Holding

The termination of arbitration proceedings under Section 32(2)(c) ends the arbitrator’s mandate, and any dispute over that termination may be decided by a court under Section 14(2).

Summary

The parties had a partnership agreement providing for arbitration of disputes. An application under Section 11 of the Arbitration and Conciliation Act, 1996 was filed to appoint an arbitrator, and the presiding arbitrator later terminated the arbitration on 29 October 2007, stating that the claimant showed no interest and had not paid fees. The Bombay High Court dismissed the application as non‑maintainable, directing the parties to seek relief by filing a writ petition. The appellants challenged this order, arguing they would be left without remedy. The Supreme Court held that the termination fell under Section 32(2)(c), which by virtue of Section 32(3) also ends the arbitrator’s mandate, and that any controversy about the termination can be examined by a court under Section 14(2). Consequently, the appellants are not left remediless and may approach the appropriate court to determine the legality of the termination. The appeal was dismissed.

Issues considered

The maintainability of an application under Section 11 of the Arbitration and Conciliation Act, 1996 after the arbitral tribunal has terminated the proceedings
Whether termination of arbitration proceedings under Section 32(2)(c) also terminates the arbitrator’s mandate under Section 14
Whether a party may challenge the termination of the arbitrator’s mandate in a civil court under Section 14(2) or must resort to writ jurisdiction under Article 226
Whether the appellant is left without any remedy after the termination

Legislation cited

Arbitration and Conciliation Act, 1996s. 11, s. 12(3), s. 14, s. 14(2), s. 2(1)(e), s. 32, s. 32(2)(c), s. 32(3)

Subjects

ArbitrationTermination of arbitral proceedingsSection 14Section 32Section 11Writ jurisdictionMandate of arbitratorCivil appeal

Judgment

[2014] 3 S.CR. 558

A LALITKUMAR V. SANGHAVI (D) TH. LRS. NEETA LALIT
KUMAR SANGHAVI & ANR.
v.
DHARAMDAS V. SANGHAVI & ORS.
(Civil Appeal No. 3148 of 2014)
B MARCH 04, 2014
[DR. B.S. CHAUHAN, J. CHELAMESWAR AND M.Y.
EQBAL, JJ.]

C ARBITRATION AND CONCILIATION ACT, 1996: ss.14,
32 - Termination of arbitration proceedings by arbitrator on
the ground that the claimant did not take interest in the matter
and did not pay the fees - Fresh application uls. 11 for
appointment of arbitrator - Dismissed as not maintainable on
0 the ground that remedy lies in invoking writ jurisdiction and
not application u/s. 11 - Held: The order by which the Arbitral
Tribunal terminated the arbitral proceedings could only fall
within the scope of s.32(2)(c) i.e. the continuation of the
proceedings has become impossible - By virtue of s.32(3),
E 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 s. 32 and s. 14, the question whether the
mandate of the arbitrator stood legally terminated or not can
be examined by the court as provided u/s. 14(2) - The
F apprehension of the appellant that they would be left
remediless is without basis in law - The appellants are at
liberty to approach the appropriate court for the determination
of the legality of the termination of the mandate of the Arbitral
Tribunal.
G
On an application under Section 11 of Arbitration and
Conciliation Act, 1996, the Arbitral Tribunal was
constituted. On 29.10.2007, the Presiding Arbitrator
terminated the arbitration proceedings on the ground that
H 558
LALITKUMAR V. SANGHAVI (D) TH. LRS. NEETA LAUT KUMAR 559
SANGHAVI v. DHARAMDAS V. SANGHAVI

the claimant did not take interest in the matter and did not A
pay the fees. The original applicant filed arbitration
application for appointment of the arbitrator. The
application was held to be not maintainable and it was.
held that the remedy was filing a writ petition. Aggrieved,
the appellant filed the instant appeal. B

