The Supreme Court’s ruling in Harshbir Singh Pannu & Anr. v. Jaswinder Singh & Ors., holding that when an arbitral tribunal terminates proceedings for non-payment of its fees, the order is legally traceable to Section 32(2)(c) of the Arbitration and Conciliation Act, 1996, even if styled as a termination under Section 38(2). The Court clarifies that Section 38(2) empowers the tribunal to demand deposits and, upon default, bring proceedings to an end; however, conceptually such termination still falls within the exhaustive framework of Section 32 governing when arbitral proceedings may be concluded. Once proceedings are terminated, the tribunal’s “mandate” also ceases, meaning the arbitral reference stands concluded and the tribunal cannot simply resume on its own. The Court rejects the maintainability of a fresh Section 11 petition for appointment of a substitute arbitrator in such circumstances, emphasising that allowing parties to restart arbitration after default would undermine procedural self-responsibility and incentivise “tribunal hopping”. Instead, the Court holds that the correct sequence of remedies is: first, move the same tribunal with a recall application seeking revival of the terminated proceedings on limited, procedural grounds; if that is rejected, the aggrieved party must then approach the court under Section 14(2) to challenge whether the tribunal’s mandate has lawfully terminated, at which stage the court may either set aside the termination order and remit the matter to the same tribunal or, if warranted, appoint a substitute arbitrator under Section 15. The judgment synthesises prior precedents such as Lalitkumar V. Sanghavi, SREI Infrastructure Finance Ltd. v. Tuff Drilling, and ONGC v. Afcons Gunanusa, and stresses that termination for non-payment is a serious, final consequence which should deter recalcitrant parties while still preserving a narrowly structured remedial pathway through recall and Section 14(2) proceedings.
Legal provisions relied on
- Arbitration and Conciliation Act, 1996, Section 32(1)–(3)
Statutory text : “32. Termination of proceedings.—(1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub‑section (2). (2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where—(a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute; or (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. (3) 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.”
Explanation: This provision exhaustively lists when arbitral proceedings can end and links such termination to automatic cessation of the tribunal’s mandate.
Relevance: The Court holds that termination for non-payment of fees under Section 38(2) is, in substance, a termination under Section 32(2)(c), attracting the consequences of Section 32(3). - Arbitration and Conciliation Act, 1996, Section 38(1)–(3)
Statutory text: “38. Deposits.—(1) The arbitral tribunal may fix the amount of the deposit or supplementary deposit, as the case may be, as an advance for the costs referred to in sub‑section (1) of section 31A, which it expects will be incurred in respect of the claim submitted to it. (2) The deposit referred to in sub‑section (1) shall be payable in equal shares by the parties, provided that where one party fails to pay his share of the deposit, the other party may pay that share: Provided that where the other party also does not pay the aforesaid share in respect of the claim or the counter‑claim, the arbitral tribunal may suspend or terminate the arbitral proceedings in respect of such claim or counter‑claim. (3) Where, the arbitral tribunal has directed the parties to deposit any amount and any party fails to pay such amount, the arbitral tribunal may refuse to deliver its award and may terminate the proceedings.”
Explanation: Section 38 authorises tribunals to call for deposits for costs, allocate them equally, and suspend or terminate proceedings, particularly if both sides default on payment.
Relevance: The termination for non-payment of arbitral fees in this case was passed invoking Section 38(2); the Supreme Court analyses how this power interacts with Section 32 and what remedies follow. - Arbitration and Conciliation Act, 1996, Section 14(1)–(2)
Statutory text: “14. Failure or impossibility to act.—(1) The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if—(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and (b) he withdraws from his office or the parties agree to the termination of his mandate. (2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub‑section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.”
Explanation: Section 14 provides a court-based remedy where there is a dispute over whether an arbitrator’s mandate has lawfully terminated.
Relevance: The Court holds that if a recall application against termination fails, the aggrieved party must invoke Section 14(2) to challenge whether the tribunal’s mandate has properly ended. - Arbitration and Conciliation Act, 1996, Section 15(1)–(2)
Statutory text: “15. Termination of mandate and substitution of arbitrator.—(1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate—(a) where he withdraws from office for any reason; or (b) by or pursuant to agreement of the parties. (2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.”
Explanation: This section sets out when an arbitrator’s mandate ends (apart from Sections 13 and 14) and how a substitute is to be appointed.
