THE CONUNDRUM OF RECALLING AN ARBITRAL TRIBUNAL POST-TERMINATION

[By Arjit Mishra]

The author is a student at the Hidayatullah National Law University, Raipur.

INTRODUCTION

On 12th October 2022, the Delhi HC in Vag Educational Services v. Aakash Educational Services opined that an arbitral tribunal cannot recall the proceedings if its mandate has been terminated under S. 32 of the Arbitration & Conciliation Act, 1996 (hereinafter ‘The Act’). However, it is to be noted that in various judgements the Supreme Court has held that if an arbitral proceeding is terminated under S. 25 of the Act, the terminated proceedings can be recalled. In this blog, I’d provide the existing jurisprudence regarding the possibility of recalling an arbitral proceeding and the flaws present in the same.

VAG EDUCATIONAL SERVICES V. AAKASH EDUCATIONAL SERVICES: WEIGHING PRECEDENT OVER RATIONALE

In this case, on 21st Sept 2019, the arbitral tribunal terminated its mandate as the respondent, as claimant, withdrew from the arbitral proceeding. However, an affidavit was filed by the respondent-claimant asserting that the Counsel had unintentionally withdrawn from the arbitral proceedings, as her instructions, from her Senior Counsel, were to withdraw another arbitral proceeding pending before the same arbitral tribunal. This affidavit was duly accepted by the tribunal and in its order dated 18th January 2020, it restored the arbitral proceedings.

The impugned order was challenged before the Delhi HC under Article 227 of the Indian Constitution. With regards to the maintainability of the petition, the respondent, while placing reliance on SBP & Co. v. Patel Engineering Ltd. and Anr. & Bhaven Construction v. Executive Engineer Sardar Sarovar Narmada Nigam, asserted that the Court cannot adjudicate on an interlocutory order passed by the arbitral tribunal. The Court negatived this contention by opining that the current case’s circumstances are unique from those in the respondent’s cited cases. In the current case, the Court must decide whether an arbitral tribunal that has declared the arbitration proceedings to be discontinued may later consider a request to rescind that order and restore the arbitration.

Withrespect to the question that whether an arbitral proceeding can be recalled post-termination, the Court remarked that a tribunal’s mandate is considered as terminated if the claimant withdraws its claimant. under S. 32(3) of the Act, 1996. This provision is only subject to S. 33 and S. 34(4). When a party asks an arbitral tribunal to fix a specific category of errors or when the parties ask the arbitral tribunal to interpret a particular clause or section of the award that it has delivered, Section 33 is applicable. According to Section 34(4), the arbitral tribunal has the authority to eliminate any grounds that the court that hears a challenge to the arbitral decision under Section 34 might use to overturn the award it has issued. Notably, neither the exigency mentioned under S. 33 nor the condition provided under S. 34 applied to the present case. Hence, the arbitral tribunal became functus officio and didn’t have any power to pass any kind of order after the termination of its mandate.

POWER TO RECALL PROCEEDINGS UNDER S. 25: ‘JUDICIALLY’ CREATED DISTINCTION WITH S. 32

It was observed above that if an arbitral tribunal’s mandate is terminated under S. 32 of the Act, 1996, no order of recalling the proceedings could be passed. Interestingly, this position of law doesn’t apply to the termination of an arbitral proceeding under S. 25 of the Act, 1996. In compliance with section 25 of the Act, the arbitrator has the authority to end an arbitration if the claimant fails to submit his statement of claim in conformity with S. 23(1) without demonstrating good cause.

The Supreme Court noted in the case of SREI Infrastructure Finance Limited v. Tuff Drilling Private Limited that the situation described in Section 32 of the Act will only occur if the proceeding is not terminated under Section 25(a) of the Act and continues to be adjudicated. Since Section 25 of the Arbitration Act does not include the phrase “mandate of the arbitral tribunal shall terminate” it must be interpreted in the context of Section 32 of the Arbitration Act. Therefore, an order to recall the arbitration proceedings may be issued if the claimant can provide adequate justification.

The SC later heard an appeal against a termination order given in accordance with Section 32 of the Act in Sai Babu v. M/S Clariya Steels Private Limited. The Supreme Court decided that no recall request would be encased in cases provided by Section 32(3) of the Arbitration Act due to the difference crafted in the SREI case between both the mandate terminating under Section 32 and the proceedings that came to an end under Section 25 of the Arbitration Act.

FUNDAMENTAL FLAWS PRESENT IN THE JURISPRUDENCE

The Arbitration Act, of 1996 provides the arbitral tribunal certain exemplary powers to allow it to carry out its functions smoothly and with minimum court intervention. However, the striking difference drawn between termination orders passed under S. 25 & S. 32 of the Act poses a roadblock to allowing the arbitral tribunal to decide on its conduct, particularly regarding its ‘mandate’. It is observed that the Courts have had an unwarranted rigid approach by not allowing recall of an arbitral proceeding if its mandate is terminated under S. 32 of the Act.

The stated ‘rigid’ approach prevents the arbitral tribunal to recall its proceeding if there exist genuine and satisfactory reasons for doing the same. Even in the Vag Educational case, the Court ignored the bonafide mistake made by the Counsel of signing the wrong withdrawal sheet and proceeded to hold, in consonance with precedents, that the arbitral tribunal proceeding can’t be recalled. It also caused unjustified harm to the party because of its Counsel’s unintentional mistake.

Furthermore, Section 32(2)(c) of the Act provides that if the arbitral tribunal believes that the continuation of proceedings has become unnecessary and impossible, it can terminate its proceeding.. This provision construed with the ‘rigid’ approach upheld by courts makes the tribunal’s power rampant as it will have no sort of accountability for the reasons it provides for terminating arbitral proceedings under S. 32(2)(c) of the Act.

Notably, in the SREI case, the SC rightly held that the provisions of the Act should be given purposive interpretation but it misapplied the same. By not allowing the recalling of the arbitral proceeding, the Court nullifies every reason for opting for the arbitration mode of dispute resolution by the parties. An ideal purposive interpretation of the Act would’ve been to allow the arbitral tribunal to terminate its proceeding but not to give finality to the same. If a challenge is made to such order before the arbitral tribunal or a Court of law, the adjudicating authority should not turn a blindfolded eye towards the matter. If it finds that there exist valid reasons to recall arbitration proceedings, it should allow the same.

CONCLUSION

Albeit, the Delhi HC’s judgement, aligns with the existing jurisprudence regarding the recall of arbitral tribunal proceedings, the Court missed a golden opportunity to judicially recognize the imperative flaw in the existing position of law. It is hoped that the courts will recognize the fundamental lacunae in the position of law upheld by them and declare a new position of law for the furtherance of the objectives of the Act.

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