Wednesday, 22 May 2019

Whether Sole Arbitrator after termination of proceedings U/S 32 (2) (c) of Arbitration Act can recall said order?

The sole arbitrator who was appointed in this case
terminated proceedings under Section 32(2)(c) of the
Arbitration and Conciliation Act, 1996 (hereinafter referred
to as ‘Act’), by order dated 04.05.2017. However, on an
application dated 05.05.2017 to recall the aforesaid order,
the learned arbitrator passed an order on 18.05.2017 stating
that, as good reasons had been made out in the affidavit for
recall, he was inclined to recall the order even though
under the Act, in law, it may be difficult to do so. A
revision filed against the aforesaid order was dismissed by
the High Court on 14.06.2017.
Having heard learned counsel for the parties, we are
of the view that the matter is no longer res integra. In
SREI Infrastructure Finance Limited v. Tuff Drilling
Private Limited’ [(2018) 11 SCC 470], this Court held:
22. Section 32 contains a heading “Termination of
Proceedings”. Sub-section (1) provides that the
arbitral proceedings shall be terminated by the final

arbitral award or by an order of the Arbitral
Tribunal under sub-section (2). Sub-section (2)
enumerates the circumstances when the Arbitral
Tribunal shall issue an order for the termination of
the arbitral proceedings. The situation as
contemplated under Sections 32(2)(a) and 32(2)(b) are
not attracted in the facts of this case. Whether
termination of proceedings in the present case can be
treated to be covered by Section 32(2)(c) is the
question to be considered. Clause (c) contemplates
two grounds for termination i.e. (i) the Arbitral
Tribunal finds that the continuation of the
proceedings has for any other reason become
unnecessary, or (ii) impossible. The eventuality as
contemplated under Section 32 shall arise only when
the claim is not terminated under Section 25(a) and
proceeds further. The words “unnecessary” or
“impossible” as used in clause (c) of Section 32(2),
cannot be said to be covering a situation where
proceedings are terminated in default of the
claimant. The words “unnecessary” or “impossible”
has been used in different contexts than to one of
default as contemplated under Section 25(a). Subsection
(3) of Section 32 further provides that the
mandate of the Arbitral Tribunal shall terminate with
the termination of the arbitral proceedings subject
to Section 33 and sub-section (4) of Section 34.
Section 33 is the power of the Arbitral Tribunal to
correct any computation errors, any clerical or
typographical errors or any other errors of a
similar nature or to give an interpretation of a
specific point or part of the award. Section 34(4)
reserves the power of the court to adjourn the
proceedings in order to give the Arbitral Tribunal an
opportunity to resume the arbitral proceedings or to
take such other action as in the opinion of the
Arbitral Tribunal will eliminate the grounds for
setting aside the arbitral award. On the termination
of proceedings under Sections 32(2) and 33(1),
Section 33(3) further contemplates termination of the
mandate of the Arbitral Tribunal, whereas the
aforesaid words are missing in Section 25. When the
legislature has used the phrase “the mandate of the
Arbitral Tribunal shall terminate” in Section 32(3),
non-use of such phrase in Section 25(a) has to be
treated with a purpose and object. The purpose and
object can only be that if the claimant shows
sufficient cause, the proceedings can be
recommenced.”

It is clear, therefore, that a distinction was made by
this Court between the mandate terminating under section 32
and proceedings coming to an end under section 25. This
Court has clearly held that no recall application would,
therefore, lie in cases covered by section 32(3).
This being the case, we allow the appeal that is being
filed and set aside the judgment of the High Court of
Karnataka dated 14.06.2017.

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4956 OF 2019


SAI BABU  Vs  M/S CLARIYA STEELS PVT. LTD. 

Dated:May 01, 2019.

