By: Priyanshi Bhageria
The author would like to thank Parimal Kashyap, Associate AZB & Partners, Mumbai for his valuable comments and constant guidance on the draft.
Recently, in Vag Educational Services v Aakash Educational Services, the Delhi High Court opined that an arbitral tribunal cannot recall the proceedings if its mandate is terminated under Section 32 of the Arbitration & Conciliation Act, 1996 (hereinafter ‘Act’). In this context, a few questions arise pertaining to recalling of arbitration proceedings after termination. While the Act provides for termination of proceedings under Section 32 and Section 25, it is silent on the power of the arbitral tribunal to recall its orders.
This article presents an analysis of an arbitral tribunal’s power to recall the arbitration proceedings. The analysis highlights the similar power given to the courts in India, the jurisprudence surrounding the arbitral tribunal’s recall powers, and then touches upon some legal conundrums and questions that still remain after an attempt by the judiciary to settle the position in this regard.
Power of Courts to ‘Recall’
It must be noted that the power to ‘recalling’ is different from the power of ‘review’. Power to recall relates to going back to the judgement/order when there is a fault of the party or the party was deprived of making its submissions due to a bonafide or a sufficient cause. On the other hand, the power of ‘review’ relates to a situation when there is an error in the judgement/order of the Court. The courts can therefore go into the merits in the case of the latter.
Order IX Rule 13 of the Code of Civil Procedure empowers courts to recall their orders. According to the said rule, if the court is satisfied that summons were not duly served on the defendant, or that there was sufficient cause for defendant’s failure to appear when the suit was called on for hearing, the Court can pass an order setting aside an ex parte decree that may have been passed against the defendant. The provision does not explicitly refer to the power to recall, however, one can infer it, as while setting aside an ex parte order already passed by the court, the court is ‘recalling’ its order after ‘sufficient cause’ is shown.
Similarly, in the case of High Courts, there is no explicit mention of a power of recall. However, in Municipal Corporation of Greater Mumbai & Anr v Pratibha Industries Ltd & Ors, the Supreme Court held that the power to recall its own order flows from Article 215 of the Indian Constitution. The Court added that High Courts, being courts of record, have the inherent jurisdiction to recall their own orders in the interest of justice.
Does the Arbitral Tribunal have similar power?
As discussed in the previous section, it is settled that the courts have the power to recall their own orders. However, the same is not mentioned for an arbitral tribunal in the Act. Sections 25 and 32 of the Act refer to termination of proceedings. Section 25(a) of the Act states that where the claimant fails to communicate his statement of claim, without showing any sufficient cause, the arbitral tribunal shall terminate the proceedings. Likewise, Section 32 of the Act provides for termination of arbitral proceedings on account of issuance of final award or an order of termination under Section 32(2) of the Act. Section 32(2)(c) of the Act mandates the arbitrator to issue an order of termination of proceedings where the continuation of the proceedings has become ‘unnecessary’ or ‘impossible’. However, the Act nowhere makes reference to recalling of terminated proceedings.
The issue came before various high courts. The High Courts of Bombay & Patna, respectively, in M/s Anuptech Equipments Private v M/S Ganpati Co-Op Housing and Senbo Engineering Ltd v State of Bihar and Ors, held that in the absence of any remedy provided against an order of termination of proceedings passed under Section 25(a) of the Act, a party could seek recourse through a writ petition under Article 226 of the Constitution. The Bombay High Court focused more on the maintainability of writ petition instead of denying the power of recall. Accordingly, it held that a writ is maintainable against a person, authority or a tribunal. While the Patna High Court reasoned that a recall power cannot be interpreted from the provisions of the Act either specifically or by necessary implication. However, the Delhi High Court in the matter of Awasthi Construction Co v Govt of NCT of Delhi and Anr, differed from the abovementioned judgements and held that the arbitrator does not become functus officio after passing an order under Section 25(a) of the Act and can recall the order after sufficient cause is shown. This is because the Act has granted discretion to the arbitral tribunal to terminate the proceedings and the same is not an automatic termination. The view was subsequently followed by the Madras High Court in Bharat Heavy Electricals Ltd v Jyothi Turbopower Services Private Ltd and Ors.