Relevance: The Supreme Court explains that a substitute arbitrator can arise only after the legality of termination is tested under Section 14(2); a fresh Section 11 is not the primary remedy against a termination order. - Arbitration and Conciliation Act, 1996, Section 11(5)–(6)
Statutory text: “11. Appointment of arbitrators.—… (5) Failing any agreement referred to in sub‑section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court. (6) Where, under an appointment procedure agreed upon by the parties,—(a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.”
Explanation: Section 11 empowers courts to constitute tribunals where party-agreed appointment procedures fail.
Relevance: The Court holds that once proceedings are terminated for non-payment, parties cannot circumvent the consequences by using Section 11 to start afresh; instead, they must follow the recall plus Section 14(2) route. - Arbitration and Conciliation Act, 1996, Section 25(a)
Statutory text: “25. Default of a party.—Unless otherwise agreed by the parties, where, without showing sufficient cause,—(a) the claimant fails to communicate his statement of claim in accordance with sub‑section (1) of section 23, the arbitral tribunal shall terminate the proceedings; …”
Explanation: Section 25(a) allows tribunals to terminate proceedings where a claimant defaults in filing the statement of claim without sufficient cause.
Relevance: The judgment relies on SREI Infrastructure to differentiate between terminations under Section 25 and those under Section 32, and to locate an implied power of recall for procedural defaults that is now applied, with limits, to Section 38-related terminations. - Arbitration and Conciliation Act, 1996, Section 31A(1), (3)–(4)
Statutory text: “31A. Regime for costs.—(1) In relation to any arbitration proceeding or a proceeding under any of the provisions of this Act, the Court or arbitral tribunal, notwithstanding anything contained in the Code of Civil Procedure, 1908, shall have the discretion to determine—(a) whether costs are payable by one party to another; (b) the amount of such costs; and (c) when such costs are to be paid. … (3) In determining the costs, the Court or arbitral tribunal shall have regard to all the circumstances, including—(a) the conduct of the parties; (b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; (c) whether the party had made a frivolous counter‑claim leading to delay in the disposal of the arbitral proceedings; and (d) whether any reasonable offer to settle the dispute is made by a party and refused by the other party. (4) The Court or arbitral tribunal may make an order requiring a party to pay—(a) a proportion of another party’s costs; (b) a stated amount in respect of another party’s costs; (c) costs from or until a certain date only; (d) costs incurred before proceedings have begun; (e) costs relating to particular steps taken in the proceedings; (f) costs relating only to a distinct part of the proceedings; and (g) interest on costs from and until a certain date, including a date before judgment.”
Explanation: Section 31A sets a flexible but structured costs regime, including fee allocation and sanctions for frivolous conduct.
Relevance: The Supreme Court ties Section 31A with Section 38 to emphasise that tribunals have tools to manage costs and deposits, and that parties bear procedural responsibility to fund their claims and counterclaims. - Arbitration and Conciliation Act, 1996, Section 39(1)
Statutory text: “39. Lien on arbitral award and deposits as to costs.—(1) Subject to the provisions of sub‑section (2) of section 31, the arbitral tribunal shall have a lien on the arbitral award for any unpaid costs of the arbitration.”
Explanation: Section 39 allows tribunals to retain awards as security for unpaid costs, including fees.
Relevance: The judgment notes that lien, costs-shifting, and deposit mechanisms show that termination of proceedings for non-payment is a drastic measure and part of a calibrated statutory scheme. - Arbitration and Conciliation Act, 1996, Section 37(1)–(2)
Statutory text: “37. Appealable orders.—(1) Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:—(a) refusing to refer the parties to arbitration under section 8; (b) granting or refusing to grant any measure under section 9; (c) setting aside or refusing to set aside an arbitral award under section 34. (2) An appeal shall also lie to a court from an order of the arbitral tribunal—(a) accepting the plea referred to in sub‑section (2) or sub‑section (3) of section 16; or (b) granting or refusing to grant an interim measure under section 17.”
Explanation: Section 37 is an exhaustive appeal provision, and does not include an appeal from orders terminating proceedings.
Relevance: Because termination orders are not appealable, the Court reasons that the remedy lies in recall plus Section 14(2), not in direct appellate or writ supervision. - Arbitration and Conciliation Act, 1996, Section 34(1)
Statutory text: “34. Application for setting aside arbitral award.—(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub‑section (2) and sub‑section (3).”
Explanation: Section 34 allows challenge to awards, not to orders terminating proceedings where no award exists.
