1. Arbitrator terminated proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996, subsequently recalled the order, and the High Court dismissed a revision against it. (Para 1 )
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2019 Supreme(SC) 1531
SUPREME COURT OF INDIA
Rohinton Fali Nariman, Vineet Saran, JJ.
Sai Babu - Appellant
Versus
Clariya Steels Pvt. Ltd. - Respondent
Civil Appeal No. 4956 of 2019
Decided On : 01-05-2019
Important Points
No recall application would lie in cases covered by section 32(3) of the Arbitration and Conciliation Act, 1996.
Subject
Arbitration Law - Termination of Proceedings
Act Referred
Headnote
Arbitration - Termination of Proceedings - The court held that no recall application would lie in cases covered by section 32(3) of the Arbitration and Conciliation Act, 1996.
Fact of the Case:
The sole arbitrator terminated proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996, but later inclined to recall the order based on good reasons made out in the affidavit for recall.
Finding of the Court:
The court found that no recall application would lie in cases covered by section 32(3) and set aside the judgment of the High Court of Karnataka.
Issues: The issue was whether a recall application would lie in cases covered by section 32(3) of the Arbitration and Conciliation Act, 1996.
Ratio Decidendi: The court interpreted Section 32(3) and held that no recall application would lie in cases covered by this provision.
Final Decision: The appeal was allowed, and the judgment of the High Court of Karnataka dated 14.06.2017 was set aside. A substitute arbitrator was appointed to decide all disputes between the parties.
Legal Category Hierarchy
Advocates Appeared:
Kiran Suri, Adv., T.S. Shanthi, Adv., Aishwarya Kumar, Adv., Narendra Kumar, Adv., Charudatta Mahindrakar, Adv., Pramit Chhetri, Adv., C.B. Gururaj, Adv., Prakash Ranjan Nayak, Adv.
Kiran Suri, Adv., T.S. Shanthi, Adv., Aishwarya Kumar, Adv., Narendra Kumar, Adv., Charudatta Mahindrakar, Adv., Pramit Chhetri, Adv., C.B. Gururaj, Adv., Prakash Ranjan Nayak, Adv.
Table of Contents
2. Whether an order terminating arbitral proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996, can be recalled by the arbitrator. (Para 1 )
3. The court distinguished between termination under Section 25(a) for claimant default and termination under Section 32, where the arbitrator's mandate explicitly terminates. (Para 2 , 3 )
4. No recall application lies where the mandate of the Arbitral Tribunal has terminated under Section 32(3) of the Arbitration and Conciliation Act, 1996. (Para 2 , 3 )
5. Appeal allowed, High Court judgment set aside, and a substitute sole arbitrator appointed by consent of the parties. (Para 4 , 6 )
6. Can an arbitrator recall an order terminating proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996?
No. Under Section 32(3), the mandate of the Arbitral Tribunal terminates upon the termination of proceedings. Unlike Section 25(a), which allows for recommencement upon showing sufficient cause, Section 32(3) explicitly terminates the mandate, making a recall application impermissible. (Para 2 , 3 )
7. What is the legal distinction between termination under Section 25(a) and Section 32 of the Arbitration and Conciliation Act, 1996?
Section 25(a) addresses termination due to claimant default and does not explicitly terminate the arbitrator's mandate, allowing for recommencement. Section 32 addresses termination when proceedings become unnecessary or impossible, and Section 32(3) explicitly terminates the arbitrator's mandate. (Para 2 , 3 )
8. What is the procedure when an arbitrator's mandate terminates under the Arbitration and Conciliation Act, 1996?
Pursuant to Section 15(2) of the Act, when the mandate of an arbitrator terminates, a substitute arbitrator must be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. (Para 5 )
ORDER
1. 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.
2. 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 , this Court held:
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. 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). Subsection (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."
3. 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 has clearly held that no recall application would, therefore, lie in cases covered by section 32(3).
4. This being the case, we allow the appeal that is being filed and set aside the judgment of the High Court of Karnataka dated 14.06.2017.
5. However, this is not the end of the matter. Section 15(2) of the Act states:
15. Termination of mandate and substitution of arbitrator.-
(2) Where the mandate of an arbitrator terminates, a substitut
