereof, an arbitral tribunal is empowered
to fix a deposit of costs for claims and counterclaims separately.
The scheme of the Act, 1996 considers claims and counter-claims
to be independent proceedings since the latter is not contingent
upon the former. Thus, it held that the determination of fees under
the Fourth Schedule should also be calculated separately for a
Special Leave Petition (C) No. 10389 of 2025 Page 223 of 269
claim and counter-claim. It expressly rejected the contention that
the term “sum in dispute” used in the schedule refers to a
cumulation of the claim and the counter-claim. The relevant
observations read as under: -
“117 Consequently, on the basis of the above analysis, the
following principles emerge:
(i) the Arbitration Act treats claims and
counterclaims on a par, and holds them subject to
the same procedural timelines and requirements —
(ii) The Arbitration Act allows the Arbitral
Tribunal to fix a deposit of costs for claims and
counterclaims separately, recognising that they are
distinct proceedings
(iii) The Arbitration Act considers claims and
counterclaims to be independent proceedings since
the latter is not contingent upon the former -
Rather, the Act protects the right of any respondent
to raise a counterclaim in an arbitration
proceeding, provided it arises from the arbitration
agreement under dispute Further, in the event of a
default in the payment of a deposit either for the
claim or counterclaim, it specifically notes that the
proceedings will be terminated only in respect of
the claim, or as the case may be, the counterclaim
in respect of which the default has occurred
(iv) Though a counterclaim may arise from similar
facts as a claim, the counterclaim is not a set-off
and is not in the nature of a defence to the claim.
(v) A counterclaim will survive for independent
adjudication even if the claim is dismissed or
withdrawn and the respondent to a claim would be
entitled to pursue their counterclaim regardless of
the pursuit of or the decision on the claim.
Special Leave Petition (C) No. 10389 of 2025 Page 224 of 269
xxx xxx xxx
136. [...] On a combined reading of Section 31(8), Section 31-
A and Section 38(1), it is clear that : (i) separate deposits are
to be made for a claim and counterclaim in an arbitration
proceeding; and (ii) these deposits are in relation to the costs
of arbitration, which includes the fee of the arbitrators.
Therefore, prima facie, the determination of the fee under
Schedule IV should also be calculated separately for a claim
and counterclaim i.e. the term "sum in dispute" refers to
independent claim amounts for the claim and counterclaim.
Such an interpretation is also supported by the definition of
claim and counterclaim, and by the fact that the latter
constitutes proceedings independent and distinct from the
former.
137. If this interpretation were to be discarded in favour of
construing "sum in dispute" as a cumulation of the claim
amount for the claim and counterclaim, it would have far-
reaching consequences in terms of procedural fairness. First,
under the proviso to Section 38(1), the Arbitral Tribunal can
direct separate deposits for a claim and counterclaim. These
are based on the cost of arbitration defined by a conjoint
reading of Sections 31(8) and 31-A, which includes the
arbitrators' fee. Hence, if the arbitrators were to charge a
common fee for both the claim and counterclaim, they would
have to then equitably divide that fee while calculating
individual deposits for the purpose of the proviso to Section
38(1). Second, the second proviso to Section 38(2) provides
that if the deposit is not made by both the parties, the Arbitral
Tribunal can dismiss the claim and/or counterclaim, as the
case may be. If the claim was to be dismissed in such a
manner, it would lead to an absurd situation where the
arbitrators' fee would have to be revised in the middle of the
arbitration proceedings solely on the basis of the amount of
the counterclaim. Third, under Section 23(2-A), the only
requirement of a counterclaim is that it should arise out of the
same arbitration agreement as the claim. However, the cause
of action of a counterclaim may be entirely different from the
claim and possibly far more complex. Therefore, determining
Special Leave Petition (C) No. 10389 of 2025 Page 225 of 269
the arbitrators' fee on a combined basis for both the claim and
counterclaim would thus not match up to the separate effort
they would have to put in for each individual dispute in the
claim and counterclaim.
(Emphasis supplied)
335. Undoubtedly, when the counter-claims were filed by the
respondents herein, the Sole Arbitrator, as per Afcons (supra) was
once again required to seek the consent of the parties for
determining the fees on the basis of the Fourth Schedule in respect
of the said counter-claims.
336. It does not appear from the material on record that the Sole
Arbitrator had obtained the consent of both the parties before
revising the fees payable in lieu of the counter-claims filed.
337. However, we cannot lose sight of one another significant
observation made by this Court in Afcons (supra). This Court held
that when one or both parties, or the parties and the arbitral
tribunal, as the case may be, are unable to reach a consensus on
the fee matrix, it would be open to the arbitral tribunal to
determine the same in accordance with the Fourth Schedule of the
Act, 1996. The Fourth Schedule of the Act, 1996 is the model fee
Special Leave Petition (C) No. 10389 of 2025 Page 226 of 269
schedule that is binding on all. Thus, where the arbitral tribunal
fixes the fee in terms of the Fourth Schedule, the parties would not
be permitted to object to the same. The relevant observations read
as under: -
“ 105 Conscious and aware as we are that (i) Arbitration
proceedings must be conducted expeditiously; (ii) Court
interference should be minimal; and (iii) Some litigants
would object to even a just and fair arbitration fee, we would
like to effectuate the object and purpose behind enacting the
model fee schedule. When one or both parties, or the parties
and the arbitral tribunal are unable to reach a consensus, it
is open to the arbitral tribunal to charge the fee as stipulated
in the Fourth Schedule, which we would observe is the model
fee schedule and can be treated as binding on all.
Consequently, when an arbitral tribunal fixes the fee in terms
of the Fourth Schedule, the parties should not be permitted to
object the fee fixation. It is the default fee, which can be
changed by mutual consensus and not otherwise .”
338. Since the Sole Arbitrator in the present case at hand had revised
the arbitral fees in accordance with the Fourth Schedule of the Act,
1996, it was no longer open for the parties to object to the same.
339.
Although we are of the opinion that the Sole Arbitrator before
proceeding to revise the arbitral fees in accordance with the Fourth
Schedule of the Act, 1996 ought to have first sought the consent of
both the parties, yet we are not inclined to hold the order passed
Special Leave Petition (C) No. 10389 of 2025 Page 227 of 269
by the Sole Arbitrator terminating the arbitral proceedings to be
bad in law on this ground.
340. We say so because, the Sole Arbitrator before terminating the
proceedings enquired from both the parties whether they would
be willing to pay the share of the fees for either the claim or the
counter-claim.
341.
The appellants herein submitted that they were not in a position
to pay the arbitral fees for both the claim and the counter-claim,
and could pay only their share of the fees only in respect of the
claim.
