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2025 Supreme(SC) 2016

SUPREME COURT OF INDIA
J.B. PARDIWALA, R. MAHADEVAN, JJ.
Harshbir Singh Pannu and Another – Appellants
Versus
Jaswinder Singh – Respondent
Civil Appeal No. 14630 of 2025 [Arising out of Special Leave Petition (Civil) No. 10389 of 2025]
Decided On : 08-12-2025

Important Points

The power to terminate arbitral proceedings is exclusively governed by Section 32(2) of the Act. Termination ends both the proceedings and the arbitrator's mandate. Aggrieved parties must first file a recall application before the arbitrator; if unsuccessful, they may invoke Section 14(2) of the Act for resolution.

Subject

Arbitration Law - Arbitral Procedure and Termination

Act Referred

ARBITRATION AND CONCILIATION ACT: S.11, S.12, S.14, S.17, S.23, S.25, S.29(a), S.30, S.32(2)(c), S.38
CONSTITUTION OF INDIA: Art.227
SICK INDUSTRIAL COMPANIES RULES: R.43, R.44
UNCITRAL ARBITRATION RULES: R.17, R.18, R.19, R.34

Headnote

(A) Arbitration and Conciliation Act, 1996 - Sections 14, 15, 25, 30, 32 and 38 - Termination of arbitral proceedings - Power of arbitral tribunal to terminate proceedings for non-payment of fees - Held, Section 32 is exhaustive regarding termination - Recourse for termination for any reason, including non-payment of deposits, falls under Section 32(2)(c) - Termination of proceedings results in the termination of the mandate of the arbitrator - Parties cannot initiate fresh arbitration proceedings for the same dispute after the termination of the mandate. (Paras 104, 144, 211 and 264)

(B) Remedy against termination - Tribunal possesses inherent procedural power to recall an order terminating proceedings to correct procedural errors - If recall is refused, party may approach a court to decide on the termination of mandate under Section 14(2) - A fresh petition for appointment of an arbitrator is not maintainable post-termination without the original order being set aside. (Paras 275, 297, 311 and 314)

(C) Fixation of fees - Fees settled at the threshold are binding - Unilateral revision of fees without consent of parties is impermissible - Arbitral tribunal must seek consent for fee revision; failure to reach consensus entitles the arbitrator to decline the assignment. (Paras 326, 335 and 338)

Facts of the case:
A dispute arose between partners in a business entity. An arbitrator was appointed to resolve the matter. During the proceedings, the arbitrator revised the fees payable based on the addition of a counterclaim, which the parties failed to pay as directed. Consequently, the arbitrator terminated the proceedings. The claimants challenged the termination and filed a fresh petition seeking the appointment of a new arbitrator, which was rejected by lower judicial forums, leading to the current proceedings.

Findings of Court:
The court determined that all order of termination of arbitral proceedings are fundamentally orders issued under Section 32(2)(c) of the Act. The tribunal stands divested of authority once the proceedings are terminated. The court established that the remedy against such termination is to move the arbitrator for a recall of the order first, and subsequently move the court under Section 14(2) if the recall application is dismissed.

Issues: Whether termination of proceedings for non-payment of fees is equivalent to termination of the mandate of the arbitrator; what is the appropriate remedy for a party aggrieved by an order of termination of arbitral proceedings; can a fresh petition for appointment of an arbitrator be maintained post-termination.

Ratio Decidendi: The court reasoned that Section 32 is the sole provision governing the termination of arbitral proceedings. The termination for non-payment of fees falls under the residuary clause of Section 32(2)(c). Because the Act is a complete code, no fresh appointment under the relevant section is allowed; rather, the aggrieved party must apply for recall or challenge the termination of the mandate under Section 14(2).

Result: Appeal partly allowed; matter remanded to the high court for the appointment of a substitute arbitrator.
Judgement Key Points

Certainly. Based on the detailed document provided, here are the key legal points:

  1. The power of the arbitral tribunal to terminate proceedings is primarily derived from Section 32(2) of the Act, 1996, which explicitly authorizes the tribunal to issue an order for termination under specific circumstances (!) (!) .

