G Rajendra Naidu Vs Mohan Das

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 3^RD DAY OF FEBRUARY, 2025

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BEFORE

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THE HON'BLE MR JUSTICE R. NATARAJ WRIT PETITION NO.21162 OF 2022 (GM-CPC)

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BETWEEN:

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G. RAJENDRA NAIDU SON OF (LATE) GOVINDA NAIDU, AGED ABOUT 77 YEARS, AND R/AT # 4, 1^ST STREET, GALIVARI KANDIGI, ARAKONAM VELLORE DISTRICT, TAMIL NADU-632001.

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…PETITIONER

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(BY SRI RAJESH MAHALE, SENIOR ADVOCATE FOR SRI ABHINAY Y. T., ADVOCATE)

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AND:

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MOHAN DAS SON OF MARKONDA NAIDU, Digitally signed AGED ABOUT 54 YEARS, by RENUKA R/AT # 1814/4, Location: High Court Of 13^TH MAIN ROAD, Karnataka ANNA NAGAR WEST, CHENNAI-600 040.

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…RESPONDENT

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(BY SRI DHYAN CHINNAPPA, SENIOR ADVOCATE FOR SRI RAGHU PRAKASH BABU D., ADVOCATE)

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THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF CERTIORARI AND QUASH THE ORDER DATED 14.02.2020 PASSED IN O.S.NO.1552/2013 BY I ADDITIONAL CIVIL JUDGE,

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BENGALURU RURAL DISTRICT, BENGALURU VIDE ANNEXUREE.

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THIS PETITION, COMING ON FOR DICTATING ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR JUSTICE R. NATARAJ

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ORAL ORDER

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The plaintiff in O.S.No.1552/2013, on the file of I Additional Civil Judge, Bengaluru Rural District, Bengaluru is before this Court challenging an order dated 14.02.2020, by which, the Court dismissed the suit as not maintainable.

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(i) A suit in O.S.No.1552/2013 was filed for declaration that the plaintiff is entitled to 50% of the land, which was described in schedule to the suit and to effect partition by metes and bounds. The plaintiff claimed that he and the defendant had contributed equally for purchase of the property described in the schedule to the suit but the sale deed was executed only in the name of the defendant. Later, they entered into a settlement on

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20.11.2005, in terms of which, the defendant admitted that the plaintiff had paid 50% of the sale consideration and it was agreed that the suit property shall be put for sale and the proceeds shall be shared equally between the plaintiff and the defendant. It was also provided that the parties may agree to divide the property into two equal portions. The memorandum of understanding dated 20.11.2005 provided for settlement of disputes between the plaintiff and the defendant through arbitration by Mr. Sadasiva Reddy.

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(ii) The plaintiff purportedly demanded his share in the property but the defendant did not co-operate in finalizing the claim, following which, Arbitrator was requested to enter reference. The Arbitrator entered reference and issued notice to both the parties to appear before him. The defendant addressed a communication dated 19.11.2012 requesting a joint arbitration with one Mr. Rajasekaran, which was accepted by the plaintiff. However, the said Mr. Rajasekaran did not indicate his

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willingness to be an Arbitrator. The defendant therefore stopped appearing before the Arbitrator.

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(iii) Consequently, the Arbitrator in terms of a communication dated 23.08.2013 dropped the proceedings on the ground that there was not even a single sitting for more than 2 years and therefore he directed the parties to work out their remedy before the Civil Court.

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(iv) The plaintiff therefore filed O.S.No.1552/2013 for the aforementioned reliefs. Since the defendant was placed ex parte, after hearing the plaintiff, the suit was set down for judgment. At that stage, the defendant filed an application for setting aside the ex parte decree and also an application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act, 1996’) read with Order VII Rule 11 (d) of the Code of Civil Procedure. It was contended by the defendant that since the Arbitrator had withdrawn from the proceedings, the parties were bound to workout such remedy that are available to them under the Act, 1996 Act and therefore the plaintiff cannot approach the Civil Court.

