IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3148 OF 2014

[Arising out of Special Leave Petition (Civil) No.4267 of

2013]

Lalitkumar V. Sanghavi (D)

Th. LRs Neeta Lalit Kumar

Sanghavi & Anr. …Appellants

Versus

Dharamdas V. Sanghavi & Ors. …Respondents

J U D G E M E N T

Chelameswar, J.

1. Aggrieved by an order dated 24th September, 2010 in

Arbitration Application No. 44/2008 on the file of the High Court

of Bombay, the instant SLP is filed by the two children of the

applicant (hereinafter referred to as “the original applicant”) in

1

Page 2

the above mentioned application. The SLP is filed with a delay

of 717 days. Therefore, two IAs came to be filed, one seeking

substitution of the legal representatives of the deceased

appellant and the other for the condonation of delay in filing the

SLP.

2. The 1st respondent is the brother of the original appellant

and the other respondents are the children of another deceased

brother of the original applicant. Respondents are served and

they have contested both the IAs.

3. Accepting the reasons given in the applications, we deem

it appropriate to condone the delay in preferring the instant SLP

and also substitute the original appellant (since deceased) by

his legal representatives. Both the IAs are allowed. Delay

condoned. Substitution allowed. Leave granted.

4. The undisputed facts are that the parties herein are

carrying on some business in the name and style of a

partnership firm constituted under a partnership deed dated

20th October 1962. The partnership deed provided for the

2

Page 3

resolution of the disputes arising between the partners touching

the affairs of the partnership by means of an arbitration. In

view of certain disputes between the partners (details of which

are not necessary for the present purpose) the original

applicant filed arbitration application No.263/2002 under

Section 11 of the Arbitration and Conciliation Act, 1996

(hereinafter referred to as ‘the Act’, for short) before the Chief

Justice of the Bombay High Court which was disposed of by an

order dated 21st February, 2003 by a learned Judge of the

Bombay High Court, who was the nominee of the Chief Justice

under the Act. The relevant portion of the order reads as

follows:

“Considering that applicant respondent No.1

have appointed two arbitrators, Justice H. Suresh,

Retired Judge of this Court is appointed as

presiding arbitrator. The arbitral tribunal so

constituted to decide all disputes including claims

and counter claims of the parties arising from the

controversy. In case respondents do not

cooperate with the matter of appointment of third

arbitrator, applicant initially to bear the made

part of final award in the position, application

disposed of accordingly.”

5. By his order dated 29th October, 2007, the presiding

arbitrator informed the appellants that the arbitration

3

Page 4

proceedings stood terminated. The relevant portion of the

order reads as follows:

“The matter is pending since June, 2003 and

though the meeting was called in between June,

2004 and 11th April, 2007, the Claimant took no

interest in matter. Even the fees directed to be

given is not paid.

In these circumstances please note that the

arbitration proceedings stands terminated. All

interim orders passed by the Tribunal stand

vacated.”

6. In response to the said communication, the original

applicant, through his lawyer, communicated to the arbitrators

and also the advocates of the respondents herein that the order

of the arbitrators dated 29th October, 2007 does not reflect the

true factual position of the matter. The relevant portion of the

letter reads as follows:

“The Hon’ble Arbitral Tribunal is therefore

requested to kindly revoke the said letter dated

29th October 2007 and modify the same and

kindly record that the proceedings are being

terminated due to non compliance of

orders/directions as also non payment of fees and

charged by the Respondent No.1”

7. On 17.1.2008, the original applicant filed arbitration

application No.44/2008 with prayers (insofar as they are

relevant for the present purpose) as follows:

4

Page 5

a) this Hon’ble Court be pleased to appoint some

fit and proper person as arbitrator for entering

reference and adjudicating upon the disputes in

respect of M/s. Sanghavi Brothers.

b) the Respondent No.1 to 4 be directed to

deposit a sum of Rs.1,00,000/- towards costs of

arbitration and fees of the Arbitrator.”

That application came to be dismissed by the order under

appeal in substance holding that such an application invoking

Section 11 of the Act is not maintainable - with an observation

that “the remedy of the application is by filing a writ petition

not an application under Section 11 of the Act”.

8. Within a couple of weeks thereafter, the original applicant

died on 7.10.2012. The question is whether the High Court is

right in dismissing the application as not maintainable. By the

judgment under appeal, the Bombay High Court opined that the

remedy of the appellant lies in invoking the jurisdiction of the

High Court under Article 226 of the Constitution. In our view,

such a view is not in accordance with the law declared by this

Court in S.B.P. & Co. v. Patel Engineering Ltd., (2005) 8

SCC 618. The relevant portion of the judgment reads as under:

5

Page 6

“45. It is seen that some High Courts have

proceeded on the basis that any order passed by

an arbitral tribunal during arbitration, would be

capable of being challenged under Article 226 or

227 of the Constitution of India. We see no warrant

for such an approach. Section 37 makes certain

orders of the arbitral tribunal appealable. Under

Section 34, the aggrieved party has an avenue for

ventilating his grievances against the award

including any in-between orders that might have

been passed by the arbitral tribunal acting under

Section 16 of the Act. The party aggrieved by any

order of the arbitral tribunal, unless has a right of

appeal under Section 37 of the Act, has to wait

until the award is passed by the Tribunal. This

appears to be the scheme of the Act. The arbitral

tribunal is after all, the creature of a contract

between the parties, the arbitration agreement,

even though if the occasion arises, the Chief Justice

may constitute it based on the contract between

the parties. But that would not alter the status of

the arbitral tribunal. It will still be a forum chosen

by the parties by agreement. We, therefore,

disapprove of the stand adopted by some of the

High Courts that any order passed by the arbitral

tribunal is capable of being corrected by the High

Court under Article 226 or 227 of the Constitution

of India. Such an intervention by the High Courts is

not permissible.”

