2024 (5) TMI 844 - SC - Indian Laws

Arbitral proceedings cannot be terminated under Section 32(2)(c) without tribunal recording satisfaction that proceedings became unnecessary or impossible

Dani Wooltex Corporation & Ors. Versus Sheil Properties Pvt. Ltd. & Anr.

Dani Wooltex Corporation & Ors. Versus Sheil Properties Pvt. Ltd. & Anr. - TMI 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.