Dismissing the appeal, the Court

HELD: 1.1. Chapter Ill of the Arbitration and
Conciliation Act, 1996 deals with the appointment,
challenge to the appointment and termination of the C
mandate and· substitution of the arbitrator etc. Section
11 provides for the various modes of appointment of an
arbitrator for the adjudication of the disputes which the
parties agree to have resolved by arbitration. Arbitrators
could be appointed either by the agreement between the D
parties or by making an application to the Chief Justice
of the High Court or the Chief Justice of India, as the case
may be, as specified under Section 11 of the Act. Section
12(3) provides for a challenge to the appointment of an
arbitrator on two grounds. They are - (a) "that E
· circumstances exist" which "give rise to justifiable
doubts as to" the "independence or impartiality" of the
arbitrator; (b) that the arbitrator does not "possess the
qualification agreed to by the parties". Section 14
declares that "the mandate of an arbitrator shall F
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 the clause (a) then
an application may be made to the Court - "to decide on G
the termination of the mandate". 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 the H
560 SUPREME COURT REPORTS [2014] 3 S.C.R

A 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 sub-clauses (a) to (c) thereof.
The contingencies are (a) the claimant withdraws his
B 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
c proceedings has for any other reason become
unnecessary or impossible. [Paras 10, 11, 12 and 13) [565-
C-F; 566-B-C, G-H]
1.2. On the facts of the instant case, the applicability
of sub-clauses (a) and (b) of Section 32(2) is clearly ruled
D out and the order by which the Tribunal terminated the
arbitral proceedings could only fall within the scope of
Section l2, sub-Section (2), sub-clause (c) i.e. the
continuation of the proceedings has become impossible.
By virtue of Section 32(3), on the termination of the
E 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
F can be examined by the court "as provided under Section
14(2). [Para 14) [567-A-C)
2. The apprehension of the appellant that they would
be left remediless is without basis in law. The appellants
are at liberty to approach the appropriate court for the
G determination of the legality of the termination of the
mandate of the arbitral tribunal which in turn is based
upon the order by which the arbitral proceedings were
terminated. [Paras 16 and 17) [567-F-G]
S.B.P. & Co. v. Patel Engineering Ltd. (2005) 8 SCC 618:
H 2005 (4) Suppl. SCR 688 - relied on.
LALITKUMAR V. SANGHAVI (D) TH. LRS. NEETA LALIT KUMAR 561
SANGHAVI v. DHARAMDAS V. SANGHAVI

Case Law Reference: A

2005 (4) Suppl. SCR 688 Relied on
Para 8

CIVIL APPELLATE JURISDICTION : Civil Appeal'No.
3148 of 2014. B

From the Judgment & Order dated 24.09.2010 of the High
Court of Bombay in AA No. 44 of 2008.

Shyam Divan, Nirman Sharma, Manasi Kumar, Mahesh
Agarwal, Rishi Agarwala, E.C. Agrawala, Manisha Ambwani C
for the Appellant.

C.U. Singh, Gopal Singh, Satyan Vaishnav, R.S. Bobde,
Pallavi Sharma (for Parekh & Co.) for the Respondents.
D
The Judgment of the Court was delivered by

J. CHELAMESWAR, J. 1. Aggrieved by an order dated
24th September, 2010 in Arbitration Application No. 44/2008
on the file of the High Court of Bombay, the instant SLP is filed
by the two children of the applicant (hereinafter referred to as E
"the original applicant") in the above mentioned application. The
SLP is filed with a delay of 717 days. Therefore, two IAs came
to be filed, one seeking substitution of the legal representatives
of the deceased appellant and the other for the condonation of
delay in filing the SLP. F

2. The 1st respondent is the brother of the original
appellant and the other respondents are the children of another
deceased brother of the original applicant. Respondents are
served and they have contested both the IAs. G

3. Accepting the reasons given in the applications, we
deem it appropriate to condone the delay in preferring the
instant SLP and also substitute the original appellant (since
deceased) by his legal representatives. Both the IAs are
allowed. Delay condoned. Substitution allowed. Leave H
562 SUPREME COURT REPORTS (2014) 3 S.C.R.