342. As per Section 38 of the Act, 1996, both the contesting parties,
namely, the claimant and the respondent, are responsible to bear
the fees of arbitration in equal proportion. However, where either
party defaults, the responsibility to pay the fees falls on the other
party. A claimant is responsible for his own claims, and thus
responsible to pay his share of fees in respect of the same.
Likewise, the respondent is responsible to pay the share of fees for
his counter claims. This responsibility extends to bearing the other
Special Leave Petition (C) No. 10389 of 2025 Page 228 of 269
party’s share as well, if the latter declines to pay, at least insofar as
their claim or counter-claim, as the case may be, is concerned.
343. Since the appellants herein refused to pay the requisite fees for
their own claims, the arbitral tribunal was left with no other
alternative but to terminate the proceedings.
VI. FEW MEANINGFUL SUGGESTIONS
344. Before we close this matter, we deem it appropriate to refer to
handful of international arbitration frameworks and rules to look
at the practices adopted by international organisations and better
understand the shortcomings that exist in the UNCITRAL Model
and by extension in the Act, 1996.
A. International Perspective on the Framework on Termination of
Arbitral Proceedings.
i. Singapore International Arbitration Centre Rules, 2025 (SIAC
Rules).
345. The Singapore International Arbitration Centre Rules, 2025 (for
short, the “ SIAC Rules ”) constitute the procedural framework
Special Leave Petition (C) No. 10389 of 2025 Page 229 of 269
governing arbitrations administered by the Singapore
International Arbitration Centre. These rules operate as the
governing code where parties, by agreement, designate SIAC as
the institution for the resolution of their dispute.
346. The SIAC Rules regulate the initiation, conduct and termination of
proceedings, subject to the agreement of the parties and the
mandatory provisions of the law governing the seat of arbitration.
They are a self-contained procedural code for the limited purpose
of administering arbitrations under the institution that
supplement the substantive law applicable to the contract or the
curial law governing the arbitration agreement.
347. The SIAC Rules, although not entirely based on the UNCITRAL
Model Law, nevertheless draws conceptual guidance from the
principles underlying the Model Law and the key Articles
thereunder.
348.
Rule 43 of the SIAC Rules which is in substance similarly worded
to Article 32 of the UNCITRAL Model (Section 32 of the Act, 1996),
Special Leave Petition (C) No. 10389 of 2025 Page 230 of 269
contains the power of the arbitral tribunal to suspend or terminate
the proceedings. The said Rule reads as under: -
“ 43. Suspension, Settlement, and Termination
43.1 The Registrar or the Tribunal, as appropriate, may
suspend an arbitration in accordance with such terms as the
parties have agreed or as otherwise provided in these Rules.
The Registrar or the Tribunal may, after considering the
views of the parties, order the tolling of any timelines.
43.2 In the event of a settlement, the Tribunal shall issue an
order terminating the arbitration or, if the parties so request,
the Tribunal may record the settlement in the form of a
consent award on agreed terms. The Tribunal is not obliged
to provide reasons for a consent award or to include the
settlement terms in the consent award.
43.3 The Tribunal shall, after considering the views of the
parties, issue an order terminating the arbitration where:
(a) the Claimant withdraws its claim, unless the Respondent
objects thereto and the Tribunal recognises a legitimate
interest on the Respondent’s part in obtaining a final
settlement of the dispute or any orders as to costs;
(b) the parties agree on the termination of the arbitration;
(c) the Tribunal finds that the continuation of the arbitration
has become unnecessary or impossible; or
(d) the Registrar has deemed the relevant claims,
counterclaims, or cross-claims to be withdrawn for non-
payment of deposits in accordance with Rule 56.5(b).
43.4 Prior to the constitution of the Tribunal, the Registrar
shall have the power to terminate an arbitration in
accordance with these Rules.
43.5 An order of the Tribunal or the Registrar terminating
the arbitration under this Rule 43 shall be effective on the date
of such order, unless otherwise ordered by the Tribunal or the
Registrar.”
Special Leave Petition (C) No. 10389 of 2025 Page 231 of 269
349. Remarkably, in the entire framework of the SIAC Rules, each
provision where an arbitral tribunal has been permitted to
terminate the proceedings, a specific reference is made to the
aforesaid Rule 43. This is in order to obviate the possibility of any
confusion, that the power to terminate the proceedings is not
scattered across various provisions, rather contained solely in Rule
43 thereof.
350.
For instance, we may refer to Rule 44 of the SIAC Rules, which is
substantially similar to Section 25 of the Act, 1996 and Article 25
of the UNCITRAL Model.
351. Rule 44, more particularly sub-rule (1) which allows the arbitral
tribunal to terminate the proceedings where the claimant fails to
submit his Statement of Claim within the time specified, clearly
stipulates that such termination would take place by the passing
of an order to such effect in accordance with Rule 43. The said rule
reads as under: -
“ 44. Non-participation and Non-compliance
44.1 If the Claimant fails to submit a Statement of Claim
within the time specified by the Tribunal, the Tribunal may,
after considering the views of the parties, issue an order
terminating the arbitration in accordance with Rule 43,
unless there are remaining matters which require
determination.
Special Leave Petition (C) No. 10389 of 2025 Page 232 of 269
44.2 If the Respondent fails to submit a Statement of
Defence within the time specified by the Tribunal, or if at any
point any party fails to avail itself of the opportunity to
present its case in the manner directed by the Tribunal, the
Tribunal may proceed with the arbitration without treating
such failure in itself as an admission of any allegations.
44.3 If, without showing sufficient cause, any party fails or
refuses to comply with these Rules or with any direction,
decision, ruling, order, or award of the Tribunal, or to attend
any meeting or hearing, the Tribunal may proceed with the
arbitration. In these circumstances, the Tribunal may impose
such sanctions as it deems appropriate and make an award on
the evidence before it.”
(Emphasis supplied)
352. Similarly, Rule 56 of SIAC Rules, which is similarly in nature to
Section 38 of the Act, 1996, empowers the Registrar of the SIAC to
determine and direct the deposit of a certain sum towards the cost
of the arbitration. Rule 56.5 provides that where a party fails to
pay the deposits as required, the proceedings may be suspended
or deemed to be withdrawn without prejudice. The said rule reads
as under: -
“ 56. Deposits
56.1 The Registrar shall fix the deposits payable towards the
estimated costs of the arbitration calculated in accordance
with the amount in dispute under the Schedule of Fees.
Unless the Registrar otherwise directs, 50 percent of such
deposits shall be payable by the Claimant(s) and 50 percent
of such deposits shall be payable by the Respondent(s). The
Registrar may fix separate deposits for a claim, counterclaim,
or cross-claim.