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(i) The application was contested by the

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plaintiff, who contended that the order passed by the Arbitrator amounted to termination of his mandate under Section 32(c) of the Act, 1996 and therefore the plaintiff cannot be left remediless to workout his rights under the memorandum of understanding dated 20.11.2005. Thus, it was contended that the suit was maintainable.

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(ii) The Trial Court in terms of the impugned order, allowed the application and dismissed the suit as not maintainable in view of Section 8 of the Act, 1996,

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(iii) While holding so, it held that “the Arbitration proceedings has already started by issuing notices to the parties but the plaintiff has filed the present suit holding that Arbitrator has opined to approach the Civil Court for appropriate relief”. In view of the Act, 1996, the Arbitrator cannot give an opinion to approach the Civil Court to the parties and he has to decide the case and in case of any disputes as to the award passed by the Arbitrator, then the parties can approach competent Court and the jurisdiction of the Civil Court is barred in view of Section 8

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of the Act, 1996. As such, there is an express bar to file a civil suit. Hence, in view of Section 8 of the Act, 1996, the suit of the plaintiff is not maintainable as per Section 9 of CPC, as there is a bar to institute suit under Section 8 of the Act, 1996. Both the parties are directed to approach the competent forum. Being aggrieved by the said order, this petition is filed.

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The learned Senior Counsel for the petitioner contends that the proceedings shall be terminated under the circumstances stated in Section 32 of the Act, 1996. He contends that the proceedings would terminate if a final arbitral award is passed or when a claimant withdraws his claim or the parties agree on the termination of the proceedings. He contends that if the arbitral Tribunal finds that the continuation of the proceedings for any other reason becomes unnecessary or impossible, the mandate stands terminated. He contends that in the instant case, the defendant did not appear before the Arbitrator and there were no effective sittings

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and the Arbitrator withdrew from the proceedings as continuation of the proceedings was rendered impossible. Therefore, he contends that once the mandate of the Tribunal came to an end, there is no question of invoking Section 8 of the Act, 1996 to shoot down the suit filed by the plaintiff for the reliefs sought for.

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He further contended that there is a marked

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difference in the termination of the mandate of an arbitrator and termination of the proceedings. He contends that the order dated 23.08.2013 is not termination of the mandate of the Arbitrator but is a termination of the arbitration proceedings itself and therefore, the plaintiff was exempt from invoking Sections 11(6) or 15(2) of the Act, 1996. He also contends that the arbitral proceedings can be terminated by a Tribunal under Sections 25(a), 32(2) or second proviso to Section 38(2) of the Act, 1996. He contends that when the proceedings are terminated under Section 32(2) or under Section 32(1) of the Act, 1996, the lis is put to an end. However, if the proceedings

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are terminated under Section 25(a) or under Section 32(2) or second proviso to sub-section (2) of Section 38 of the Act, 1996, the lis is alive. Therefore, he contends that since the Arbitrator had expressed his helplessness and impossibility to continue, he terminated the proceedings which is referable to Section 25(a) of the Act, 1996. He therefore, contends that the plaintiff cannot be left remediless and since the arbitrator was already named, he was not expected to again invoke second proviso to Section 11 or Section 15 of the Act, 1996.

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6. He further contends that the defendant has

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been protracting the proceedings on one or the other reason, though he had agreed for settlement of dispute in terms of the memorandum of understanding dated 20.11.2005. He contends that the defendant being a person who is in the wrong, cannot plead or take advantage of any situation to deny the claim of the plaintiff. In support of his contention he has relied upon

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the judgment of the Apex Court in the case of Devendra

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Kumar Vs. State Of Uttaranchal & Ors.¹

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He contends that defendant did not contest the