A granted.

4. The undisputed facts are that the parties herein are
carrying on some business in the name and style of a
partnership firm constituted under a partnership deed dated 20th
B October 1962. The partnership deed provided for the resolution
of the disputes arising between the partners touching the affairs
of the partnership by means of an arbitration. In view of certain
disputes between the partners (details of which are not
necessary for the present purpose) the original applicant filed
arbitration application No.263/2002 under Section 11 of the
C Arbitration and Conciliation Act, 1996 (hereinafter referred to
as 'the Act', for short) before the Chief Justice of the Bombay
High Court which was disposed of by an order dated 21st
February, 2003 by a learned Judge of the Bombay High Court,
who was the nominee of the Chief Justice under the Act. The
D relevant portion of the order reads as follows:

"Considering that applicant respondent No.1 have
appointed two arbitrators, Justice H. Suresh, Retired Judge
of this Court is appointed as presiding arbitrator. The
E arbitral tribunal so constituted to decide all disputes
including claims and counter claims of the parties arising
from the controversy. In case respondents do not cooperate
with the matter of appointment of third arbitrator, applicant
initially to bear the made part of final award in the position,
F application disposed of accordingly."

5. By his order dated 29th October, 2007, the presiding
arbitrator informed the appellants that the arbitration
proceedings stood terminated. The relevant portion of the order
reads as follows:
G
"The matter is pending since June, 2003 and though
the meeting was called .in between June, 2004 and 11th
April, 2007, the Claimant took no i~rest in matter. Even
the fees directed to be given is not p)id.
H
LALITKUMAR V. SANGHAVI (D) TH. LRS. NEETA LAUT KUMAR 563
SANGHAVI v. DHARAMDAS V. SANGHAVI [J. CHELAMESWAR, J.]

In these circumstances please note that the A
arbitration .proceedings stands terminated. All interim
orders passed by the Tribunal stand vacated."·

6. In response to the said communication, the original
applicant, through his lawyer, communicated to the arbitrators 8
and also the advocates of the respondents herein that the order
of the arbitrators dated 29th October, 2007 does not reflect the .
true factual position of the matter. The relevant portion pf the
letter reads as follows:

"The Hon'ble Arbitral Tribunal is therefore requested C
to kindly revoke the said letter dated 29th October 2007
and modify the same and kindly record that the
proceedings are being terminated due to non compliance
of orders/directions as also non payment of fees and
charged by the Respondent No.1" D
'
7. On 17. 1.2008, the original applicant filed arbitration
application No.44/2008 with prayers (insofar as they are
relevant for the present purpose) as follows:

(a) this Hon'ble Court be pleased to appoint some fit and E
proper person as arbitrator for entering reference and
adjudicating upon the disputes in respect of M/s. Sanghavi
Brothers.

(b) the Respondent No.1 to 4 be directed to deposit a sum F
of Rs.1,00,000/- towards costs of arbitration and fees of
the Arbitrator."

That application came to be dismissed by the order under
appeal in substance holding that such an application invoking G
Section 1t of the Act is not maintainable - with an observation
that "the remedy of the application is by filing a writ petition not
an application under Section 11 of the Act".

8. Within a couple of weeks thereafter, the original
H'
564 SUPREME COURT REPORTS [2014] 3 S.C.R.

A 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
B view, such a view is not in accordance with the law declared
by this Court in S.B.P. & Co. v. Patel Engineering Ltd., (2005)
8 SCC 618. The relevant portion of the judgment reads as
under:

"45. It is seen that some High Courts have proceeded on
c the bagis 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
D 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
E 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,
F 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
G 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."

That need not, however, necessarily mean that the application
H
LALITKUMAR V. SANGHAVI (D) TH. LRS. NEETA LAUT KUMAR 565
SANGHAVI v. DHARAMDAS V. SANGHAVI [J. CHELAMESWAR, J.]

such as the one on hand is maintainable under Section 11 of 'A
the Act.