Special Leave Petition (C) No. 10389 of 2025 Page 233 of 269
56.2 Where the amount in dispute is not quantifiable at the
time the deposits are due, the Registrar shall make a
provisional estimate of the costs of the arbitration and call for
the deposits thereon. This estimate may be adjusted upon the
quantification of the amount in dispute or in light of such
information as may subsequently become available.
56.3 The Registrar may at any time direct the parties to
make further or additional deposits towards the estimated
costs of the arbitration.
56.4 Parties are jointly and severally liable for the costs of
the arbitration. In the event that a party does not pay the
deposits as directed, the Registrar may direct the other party
to make payment of the deposits on its behalf.
56.5 If a party fails to pay the deposits as directed, the
Registrar may:
(a) direct the Tribunal and the SIAC Secretariat to suspend
the conduct and administration of the arbitration in
whole or in part; and/or
(b) set a time limit on the expiry of which the relevant claim,
counterclaim, or cross-claim shall be considered as
withdrawn on a without prejudice basis.
56.6 All deposits towards the estimated costs of the
arbitration shall be made to and held by SIAC. Any interest
which may accrue on such deposits shall be retained by SIAC.
56.7 If a party pays the deposits towards the estimated costs
of arbitration on behalf of another party, the Tribunal may
issue an order or award for the reimbursement of such
deposits paid.”
353. Rule 43 sub-rule (3) specifically stipulates that the arbitral tribunal
shall, after considering the views of the parties, issue an order for
terminating the proceedings where the claim or the counter-claim,
Special Leave Petition (C) No. 10389 of 2025 Page 234 of 269
as the case may be is deemed to be withdrawn due to non-
payment of deposits in accordance with Rule 56.5(b).
354. What emerges from the above is that Rule 43 of the SIAC Rules
encompasses and consolidates all the various modes of
termination that has been envisaged under the UNCITRAL Model
and the Act, 1996 into one single provision. The said rule
incorporates the following: -
(i) The power to terminate the proceedings on account of
default by the claimant in communicating its Statement of
Claims, as provided under Section 25(a) of the Act, 1996
(which corresponds to Article 25 of the UNCITRAL Model).
(ii)
The power to terminate the proceedings in the event the
parties arrive at a settlement, as stipulated under Section 30
of the Act, 1996 (which corresponds to Article 30 of the
UNCITRAL Model).
(iii) The power to terminate the proceedings in the event of
withdrawal of the claims, or pursuant to an agreement
between the parties to such effect, or where the proceedings
are rendered unnecessary or impossible, as envisaged by
Special Leave Petition (C) No. 10389 of 2025 Page 235 of 269
Section 32 of the Act, 1996 (which corresponds to Article 32
of the UNCITRAL Model).
(iv) The power to terminate the proceedings in case the parties
fail to pay the deposit required by the arbitral tribunal, as
stipulated under Section 38 of the Act, 1996.
355. Unlike the Act, 1996, where the “power” to terminate the
proceedings has been referred to in various provisions, the SIAC
Rules, more particularly Rule 43, make it abundantly clear, that
the power of the arbitral tribunal to either suspend or terminate
the proceedings, lies only under the said Rule.
356. The various grounds on which the proceedings can be terminated
under the Act, 1996, more particularly under Section(s) 25, 30, 32
and 38 thereof, have also been consolidated into one single
umbrella provision being Rule 43.
357. This consolidation of the various situations in which arbitral
proceedings may be terminated into a single simplified provision
eliminates the ambiguity surrounding the nature and legal effect
of such an order of termination.
Special Leave Petition (C) No. 10389 of 2025 Page 236 of 269
358. It removes the anomaly that still persists under the Act, 1996, more
particularly the divergence in view as regards the nature of
termination of proceedings under Section 25(a) and Section 32 of
the said Act.
359. Where on the one hand, the termination of proceedings in terms
of Section 25(a) has been construed to also mean the consequent
termination of the mandate of the arbitral tribunal in terms of
Section 32(2), as held in Datar Switchgear (supra) and PCL Suncon
(supra).
360. On the other hand, as per SREI Infrastructure (supra) and Sai
Babu (supra), the termination of proceedings under Section(s)
25(a), 32 and 38, have been construed as independent and distinct
provisions that empower the tribunal to terminate the
proceedings, as a consequence of which, the mandate of the
arbitral tribunal has been understood to terminate only where the
termination takes place in terms of Section 32(2), but not in cases
where the proceedings are terminated in terms of Section 25 or 38
of the Act, 1996.
Special Leave Petition (C) No. 10389 of 2025 Page 237 of 269
ii. London Court of International Arbitration Rules, 2020 (LCIA
Rules).
361. Similarly, the London Court of International Arbitration Rules,
2020 (for short the “ LCIA Rules ”) contains the procedural
framework governing arbitrations conducted at the Institution.
362. The LCIA Rules prescribe the manner in which arbitral
proceedings are to be commenced, the constitution of the arbitral
tribunal and the conduct of proceedings including the powers of
the tribunal to terminate the proceedings.
363.
Article 22 of the LCIA Rules enumerates the various powers of the
arbitral tribunal. Similar to the SIAC Rules, the power of the
arbitral tribunal to terminate the proceedings has been provided
in only one provision, namely, Article 22 sub-paragraph (xi). The
circumstances in which the proceedings can be terminated
thereunder are materially similar in nature to those contemplated
under Section 32(2) of the Act, 1996 ( pari-materia to Article 32 of the
UNCITRAL Model). The said provision reads as under: -
“Article 22 Additional Powers
22.1 The Arbitral Tribunal shall have the power, upon the
application of any party or (save for sub- paragraph (x)
below) upon its own initiative, but in either case only after
giving the parties a reasonable opportunity to state their
Special Leave Petition (C) No. 10389 of 2025 Page 238 of 269
views and upon such terms (as to costs and otherwise) as the
Arbitral Tribunal may decide:
(i) to allow a party to supplement, modify or amend any
claim, defence, counterclaim, cross-claim, defence to
counterclaim, defence to cross-claim and reply,
including a Request, Response and any other written
statement, submitted by such party;
(ii) to abridge or extend (even where the period of time has
expired) any period of time prescribed under the
Arbitration Agreement, any other agreement of the
parties or any order made by the Arbitral Tribunal;
(iii) to conduct such enquiries as may appear to the Arbitral
Tribunal to be necessary or expedient, including
whether and to what extent the Arbitral Tribunal
should itself take the initiative in identifying relevant
issues and ascertaining relevant facts and the law(s) or
rules of law applicable to the Arbitration Agreement,
the arbitration and the merits of the parties' dispute;
(iv) to order any party to make any documents, goods,
samples, property, site or thing under its control
available for inspection by the Arbitral Tribunal, any
other party, any expert to such party and any expert to
the Tribunal;
(v) to order any party to produce to the Arbitral Tribunal
and to other parties documents or copies of documents
in their possession, custody or power which the
Arbitral Tribunal decides to be relevant;
(vi) to decide whether or not to apply any strict rules of
evidence (or any other rules) as to the admissibility,
relevance or weight of any material tendered by a party
on any issue of fact or expert opinion; and to decide the
time, manner and form in which such material should
be exchanged between the parties and presented to the
Arbitral Tribunal;
(vii) to decide the stage of the arbitration at which any issue
or issues shall be determined, in what order, and the
procedure to be adopted at each stage in accordance
with Article 14 above;
(viii) to determine that any claim, defence, counterclaim,
cross-claim, defence to counterclaim or defence to
Special Leave Petition (C) No. 10389 of 2025 Page 239 of 269
cross-claim is manifestly outside the jurisdiction of the
Arbitral Tribunal, or is inadmissible or manifestly
without merit; and where appropriate to issue an order
or award to that effect (an “Early Determination”);
(ix) to order compliance with any legal obligation or
payment of compensation for breach of any legal
obligation or specific performance of any agreement
(including any arbitration agreement or any contract
relating to land);
(x) to allow one or more third persons to be joined in the
arbitration as a party provided any such third person
and the applicant party have consented expressly to
such joinder in writing following the Commencement
Date or (if earlier) in the Arbitration Agreement; and
thereafter to make a single final award, or separate
awards, in respect of all parties so implicated in the
arbitration; and
(xi) to order the discontinuance of the arbitration if it
appears to the Arbitral Tribunal that the arbitration
has been abandoned by the parties or all claims and any
counterclaims or cross-claims have been withdrawn by
the parties, after giving the parties a reasonable
opportunity to state their views.