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suit and was placed ex parte. However, when the case was posted for judgment, the defendant filed an application under Order IX Rule 7 of CPC and also an application under Order VII Rule 11(d) read with Section 8 of the Act, 1996 for rejection of the plaint. He contends that the defendant in order to overcome the prohibition contained under Order VIII Rule 1 of CPC, which prescribes an outer limit of 120 days to file the written statement had filed the instant applications. He therefore submits that both the applications filed by the defendant are liable to be rejected. He submits that if the plaintiff is compelled to again pursue the procedure prescribed under Sections 11(6) or 15(2) of the Act, 1996, he would be relegated to the stage when he was in the year 2010 and therefore submits that the impugned order has given a

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1 2013 (9) SCC 363

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wrong handle to the defendant to deny the claim of the plaint on technical grounds.

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(i) Learned Senior Counsel for the defendant submitted that the Arbitration and Conciliation Act, 1996 contemplates (a) termination of the mandate of an Arbitrator under Sections 14 and 15 of the Act, 1996 and (b) the termination of arbitral proceedings under Sections 25, 32 and 38 of the Act, 1996. He contends that Sections 14, 15 and 25 of the Act, 1996 are found in Chapter 3 relating to composition of an arbitral Tribunal and contemplates termination of the mandate of an arbitral Tribunal and the consequent appointment of a substitute Arbitrator. He contends that in addition to the grounds for termination of the mandate of an Arbitrator, Section 14 of the Act, 1996 provides that his stands mandate stands terminated when he withdraws from the office for any reason or if the parties agree for termination of his mandate. In the first case, a substituted Arbitrator can be appointed.

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(ii) He further contends that under Section 25 subsection (a) of the Act, the arbitral proceedings shall stand terminated when the claimant fails to communicate his statement of claim. Hence, he drew a distinction between Sections 14, 15, 25 and Sections 32 and 38 of the Act, 1996 and contended that Sections 32 and 38 of the Act, 1996 are found in chapter VI relating to making of an arbitral award and termination of proceedings. He contends that under Section 32 of the Act of 1996, there are 4 situations when the proceedings can terminate which are, (a) when the Arbitrator submits his award, (b) when the claimant withdraws his claim, (c) when the parties agree on the termination and (d) when the arbitral Tribunal finds continuation of the proceedings has for any other reason become unnecessary or impossible. He contends that under Section 32(3) of the Act, 1996, the mandate of the Tribunal shall terminate. Therefore, he contends that the letter addressed by the Arbitrator dated 23.08.2013 dropping the arbitral proceedings is not an

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order terminating the arbitral proceedings under Section 32(C) of the Act, as it was not mentioned therein that the Arbitral proceedings has either become unnecessary or impossible. Therefore, he contends that Arbitrator has withdrawn from the proceedings and hence it should be deemed that the mandate of the arbitrator has terminated under Section 14 of the Act, 1996. He further contends that even if it is assumed that it is a termination of proceedings under Section 32(c) of the Act, 1996, in terms of Section 32(2) of the Act of 1996, the entire arbitration is not deemed to be closed and the plaintiff was entitled to take recourse to Sections 14 and 15 of the Act, 1996. In support of this, he relied upon the judgment of the Apex Court in the case of Lalitkumar V. Sanghavi (Dead) Through LRS² , he also referred to the judgment of Delhi High Court in the case of PCL Suncon Vs. National Highway Authority of India³ and Dani Wooltex Corporation and others Vs. Sheil Properties Private

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2 2014 (7) SCC 255

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3 2021 SCC Online Del 313

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Limited and Another⁴ . He also referred to the judgment of the Apex Court in the case of Srei Infrastructure Finance Limited Vs. Tuff Drilling Private Limited⁵ and contended that even after the order terminating the proceedings, if sufficient cause is shown, the claim statement can be accepted by the Tribunal by recalling its earlier order. Thus, he contends that the suit at any rate was not maintainable as the plaintiff having once invoked Section 11 of the Act, 1996, he cannot go back to the Civil Court seeking adjudication of his dispute.