  2. Termination of arbitral proceedings can occur either through the final arbitral award or via an order issued by the arbitral tribunal under Section 32(2). The circumstances for such an order include withdrawal of claims, agreement between parties, or when continuation becomes unnecessary or impossible (!) (!) .

  3. The phrase "mandate of the arbitral tribunal shall terminate" is specifically associated with the conclusion of proceedings under Section 32(3), indicating the end of the tribunal's authority and jurisdiction over the dispute (!) (!) .

  4. The provisions under Sections 25, 30, and 38 of the Act, 1996, describe various circumstances under which proceedings may be terminated, but these do not independently confer the power to terminate proceedings. Instead, they set the conditions that may lead to a termination order under Section 32(2) (!) (!) .

  5. The order for termination of proceedings, especially when based on defaults such as non-payment of fees or failure to participate, is considered an order under Section 32(2). Such an order effectively ends the arbitration process and the tribunal's authority, unless the proceedings are revived or the order is challenged (!) (!) (!) .

  6. Termination of proceedings does not necessarily mean the termination of the arbitral tribunal's mandate unless it is explicitly ordered under Section 32(2). The distinction is crucial because the tribunal's mandate can be revived if proceedings are reopened, but once the proceedings are conclusively terminated under Section 32(2), the tribunal's authority ceases (!) (!) (!) .

  7. The appropriate remedy against an order terminating proceedings is typically to seek recall or review of that order within the arbitral process, rather than challenging the mandate of the arbitrator under Section 14, unless the tribunal acts beyond its jurisdiction or without authority (!) (!) (!) .

  8. The legal effect of an order terminating proceedings for reasons such as non-payment of fees is consistent with the finality of the arbitration process, and such orders are not considered awards. They are procedural in nature and can be challenged only through specific statutory remedies, such as applications for recall or setting aside under Sections 34 or 37, or through proceedings under Section 14(2) if the tribunal's authority is questioned (!) (!) (!) .

  9. The law recognizes that proceedings can be terminated for various reasons, including default, settlement, or impossibility, and each has specific procedural implications. However, once properly terminated under Section 32(2), the arbitration process is considered concluded, with the tribunal's jurisdiction extinguished (!) (!) .

  10. Challenges to procedural orders, including those for termination, are generally not permissible under Article 227 of the Constitution unless the tribunal acts without jurisdiction or beyond its authority, such as acting after its mandate has been lawfully terminated (!) (!) (!) .

  11. There is a recognized distinction between the termination of proceedings and the termination of the tribunal's mandate. The former is about ending the arbitration process, while the latter pertains to the arbitrator's authority, which can be revived if proceedings are reopened (!) (!) (!) .

  12. The legislative framework and judicial interpretations emphasize that the power to terminate proceedings is circumscribed and must be exercised within the specific provisions of the Act, primarily Section 32(2), and cannot be inferred from other provisions in isolation (!) (!) .

  13. The law also acknowledges that the remedies for wrongful termination are limited and generally involve challenging the order through statutory procedures rather than through broad judicial review, except where the tribunal acts outside its jurisdiction or in violation of fundamental principles (!) (!) .

  14. The principles underlying the law on arbitration include the importance of party autonomy, procedural self-responsibility, and the finality of arbitration awards, which collectively restrict unwarranted judicial interference in procedural orders, including termination orders (!) (!) .

  15. The law also recognizes that a party cannot reinitiate arbitration on the same dispute after its proceedings are lawfully terminated, to prevent abuse and forum shopping, unless explicitly permitted by law or specific provisions (!) (!) .

These points collectively outline the legal framework governing the power, scope, and remedies related to the termination of arbitral proceedings under the Act, 1996, and related procedural principles.


Legal Category Hierarchy

Advocates appeared:
For the Petitioner(s): Mr. Samarth Sagar, Adv. Ms. Mithu Jain, AOR Mr. Sanchit Garga, Adv. Mr. Shashwat Jaiswal, Adv. Mr. Bhanu Pratap Singh, Adv.