22.2 By agreeing to arbitration under the Arbitration
Agreement, the parties shall be treated as having agreed not
to apply to any state court or other legal authority for any
order available from the Arbitral Tribunal (if formed) under
Article 22.1, except with the agreement in writing of all
parties.
22.3 The Arbitral Tribunal shall decide the parties' dispute
in accordance with the law(s) or rules of law chosen by the
parties as applicable to the merits of their dispute. If and to
the extent that the Arbitral Tribunal decides that the parties
have made no such choice, the Arbitral Tribunal shall apply
the law(s) or rules of law which it considers appropriate.
22.4 The Arbitral Tribunal shall only apply to the merits of
the dispute principles deriving from "ex aequo et bono",
Special Leave Petition (C) No. 10389 of 2025 Page 240 of 269
"amiable composition" or "honourable engagement" where
the parties have so agreed in writing.
22.5 Subject to any order of the Arbitral Tribunal under
Article 22.1(ii), the LCIA Court may also set, abridge or
extend any period of time under the Arbitration Agreement
or other agreement of the parties (even where the period of
time has expired).
22.6 Without prejudice to Article 22.1(xi), the LCIA Court
may determine, after giving the parties a reasonable
opportunity to state their views, that the arbitration shall be
discontinued if it appears to the LCIA Court that the
arbitration has been abandoned by the parties or all claims
and any counterclaims or cross-claims have been withdrawn
by the parties.”
(Emphasis supplied)
364.
Article 22 sub-paragraph (xi) empowers the tribunal, after giving
the parties a reasonable opportunity of being heard, to order the
discontinuance of the arbitration proceedings if it appears that the
arbitration has been abandoned by the parties or that all claims
and counter-claims have been withdrawn.
365.
Thus, the LCIA Rules also contains one single source of the power
of the arbitral tribunal to terminate or discontinue the
proceedings, in the form of Article 22.
366. Article 24 of the LCIA Rules is also significant. It is in substance
similar to Section 38 of the Act, 1996, inasmuch as it empowers the
Special Leave Petition (C) No. 10389 of 2025 Page 241 of 269
LCIA Court to direct the parties to make advance payments
towards the cost of arbitration, as determined under the Rules. The
said provision reads as under: -
“ Article 24 Advance Payment for Costs
24.1 The LCIA Court may direct the parties, in such
proportions and at such times as it thinks appropriate, to
make one or more payments to the LCIA (the "Advance
Payment for Costs") in order to secure payment of the
Arbitration Costs under Article 28.1. Such payments by the
parties may be applied by the LCIA to pay any item of such
Arbitration Costs (including the LCIA’s own fees and
expenses) in accordance with the LCIA Rules.
24.2 The Advance Payment for Costs shall be the property
of the LCIA, to be disbursed or otherwise applied by the LCIA
in accordance with the LCIA Rules and invested having
regard to the interests of the LCIA. The parties agree that the
LCIA shall not act as trustee and its sole duty to the parties
in respect of the Advance Payment for Costs shall be to act
pursuant to these LCIA Rules.
24.3 In the event that, at the conclusion of the arbitration,
the Advance Payment for Costs exceeds the total amount of
the Arbitration Costs under Article 28.1, the excess amount
shall be transferred by the LCIA to the parties in such
proportions as the parties may agree in writing or, failing
such agreement, in the same proportions and to the same
parties as the Advance Payment for Costs was paid to the
LCIA, subject to any order of the Arbitral Tribunal.
24.4 The LCIA will make reasonable attempts to contact the
parties in order to arrange for the transfer of the excess
amount, using the contact details provided to the LCIA
during the proceedings. If a response is not received from a
party so contacted within 30 days, the LCIA will provide that
party with written notice of its intention to retain the excess
amount. If no response is received within a further 60 days,
Special Leave Petition (C) No. 10389 of 2025 Page 242 of 269
the party will be deemed irrevocably to have waived any right
to claim and/or receive the excess amount.
24.5 Save for exceptional circumstances, the Arbitral
Tribunal should not proceed with the arbitration without
having ascertained from the Registrar that the LCIA is or will
be in requisite funds as regards outstanding and future
Arbitration Costs.
24.6 In the event that a party fails or refuses to make any
payment on account of the Arbitration Costs as directed by
the LCIA Court, the LCIA Court may direct the other party
or parties to effect a further Advance Payment for Costs in an
equivalent amount to allow the arbitration to proceed (subject
to any order or award on Arbitration Costs).
24.7 In such circumstances, the party effecting the further
Advance Payment for Costs may request the Arbitral
Tribunal to make an order or award in order to recover that
amount as a debt immediately due and payable to that party
by the defaulting party, together with any interest.