The sole arbitrator who was appointed in this case
terminated proceedings under Section 32(2)(c) of the
Arbitration and Conciliation Act, 1996 (hereinafter referred
to as ‘Act’), by order dated 04.05.2017. However, on an
application dated 05.05.2017 to recall the aforesaid order,
the learned arbitrator passed an order on 18.05.2017 stating
that, as good reasons had been made out in the affidavit for
recall, he was inclined to recall the order even though
under the Act, in law, it may be difficult to do so. A
revision filed against the aforesaid order was dismissed by
the High Court on 14.06.2017.
Having heard learned counsel for the parties, we are
of the view that the matter is no longer res integra. In
SREI Infrastructure Finance Limited v. Tuff Drilling
Private Limited’ [(2018) 11 SCC 470], this Court held:
22. Section 32 contains a heading “Termination of
Proceedings”. Sub-section (1) provides that the
arbitral proceedings shall be terminated by the final

arbitral award or by an order of the Arbitral
Tribunal under sub-section (2). Sub-section (2)
enumerates the circumstances when the Arbitral
Tribunal shall issue an order for the termination of
the arbitral proceedings. The situation as
contemplated under Sections 32(2)(a) and 32(2)(b) are
not attracted in the facts of this case. Whether
termination of proceedings in the present case can be
treated to be covered by Section 32(2)(c) is the
question to be considered. Clause (c) contemplates
two grounds for termination i.e. (i) the Arbitral
Tribunal finds that the continuation of the
proceedings has for any other reason become
unnecessary, or (ii) impossible. The eventuality as
contemplated under Section 32 shall arise only when
the claim is not terminated under Section 25(a) and
proceeds further. The words “unnecessary” or
“impossible” as used in clause (c) of Section 32(2),
cannot be said to be covering a situation where
proceedings are terminated in default of the
claimant. The words “unnecessary” or “impossible”
has been used in different contexts than to one of
default as contemplated under Section 25(a). Subsection
(3) of Section 32 further provides that the
mandate of the Arbitral Tribunal shall terminate with
the termination of the arbitral proceedings subject
to Section 33 and sub-section (4) of Section 34.
Section 33 is the power of the Arbitral Tribunal to
correct any computation errors, any clerical or
typographical errors or any other errors of a
similar nature or to give an interpretation of a
specific point or part of the award. Section 34(4)
reserves the power of the court to adjourn the
proceedings in order to give the Arbitral Tribunal an
opportunity to resume the arbitral proceedings or to
take such other action as in the opinion of the
Arbitral Tribunal will eliminate the grounds for
setting aside the arbitral award. On the termination
of proceedings under Sections 32(2) and 33(1),
Section 33(3) further contemplates termination of the
mandate of the Arbitral Tribunal, whereas the
aforesaid words are missing in Section 25. When the
legislature has used the phrase “the mandate of the
Arbitral Tribunal shall terminate” in Section 32(3),
non-use of such phrase in Section 25(a) has to be
treated with a purpose and object. The purpose and
object can only be that if the claimant shows
sufficient cause, the proceedings can be
recommenced.”

It is clear, therefore, that a distinction was made by
this Court between the mandate terminating under section 32
and proceedings coming to an end under section 25. This
Court has clearly held that no recall application would,
therefore, lie in cases covered by section 32(3).
This being the case, we allow the appeal that is being
filed and set aside the judgment of the High Court of
Karnataka dated 14.06.2017.
However, this is not the end of the matter. Section
15(2) of the Act states:
15. Termination of mandate and substitution of
arbitrator.—
(2) Where the mandate of an arbitrator terminates, a
substitute arbitrator shall be appointed
according to the rules that were applicable to
the appointment of the arbitrator being
replaced.
By the consent of the parties, Hon’ble Mr. Justice
K.N. Keshavanarayana, former Judge of the High Court of
Karnataka, is appointed to be the sole arbitrator to decide
all disputes between the parties.
The appeal stands disposed of accordingly.
………………………………………………………………………., J.
[ ROHINTON FALI NARIMAN ]
………………………………………………………………………., J.
New Delhi; [ VINEET SARAN ]
May 01, 2019.

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