Table of Contents

1. Partnership dispute — Arbitration invoked — Sole Arbitrator appointed — Proceedings terminated for non-payment of fees under Section 38, Arbitration and Conciliation Act, 1996. (Para 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 14 , 19 , 21 , 22 , 23 )

2. Termination for non-payment of fees is contrary to law — Section 32 is the only source of termination power — Remedy lies in appointing substitute arbitrator. (Para 30 , 32 , 34 , 36 , 37 , 38 , 40 , 41 , 42 , 43 , 44 , 45 , 46 )

4. Section 32 is the exhaustive source of power to terminate proceedings; termination of proceedings necessarily terminates the mandate of the arbitral tribunal. (Para 208 , 211 , 263 , 266 )

5. Appeal partly allowed — Remanded to High Court for appointment of a substitute arbitrator. (Para 429 , 430 , 432 , 433 )

6. Is Section 32 the exclusive source of power for an arbitral tribunal to terminate proceedings under the Act, 1996?

Yes. Section 32 is exhaustive. Other provisions like Sections 25, 30, and 38 only specify the circumstances under which the tribunal is empowered to pass a termination order under Section 32(2). (Para 208 , 209 , 211 , 213 , 263 , 266 )

7. Does the termination of arbitral proceedings automatically result in the termination of the arbitral tribunal's mandate?

Yes. Regardless of the reason for termination (e.g., default under Section 25 or 38), the legal effect is the same: the tribunal is divested of authority to act in the reference. (Para 98 , 144 , 241 , 244 , 245 , 251 )

8. What is the appropriate legal remedy for a party aggrieved by an order terminating arbitral proceedings?

The party should first file a recall application for procedural review before the tribunal. If dismissed, the party may challenge the termination of the mandate under Section 14(2). (Para 296 , 299 , 310 , 311 , 314 )

9. Can parties object to arbitral fees fixed by the tribunal in accordance with the Fourth Schedule of the Act, 1996?

No. The Fourth Schedule is the model fee schedule and is binding on all parties when no consensus is reached; parties are not permitted to object to such fixation. (Para 337 , 338 , 417 )

10. Can a party re-initiate arbitration before a new tribunal after proceedings were terminated due to their own default?

No. Termination penalizes inertia and recalcitrance. Allowing a fresh arbitration would encourage tribunal hopping and defeat the principle of procedural self-responsibility. (Para 254 , 256 , 259 , 261 )

JUDGMENT :

J.B. PARDIWALA, J.

For the convenience of exposition, this judgment is divided into the following parts:-

INDEX

I.

FACTUAL MATRIX

A. Proceedings before the Sole Arbitrator

B. Proceedings before the High Court

II.

IMPUGNED ORDER

III.

SUBMISSIONS ON BEHALF OF THE APPELLANTS

IV.

ISSUES FOR DETERMINATION

V.

ANALYSIS

A. Termination of Arbitral Proceedings under the Act, 1996

i. Statutory Provisions pertaining to Termination of Proceedings

ii. What is the source of the Arbitral Tribunal’s power to terminate the proceedings under the Scheme of the Act, 1996?

a. Contradictory Views on the subject

I. Decisions reading Termination under Section(s) 25, 30 or 38 respectively with Section 32 sub-section (2) of the Act, 1996

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

b. Interplay between Section(s) 25, 30 38 and the termination of proceedings under Section 32 of the Act, 1996

I. History of the Working Group on the UNCITRAL Model Law on International Commercial Arbitration

II. Section 32 of the Act, 1996 and the import of the expression “Mandate of Arbitral Tribunal”

B. Remedy under the Act, 1996 against an order terminating the arbitral proceedings

a. Contradictory Views on the subject

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)

VI.

FEW MEANINGFUL SUGGESTIONS

A. International Perspective on the Framework on Termination of Arbitral Proceedings

i. Singapore International Arbitration Centre Rules, 2025 (SIAC Rules)

ii. London Court of International Arbitration Rules, 2020 (LCIA Rules)

iii. Hong Kong International Arbitration Centre Rules, 2024 (HKIAC Rules)

B. Suggestions for the Arbitration and Conciliation Bill, 2024

VII.

CONCLUSION AND THE FINAL ORDER

A. Summary of our conclusion

B. Final Order

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

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