24.8 Failure by a claiming, counterclaiming or cross-
claiming party to make promptly and in full any required
payment may be treated by the LCIA Court or the Arbitral
Tribunal as a withdrawal from the arbitration of the claim,
counterclaim or cross-claim respectively, thereby removing
such claim, counterclaim or cross-claim (as the case may be)
from the scope of the Arbitral Tribunal’s jurisdiction under
the Arbitration Agreement, subject to any terms decided by
the LCIA Court or the Arbitral Tribunal as to the
reinstatement of the claim, counterclaim or cross-claim in the
event of subsequent payment by the claiming,
counterclaiming or cross-claiming party. Such a withdrawal
shall not preclude the claiming, counterclaiming or cross-
claiming party from defending as a respondent any claim,
counterclaim or cross-claim made by another party.”
(Emphasis supplied)
Special Leave Petition (C) No. 10389 of 2025 Page 243 of 269
367. In the event the parties default in making the necessary payments
towards the cost of arbitration, as directed, then as per Article 24.5
the arbitral tribunal is mandated to not proceed any further with
the arbitration until the requisite payments are made.
368. Furthermore, as per Article 24.8, the failure of the parties to make
the requisite payment towards the cost of arbitration may be
treated as a withdrawal of its claims or counter-claims as the case
may be.
369. Where any claim or counter-claim is deemed to be withdrawn on
account of default in payment of costs, the LCIA Court or the
arbitral tribunal may stipulate any terms including the prescribing
of a specific period within which if the necessary payment is made,
the claim or the counter-claim, as the case may be would stand
reinstated.
370. Thus, where all the claims (including the counter-claims) are
deemed to be withdrawn account of non-payment of costs in terms
of Article 24.8, the LCIA Court or the arbitral tribunal, as the case
Special Leave Petition (C) No. 10389 of 2025 Page 244 of 269
may be, would be empowered to resort to its powers under Article
22 and order the discontinuance of the proceedings.
371. Similarly, the LCIA Rules do not stipulate the consequences that
would ensue if the claimant fails to file his statement of claims
within the specified period. The LCIA Rules leaves it to the
wisdom of the arbitral tribunal to decide whether such failure to
file the statement of claims amounts to abandonment of its claim
or not.
372. This is because of the wide scope of Article 22 sub-paragraph (ix)
which confers the arbitral tribunal with extensive powers and
flexibility for terminating the arbitral proceedings. A failure to file
the statement of claims can always be treated as an abandonment
of claim in terms of Article 22(ix), and the arbitral tribunal in such
circumstances would be empowered to terminate the proceedings.
373. Article 22 takes into account the various scenarios in which the
proceedings may be terminated as envisaged by the different
provisions of the UNCITRAL Model, as a whole.
Special Leave Petition (C) No. 10389 of 2025 Page 245 of 269
374. Thereby avoiding the conundrum that exists in the UNCITRAL
Model and the Act, 1996, more particularly the multiplicity of
provisions pertaining to the power to terminate the proceedings,
and the consequent confusion in regards to the nature and scope
of each of those provisions.
375. One another vital feature of the LCIA Rules, more particularly
Article 24.8 is that it enables the arbitral tribunal and the LCIA
Court, as the case may be, to outline the consequences of a claim
or counter-claim being deemed withdrawn. It allows the tribunal
or the court to stipulate such terms as it thinks fit, for the
reinstatement of the claims or counter-claims later in the
proceedings, unlike the UNCITRAL Model and the Act, 1996,
which leaves the consequences of a termination in ambiguity and
up to imagination.
iii. Hong Kong International Arbitration Centre Rules, 2024
(HKIAC Rules).
376. The 2024 Administered Arbitration Rules of the Hong Kong
International Arbitration Centre Rules (for short, the “ HKIAC
Rules ”) stipulates the procedural framework governing
arbitrations conducted at the Institution.
Special Leave Petition (C) No. 10389 of 2025 Page 246 of 269
377. The HKIAC Rules are of vital significance inasmuch as most of its
substantive procedural framework have been devised along the
lines of the UNCITRAL Model.
378. Article 37 of the HKIAC Rules in particular, mirrors Article(s) 30
and 32 of the UNCITRAL Model (corresponding to Section(s) 30
and 32 of the Act, 1996, respectively). The said provision reads as
under: -
Article 37 – Settlement or Other Grounds for
“
Termination
37.1 If, before the arbitral tribunal is constituted, a party
wishes to terminate the arbitration, it shall communicate this
to all other parties and HKIAC. HKIAC shall set a time limit
for all other parties to indicate whether they agree to
terminate the arbitration. If no other party objects within the
time limit, HKIAC may terminate the arbitration. If any
party objects to the termination of the arbitration, the
arbitration shall proceed in accordance with the Rules.
37.2 If, after the arbitral tribunal is constituted and before the
final award is made:
(a) the parties settle the dispute, the arbitral tribunal shall
either issue an order for the termination of the arbitration
or, if requested by the parties and accepted by the arbitral
tribunal, record the settlement in the form of an arbitral
award on agreed terms. The arbitral tribunal is not
obliged to give reasons for such an award.
(b) continuing the arbitration becomes unnecessary or
impossible for any reason not mentioned in Article
37.2(a), the arbitral tribunal shall issue an order for the
termination of the arbitration. The arbitral tribunal shall
issue such an order unless a party raises a justifiable
Special Leave Petition (C) No. 10389 of 2025 Page 247 of 269
objection, having been given a reasonable opportunity to
comment upon the proposed course of action.
37.3 The arbitral tribunal shall communicate copies of the
order to terminate the arbitration or of the arbitral award on
agreed terms, signed by the arbitral tribunal, to HKIAC.
Subject to any lien, HKIAC shall communicate the order for
termination of the arbitration or the arbitral award on agreed
terms to the parties. Where an arbitral award on agreed terms
is made, the provisions of Articles 35.2, 35.3, 35.5 and 35.6
shall apply.
(Emphasis supplied)
379. Article 37 sub-clause (2) envisages two circumstances in which the
arbitral tribunal may issue an order for termination of the
First,
proceedings. where the parties arrive at a settlement in
respect of the dispute, which is akin to Article 30 of the
UNCITRAL Model and Section 30 of the Act, 1996. Secondly,
where the continuation of the proceedings becomes unnecessary
or impossible for any other reason, which is akin to Article 32 of
the UNCITRAL Model and Section 32(2)(c) of the Act, 1996.
380. Interestingly, unlike the SIAC Rules or the LCIAC Rules, where
the power of the arbitral tribunal to terminate the proceedings has
been enshrined in one single provision, the HKIAC has several
other provisions apart from the aforesaid Article 37, that enables
Special Leave Petition (C) No. 10389 of 2025 Page 248 of 269
the tribunal to terminate the proceedings, similar to the
UNCITRAL Model and the Act, 1996.
