A Brain teaser, recalling of its own order by an Arbitral Tribunal post-termination of the Arbitral Proceedings

An arbitral tribunal cannot recall the proceedings if its mandate has been terminated underSection 32 of the Arbitration & Conciliation Act, 1996 ("the Act"), according to the Delhi High Court's judgment dated October 12, 2022 in the case titled“Vag Educational Services v. Aakash Educational Services”. It should be emphasized, however, that the Supreme Court has determined in a number of rulings that if an arbitral procedure is terminated pursuant toSection 25 of the Act, the terminated proceedings may be recalled.

On September 21, 2019, the respondent, who was the claimant in the abovementioned case, withdrew from the ongoing arbitration, consequently, the arbitral tribunal, ceased to exist. However, the respondent-claimant produced an affidavit claiming that the Counsel's inadvertent withdrawal from the arbitral proceedings was due to Senior Counsel's instructions. That she was instructed to withdraw from another arbitral process that was ongoing before the same arbitral tribunal. The panel properly accepted this affidavit, and in an order dated January 18, 2020, it reinstated the arbitral proceedings.

The impugned order was contested before the Delhi High Court underArticle 227 of the Indian Constitution. Addressing the maintainability of the petition, the respondent contended that the Court cannot rule on an interlocutory ruling made by the arbitral tribunal, citing“SBP & Co. v. Patel Engineering Ltd. andAnr. & Bhaven Construction v. Executive Engineer Sardar Sarovar Narmada Nigam. This argument was dismissed by stating that the specifics of the current case are distinct from those in the referenced cases by the respondent.

The Court also held that if a claimant withdraws its claim, the tribunal's mandate is deemed to have ended under Section 32. Further the Court also pondered on the question ‘Whether an arbitration proceedings can be revived after it has ended’. There are instances wherein the Act allows the arbitral tribunal to rectify mistake apparent in its order or give clarification if requested by parties underSection 33 of the Act. Further Section 34(4) of the Act, also provides that the arbitral tribunal to take steps to eliminate the setting aside of the award passed by it on the opportunity given by the Court. It shall have the power to resume arbitral proceeding or take such action which will eliminate the ground for setting aside the award by the Court, thus in a sense can relook and take steps into award passed by it. However, the present instance did not apply to either of the exigency stated under section 33 of the Act or of the condition stipulated under Section 34 of the Act. As a result, the arbitral tribunal lost its authority to issue any form of order upon the expiration of its term and became functus officio.

The position as stated above is clear, no order recalling the proceedings may be made if the authority of an arbitral tribunal was terminated in accordance with Section 32 of the Act. It's intriguing to note that the termination of an arbitration under Section 25 of the Act is not subject to this legal position. The arbitrator may terminate the arbitration in accordance with section 25 of the Act if the claimant fails to present his statement of claim in accordance with Section 23(1) of the Act without showing good cause.

The Supreme Court noted in the case titled “SREI Infrastructure Finance Limited v. Tuff Drilling Private Limited indicated that case will fall under Section 32 of the Act, only if the proceedings are not discontinued under Section 25(a) of the Act. Section 25 of the Act must be interpreted in light of Section 32 of the Act because it does not contain the language "mandate of the arbitral tribunal shall cease." Therefore, if the claimant can adequately justify it, an order to recall the arbitration proceedings may be obtained after the default is committed in terms of Section 25 of the Act.

Furthermore, in“Sai Babu v. M/S Clariya Steels Private Limited, the SC considered an appeal against a termination decision issued in line with Section 32 of the Act. Due to the distinction made in the SREI case between the authority terminating under Section 32 and the proceedings coming to a close under Section 25 of the Arbitration Act, the Supreme Court concluded that no recall request would be considered in instances covered by Section 32(3) of the Arbitration Act.

The Act grants the arbitral tribunal specific powers to enable it to do its duties effectively and with the least amount of court involvement. The obvious disparity between termination orders issued under Sections 25 and 32 of the Act, however, creates a barrier to the arbitral tribunal's ability to decide on its actions, particularly in regard to its "mandate." It has been remarked that by refusing to permit recall of an arbitral procedure once its mandate is ended under Section 32 of the Act, the Courts have taken an unjustifiably inflexible stance.

The arbitral tribunal is prohibited from recalling its proceedings even if there are legitimate and compelling reasons to do so by the above-specified "strict" approach. Even in the Vag Educational case, the Court decided that the arbitral tribunal process could not be recalled notwithstanding the counsel's genuine error of signing the incorrect withdrawal document. This decision was taken in accordance with precedence. Consequently, the party suffered unwarranted harm as a result of its Counsel's accidental error.

Additionally, Section 32(2)(c) of the Act stipulates that the arbitral tribunal may end its proceedings if it determines that doing so would be unnecessary and impractical.

Furthermore, the Apex Court misconstrued the SREI Case even while it correctly ruled that the Act's provisions should be interpreted with purpose. The Court invalidates all justifications for the parties' choice of arbitration as their method of dispute settlement by refusing to permit the recall of the arbitral proceeding. A purposeful interpretation of the Act would have permitted the arbitral panel to end its proceedings without giving them a final resolution. The adjudicatory body should not ignore the issue if a challenge is brought against such an order before an arbitral tribunal or a court of law. It should permit the recall of arbitration proceedings if it determines that there are good grounds for doing so.

Although the Delhi High Court's ruling on the restoration of arbitral tribunal proceedings is in line with previous case law, the Court could have taken the opportunity to opine on the position of recalling in certain limited cases under Section 32 of the Act, which would have been in consonance with the principle of least involvement of the Court, and giving competence to the arbitral tribunal to decide for itself in peculiar situation sometimes faced by the tribunal as in the abovementioned case.

By - Devesh Bhatia & Shirin Suri