Relevance: The Court confirms that where proceedings are terminated without an award, parties cannot use Section 34; hence the specific recall-plus-Section 14(2) pathway is necessary to avoid parties being remediless.
Core legal topic
The core legal topic is “Termination of arbitral proceedings for non-payment of fees, procedural recall, and Section 14(2) remedies under the Arbitration and Conciliation Act, 1996.”
Contextual understanding
Historically, Indian arbitration law moved from a highly court-supervised regime under the 1940 Act to a modern, UNCITRAL Model Law–inspired framework in the 1996 Act, emphasising party autonomy, minimal court intervention, and finality of arbitral processes. Section 32 was designed as an exhaustive termination provision, while Sections 25 and 38 were crafted to ensure that tribunals could penalise procedural default and non-payment of costs, without undermining the overall efficiency and self-responsibility that arbitration demands. The legislative intent, reflected in the 1996 Act and later amendments (including Section 31A), is to encourage expeditious and cost-effective dispute resolution with limited avenues for judicial interference, consistent with Article 14 and Article 21 values of fairness and timely justice as understood in constitutional jurisprudence. Globally, institutional rules such as those of the ICC, SIAC, and HKIAC similarly permit tribunals or institutions to suspend or terminate proceedings when parties do not pay deposits, reflecting a common comparative approach that links access to adjudication with compliance in funding the process, while still preserving tightly structured remedies, usually via internal review or court supervision at the seat.
Judicial interpretation
Indian courts have progressively interpreted the interplay between Sections 25, 30, 32, 38, 14, and 15 to clarify how and when arbitral proceedings may be terminated, what that means for the tribunal’s mandate, and what remedies parties possess when proceedings end prematurely. One key principle is that Section 32 is exhaustive of termination of arbitral proceedings, so that terminations under Sections 25 or 38 are treated, in substance, as falling within Section 32(2), usually clause (c), which deals with situations where continuation of the proceedings has become “unnecessary or impossible”. Another principle is that termination of proceedings, however triggered, normally brings with it termination of the tribunal’s mandate, so that the tribunal is divested of authority in that reference, and parties cannot simply re-approach courts under Section 11 to constitute a fresh tribunal on the same dispute. A third principle is the development of a limited procedural recall power: in SREI Infrastructure Finance Ltd. v. Tuff Drilling Pvt. Ltd., the Supreme Court read into Section 25(a) an implied power to recall an order terminating proceedings for default in filing a statement of claim, provided sufficient cause is shown, thus avoiding undue hardship where termination was occasioned by remediable procedural lapses. Over time, High Courts such as the Delhi High Court in PCL Suncon v. NHAI and Gangotri Enterprises v. NTPC Tamil Nadu, and the Bombay High Court in Neeta Lalitkumar Sanghavi, have applied the Supreme Court’s reasoning in Lalitkumar V. Sanghavi to hold that any order terminating proceedings—whether for abandonment, failure to file claims, or other reasons—is to be analysed under Section 32(2)(c), with the consequence that the tribunal’s mandate is treated as legally terminated and recourse lies under Section 14(2).
In Lalitkumar V. Sanghavi v. Dharamdas Sanghvi (2014), the tribunal terminated proceedings due to apparent lack of interest and failure to prosecute; the Supreme Court held that such an order was an order under Section 32(2)(c), that the mandate ended under Section 32(3), and that the appropriate remedy was an application under Section 14(2), rather than Section 34. The facts involved a claimant whose inaction caused the tribunal to conclude that continuation had become impossible; the Court’s holding was significant as it established that orders ending arbitrations for procedural default are not “awards” and must be challenged via Section 14, thereby ensuring parties are not left remediless while also preserving finality. In SREI Infrastructure Finance Ltd. v. Tuff Drilling Pvt. Ltd. (2018), the tribunal terminated proceedings under Section 25(a) because the claimant repeatedly failed to file its statement of claim; the claimant later sought recall, which the tribunal refused, but the High Court intervened under Article 227 and the Supreme Court upheld a limited recall power, reasoning that Section 25 termination occurs at a pre-award stage and that the phrase “without showing sufficient cause” implies a duty to consider reasons and allows recall where sufficient cause later emerges. The Court emphasised that termination under Section 25 is distinct from Section 32 termination: in the former, the tribunal retains jurisdiction to recall on procedural grounds; in the latter, the mandate ends and there is no recall power, only Section 14(2) recourse.