That need not, however, necessarily mean that the application

such as the one on hand is maintainable under Section 11 of

the Act.

9. Learned senior counsel for the appellants, Shri Shyam

Divan, submitted that if application under Section 11 is also

held not maintainable, the appellants would be left remediless

6

Page 7

while their grievance subsists. On the other hand, learned

senior counsel for the respondents Shri C.U. Singh submitted

that the appellant’s only remedy is to approach the arbitral

tribunal seeking a recall of its decision to terminate the

arbitration proceedings.

10. Chapter III of the Act deals with the appointment,

challenge to the appointment and termination of the mandate

and substitution of the arbitrator etc. Section 11 provides for

the various modes of appointment of an arbitrator for the

adjudication of the disputes which the parties agree to have

resolved by arbitration. Broadly speaking, arbitrators could be

appointed either by the agreement between the parties or by

making an application to the Chief Justice of the High Court or

the Chief Justice of India, as the case may be, as specified

under Section 11 of the Act. Section 12(3) provides for a

challenge to the appointment of an arbitrator on two grounds.

They are - (a) “that circumstances exist” which “give rise to

justifiable doubts as to” the “independence or impartiality” of

the arbitrator; (b) that the arbitrator does not “possess the

7

Page 8

qualification agreed to by the parties”. Section 14 declares that

“the mandate of an arbitrator shall terminate” in the

circumstances specified therein. They are-

“14. Failure or impossibility to act.—(1) The mandate

of an arbitrator shall terminate if—

(a) he becomes de jure or de facto unable to

perform his functions or for other reasons fails

to act without undue delay; and

(b) he withdraws from his office or the parties

agree to the termination of the mandate.”

(2) If a controversy remains concerning any of the

grounds referred to in clause (a) of sub-section (1), a

party may, unless otherwise agreed by the parties,

apply to the Court to decide on the termination of

the mandate.”

11. Section 14(2) provides that if there is any controversy

regarding the termination of the mandate of the arbitrator on

any of the grounds referred to in the clause (a) then an

application may be made to the Court – “to decide on the

termination of the mandate”.

12. Section 32 of the Act on the other hand deals with the

termination of arbitral proceedings.1

1 Section 32 - Termination of proceedings.

(1) The arbitral proceedings shall be terminated by the final arbitral award or by an

order of the arbitral tribunal under sub- section (2).

8

Page 9

13. From the language of Section 32, it can be seen that

arbitral proceedings get terminated either in the making of the

final arbitral award or by an order of the arbitral tribunal under

sub-Section 2. Sub-section (2) provides that the arbitral

tribunal shall issue an order for the termination of the arbitral

proceedings in the three contingencies mentioned in subclauses

(a) to (c) thereof.

14. On the facts of the present case, the applicability of subclauses

(a) and (b) of Section 32(2) is clearly ruled out and we

are of the opinion that the order dated 29th October, 2007 by

which the Tribunal terminated the arbitral proceedings could

only fall within the scope of Section 32, sub-Section (2), subclause

(c) i.e. the continuation of the proceedings has become

(2) The arbitral tribunal shall issue an order for the termination of the arbitral

proceedings where-

(a) the claimant withdraws his claim, unless the respondent objects to the

order and the arbitral tribunal recognises a legitimate interest on his part in,

obtaining a final settlement of the dispute,

(b) the parties agree on the termination of the proceedings, or

(c) the arbitral tribunal finds that the continuation of the proceedings has

for any other mason become unnecessary or impossible.

(3) Subject to section 33 and sub- section (4) of section 34, the mandate of the arbitral

tribunal shall terminate with the termination of the arbitral proceedings.

9

Page 10

impossible. By virtue of Section 32(3), on the termination of

the arbitral proceedings, the mandate of the arbitral tribunal

also comes to an end. Having regard to the scheme of the Act

and more particularly on a cumulative reading of Section 32

and Section 14, the question whether the mandate of the

arbitrator stood legally terminated or not can be examined by

the court “as provided under Section 14(2)”.

15. The expression “Court” is a defined expression under

Section 2(1)(e) which reads as follows:-

“Section 2(1)(e) “Court" means the principal Civil Court of

original jurisdiction in a district, and includes the High

Court in exercise of its ordinary original civil jurisdiction,

having jurisdiction to decide the questions forming the

subject- matter of the arbitration if the same had been the

subject- matter of a suit, but does not- include any civil court

of a grade inferior to such principal Civil Court, or any Court

of Small Causes;”

16. Therefore, we are of the opinion, the apprehension of the

appellant that they would be left remediless is without basis in

law.

17. The appellants are at liberty to approach the appropriate

court for the determination of the legality of the termination of

10

Page 11

the mandate of the arbitral tribunal which in turn is based upon

an order dated 29th October, 2007 by which the arbitral

proceedings were terminated.

18. The appeal is dismissed.

……………………………………..…J.

( Dr. B.S. CHAUHAN )

…………………………………..……J.

( J. CHELAMESWAR )

.……………………………………

( M.Y. EQBAL )

New Delhi;

March 04, 2014

you have to approach the HC for determination of legality of termination of arbitration agreement

2) the HC would pass orders on your application

1. Once the party have exhausted alternative remedy of arbitration for 9 year then can arbitration reinforced again.

In your original question it was about the arbitrator decided to recuse himself. whether the arbitration proceedings that had been running for so many years would continue with the new arbitrator.

You should be aware that it is not the arbitrator who is responsible for the proceedings, the proceedings may be continued with another arbitrator too till it is properly disposed.

2. If it can then we fall under new or old bye law ,also why.

It can continue with the law which was in force at the inception of the proceedings.