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I have considered the submissions of the

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learned Senior Counsel for the plaintiff and learned Senior Counsel for the defendant.

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The Arbitration and Conciliation Act, 1996 is a self constrained code, insofar as it relates to procedure for settlement of disputes through arbitration. Therefore, any issue arising therefrom has to be decided within the ambit

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4 (2024) 7 SCC 1

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5 (2018) 11 SCC 470

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of the Act, 1996 and keeping in mind, the core purpose of the legislation and the interest of the parties. Any interpretation that negates the purpose or frustrates the object should be avoided. In the instant case, it is necessary to record a few relevant facts, lest its importance is forgotten.

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The Memorandum of Understanding dated

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20.11.2005 contained an arbitration clause, which reads

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as follows:

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“The parties herein agree that in the event of misunderstanding or dispute with regard to the schedule property, the same shall be resolved through Arbitration and one Sri. Sadasiva Reddy, Advocate, No.1, Renuka Building, 2^nd main, Gandhinagar, Bangalore 560009 shall be the Arbitrator. If the said Arbitrator is not willing to act as Arbitrator in which event both the parties shall opt such other person to be an Arbitrator and the decision of such Arbitrator/s shall be final and binding on the parties.”

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12. Therefore, the arbitrator was named by the

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parties and hence, were bound by it, until the arbitrator

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withdrew or his appointment was challenged in the manner prescribed under Section 13 of the Act, 1996.

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The petitioner invoked the arbitration clause by

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a notice dated 20.10.2010. Therefore arbitration proceedings is deemed to have commenced on that day, in view of Section 21 of the Act, 1996. This was followed by another notice dated 05.05.2011 requesting the arbitrator to enter reference. The arbitrator addressed a letter dated 12.05.2011 to the respondent herein to meet him in person and discuss with him, so as to enable him to discharge his duty as an arbitrator to resolve the dispute. This was followed by a letter dated 09.11.2012 addressed by the petitioner to the arbitrator, which reads as follows:

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“In spite of my requests and several visits to Bangalore for initiation of Arbitration proceedings regarding the above subject, no action was taken from your end except issuing a notice to Mr. M Mohan Doss, who has not responded to the said notice. Mr. Mohan Doss neither came forward for settlement nor extended his co-operation to resolve the issue.

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Hence, I request you to return the copies of documents which are furnished together with the

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office copy of notice sent to Mr. Mohan Doss, postal receipt and acknowledgement so as to enable me to take necessary steps and to protect my interest in the aforesaid property.”

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When things stood thus, the respondent addressed a letter dated 19.11.2012 to the petitioner herein, offering to agree for arbitration of the dispute, if the petitioner consented to a joint arbitration involving Mr. K Rajasekaran, Advocate from Chennai. This therefore meant that the respondent had agreed the fact that the dispute between the petitioner and respondent was arbitrable and that there was a clause contained in the MoU which provided for resolution of the dispute through arbitration. The petitioner agreed to the aforesaid proposal of the respondent on 19.12.2012, a copy of which was marked to the arbitrator also. However, nothing transpired thereafter and the arbitrator in terms of his communication dated 23.08.2013, stated as follows:

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“Since, disputes have arisen between the parties, I was asked by the first of you by your letter dated 20.10.2010 to act as arbitrator and effect partition of the schedule property and to put you in position of your share. Accordingly, I had

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entered appearance and issued a letter to the parties dated 12.05.2011 and meet me in person so as to enable me to discharge my functions as an arbitrator. However, except the first of you, the second of you did not respond to my notice.

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Thus, the first of you by your letter dated 09.11.2012 demanded the proceedings to be closed and permit the first of you to take necessary steps to protect your interest in the property, which is described in the schedule herein under, mentioned and referred to as the schedule property.