In ONGC Ltd. v. Afcons Gunanusa JV (2024), the Supreme Court examined Sections 31, 31A, 38, and the Fourth Schedule, holding that arbitrators’ fee fixation must either follow the model Fourth Schedule or be based on party consent, and that arbitrators cannot unilaterally impose binding fees beyond that framework. The case clarified that while Section 38 allows tribunals to require deposits for costs (including fees) and to suspend or terminate proceedings if deposits are not paid, parties may challenge fee determinations that deviate from statutory norms; yet it also reinforced that once fees are validly fixed, parties must bear their share or risk termination. The uploaded judgment further synthesises High Court decisions such as Ms. Chemical Sales Corporation v. A. A. Laxmi Sales, PCL Suncon v. NHAI, Gangotri Enterprises v. NTPC Tamil Nadu, and Neeta Lalitkumar Sanghavi, which collectively underline that termination of arbitral proceedings for non-payment of fees or failure to prosecute is not a mere procedural hiccup but a final step that extinguishes the tribunal’s authority and bars re-litigation through fresh Section 11 petitions. The present Supreme Court decision in Harshbir Singh Pannu builds on this jurisprudence by squarely holding that: (i) the power to terminate for non-payment of fees is conceptually located in Section 32(2), with Section 38 acting as the operational trigger for deposit-related defaults; (ii) termination for non-payment is a calibrated response to parties’ procedural self-responsibility, and cannot lightly be reopened through successive arbitrations; and (iii) the only proper pathway for an aggrieved party is to seek recall before the same tribunal on narrow, procedural grounds and, if unsuccessful, to move the court under Section 14(2), which can then either set aside the termination and remit the matter or appoint a substitute arbitrator under Section 15 where the mandate has lawfully ended. The judgment also acknowledges policy concerns: unrestrained termination can harshly prejudice impecunious parties, but allowing unlimited restarts would squander arbitral resources and encourage strategic default; thus, the Court hints at the need for legislative clarification, including possibly adding a statutory appeal from termination orders in any future Arbitration and Conciliation Bill.
Critical analysis context
The legal framework’s strengths lie in its insistence on procedural self-responsibility, finality of arbitral processes, and a clear remedial route that avoids piecemeal challenges: parties must first attempt recall before the tribunal and then, if needed, invoke Section 14(2). This discourages tactical non-payment and tribunal hopping, preserving efficiency and respecting the tribunal’s authority. However, the law reveals weaknesses and gaps: Section 32 does not expressly mention non-payment of fees as a ground, leaving courts to stretch “unnecessary or impossible” to cover deposit defaults, which may be conceptually strained and arguably harsh on financially weaker parties. The absence of an express statutory appeal against termination orders forces parties into a more cumbersome recall-plus-Section 14 path and may create uncertainty about standards of review, especially where fee disputes intertwine with termination decisions. Judicial trends increasingly prioritise finality and anti-abuse considerations, but they risk under-emphasising access to justice concerns and may benefit from legislative refinements that distinguish wilful default from genuine financial hardship, delineate the scope of recall, and explicitly address fee-related termination in the statutory text.
Conclusion
This Supreme Court ruling cements that termination of arbitral proceedings for non-payment of fees is a serious, final step that falls within Section 32(2)(c), bringing the tribunal’s mandate to an end under Section 32(3). Parties can no longer treat such termination as a mere setback to be circumvented by filing fresh Section 11 petitions; instead, they must pursue a narrowly defined remedial sequence: recall before the tribunal followed, if necessary, by a Section 14(2) application. Practically, counsel must advise clients that fee defaults—whether due to strategic choice or financial constraints—may extinguish the arbitration entirely, with only limited prospects of revival and no direct appeal under Section 37. Arbitrators, in turn, should structure fee orders and deposit schedules transparently, record reasons carefully when terminating, and entertain recall applications within the limits of procedural review recognised by the Supreme Court. Contract drafters may respond by specifying institutional rules, clearer fee arrangements, or security for costs to minimise disputes over deposits and termination risk. Legislatively, the judgment’s suggestions about clarifying termination powers, recall scope, and providing an appeal mechanism against termination orders could inform future amendments or the proposed Arbitration and Conciliation Bill, 2024. Overall, the decision sharpens litigation risk around non-payment of arbitral fees and will likely prompt more disciplined conduct by parties and tribunals in managing costs and procedural timelines.
