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Arbitration & Conciliation Act – sec.11, 14, 32 – Termination of Arbitration proceedings by the Arbitrator for one reason or the other – Remedy is to approach concerned Civil court having jurisdiction challenging the termination order under sec. 32 read with sec.14 of the Act – No fresh petition is maintainable nor need to file writ petition or appeal – Apex court held that 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) = Lalitkumar V. Sanghavi (D) Th. LRs Neeta Lalit Kumar Sanghavi & Anr. …Appellants Versus Dharamdas V. Sanghavi & Ors. …Respondents = 2014 (March . Part) judis.nic.in/supremecourt/filename=41281

Arbitration & Conciliation Act – sec.11, 14, 32 – Termination of Arbitration proceedings by the Arbitrator for one reason or the other – Remedy is to approach concerned  Civil court having jurisdiction challenging the termination order under sec. 32 read with sec.14 of the Act – No fresh petition is maintainable nor  need to file writ petition or appeal – Apex court held that 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) = 

 

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:

                 “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 interest in matter.  Even the fees

              directed to be given is not paid.

 

 

                 In these circumstances please note  that  the  arbitration

              proceedings stands terminated. All interim orders  passed  by

              the Tribunal stand vacated.”

The original applicant in response to the letter of Arbitrator communicated as follows 

    “The Hon’ble Arbitral Tribunal is therefore  requested  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”

the original applicant again filed a fresh application for arbitration but

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

application is by filing a writ petition not an  application  under  Section

11 of the Act”.

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 S.B.P. & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618. 

“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 of the  Constitution  of  India.

             Such an intervention by the High Courts is not permissible.”

 

That need not, however, necessarily mean that the application  such  as  the

one on hand is maintainable under Section 11 of the Act.

 

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 the termination of the mandate”.

 

12.   Section 32 of the Act on the other hand deals with the termination  of

arbitral proceedings.[1]

 

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  proceedings  in  the   three   contingencies

mentioned in sub-clauses (a) to (c) thereof.

 

14.   On the facts of the present case,  the  applicability  of  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 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)”.

 

 

15.   The expression “Court” is a defined expression under  Section  2(1)(e)

which reads as follows:-

           “Section 2(1)(e) “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- matter of a

           suit, but does not- include any civil court of a grade  inferior

           to such principal Civil Court, or any 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 in law.

 

2014 (March . Part) judis.nic.in/supremecourt/filename=41281

B.S. CHAUHAN, J. CHELAMESWAR, M.Y. EQBAL

Reportable

 
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3148 OF 2014
[Arising out of Special Leave Petition (Civil) No.4267 of 2013]
Lalitkumar V. Sanghavi (D)
Th. LRs Neeta Lalit Kumar
Sanghavi & Anr. …Appellants

Versus
Dharamdas V. Sanghavi & Ors. …Respondents

 

 
J U D G E M E N T

 

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 “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.

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.

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 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 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 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
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 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, 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:
“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 interest in matter. Even the fees
directed to be given is not paid.
In these circumstances please note that the 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 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 of the letter reads as follows:
“The Hon’ble Arbitral Tribunal is therefore requested 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”

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
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 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 Section 11 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 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 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 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 of the Constitution of India.
Such an intervention by the High Courts is not permissible.”

That need not, however, necessarily mean that the application such as the
one on hand is maintainable under Section 11 of the Act.

9. Learned 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 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.

10. Chapter III 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 resolved by arbitration. Broadly speaking, arbitrators could
be appointed either by the agreement between the 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 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 terminate” in the circumstances specified therein. They
are-
“14. Failure or impossibility to act.—(1) The mandate of an
arbitrator shall terminate if—
(a) he becomes de jure or de facto unable to perform his
functions or for other reasons fails to act without undue
delay; and
(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 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 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 proceedings.[1]

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 proceedings in the three contingencies
mentioned in sub-clauses (a) to (c) thereof.

14. On the facts of the present case, the applicability of 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 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)”.
15. The expression “Court” is a defined expression under Section 2(1)(e)
which reads as follows:-
“Section 2(1)(e) “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- matter of a
suit, but does not- include any civil court of a grade inferior
to such principal Civil Court, or any 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 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 is based upon an order dated 29th October,
2007 by which the arbitral proceedings were terminated.

18. The appeal is dismissed.

……………………………………..…J.
( Dr. B.S. CHAUHAN )

 

…………………………………..……J.
( J. CHELAMESWAR )

 

.……………………………………….J.
( M.Y. EQBAL )
New Delhi;
March 04, 2014

———————–
[1] Section 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-
(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 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.

 

———————–
11

 

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