SC Judgment of 269 pages Brings Clarity on Termination of Arbitral Proceedings
The Supreme Court judgment echoes the very same judicial disquiet the earlier dictum that “Arbitration is often a friend in conferences but a foe in practice.”
As per the agreement dated 31.3.2013, the appellant no.2 and the respondent had partnership firm for health care and hospitality services. Appellant no.1 was inducted as partner in the said firm by way of a partnership agreement dated 12.3.2014. Clause 13 provided for arbitration.
By the notice dated 13.6.2018, the appellants dissolved the partnership firm and invoked arbitration.
The High Court appointed the Sole Arbitrator and directed that the fees shall be paid as per Fourth Schedule of the AA or mutually settled by the parties and the Arbitrator.
The appellants filed claim for Rs.13,65,09,906/-. As per Fourth Schedule, the Arbitrator determined the fees at Rs.17,01,655/- to be borne equally by the parties.
The respondents filed counter claim for Rs.82,78,54,166/-.
The Arbitrator revised the fees to Rs.37,50,000/- vide Order dated 23.4.2021.
The parties filed application objecting to the determination of the revised fees. The said application was rejected in view of section 38 of the AA.
The appellants filed an affidavit of their inability to bear the arbitral fees. The respondent was not ready to bear the claimant’s share of fees.
On 28.3.2022, the Arbitrator terminated the proceedings since neither party was willing to pay the arbitral fees either for the claim or counter claim.
The appellants challenged the said order, validity of Fourth Schedule and fees fixed by the Arbitrator. The said writ petition was dismissed in view of the decision in Afcons case but gave liberty to avail other remedy to challenge the order of termination of arbitral proceedings.
The second petition for appointment of arbitrator afresh was rejected as not maintainable.
The Supreme Court framed three issues in para 31 of the judgment.
- II) What meaning should be ascribed to the words “termination of the arbitral proceedings” figuring in the different provisions of the Act, 1996? Is the phrase susceptible to only one meaning?
- What is the meaning and effect of the termination of arbitral proceedings contemplated under Section 38 of the Act, 1996? Is it the same as the termination of arbitral proceedings contemplated under Section 32?
What is the remedy available to a party aggrieved by an order passed by an arbitral tribunal terminating the proceedings?
Interplay of Sections 25, 30, 38 and the termination of the proceedings under Section 32 of the Arbitration Act, 1996.
HELD that the expression “the mandate of the Arbitral Tribunal shall terminate” is undoubtedly unique to the provision of Section 32 of the Act. The nature of termination under section 32(2) does not convey that it is distinct from the termination of proceedings under other provisions of the Act.
Arbitration is built on procedural self-responsibility. The edifice is the idea that each party must advance its case diligently, without dependence on judicial paternalism. Sections 25 and 38 relating to the termination of proceedings on account of default by a party crystalize this principle.
Whether the order of termination of proceedings by the Arbitrator is contrary to the decision in Afcons case. Since the Arbitrator had revised the arbitral fees as per Fourth Schedule, it was no longer open for the parties to object to the same.
Judgment dated 8.12.2025 of the Supreme Court of India in Civil Appeal No.14630 of 2025 of Harshbir Singh Pannu and another Vs. Jaswinder Singh