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On this demand the second of you by your letter dated 19.11.2012 had suggested the name of one K. Rajasekaran, advocate as co-arbitrator, which was agreed by the first of you. However, despite my repeated request neither the second of you nor the arbitrator named by you has responded to continue the arbitration proceedings.

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Thus, keeping in view of the fact that more than 2 years have elapsed from the day of initiation of arbitration proceedings and till date not even a single sitting between the parties has taken place, I feel it appropriate to drop the arbitration proceedings initiated in respect of MOU dated 20.11.2005.

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The parties are directed to adjudicate their disputes before the appropriate Civil Court, since, the arbitration proceedings initiated stands hereby dropped”

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Following this, the petitioner filed the suit OS

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No.1552/2013 for declaring that he is entitled to 50% of

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the land and to effect partition by metes and bounds and place him in possession. The respondent was placed exparte and the case proceeded. When it was listed for judgment, the respondent filed an application under Section 8 of the Arbitration and Conciliation Act read with Order VII Rule 11(d) of CPC. Though, this application was opposed by the petitioner herein on the ground that the arbitration proceeding was terminated and therefore, the petitioner did not have any other remedy except approaching the Civil Court, the Trial Court allowed the application in terms of the order dated 14.02.2020, on the ground that the Memorandum of Understanding contained a clause for resolution of disputes through arbitration and that the arbitration proceedings had already begun, but, the arbitrator dropped the proceedings. It held that the arbitrator cannot advise the parties to approach the Civil Court and in view of Section 8 of the Act, 1996, a suit for reliefs is not maintainable before the Civil Court. Hence, the Trial Court dismissed the suit as not maintainable.

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In view of the contentions urged by the learned

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senior counsel for the petitioner and the learned senior counsel for the respondent, the questions that arise for consideration are as follows:

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(i) Whether in the facts of the present case, it could be construed that the arbitrator had withdrawn from the proceedings or whether the proceedings terminated as provided under Section 32(2)(c) and 32(3) of the Act, 1996?

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(ii) If, the arbitrator had withdrawn, whether the proceedings also terminated and whether the petitioner was left without any remedy?

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Before I proceed any further, it is crucial to

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place on record that (a) the respondent had filed an application under Section 8 of the Act, 1996 contending that the suit is not maintainable and it is only proceedings under the Act, 1996 that has to be pursued. (b) the respondent suggested the name of Mr. Rajasekaran, advocate from Chennai, to be the joint arbitrator. These two facts establish beyond doubt that the respondent

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agreed that the dispute is arbitrable and the parties are governed by the arbitration clause contained in the Memorandum of Understanding. Therefore, the respondent is estopped from contending to the contrary in any litigation that may henceforth ensue between them, concerning the Memorandum of Understanding dated 20.11.2005.

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In order to answer, the two questions framed by this Court as stated above, it is necessary to note that under certain circumstances, the mandate of an arbitrator can terminate although the proceedings do not and in some cases the proceedings terminate resulting in terminating the mandate of the arbitrator.

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When an arbitrator is appointed under Section 11 or if, the parties have agreed to a named arbitrator, his appointment can be challenged on the grounds mentioned under Section 12 of the Act, 1996. If, a challenge is made as per the procedure contained under Section 13 of the Act, 1996 and if the arbitrator decides, he can withdraw from his office and in that event, his mandate stands

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terminated. His mandate also stands terminated, if he becomes de jure or defacto unable to perform his functions or for other reasons failed to act without undue delay or if he withdraws from his office or the parties agree to the termination of his mandate. In the former case, a party to the arbitration may apply to the District

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Court to decide on termination of the mandate. In the latter case, the parties are entitled to invoke Section 15(2) of the Act, 1996 and apply for appointment of a substituted arbitrator. In all the above cases, the mandate of an arbitrator stands terminated and not the proceedings. Similarly, if the arbitrator fails to pass an award within the time specified, his mandate stands terminated under Section 29 A(4) of the Act, 1996.

