Supreme Court On The Exhaustive Nature of Section 32 for Termination of Arbitral Proceedings and Remedy Under Section 14

The Supreme Court of India while hearing the case of Harshbir Singh Pannu v. Jaswinder Singh, 2025., clarified 'Exhaustive Nature' of Section 32 for Termination of Arbitral Proceedings and Remedy Under Section 14(2), and rejected the distinction between the termination of a mandate and proceedings under Section 25, and established that the appropriate remedy against a termination order is a recall application followed by a challenge under Section 14(2).

The matter is stemmed from a litigation arose from a 2013 partnership dispute involving "M/s Amritsar Health & Hospitality Services". Following a Section 11 petition, the High Court of Punjab and Haryana appointed a Sole Arbitrator whose fees were to be determined as per the Fourth Schedule of the Arbitration and Conciliation Act, 1996.

While the claim was valued at approximately ₹13.6 crore during the proceedings, the respondent filed a counter-claim of over ₹82.7 crore, due to which the arbitrator revised the total fees to ₹37.5 lakhs. However, the appellants expressed his financial inability to pay the revised amount, leading the arbitrator to terminate the proceedings under Section 38(2) on March 28, 2022.

The appellants, subsequently, filed a second petition under Section 11 of the Act, for the fresh appointment arbitrator, which the High Court dismissed as non-maintainable, prompting the present appeal to the Supreme Court.

The Supreme Court, through a detailed analysis of the UNCITRAL Model Law and the scheme of the 1996 Act, sought to resolve the "interpretative dichotomy" that had plagued the Indian arbitration for decades.

The Apex Court reitrated that Section 32 is the exhaustive and sole provision under which an arbitral tribunal is empowered to terminate proceedings. It further clarified that Sections 25 (default of a party), 30 (settlement), and 38 (deposits) do not contain independent powers of termination but merely describe the circumstances that trigger a termination order under Section 32(2).

By rejecting its earlier view in SREI Infrastructure Finance Ltd. v. Tuff Drilling, which suggested that termination under Section 25(a) was distinct from Section 32 because it did not explicitly mention the termination of the "mandate", the Apex Court observed that the "mandate" of a tribunal is merely descriptive of its authority; therefore, once proceedings are terminated for any reason—be it a final award, withdrawal, or default—the tribunal is rendered functus officio and its authority extinguished across the board.

As for the Fourth Schedule, the Supreme Court affirmed the principles in ONGC v. Afcons (2022), stating that while the schedule is not mandatory, if a tribunal fixes its fees in accordance with this "model fee schedule," parties are legally prohibited from objecting to the fixation. The Court emphasized procedural self-responsibility, noting that a claimant is responsible for the fees of their own claim. If a party's "obdurate stance" or "contumacious conduct" leads to termination, they cannot simply bypass the consequences by seeking a fresh appointment under Section 11.

The Apex Court established a clear hierarchy; as such a party aggrieved by a termination order must first file an application for recall (procedural review) before the arbitrator to correct any patent error. If the recall is dismissed, the appropriate statutory remedy is an application to the Court under Section 14(2) to decide on the legality of the termination of the mandate.

In conclusion, the Apex Court, despite finding the arbitrator's termination order legally sound, exercised its discretion to appoint a substitute arbitrator in this specific case, citing the "flux and uncertainty" of the law at the time the dispute arose.

Coram: Justice J.B. Pardiwala and Justice R. Mahadevan.