Case Note & Summary
The appeal arose from a dispute involving Dani Wooltex Corporation (appellant), Sheil Properties (respondent), and Marico Industries. The appellant owned land in Mumbai, part of which was developed by Sheil under a Development Agreement dated 11th August 1993. A Memorandum of Understanding was executed between the appellant and Marico for sale of another portion, leading to objections from Sheil. Suits were filed by Sheil (Suit No.2541 of 2006) and Marico (Suit No.2116 of 2011), and a sole arbitrator was appointed on 13th October 2011 to resolve the disputes. The arbitrator dealt with claims from both Sheil and Marico. Marico's claim culminated in an award on 6th May 2017, but Sheil's claim did not proceed. The appellant filed an application under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996, alleging that Sheil had abandoned its claim by not taking any steps for eight years. The Arbitral Tribunal terminated the proceedings on 1st December 2020. Sheil challenged this order under Section 14(2) of the Act before the Bombay High Court, which set aside the termination and directed the Arbitral Tribunal to continue. The Supreme Court considered whether the High Court could interfere under Section 14(2). The Court held that Section 14(2) is limited to deciding disputes about the de jure or de facto inability of the arbitrator to act and does not permit review of the merits of the Arbitral Tribunal's decision under Section 32(2)(c). The Arbitral Tribunal's decision was based on a plausible view of facts, and the High Court erred in substituting its own view. The Supreme Court allowed the appeal, set aside the High Court's order, and restored the Arbitral Tribunal's order terminating the proceedings.
Headnote
A) Arbitration - Termination of Arbitral Proceedings - Section 32(2)(c) of the Arbitration and Conciliation Act, 1996 - Abandonment - The Arbitral Tribunal terminated proceedings on the ground that the claimant had abandoned its claim by not taking any steps for eight years. The High Court set aside the order under Section 14(2). The Supreme Court held that the High Court exceeded its jurisdiction under Section 14(2) as the Arbitral Tribunal's decision was based on a plausible view of facts and was not perverse. The Court emphasized that Section 14(2) is not a provision for appeal or revision against the Arbitral Tribunal's decision. (Paras 2-5, 8-10) B) Arbitration - Default of Party - Section 25 of the Arbitration and Conciliation Act, 1996 - Failure to Appear - The Court noted that Section 25(c) provides that if a party fails to appear at an oral hearing, the Arbitral Tribunal may continue the proceedings and make an award on the evidence before it. However, in this case, the Arbitral Tribunal chose to terminate proceedings under Section 32(2)(c) instead, which was within its discretion. (Para 10) C) Arbitration - Judicial Interference - Section 14(2) of the Arbitration and Conciliation Act, 1996 - Scope - The Supreme Court clarified that Section 14(2) allows the court to decide on the termination of the mandate of an arbitrator only when there is a dispute regarding the de jure or de facto inability of the arbitrator to act. It does not permit the court to review the merits of the Arbitral Tribunal's decision to terminate proceedings under Section 32(2)(c). The High Court's interference was therefore unwarranted. (Paras 5, 8-10)
Issue of Consideration
Whether the High Court, while exercising power under Section 14(2) of the Arbitration and Conciliation Act, 1996, could set aside the order of the Arbitral Tribunal terminating the arbitral proceedings under Section 32(2)(c) of the Act on the ground of abandonment by the claimant.
Final Decision
The Supreme Court allowed the appeal, set aside the impugned judgment and order of the High Court, and restored the order of the Arbitral Tribunal dated 1st December 2020 terminating the arbitral proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996.
Law Points
- Section 32(2)(c) of the Arbitration and Conciliation Act
- 1996
- Section 14(2) of the Arbitration and Conciliation Act
- Abandonment of arbitral proceedings
- Termination of mandate of arbitrator
- Scope of judicial interference under Section 14(2)