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On the other hand, the arbitral proceedings terminate, if the parties settle the dispute and request the arbitral tribunal to record a settlement in the form of an arbitral award. It would also terminate, when the tribunal passes a final arbitral award or when it passes an order under sub-section (2) of Section 32 of the Act, 1996.

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Subsection 2 of Section 32 provides that the tribunal shall issue an order for the termination of the arbitral proceedings, where (a) the claimant withdraws his claim (b) the parties agree on the termination of the proceedings or (c) the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible. Section 32 (3) of the Act, 1996 provides that subject to Section 33 and sub-section (4) of Section 34, the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings.

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In the case on hand, the arbitrator held that

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the parties had not appeared before him and that not a single sitting of the arbitral tribunal was held and therefore, he dropped the proceedings. The question whether he dropping the proceedings amounted to termination of proceedings under Section 32 (2)(c) of the Act, 1996 is the moot question. The Hon’ble Apex Court in

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Dani Wooltex Corporation, referred supra while considering what amounts to termination of arbitral

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proceedings on the ground that it is unnecessary or impossible held as follows:

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“14. On a conjoint reading of Sections 14 and 15, it is apparent that arbitrator always has the option to withdraw for any reason. Therefore, he can withdraw because of the parties' non-cooperation in the proceedings. But in such a case, his mandate will be terminated, not the arbitral proceedings.

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Therefore, clause (c) of sub-section (2) of Section 32 can be invoked for reasons other than those mentioned in sub-section (1) of Section 32 and clauses (a) and (b) of sub-section (2) of Section 32. Under clause (c), the mere existence of a reason for terminating the proceedings is not sufficient. The reason must be such that the continuation of the proceedings has become unnecessary or impossible. In a given case, when a claimant files a claim and does not attend the proceedings, clause (a) of Section 25 comes into operation, resulting in the learned arbitrator terminating the proceedings. If, after filing a claim, the claimant fails to appear at an oral hearing or fails to produce documentary evidence, it cannot be said that the continuation of proceedings has become unnecessary. If the claimant fails to appear at an oral hearing after filing the claim, in view of clause (c) of Section 25, the learned arbitrator can proceed with the arbitral proceedings. The fact that clause (c) of Section 25 enables the Arbitral Tribunal to proceed in the absence of the claimant shows the legislature's intention that the claimant's failure to appear after filing the claim cannot be a

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ground to say that the proceedings have become unnecessary or impossible.

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Therefore, if the party fails to appear for a hearing after filing a claim, the learned arbitrator cannot say that continuing the arbitral proceedings has become unnecessary. Abandonment by the claimant of his claim may be grounds for saying that the arbitral proceedings have become unnecessary. However, the abandonment must be established. Abandonment can be either express or implied. Abandonment cannot be readily inferred. One can say that there is an implied abandonment when admitted or proved facts are so clinching and convincing that the only inference which can be drawn is of the abandonment. Mere absence in proceedings or failure to participate does not, per se, amount to abandonment. Only if the established conduct of a claimant is such that it leads only to one conclusion that the claimant has given up, his/her claim can an inference of abandonment be drawn. Merely because a claimant, after filing his statement of claim, does not move the Arbitral Tribunal to fix a date for the hearing, it cannot be said that the claimant has abandoned his claim. The reason is that the arbitral tribunal has a duty to fix a date for a hearing. If the parties remained absent, the arbitral tribunal can take recourse to Section 25.”