381. Article 41 which is closely linked to Section 38 of the Act, 1996,
empowers the arbitral tribunal to determine and direct the parties
to pay an advance for the costs of the arbitration. The said
provision reads as under: -
“ Article 41 – Deposits for Costs
41.1 As soon as practicable after receipt of the Notice of
Arbitration by the Respondent, HKIAC shall, in principle,
request the Claimant and the Respondent each to deposit with
HKIAC an equal amount as an advance for the costs referred
to in Article 34.1(a), (b), (c) and (f). HKIAC shall provide a
copy of such request to the arbitral tribunal.
41.2 Where the Respondent submits a counterclaim or cross-
claim, or it otherwise appears appropriate in the
circumstances, HKIAC may request separate deposits.
41.3 During the course of the arbitration, HKIAC may
request the parties to make supplementary deposits with
HKIAC. HKIAC shall provide a copy of such request to the
arbitral tribunal.
41.4 If the required deposits are not paid in full to HKIAC
within 30 days after receipt of the request, HKIAC shall so
inform the parties in order that one or another of them may
make the required payment. If such payment is not made:
(a) where the arbitral tribunal is not yet constituted, HKIAC
may suspend or cease to administer the arbitration;
(b) the arbitral tribunal may order the suspension or
termination of the arbitration or continue with the
arbitration on such basis and in respect of such claim or
counterclaim as the arbitral tribunal considers fit.
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41.5 If a party pays the required deposits on behalf of another
party, the arbitral tribunal may, at the request of the paying
party, make an award for reimbursement of the payment.
41.6 When releasing the final award, HKIAC shall render an
account to the parties of the deposits received by HKIAC.
Any unexpended balance shall be returned to the parties in
the shares in which it was paid by the parties to HKIAC, or
as otherwise instructed by the arbitral tribunal.
41.7 HKIAC shall place the deposits made by the parties in
an account at a reputable licensed deposit-taking institution.
In selecting the account, HKIAC shall have due regard to the
possible need to make the deposited funds available
immediately.”
(Emphasis supplied)
382. In the event the aforesaid costs are not paid by the parties, Article
41.4 empowers the HKIAC, where the tribunal is yet to be
constituted, or the arbitral tribunal, if so constituted, to either
suspend or terminate the proceedings, in terms of clause (a) and
(b), respectively.
383. Thus, the HKIAC Rules treats the power to terminate the
proceedings for non-deposit of fees to be separate and distinct
from a termination of proceedings under Article 37.2, on account
of the proceedings being rendered unnecessary or impossible.
384. The above approach is similar to how Section(s) 32 and 38 of the
Act, 1996 have been understood by the Delhi High Court in
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Sushila Kumari (supra) and by this Court in Lalitkumar V
Sanghvi (supra).
385. Similarly, Article 26 of the HKIAC Rules is to a large extent in
consonance with Section 25 of the Act, 1996 and corresponding
Article 25 of the UNCITRAL Model. The said provision reads as
under: -
“ Article 26 – Default
26.1 If, within the time limit set by the arbitral tribunal, the
Claimant has failed to communicate its written statement
without showing sufficient cause for such failure, the arbitral
tribunal may terminate the arbitration unless another party
has brought a claim and wishes the arbitration to continue,
in which case the arbitral tribunal may proceed with the
arbitration in respect of the other party’s claim.
26.2 If, within the time limit set by the arbitral tribunal, the
Respondent has failed to communicate its written statement
without showing sufficient cause for such failure, the arbitral
tribunal may proceed with the arbitration notwithstanding
such failure.
26.3 If any of the parties, duly notified under these Rules,
fails to present its case in accordance with these Rules
including as directed by the arbitral tribunal without
showing sufficient cause for such failure, the arbitral tribunal
may proceed with the arbitration and make an award on the
basis of the evidence before it. ”
(Emphasis supplied)
386. Article 26.1 empowers the arbitral tribunal, in addition to its
powers under Article(s) 37 and 41.4 of the HKIAC Rules, to
terminate the proceedings, in the event the claimant, without
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sufficient cause, fails to communicate his Statement of Claims,
within the time specified.
387. What can be discerned from the above is that the HKIAC Rules
similar to the UNCITRAL Model and the Act, 1996, contains
various provisions that empower the arbitral tribunal to terminate
the proceedings, in the different circumstances envisaged therein.
388. However, despite the aforesaid approach, the HKIAC Rules avoid
the pitfalls that are present in the UNCITRAL Model and by
extension in the Act, 1996, insofar as termination of proceedings is
concerned.
389.
Unlike Section 32 of the Act, 1996 and Article 32 of the UNCITRAL
Model that has led to a divergence in view, as regards the source
of the power of the arbitral tribunal to terminate the proceedings
by use of the expression “ The arbitral proceedings shall be terminated
by the final arbitral award or by an order of the arbitral tribunal under
sub-section (2)” , none of the provisions which pertain to
termination of proceedings employ the vague expression that has
been used in Article 32 of the UNCITRAL Model, to connote that
Special Leave Petition (C) No. 10389 of 2025 Page 252 of 269
the proceedings can be terminated only by virtue of an order
under a particular provision.
390. The HKIAC Rules embrace the possibility that the proceedings can
be terminated by the arbitral tribunal in exercise of its powers
under the various provisions contained therein.
391. It furthermore avoids the biggest blunder that exists in the
UNCITRAL Model. The UNCITRAL Model for reasons not
known to us, uses the expression “ subject to section 33 and sub-
section (4) of section 34, the mandate of the arbitral tribunal shall
terminate with the termination of the arbitral proceedings ” for the
termination of proceedings under Section 32, but omits the same
insofar as the proceedings are terminated under the other
provisions.
392.
No reason whatsoever is discernible for why the aforesaid
expression has been used in some provision and omitted in the
other. This oversight has single handedly resulted in a huge mess
and the contradictory views that have been expressed by several
decisions of this Court and the various High Court. It has led to an
interpretative dichotomy, where the nature and effect of
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termination of proceedings are construed to be different,
depending upon the provision under which the proceedings
happen to be terminated.
393. The HKIAC Rules avoids the above oversight. None of the various
provisions contained in the rules that pertain to the termination of
proceedings use the aforesaid expression. The Rules do not specify
different consequences that would ensue upon the termination of
the arbitral proceedings under the various provisions contained
therein. Rather, the termination of proceedings is construed to
have only one single effect, that being the end of arbitration,
irrespective of the specific rule in lieu of which the termination
happens to take place.
B. Suggestions for the Arbitration and Conciliation Bill, 2024.
394. Before we close this matter, we would like to say something as
regards the litigation which has unfolded before us.
395. The Arbitration Act that came into force in 1940, was the first
legislative enactment that dealt with arbitration. Fifty years later,
Special Leave Petition (C) No. 10389 of 2025 Page 254 of 269
the aforesaid legislation was replaced by the Arbitration and
Conciliation Act, 1996.
