Supreme Court: In a civil appeal concerning the issue about the legality and validity of the order of termination of the arbitral proceedings under Section 32 (2)(c) of the Arbitration and Conciliation Act, 1996 (‘the Arbitration Act’) passed by the Arbitral Tribunal, the division bench of Abhay S. Oka* and Pankaj Mithal, JJ. has held the following:
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The power under Section 32 (2)(c) of the Arbitration Act can be exercised only if, for some reason, the continuation of proceedings has become unnecessary or impossible. Unless the Arbitral Tribunal records its satisfaction based on the material on record that proceedings have become unnecessary or impossible, the power under Section 32(2)(c) cannot be exercised. If the said power is exercised casually, it will defeat the very object of enacting the Arbitration Act.
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It is the Arbitral Tribunal’s duty to fix a meeting for a hearing even if parties to the proceedings do not make such a request. It is the duty of the Arbitral Tribunal to adjudicate upon the dispute referred to it. If, on a date fixed for a meeting/hearing, the parties remain absent without any reasonable cause, the Arbitral Tribunal can always take recourse to the relevant provisions of the Arbitration Act, such as Section 25.
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The failure of the claimant to request the Arbitral Tribunal to fix a date for hearing, per se, is no ground to conclude that the proceedings have become unnecessary.
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The abandonment of the claim by a claimant can be a ground to invoke Section 32(2)(c). The abandonment of the claim can be either express or implied. The abandonment cannot be readily inferred. There is an implied abandonment when admitted or proved facts are so clinching that the only inference which can be drawn is of the abandonment. Only if the established conduct of a claimant is such that it leads only to one conclusion that the claimant has given up his/her claim can an inference of abandonment be drawn. Even if it is to be implied, there must be convincing circumstances on record which lead to an inevitable inference about the abandonment. Only because a claimant, after filing his statement of claim, does not move the Arbitral Tribunal to fix a date for the hearing, the failure of the claimant, per se, will not amount to the abandonment of the claim
In this case, the Arbitral Tribunal passed an order terminating the arbitral proceedings in the exercise of power under Section 32(2)(c) of the Arbitration Act. Thereafter, the respondent 1 filed an application before the Bombay High Court to challenge the legality and validity of the order of the Arbitral Tribunal by taking recourse to Section 14(2) of the Arbitration Act, whereby , the Single Judge had set aside the order of termination of the proceedings passed by the Arbitral Tribunal and directed the Arbitral Tribunal to continue the proceedings. Aggrieved, the appellant filed the present appeal.
The Court took note of Chapter V of the Arbitration Act that contains provisions regarding the conduct of arbitral proceedings. The Court noted that if parties do not agree on the timelines for filing statements of claim and defence, under Section 23 (1) of the Act, the Arbitral Tribunal has the power to determine the timelines for filing pleadings.
The Court noted that the power to terminate arbitral proceedings on the claimant’s default to file a statement of claim is the only provision under the Arbitration Act to terminate the arbitral proceedings, apart from Section 32 of the Arbitration Act.
The Court further noted that the Arbitration Act has two provisions for terminating an Arbitrator’s mandate. The Arbitrator is empowered to withdraw from his office, which terminates his mandate. However, the arbitral proceedings continue by the arbitrator’s substitution.
On a conjoint reading of Sections 14 and 15, the Court noted that it is apparent that an Arbitrator always has the option to withdraw for any reason. Therefore, the Court said that he can withdraw because of the parties’ non- cooperation in the proceedings. But in such a case, his mandate will be terminated, not the arbitral proceedings.
The Court further took note of Section 32 of the Arbitration Act, which provides for the termination of the arbitral proceedings, and said that clause (c) of subsection (2) of Section 32 can be invoked for reasons other than those mentioned in Section 32 (1) and clauses (a) and (b) of Section 32 (2). Under clause (c), the mere existence of a reason for terminating the proceedings is not sufficient. The reason must be such that the continuation of the proceedings has become unnecessary or impossible.
The Court said that, when a claimant files a claim and does not attend the proceedings, clause (a) of Section 25 comes into operation, resulting in the Arbitrator terminating the proceedings. If, after filing a claim, the claimant fails to appear at an oral hearing or fails to produce documentary evidence, it cannot be said that the continuation of proceedings has become unnecessary Therefore, if the party fails to appear for a hearing after filing a claim, the Arbitrator cannot say that continuing the arbitral proceedings has become unnecessary.
The Court said that abandonment by the claimant of his claim may be grounds for saying that the arbitral proceedings have become unnecessary. However, the abandonment must be established. One can say that there is an implied abandonment when admitted or proved facts are so clinching and convincing that the only inference which can be drawn is of the abandonment. Mere absence from proceedings or failure to participate does not, per se, amount to abandonment. Only if the established conduct of a claimant is such that it leads only to one conclusion that the claimant has given up his/her claim, can an inference of abandonment be drawn. Merely because a claimant, after filing his statement of claim, does not move the Arbitral Tribunal to fix a date for the hearing, it cannot be said that the claimant has abandoned his claim, as the Arbitral Tribunal has a duty to fix a date for a hearing. If the parties remain absent, the Arbitral Tribunal can take recourse to Section 25.
Thus, in the present case the Court said that there was no abandonment either express or implied. The inference of the abandonment has been drawn by the Arbitrator only on the ground that respondent 1 did not challenge respondent 2’s award and took no steps to convene the meeting of the Arbitral Tribunal. The failure to challenge the award on respondent 2’s claim will not amount to abandonment of the claim filed by respondent 1 in 2012.
Therefore, the Court held that there was absolutely no material on record to conclude that respondent 1 had abandoned its claim or, at least, the claim against the appellant. Till the award dated 06-05-2017 was passed in respondent 2’s claim, respondent 1’s representative was always present at all hearings till the passing of the award. Hence, the Court said that the finding of the Arbitrator that there was abandonment of the claim by the appellant is not based on any documentary or oral evidence on record is entirely illegal.
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