Arbitrator Terminating The Arbitral Proceedings Under Section 25(A) Of The A&C Act, Challenge Maintainable Under Article 227 Of The Constitution Of India: Delhi High Court

The Single Bench of Justice C. Hari Shankar reiterated that the Arbitral Tribunal has the power to recall the order passed by it under Section 25(a) of the A&C Act terminating the arbitral proceedings.

A sole arbitrator appointed to adjudicate the disputes between the parties, the Union of India and Indian Agro Marketing Co Operative Ltd, passed an order terminating the arbitral proceedings before her. The arbitrator held that the Union of India had defaulted in filing statements of claim despite repeated opportunities granted to it. The petitioner/Union of India filed applications before the sole arbitrator for recall of the said order, but the arbitrator did not pass any order on the said applications.

The Union of India filed writ petitions before the Delhi High Court under Article 227 of the Constitution of India to set aside the order passed by the sole arbitrator, or in the alternative sought directions to the arbitrator to pass an order on the applications filed by the petitioner seeking recall of the orders.

The petitioner/Union of India submitted before the High Court that the orders were passed by the arbitrator terminating the arbitral proceedings under Section 25(a) of the A&C Act, against which there is no alternate remedy available to the petitioner. Thus, the petitioner contended that petitions under Article 227 were maintainable against the order of the arbitrator.

The Union of India averred that as per the law laid down by the Supreme Court in the case of Srei Infrastructure Finance Ltd. versus Tuff Drilling Pvt. Ltd. (2017), the Arbitral Tribunal is bound in law to consider the petitioner's application for recall of the order passed under Section 25(a) of the A&C Act.

Section 25(a) of the A&C Act provides that where the claimant fails to communicate his statement of claim within the stipulated time, the Arbitral Tribunal shall terminate the proceedings.

The High Court observed that the A&C Act does not provide any remedy against an order passed under Section 25(a) of the A&C Act, either under Section 34 or Section 36, or under any other provision of the A&C Act.

The Court held that since no alternate remedy was available to the petitioner to challenge the order of arbitrator passed under Section 25(a), the petitions under Article 227 of the Constitution were ex facie maintainable.

The Court noted that in the case of Srei Infrastructure Finance Ltd. versus Tuff Drilling Pvt. Ltd. (2017), the arbitrator had terminated the arbitral proceedings under Section 25(a) on the ground of failure by the claimant in filing the statement of claim. The Court observed that the Supreme Court had held that where the claimant was able to show sufficient cause for failing to file the statement of claim within the stipulated time, Arbitral Tribunal could not terminate the proceedings under Section 25(a). The Supreme Court had ruled that if there was a sufficient cause shown by the claimant, the Arbitral Tribunal had the power to recall the order passed by it under Section 25(a) of terminating the arbitral proceedings.

The High Court thus directed the sole arbitrator to consider and take a decision on the petitioner's applications, seeking recall of the orders passed by the arbitrator.

The Court thus partly allowed the writ petitions.

Case Title: Union of India versus Indian Agro Marketing Co Operative Ltd

Citation: 2022 LiveLaw (Del) 423

Dated: 02.05.2022 (Delhi High Court)

Counsel for the Petitioner: Mr. Rakesh Kumar, CGSC for UOI

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