396. The Act, 1996 has remained in force for almost thirty-years since
its enactment. Various amendments to the Act, 1996 have been
made over the years so as to ensure that arbitration proceedings
are conducted and concluded expeditiously.
397.
It is indeed very sad to note that even after these many years,
procedural issues such as the one involved in the case at hand,
have continued to plague the arbitration regime of India.
398. The Department of Legal Affairs has now, once again proposed to
replace the existing legislation on arbitration with the Arbitration
and Conciliation Bill, 2024. Unfortunately, even the new Bill has
taken no steps whatsoever to ameliorate the position of law as
regards the termination of proceedings by the arbitral tribunal.
399. The problem which originated forty years ago when the
UNCITRAL Model Law on International Commercial Arbitration
was first adopted in 1985, and thereafter continued to persist
within the Act, 1996 that was drafted in accordance with the
Special Leave Petition (C) No. 10389 of 2025 Page 255 of 269
Model Law, is still present in the new he Arbitration and
Conciliation Bill, 2024.
400. As observed in Gayatri Balasamy v. M/s ISG Novasoft
Technologies Ltd. reported in 2025 INSC 605 “ any uncertainty in the
law of arbitration would be an anathema to business and commerce ”.
401. It is high time, that the uncertainty surrounding the power of the
arbitral tribunal to terminate the proceedings under the various
provisions of the Act, 1996 are either consolidated into a single
provision like the SIAC Rules and the LCIA Rules, or the
contradictory phraseology used in the various provisions are
tweaked to make the provisions consistent.
402. The Arbitration and Conciliation Bill, 2024 should explicitly
provide the nature and effect of the termination of proceedings
insofar as the authority of the arbitral tribunal is concerned to
entertain a recall application. A proper remedy against an order
terminating the proceedings is the need of the hour.
403. The Arbitration and Conciliation Bill, 2024 should make an effort
to recognise the power of the arbitral tribunal to review its own
Special Leave Petition (C) No. 10389 of 2025 Page 256 of 269
orders and should clearly delineate the extent and contours of
such power.
404. The Parliament in its wisdom, should also consider the option of
providing a statutory appeal in Section 37 of the Arbitration and
Conciliation Bill, 2024 against an order terminating the
proceedings, similar to an order passed by the arbitral tribunal
under Section 16 when it accedes to a plea of lack of jurisdiction.
405. It will also be worthwhile, if the Arbitration and Conciliation Bill,
2024 delineates the future course of action that may be available to
an aggrieved party, in the event the order for termination of
proceedings is upheld.
406. The Parliament should take a policy decision whether a belligerent
or erring party, who wilfully allows the proceedings to terminate
due to its own contumacious conduct should be allowed to have a
second bite at the cherry and reinitiate arbitration once again and
whether the same claims can be reinstated or reintroduced in
another proceeding.
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407. Gary Born in his book the International Commercial Arbitration
rd
(3 Edition) explained “ the legal effect of an order terminating arbitral
proceedings, and the permissibility of re-instituting arbitration in respect
of the same dispute, are matters ultimately regulated by the applicable
national laws, rather than by any transnational principle of arbitral
procedure ”.
408. Thus, the question of whether a party should be allowed to
reinitiate arbitration after its termination has to be answered by
the national laws of a particular country.
409. In this regard, the provisions of the Code of Civile Procedure, 1908
may be significant. Though such termination does not partake the
character or res-judicata, it may still operate as constructive res-
judicata, inasmuch as the majority provisions of the stipulates that
a party aggrieved by the dismissal of its suit has to ordinarily
move the same court for seeking its restoration, and that the filing
of a fresh suit, save for a limited circumstances is otherwise barred.
410. In our opinion, a party who has allowed the proceedings to
terminate by its own obdurate stance, should ordinarily be not
allowed to once again re-initiate arbitration.
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411. To allow the same would lead to a chilling effect, where a devious
party, if it finds that the proceedings are not progressing
favourably towards his claims, could mischievously let the same
terminate by its own actions and then re-initiate arbitration. It
would allow mischievous parties a license to forum shop without
fear.
412.
At the same time, arbitration is not infinite. Every arbitration
initiated under the Act, 1996 comes at the expense of several
precious hours of the judicial time and resources. The pendency of
arbitration proceedings due to unavailability of arbitrators is
already alarming. If we are to add more unnecessary proceedings
on top of this already overburdened system, then that, in our
opinion would be the death knell of arbitration.
413. The final call however in regards to aforesaid lacunae in the Act,
1996 has to be ultimately taken by the Parliament.
414. In view of the aforesaid, we urge the Department of Legal Affairs,
Ministry of Law and Justice to take a serious look at the arbitration
regime that is prevailing in India and bring about necessary
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changes while the Arbitration and Conciliation Bill, 2024 is still
being considered.
VII. CONCLUSION AND THE FINAL ORDER
A. Summary of our legal discussion.
415. A conspectus of our legal discussion is as under: -
(I) Section 32 of the Act, 1996 is exhaustive and covers all cases
of termination of arbitral proceedings under the Act, 1996.
The power of the arbitral tribunal to pass an order to
terminate the proceedings under the scheme of the Act, 1996
lies only in Section 32(2).
(II) Sections 25, 30 and 38 of the Act, 1996 respectively, only
denote the circumstances in which the tribunal would be
empowered to take recourse to Section 32(2) and thereby,
terminate the proceedings.
(III) The use of the expression “ the mandate of the Arbitral Tribunal
shall terminate” in Section 32 of the Act, 1996 and its
omission in Section(s) 25, 30 and 38 of the said Act, cannot
be construed to mean that the nature of termination under
Section 32(2) is distinct from a termination under the other
aforesaid provisions of the Act, 1996.
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(IV) The expression “ mandate of the Arbitral Tribunal” is merely
descriptive of the function entrusted to the tribunal,
namely, the authority and duty to adjudicate the disputes
before it. It refers to the obligation of the arbitral tribunal to
administer the arbitration by conducting the proceedings in
order to adjudicate upon the disputes referred to it.
(V) Irrespective of whether the proceedings are terminated on
account of the passing of a final award, or by the
withdrawal of claims, or on account of default by the
claimant, or the intervention of any impossibility in the
continuation of the proceedings, the legal effect remains the
same, inasmuch as the arbitral tribunal thereafter stands
divested of its authority to act in the reference.
(VI) The common thread that runs across Sections 25, 30 32 and
38 of the Act, 1996 respectively is that although the arbitral
proceedings may get terminated for varied reasons, yet the
consequence of such termination remains the same i.e., the
arbitral reference stands concluded and the authority of the
tribunal stands extinguished.
