Harshbir Singh Pannu v. Jaswinder Singh 2025 INSC 1400 -S.32 Arbitration Act - Termination

Arbitration and Conciliation Act 1996 - Section 25, 30, 38 & 32 - Section 32 is exhaustive and covers all cases of termination of arbitral proceedings under the Act - The power of the arbitral tribunal to pass an order to terminate the proceedings under the scheme of the Act, lies only in Section 32(2) - Sections 25, 30 and 38 respectively, only denote the circumstances in which the tribunal would be empowered to take recourse to Section 32(2) and thereby, terminate the proceedings. (Para 416)

Arbitration and Conciliation Act - Section 32,34,14,15- The arbitral tribunal possesses the inherent procedural power to recall an order terminating the proceedings as such power is merely to correct an error apparent on the face of the record or to address a material fact that was overlooked. Where an arbitral tribunal passes an order for terminating the proceedings under the Act, the appropriate remedy available to the parties would be to first file an application for recall of such order before the arbitral tribunal itself. The arbitral tribunal would then in turn be required to examine whether the order does or does not deserve to be recalled- If a favourable order is passed for recommencing arbitration proceedings, the only option available to a party aggrieved therefrom, would be to participate in the proceedings and thereafter, challenge the final award under Section 34- If, however, the recall application is dismissed, the party aggrieved therefrom, would be empowered to approach the court under Section 14(2) - The court would then in turn examine whether the mandate of the arbitrator stood legally terminated or not. If it finds that the proceedings were not terminated in accordance with the law, it would be empowered to either set-aside the order of termination of proceedings and remand the matter to the arbitral tribunal, or, if the circumstances so require, proceed to appoint a substitute arbitrator in terms of Section 15 (Para 416) under no circumstances, can a party file a fresh application under Section 11 of the Act, 1996 and initiate a second round of arbitration. (Para 316)

Arbitration and Conciliation Act - Section 38 -4th Schedule - When one or both parties, or the parties and the arbitral tribunal, as the case may be, are unable to reach a consensus on the fee matrix, it would be open to the arbitral tribunal to determine the same in accordance with the Fourth Schedule of the Act, 1996. The Fourth Schedule of the Act, 1996 is the model fee schedule that is binding on all. Thus, where the arbitral tribunal fixes the fee in terms of the Fourth Schedule, the parties would not be permitted to object to the same. (Para 337)

Arbitration and Conciliation Act - Section 30- The arbitral tribunal is required to terminate the proceedings, upon the settlement of the dispute by the parties.- once the dispute between the parties stands settled, nothing remains for the arbitral tribunal to adjudicate upon. (Para 81)

Arbitration and Conciliation Act 1996- The power of review is available to an arbitral tribunal to the limited extent of curing a patent or procedural error. Thus, an arbitral tribunal has the power to entertain an application for recall of an order terminating the proceedings passed by it. (Para 311)

Arbitration and Conciliation Act 1996 - Section 14- The expression “the Court to decide on the termination of the mandate” should be given an expansive meaning to include any challenge to an order for termination of proceedings simpliciter- The termination of proceedings in essence results in the arbitrator being absolved of its duty to administer the arbitration. (Para 297)

Arbitration and Conciliation Bill, 2024 - Even the new Bill has taken no steps whatsoever to ameliorate the position of law as regards the termination of proceedings by the arbitral tribunal- Suggestions Given (Para 394-414)

Interpretation of Statues - A provision cannot be read in an inconsistent manner. It must be read as a whole, every sub-section forming part thereof must be given a harmonious, consistent and purposeful interpretation, so as to give effect to the legislative intent underlying the enactment. It is impermissible to dismember a provision and ascribe to it multiple meanings divorced from its textual and contextual setting. (Para 229) Marginal note- In the absence of any inherent conflict or contradiction between the marginal note and the substantive parts of a particular provision, the marginal note may be used to aid in the interpretation of the provision. (Para 214)

Factual Summary: This case arose from a partnership dispute that was referred to a Sole Arbitrator in March 2020. The arbitrator's fees were set according to the Fourth Schedule of the Arbitration and Conciliation Act, 1996. When the respondent filed a counter-claim, the total fees were revised to Rs. 37.50 lakh based on the ceiling set in the Fourth Schedule. Following objections and the refusal of both the appellants and the respondent to pay their equal share of the revised fees, the Sole Arbitrator terminated the arbitral proceedings on March 28, 2022, under Section 38 of the Act. The appellants' attempt to get a new arbitrator appointed via a subsequent Section 11 petition was rejected by the High Court, leading to the appeal before the Supreme Court. The Supreme Court ultimately partially allowed the appeal, ordering the appointment of a substitute arbitrator based on the unique facts and the historical uncertainty surrounding the determination of fees and termination remedies at that time