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The Hon’ble Apex Court concluded at paragraph

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Nos. 25 and 26, which read as follows:

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“25. To conclude:

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25.1. The power under clause (c) of sub-section (2) of Section 32 of the Arbitration Act can be exercised only if, for some reason, the continuation of proceedings has become unnecessary or impossible. Unless the Arbitral Tribunal records its satisfaction based on the material on record that proceedings have become unnecessary or impossible, the power under clause (c) of subsection (2) of Section 32 cannot be exercised. If the said power is exercised casually, it will defeat the very object of enacting the Arbitration Act;

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25.2. It is the Arbitral Tribunal's duty to fix a meeting for hearing even if parties to the proceedings do not make such a request. It is the duty of the Arbitral Tribunal to adjudicate upon the dispute referred to it. If, on a date fixed for a meeting/hearing, the parties remain absent without any reasonable cause, the Arbitral Tribunal can always take recourse to the relevant provisions of the Arbitration Act, such as Section 25;

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25.3. The failure of the claimant to request the Arbitral Tribunal to fix a date for hearing, per se, is no ground to conclude that the proceedings have become unnecessary; and

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25.4. The abandonment of the claim by a claimant can be a ground to invoke clause (c) of sub-section (2) of Section 32. The abandonment of the claim can be either express or implied. The abandonment cannot be readily inferred. There is an implied abandonment when admitted or proved facts are so clinching that the only inference which can be drawn is of the abandonment. Only if the established conduct of a claimant is such that it leads only to one conclusion that the claimant has given up his/her claim can an inference of

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abandonment be drawn. Even if it is to be implied, there must be convincing circumstances on record which lead to an inevitable inference about the abandonment. Only because a claimant, after filing his statement of claim, does not move the Arbitral Tribunal to fix a date for the hearing, the failure of the claimant, per se, will not amount to the abandonment of the claim.

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Therefore, for the reasons recorded above, we concur with the view taken by the learned Single Judge. The appeal is, accordingly, dismissed with no order as to costs. As the learned sole arbitrator has withdrawn from the proceedings, the parties shall take necessary steps to get the substituted arbitrator appointed in accordance with law.”

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Therefore, mere non appearance of the parties before the arbitral tribunal cannot be construed as rendering the proceedings unnecessary or impossible. The proceedings can be construed as having become unnecessary when either the parties have settled the dispute or the subject matter of the arbitration is frustrated. It can become impossible, when the parties to the dispute have not taken steps, for example if one of the arbitrators has been disabled or has expired and no steps are taken for appointment of another arbitrator. It may also arise in a case when a party to the lis has expired and

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no steps are taken to bring the legal heirs of the said party. In the instant case, the arbitrator indicated that he felt it appropriate to drop the arbitration proceedings. The arbitrator was completely oblivious of the fact that termination of the proceedings should result in an award either under Section 32 (1) or under Section 32 (2) of the Act, 1996 so that an aggrieved party can approach the Court under Section 34. By mere dropping of the proceedings, an award did not ensue and therefore, it has to be held that the arbitrator by dropping the proceedings did not mean that he had terminated the proceedings, but had withdrawn from the proceedings. In this regard, it is appropriate to refer to the judgment of the Delhi High Court in the case of PCL Suncon, referred supra where it held that “A plain reading of Section 32 (2) of the Act, 1996 indicates that it, essentially, contemplate situations where it is not necessary to enter an award for settlement of the disputes or where the same becomes impossible. In terms of clause (a) of Section 32 (2) of the Act, 1996 an arbitral proceeding would come to an end with the

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claimant withdrawing his claim”. Viewed from the above standpoint, it is clear that an order which terminates arbitral proceedings on the ground that it has become impossible or unnecessary to continue the arbitral proceedings would not result in an award. The High Court of Delhi referred to the judgment of the Hon’ble Apex Court in the case of Indian Farmers Fertilizer Cooperative Limited V/s. Bhadra Products⁶ , where it was held as follows:

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“The Supreme Court held that said order to be one terminating the arbitral proceedings under Section 32 (2)(c) of the A & C Act as the said order would not qualify as an order under causes (a) or (b) of Section 32 (2) of the A & C Act. The Court proceeded on the basis that Section 32 of the A & C Act is exhaustive and covers all cases of termination of arbitral proceedings. This is implicit in paragraph No. 11 and 12 of the said decision, which reads as under:

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Section 32 of the Act on the other hand deals with the termination of arbitral proceedings. From the language of Section 32, it can be seen that arbitral proceedings get terminated either in the making of the final arbitral award or by an order of the Arbitral Tribunal under sub-section (2). Sub-section (2) provides that the Arbitral Tribunal shall issue an order for the termination of the arbitral

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6 (2018) 2 SCC 534

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proceedings in the three contingencies mentioned in clauses (a) to (c) thereof.