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(VII) There is a clear distinction between a procedural review and
a review on merits. The arbitral tribunal possesses the
inherent procedural power to recall an order terminating
the proceedings as such power is merely to correct an error
apparent on the face of the record or to address a material
fact that was overlooked. It does not tantamount to
revisiting the findings of law or reappreciating the
substantive issues already decided.
(VIII) Where an arbitral tribunal passes an order for terminating
the proceedings under the Act, 1996, the appropriate
remedy available to the parties would be to first file an
application for recall of such order before the arbitral
tribunal itself. The arbitral tribunal would then in turn be
required to examine whether the order does or does not
deserve to be recalled.
(IX) If a favourable order is passed for recommencing arbitration
proceedings, the only option available to a party aggrieved
therefrom, would be to participate in the proceedings and
thereafter, challenge the final award under Section 34 of the
Act, 1996.
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(X) If, however, the recall application is dismissed, the party
aggrieved therefrom, would be empowered to approach the
court under Section 14(2) of the Act, 1996. The court would
then in turn examine whether the mandate of the arbitrator
stood legally terminated or not. If it finds that the
proceedings were not terminated in accordance with the
law, it would be empowered to either set-aside the order of
termination of proceedings and remand the matter to the
arbitral tribunal, or, if the circumstances so require, proceed
to appoint a substitute arbitrator in terms of Section 15 of
the Act, 1996.
B. Final Order.
416. In the present case, the fees of the entire arbitration had been
determined by the Sole Arbitrator in accordance with the Fourth
Schedule of the Act, 1996, with the consent of the appellants and
the respondent herein.
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417. As discussed in the earlier parts of this judgment, the decision of
this Court in Afcons (supra) held that the fees stipulated in the
Fourth Schedule is the model fee schedule, and is binding on all
parties. When an arbitral tribunal fixes the fees in terms of the
Fourth Schedule, the parties are not permitted to object to the
same. At the cost of repetition, we again reproduce the relevant
observations: -
“105 Conscious and aware as we are that (i) Arbitration
proceedings must be conducted expeditiously; (ii) Court
interference should be minimal; and (iii) Some litigants
would object to even a just and fair arbitration fee, we would
like to effectuate the object and purpose behind enacting the
model fee schedule. When one or both parties, or the parties
and the arbitral tribunal are unable to reach a consensus, it
is open to the arbitral tribunal to charge the fee as stipulated
in the Fourth Schedule, which we would observe is the model
fee schedule and can be treated as binding on all.
Consequently, when an arbitral tribunal fixes the fee in terms
of the Fourth Schedule, the parties should not be permitted to
object the fee fixation. It is the default fee, which can be
changed by mutual consensus and not otherwise.”
418. Once the fees had been determined by the Sole Arbitrator in
accordance with the Fourth Schedule of the Act, 1996, and the
appellants herein had given their consent to the same, it was no
longer open for them to refuse to deposit the said amount.
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419. If at all, the appellants were facing any financial difficulty, the
correct approach should have been to request the arbitrator to
suspend the proceedings in terms of Section 38 sub-section (2) of
the Act, 1996 till the time they could arrange the requisite sum.
420. We also do not approve the stance of the appellants insofar as they
submitted that they were not in a position to pay the arbitral fees
for both the claim and the counter-claim, and could pay their share
of the fees in respect of the claim alone. This is particularly in view
of the fact that the respondent herein was willing to pay his share
of the arbitral fees for both the claim and the counter claim.
421. As per Section 38 of the Act, 1996, both the contesting parties,
namely, the claimant and the respondent, are responsible to bear
the fees of arbitration in equal proportion. However, where either
party defaults, the responsibility to pay the fees falls on the other
party.
422. Arbitration being a consensual mode of alternative dispute
resolution, is built upon procedural self-responsibility. Section 38
enshrines this principle, by stipulating that each party would be
responsible for paying the fees of arbitration for their own claims.
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423. A claimant is responsible for his own claims, and thus responsible
to pay his share of fees in respect of the same. Likewise, the
respondent is responsible to pay the share of fees for his counter-
claims. This responsibility extends to bearing the other party’s
share as well, if the latter declines to pay, at least insofar as their
claim or counter-claim, as the case may be, is concerned.
424.
In the present case, since the appellants herein refused to pay the
requisite fees for their own claims, the arbitral tribunal was left
with no other alternative but to terminate the proceedings.
Without the requisite deposits being made, there was no possible
way for the arbitral tribunal to effectively conduct the hearings.
We, therefore, find no infirmity in the order passed by the arbitral
tribunal terminating the proceedings.
425. However, we take note of the fact that the present dispute arose
all the way back in the year 2020. Five years have gone by. When
the proceedings came to be terminated, the position of law as
regards the manner in which the fees are to be determined, was in
a state of flux and uncertainty.
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426. The aforesaid is evident from the fact that after the arbitral
proceedings came to be terminated for the non-deposit of fees, the
appellants promptly preferred a writ petition before the High
Court of Punjab and Haryana challenging the validity of the
Fourth Schedule of the Act, 1996 and the determination of fees by
the Sole Arbitrator in lieu thereof.
427. Even the position of law as regards the termination of proceedings
under the Act, 1996 and the consequences that flow therefrom,
largely remained uncertain.
428. Had the appellants known beforehand, the sanctity and binding
nature of the Fourth Schedule of the Act, 1996 and the finality that
is attached to an order terminating the arbitral proceedings,
perhaps their stance would have been different before the arbitral
tribunal.
429. Thus, in view of the peculiar facts and circumstances of this case,
and in order to ensure that the parties are not deprived of any
means of adjudication of their dispute, we are inclined to extend
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one last opportunity to the appellants herein to resolve the same
through one another round of arbitration.
430. It has been more than three-years, that the order for termination
of the proceedings came to be passed by the Sole Arbitrator. In
such circumstances, we are of the view, that this is a fit case for the
appointment of a substitute arbitrator to look into both the claims
and the counter-claims filed by the appellants and the respondent,
respectively.
431. The substitute arbitrator would be at liberty to conduct the
hearings de novo , with the consent of both the parties, and having
regard to the lapse of a considerable amount of time, permit the
parties to amend their claims or counter-claims, as the case may
be, if so required.
432.
In the result, this appeal is partly allowed. The matter is remanded
to the High Court for the appointment of a substitute arbitrator.
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433. The High Court shall undertake the exercise for appointing an
arbitrator within a period of two weeks from the date of receipt of
this order.
434. Pending application(s), if any, shall stand disposed of.
435. The Registry shall forward one copy each of this judgment to all
the High Courts and one copy shall also be forwarded to the
Department of Legal Affairs, Ministry of Law & Justice,
Government of India.
............................................. J.
(J.B. Pardiwala)
............................................. J.
(R. Mahadevan)
New Delhi;
th
08 December, 2025.
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