The Supreme Court on May 1, 2019, in the case of Sai Babu v. M/S Clariya Steels Pvt. Ltd., has observed that once the arbitrator terminates the arbitration proceedings under Section 32(2) (c) of the Arbitration and Conciliation Act, 1996, it cannot be recalled by filing an application.
A Bench comprising of Justice Rohinton Fali Nariman and Justice Vineet Saran was hearing an appeal filed against the judgment passed by the Karnataka High Court wherein the High Court had dismissed the challenge against the ‘recall’ by the arbitrator.
In this case, the sole arbitrator terminated the proceedings under Section 32(2) (c) i.e. on the ground that the continuation of the proceedings become unnecessary or impossible. However, later, on an application by one of the parties the arbitrator recalled the proceedings.
In appeal, the Bench referred to its judgment in the case of SREI Infrastructure Finance Limited v. Tuff Drilling Private Limited, in which the issue was whether arbitral tribunal which has terminated the proceeding under Section 25(a) due to non filing of claim by claimant has jurisdiction to consider the application for recall of the order terminating the proceedings on sufficient cause being shown by the claimant? It was held that the Tribunal had jurisdiction to recall an order terminating the proceedings under Section 25(a).
In the present case, the court reproduced the following observation made in the above case to come to the conclusion that the termination under Section 32 cannot be recalled.
"Section 32 contains a heading "Termination of Proceedings". Sub-section (1) provides that the arbitral proceedings shall be terminated by the final arbitral award or by an order of the Arbitral Tribunal under sub-section (2). Sub-section (2) enumerates the circumstances when the Arbitral Tribunal shall issue an order for the termination of the arbitral proceedings. The situation as contemplated under Sections 32(2)(a) and 32(2)(b) are not attracted in the facts of this case. Whether termination of proceedings in the present case can be treated to be covered by Section 32(2)(c) is the question to be considered. Clause (c) contemplates two grounds for termination i.e. (i) the Arbitral Tribunal finds that the continuation of the proceedings has for any other reason become unnecessary, or (ii) impossible. The eventuality as contemplated under Section 32 shall arise only when the claim is not terminated under Section 25(a) and proceeds further. The words "unnecessary" or "impossible" as used in clause (c) of Section 32(2), cannot be said to be covering a situation where proceedings are terminated in default of the claimant. The words "unnecessary" or "impossible" has been used in different contexts than to one of default as contemplated under Section 25(a). Subsection (3) of Section 32 further provides that the mandate of the Arbitral Tribunal shall terminate with the termination of the arbitral proceedings subject to Section 33 and subsection (4) of Section 34. Section 33 is the power of the Arbitral Tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature or to give an interpretation of a specific point or part of the award. Section 34(4) reserves the power of the court to adjourn the proceedings in order to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of the Arbitral Tribunal will eliminate the grounds for setting aside the arbitral award. On the termination of proceedings under Sections 32(2) and 33(1), Section 33(3) further contemplates termination of the mandate of the Arbitral Tribunal, whereas the aforesaid words are missing in Section 25. When the legislature has used the phrase "the mandate of the Arbitral Tribunal shall terminate" in Section 32(3), non-use of such phrase in Section 25(a) has to be treated with a purpose and object. The purpose and object can only be that if the claimant shows sufficient cause, the proceedings can be recommenced."
"It is clear, therefore, that a distinction was made by this Court between the mandate terminating under section 32 and proceedings coming to an end under section 25. This Court has clearly held that no recall application would, therefore, lie in cases covered by section 32(3),” the court concluded.
Therefore, the court allowed the appeal and set aside the judgment passed by the Karnataka High Court. However, before ending the matter, the court in accordance to Section 15(2) of the Act appointed K.N. Keshavanarayana, former Judge of the High Court of Karnataka, as the sole arbitrator to decide all disputes between the parties.