9. Learne<f senior counsel for the appellants, Shri Shyam
Divan, submitted that if application under Section 11 is also
held not maintainable, the appellants would be left remediless
B
while their grievance subsists. On the other hand, learned
senior counsel for the respondents Shri C.U. Singh submitted
that the appellant's only remedy is to approach the arbitral
tribunal seeking a recall of its decision to terminate the
arbitration proceedings.
c
10. Chapter Ill of the Act deals with the appointment,
challenge to the appointment and termination of the mandate
and substitution of the arbitrator etc. Section 11 provides for
the various modes of appointment of an arbitrator for the
adjudication of the disputes which the parties agree to have o
resolved by arbitration. Broadly speaking, arbitrators could be
appointed either by the agreement between the parties or by
making an application to the Chief Justi~e of the High Court or
the Chief Justice of India, as the case may be, as specified
under Section 11 of the Act. Section 12(3) provides for a E
challenge to the appointment of an arbitrator on two grounds.
They are - (a) "that circumstances exist" which "give rise to
justifiable doubts as to" the "independence or impartiality" of
the arbitrator; (b) that the arbitrator does not "possess the
qualification agreed to by the parties". Section 14 declares that
F
"the mandate o( an arbitrator shall terminate" in the
circumstances specified therein. They are-

"14. Failure or impossibility to act.-(1) The mandate of
an arbitrator shall terminate if-
G
(a) he becomes de jure or de facto unable to perform
his functions or for other reasons fails to act without
undue delay; and

H
•
566 SUPREME COURT REPORTS [2014] 3 S.C.R.

A (b) he withdraws from his office or the parties agree
to the termination of the mandate."
(2) If a controversy remains concerning any of the grounds
referred to in clause (a) of sub-section (1 ), a party may,
unless otherwise agreed by the parties, apply to the Court
B to decide on the termination of the mandate."

11. 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 the clause (a) then an
c application may be made to the Court - "to decide on the
termination of the mandate".
12. Section 32 of the Act on the other hand deals with the
termination of arbitral proceedings1 •
D 13. 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 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
E proceedings in the three contingencies mentioned in sub-
clauses (a) to (c) thereof.

1. Section 32 - Termination of proceedings .
. (1) The arbitral proceedings shall be terminated by the final arbitral award
F 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-
(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,
G (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 mason 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.
H
LALITKUMAR V. SANGHAVI (0) TH. LRS. NEETA LALIT KUMAR 567
SANGHAVI v. DHARAMDAS V. SANGHAVI [J. CHELAMESWAR, J.]

14. On the facts of the present case, the applicability of A
sub-clauses (a) and (b) of Section 32(2) is clearly ruled out and
we are of the opinion that the order dated 29th October, 2007
by which the Tribunal terminated the arbitral proceedings could
only fall within the scope of Section 32, sub-Section (2), sub-
clause (c) i.e. the continuation of the proceedings has become B
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 c
arbitrator stood legally terminated or not can be examined by
the court "as provided under Section 14(2)".

15. The expression "Court" is a defined expression under
Section 2(1)(e) which reads as follows:-
D
"Section 2(1 ).{fil "Court" means the principal Civil Court of
original jurisdiction in a district, and includes the High Court
.in exercise of its ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the subject-
matter of the arbitration if the same had been the subject- E
matter of a suit, but does not- include any civil court of a
grade inferior to such principal Civil Court, or ariy Court
of Small Causes;"

16. Therefore, we are of the opinion, the apprehension of
the appellant that they would be left remediless is without basis F
in law.

17. The appellants are at liberty to approach the
appropriate court for the determination of the legality of the
termination of the mandate of the arbitral tribunal which in turn G
is based upon an order dated 29th October, 2007 by which the
arbitral proceedings were terminated.

18. The appeal is dismissed.
D.G. Appeal dismissed. H