Termination of arbitral proceedings under Section 32(2)(c) requires demonstrable impossibility; mere overlapping issues in parallel civil proceedings do not suffice.

JUDGMENT

“Everything is theoretically impossible, until it is done”, is a remarkable statement by Robert A. Heinlein, an author of American science fiction. It holds some relevance in the present case, as it involves an order of termination of the arbitral proceedings on the ground that the continuation of the proceedings has become „impossible‟.

2. The present petition is filed under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the „Act‟) assailing the order dated 02.09.2022 passed by the Arbitral Tribunal, whereby, the Tribunal terminated the arbitral proceedings invoking Section 32 (2)(c) of the Act. The impugned order has been challenged on various grounds, inter alia, that the statutory requirements of (2)(c) of the Act are not satisfied.

FACTUAL MATRIX

3. The dispute arises from a series of commercial arrangements between the parties culminating in a Business Transfer Agreement (hereinafter referred to as „BTA‟) executed on 03.05.2019, under which the respondent agreed to acquire the petitioner‟s thermal transfer ribbon business for a total consideration of INR 35 crores. The transaction was preceded by a Secrecy Agreement dated 21.11.2017 and a Letter of Intent issued on 11.12.2018 by Armor SAS, the parent company of the respondent.

4. Following the execution of the BTA and a mutually agreed extension of the closing date, the respondent, on 30.08.2019, paid INR 29.5 crores and took over the entire business undertaking, including all assets, records, and employees, in terms of Schedule H of the BTA. The petitioners assert that they fulfilled all pre-closing obligations as certified by the Closing Certificate under Schedule G of the BTA. Despite assuming full operational control of the business from the closing date, the respondent allegedly withheld the balance INR 5.5 crores.

5. Conversely, after the takeover, as per the facts stated by the respondent, PwC was engaged by the respondent to conduct a forensic audit of the transaction between the parties. Through correspondence exchanged between October and December 2019, PwC levelled allegations of fraud, misrepresentation, and breach of the BTA against the petitioner.

6. In the meantime, the petitioners sought interim protection by filing a petition under Section 9 of the Act, resulting in directions for disclosure of assets. On 09.03.2020, the petitioners formally invoked arbitration under Clause 9.6 of the BTA by filing an application to DIAC, but the respondent did not respond, prompting the petitioners to move a petition under Section11(6) of the Act.

7. During the pendency of the Section 11 petition, the respondent, in its response to the petitioner's request for arbitration dated 09.03.2020 before DIAC, nominated its nominee arbitrator on 19.01.2021. Thereafter, a three-member Tribunal was constituted under the DIAC Rules, 2018.

8. Once the arbitral proceedings commenced, the respondent sought the joinder of several non-signatory parties under Rule 28.1 of the DIAC Rules, which the Tribunal rejected on 29.04.2021 while clarifying that the respondent was free to pursue remedies before a competent forum. The petitioners filed their Statement of Claim on 09.06.2021.

9. Shortly thereafter, and before filing its defence in arbitration, the respondent instituted CS(COMM) 376/2021 on 13.08.2021 before this Court against the petitioners and multiple non-signatories on the same underlying cause of action forming the basis of its proposed counterclaims. The following