2024 (5) TMI 844 - SC - Indian Laws

Legality and validity of the order of termination of the arbitral proceedings under clause (c) of subsection (2) of Section 32 of the Arbitration and Conciliation Act, 1996 - abandonment of claim filed before the learned Arbitrator - HELD THAT - It is held and concluded as follows a. The power under clause (c) of subsection (2) of Section 32 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 clause (c) of subsection (2) of Section 32 cannot be exercised. If the said power is exercised casually, it will defeat the very object of enacting the Arbitration Act; b. It is the Arbitral Tribunal's duty to fix a meeting for 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; c. 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; and d. The abandonment of the claim by a claimant can be a ground to invoke clause (c) of subsection (2) of Section 32. 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. Appeal dismissed.

Summary

Issues Involved:
1. Legality and validity of the order of termination of arbitral proceedings u/s 32(2)(c) of the Arbitration and Conciliation Act, 1996.

Summary:

Legality and Validity of Termination Order u/s 32(2)(c) of the Arbitration Act:
1. The appeal concerns the legality and validity of the termination order of arbitral proceedings passed by the Arbitral Tribunal u/s 32(2)(c) of the Arbitration Act.
2. The factual matrix involves a dispute between the first appellant, Dani Wooltex Corporation, and the first respondent, Sheil Properties, regarding a Development Agreement. Marico Industries was also involved due to a Memorandum of Understanding (MOU) with the first appellant. The dispute led to two separate suits and subsequent arbitration proceedings.
3. The Arbitral Tribunal terminated the proceedings based on Sheil's alleged abandonment of the claim, citing inactivity for eight years. Sheil contested this, asserting that it was awaiting the decision in Marico's arbitration.
4. The High Court set aside the termination order, directing the continuation of proceedings. The first appellant challenged this decision, arguing that the Arbitral Tribunal's decision was based on factual appreciation and should not be second-guessed by the Court.

Consideration of Submissions:
5. The Supreme Court examined the provisions of the Arbitration Act, particularly Sections 23, 25, 32, 14, and 15, emphasizing the duties of the Arbitral Tribunal to conduct and continue proceedings unless specific conditions for termination are met.
6. The Court noted that the Arbitral Tribunal must fix hearings and cannot rely solely on parties to request them. The Tribunal's duty includes proceeding with the arbitration even if parties are absent, as per Section 25.
7. The Court highlighted that abandonment of a claim must be clearly established, either expressly or impliedly, through convincing and clinching facts. Mere inactivity or absence does not constitute abandonment.

Conclusion:
8. The Court concluded that there was no material evidence to support the Arbitral Tribunal's finding of abandonment by Sheil. The Tribunal's decision was deemed illegal as it was not based on substantial evidence.
9. The Supreme Court upheld the High Court's decision, dismissing the appeal and directing the appointment of a substituted Arbitrator as the original Arbitrator had withdrawn from the proceedings.