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On the facts of the present case, the applicability of clauses (a) and (b) of Section 32(2) is clearly ruled out and we are of the opinion that the order dated 29-10-2007 by which the Tribunal terminated the arbitral proceedings could only fall within the scope of Section 32, sub-section (2), clause (c) i.e. the continuation of the proceedings has become impossible. By virtue of Section 32(3), on the termination of the arbitral proceedings, the mandate of the Arbitral Tribunal also comes to an end. Having regard to the scheme of the Act and more particularly on a cumulative reading of Section 32 and Section 14, the question whether the mandate of the arbitrator stood legally terminated or not can be examined by the court “as provided under Section 14(2).””

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The Hon’ble Apex Court in the case of Lalitkumar, referred supra was considering a case where the arbitral tribunal terminated the proceedings on the ground that the claimant took no interest in the matter despite many adjournments. The Hon’ble Apex Court held that the termination of the proceedings could fall within the scope of Section 32 (2)(c) of the Act, 1996 as the continuation of the proceedings became impossible. It also held that by virtue of Section 32(3) of the Act, 1996 the mandate of the arbitral tribunal also comes to an end. It

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further held that the question whether the mandate of the arbitrator should legally be terminated or not can be examined by the Court as provided under Section 14 (2) of the Act. Similarly in the case of Srei Infrastructure Finance Limited, referred supra the Apex Court was considering a case where the claimant had failed to file a claim petition within the time permitted. Therefore, the Supreme Court considered the question whether non filing of a claim petition resulted in termination of the proceedings. The Hon’ble Apex Court held that the proceedings do not terminate and that it is always open for the claimant to file an application on principles set out under Order IX Rule 9 of CPC and seek for restoration of the proceedings.

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If the aforesaid is taken into consideration, the only conclusion that can be drawn is that the arbitrator had withdrawn from the proceedings and that his mandate alone was terminated but not the proceedings. If, the arbitrator terminated only his mandate, then it was similar to a case of the arbitrator withdrawing from the

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proceedings. If that be so, the petitioner cannot be rendered remediless. He certainly cannot file a suit before the Civil Court in view of the fact that the proceedings of arbitration have already commenced by issuance of the notice. Therefore, the petitioner having chosen a forum cannot abandon it and now come before the Civil Court. In view of the finding that the arbitrator has withdrawn from the proceedings, the only remedy available to the petitioner is to invoke process prescribed under Section 15 (2) of the Act, 1996.

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In view of the above, the questions framed by this Court are answered as follows:

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“Question No.(i): The arbitrator in the instant case has not terminated the proceedings, but, has withdrawn from the proceedings and therefore, the proceedings do not terminate.”

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“Question No.(ii): The petitioner is entitled to invoke the process of the Court under Section 15(2) of the Act 1996.”

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In view of the above, the following orders are

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passed:

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ORDER

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i. The writ petition is disposed off.

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ii. The arbitral proceedings initiated by the petitioner on 20.10.2010 in respect of the Memorandum of Understanding dated 20.11.2005 entered into between the petitioner and the respondent is not terminated although, the mandate of the arbitrator Sri. Sadasiva Reddy stood terminated.

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iii. As a result the impugned order passed by the Trial Court is upheld.

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iv. Since, the respondent has not disputed the arbitration clause contained in the Memorandum of Understanding dated 20.11.2005 and the arbitrability of the dispute, it is open for the petitioner to invoke Section 15

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