This position was settled by the Apex Court in Srei Infrastructure Finance Ltd v Tuff Drilling Private Ltd. The Court held that when an arbitral tribunal terminates the proceedings under Section 25(a) of the Act, it can recall its order if sufficient cause is shown by the claimant. It affirmed with the judgement of the Delhi High Court and agreed with its rationale. The Court further differentiated between termination under Section 25(a) and Section 32 and observed that recall is possible only under the former as it deals with termination on account of ‘default of the claimant’ while the latter deals with ‘impossibility’ to continue with the arbitral proceedings.
Hence the Supreme Court seems to have settled the position with regard to termination of the proceedings and recall by the arbitrator. However, certain concerns remain unaddressed.
Concerns Remain: Is the SC right?
In the above background, it is important to note that although the Act does not provide for recall when the proceedings are terminated, it does provide for the appointment of a substitute arbitrator. Section 15(2) of the Act states that when the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed.
In Sai Babu v M/s Clariya Steels Private Limited, the Supreme Court decided that a recall is not possible in cases under Section 32 of the Act due to the difference pointed out in the Srei case between Section 32 and Section 25. In the instant case, the Court went on to appoint a substitute arbitrator under Section 15(2) of the Act.
A question arises when the Act already provides for a recourse in the event of termination, did the Supreme Court in the Srei case rightly uphold the power to recall for an arbitral tribunal in the absence of any explicit provision for it.
It must be noted that both Sections 25 and 32 deal with termination of proceedings, which ultimately leads to termination of the mandate of the arbitrator. The Apex Court, in the Srei case has failed to explain why recourse was not taken to Section 15(2) in the event of termination of proceedings under Section 25(a). Although there is a difference between a termination under Section 25(a) and Section 32, it only reinforces the point that a substitute arbitrator must be appointed if case falls under Section 25(a) as the tribunal has voluntarily terminated the proceedings. Hence, seeking substitution of the arbitrator in such a case would be a plausible option as it would not only be under a statutory mandate but also minimise the application of discretion, considering there is no provision for ‘recall’.
Further, the word used in Section 25(a) is ‘shall’ and not ‘may’. Hence, the rationale of the court for providing for power to recall under Section 25(a) is that the tribunal has exercised discretion cannot be a sole reason for giving such a power. The tribunal will have to terminate the proceedings, as the statute clearly mandates for it, if the Claimant, without showing a sufficient cause, fails to file its statement of claim in accordance with the timelines specified in Section 23(1). Although scholars may argue that while determining whether the sufficient cause is shown, the tribunal will exercise its discretion, the same leaves only a little leeway for the tribunal. Termination of proceedings in such an event is not one of the many options available for the tribunal, rather it is the only recourse that the tribunal can take. Therefore, calling it a ‘discretion’ of the court and basing the reasoning only on this argument seems unsustainable.
Coming back to the question that we began the article with – does the scheme of the Act permit an arbitrator to recall its order? Given the situation today, there is nothing much in terms of statutory provisions that can be taken recourse to when recall of terminated proceedings are concerned. Although Section 33 of the Act provides for correction and interpretation of the arbitral award, applicability of the same on order of termination is not properly adjudicated upon at the moment.
Therefore, delegation of the power of recall to the arbitral tribunal, could prove to be a boon but its judicial creation – (i) where a remedy appears to have been available in the Act itself; (ii) where the Act makes no reference to recall powers of the arbitral tribunal and (iii) where rationale is legally untenable, is a controversial verdict to accept in the first place. Further, in absence of mechanism and safeguards available in the event where the tribunal exercises its recall powers, the arbitrariness of the procedure can be an issue which would lead to further litigation between the parties.
Priyanshi is a third-year student pursuing B.A. LL.B. from RMLNLU.