0

Failure to Request Hearing Date does not Automatically Terminate Arbitration Proceedings: Supreme Court

Case Name: Dani Wooltex Corporation & Ors v. Sheil Properties Pvt Ltd. & Anr 

Case No.: Civil Appeal No.6462 of 2024 

Dated: May 16, 2024 

Quorum: Justice Abhay S Oka and Justice Pankaj Mithal 

FACTS OF THE CASE: 

T The first appellant is a partnership company called Dani Wooltex Corporation, and it possessed some land in Mumbai. Sheil Properties, a private limited company, was the initial respondent and was involved in the development of real estate. Another limited corporation in the consumer goods industry is the second respondent, Marico Industries, or simply “Marico.”  

Under the terms of the Development Agreement, dated August 11, 1993 (referred to as “the Agreement”), Sheil was allowed to develop a portion of the first appellant’s property. The first appellant consented to sell Marico another piece of its property through the execution of a Memorandum of Understanding (MOU) between the two parties. Marico was granted a specific amount of FSI/TDR as per the terms of the MOU. 

Marico published a notice informing the public that objections were welcome. Sheil responded with one, stating that the Agreement would govern any business dealings between Marico and the first appellant.  

Due to the disagreement between Sheil and the first appellant, Sheil filed a lawsuit (Suit No. 2541 of 2006) demanding the particular performance of the MOU as amended by the purported consent provisions. In the aforementioned lawsuit, Marico and the first appellant were parties. Additionally, Sheil was named as a party defendant in a lawsuit that Marico filed (Suit No. 2116 of 2011) against the first appellant in this case.  

The learned Single Judge overturned the Arbitral Tribunal’s order to terminate the proceedings and instructed the arbitral tribunal to carry on with the proceedings by means of the contested judgement and order. It is noteworthy to mention that I.A. no. 180843 of 2023 indicates that on July 26, 2023, the experienced lone arbitrator notified the parties of his unwillingness to continue serving as the sole arbitrator. 

 LEGAL PROVISIONS:  

  • Section 32(2)(c) of the Arbitration Act- conferred a residual authority on the Arbitral Tribunal to end the proceedings in the event that it determines that their continuance is no longer necessary or feasible for any other reason. 

 CONTENTIONS OF THE APPELLANTS: 

The learned counsel for the appellants fiercely and strongly argued that In the case of Kothari Developers v. Madhukant S. Patel, the learned Single Judge of the High Court of Judicature at Bombay held that the Arbitral Tribunal was entitled to invoke its power under Section 32(2)(c) of the Arbitration Act if it is proven that the proceedings have become unnecessary due to the claimant’s inaction.  

This was brought up by the learned senior counsel appearing on behalf of the first appellant. He argued that the Arbitration Act’s Section 14 does not give the Court the authority to review the Arbitral Tribunal’s ruling, particularly when that ruling is supported by the evidence and a reasonable argument.  

The experienced senior attorney went on to say that the Arbitral Tribunal made an effort to guarantee Sheil’s attendance at Marico’s arbitration. Following the Marico case ruling, Sheil opted not to attend the Arbitral Tribunal sitting on March 11, 2020.  

It is argued that no information is in the record indicating that Sheil’s claim arbitration was scheduled to take place following Marico’s arbitration, nor is there any evidence supporting that allegation. In his submission, he stated that the Arbitral Tribunal’s factual findings on Sheil’s position could not be overturned by the Court. 

 CONTENTIONS OF THE RESPONDENTS: 

The arguments put forward by the learned counsel for the appellants were sharply and passionately rejected by the learned counsel for the respondents that the authority granted by Section 32(2)(c) of the Arbitration Act cannot be used unless a clear determination is made that it is either impractical or impossible to carry on with the procedures.  

The learned senior counsel argued that the Court must consider the legality of the Arbitral Tribunal’s termination of its mandate in order to exercise its authority under Section 14(2) of the Arbitration Act. The Court’s decision in the case of Lalitkumar V. Sanghavi & Anr. v. Dharamdas V. Sanghavi & Ors served as support for this claim. He argued that it is not possible to infer desertion.  

He argued that because the lawsuits Marico and Sheil brought were distinct from one another, the arbitral processes were also distinct. Sheil and Marico have not filed a claim for relief from one another. 

But because the two referrals had similar questions about whether the agreement requirements could be enforced, the parties decided to move forward with Sheil’s reference after Marico’s reference was resolved. The sole arbitrator in the Sheil reference did not offer any more instructions following the preliminary directives that were given on November 8, 2011, concerning the submission of pleadings, he further submitted. 

 COURT’S ANALYSIS AND JUDGMENT: 

The court said that the Arbitration Act’s chapter V covers provisions pertaining to the conduct of arbitral procedures, as noted by the court. Under subsection (1) of Section 23, the Arbitral Tribunal has the authority to set the deadlines for filing pleadings in the event that the parties cannot agree on the dates for filing statements of claim and defence.  

It was further observed that Section 23, subsection (4), which became effective on October 23, 2015, stipulates that the filing of pleadings, or statements of claim and defence, must be finished within six months of the date on which the learned arbitrator—or all of the learned arbitrators, as the case may be—receive written notice of their appointment. 

The authority granted by clause (c) of subsection (2) of Section 32 of the Arbitration Act may only be used in the event that it is no longer necessary or feasible to continue the proceedings for whatever reason.  

The authority granted by clause (c) of subsection (2) of Section 32 cannot be used unless the Arbitral Tribunal certifies, on the basis of the evidence on file, that the proceedings are no longer required or feasible. The fundamental purpose of passing the Arbitration Act will be defeated if the aforementioned power is used carelessly. 

The court has also examined that even if the parties to the proceedings do not desire a hearing, it is the Arbitral Tribunal’s responsibility to schedule one. The Arbitral Tribunal’s responsibility is to make a decision regarding the dispute that has been referred to it. In the event that parties fail to show up for a scheduled conference or hearing without a valid reason, the Arbitral Tribunal retains the right to invoke pertinent provisions of the Arbitration Act, including Section 25.  

It is difficult to deduce the abandonment. When stated or proven facts are so clear-cut that the only conclusion that can be made is that there has been an abandonment, there is an implied abandonment. An inference of abandonment can only be made if a claimant’s documented behaviour is such that it points exclusively to the conclusion that the claimant has given up on the matter. Even in cases where it is to be inferred, there must be solid facts on file that support the conclusion that the person was abandoned.  

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.” 

Judgment reviewed by Riddhi S Bhora. 

Click to view judgment.