Termination Proceeding in Aribitration
Termination Proceedings in Arbitration: Detailed Explanation
What is Termination of Arbitration Proceedings?
Termination of arbitration proceedings refers to the legal ending of the arbitral process before the final award is rendered or after an award is made, either by agreement, procedural decision, or as a consequence of certain events or rulings. Termination can happen at various stages of arbitration for different reasons, such as settlement, withdrawal, jurisdictional issues, or default.
Grounds and Modes for Termination of Arbitration Proceedings
Arbitration proceedings can be terminated through:
Settlement or Agreement of the Parties
Withdrawal or Discontinuance by Claimant
Death or Insolvency of a Party
Juridical/Procedural Grounds
Award by the Tribunal
Failure to Constitute Tribunal
Declaration of Arbitration as Terminated by Tribunal
1. Termination by Settlement (Section 30(1) of Arbitration and Conciliation Act, 1996)
Parties can agree to settle the dispute at any point during arbitration.
Once settlement is reached, parties inform the arbitral tribunal, which then terminates the proceedings.
The tribunal may record the settlement in the form of a Consent Award, which is enforceable like an arbitral award.
Case Law:
Union of India v. Hybrid Electricals (AIR 1993 SC 2338)
The Supreme Court recognized that an arbitral tribunal must record the parties’ settlement as an award if requested.
The consent award holds the same binding effect as a regular arbitral award.
2. Termination by Withdrawal of Claimant (Section 30(2))
The claimant may withdraw the claim or discontinue arbitration.
The tribunal may terminate proceedings but can require claimant to compensate the other party for expenses or damages caused.
Case Law:
S.B.P. and Co. v. Patel Engineering Ltd. (2005) 8 SCC 618
The Court ruled that withdrawal by claimant is permissible, but the tribunal may impose costs or damages on the claimant for unjustified withdrawal.
This protects the respondent from unfair loss.
3. Termination due to Death or Insolvency (Section 32)
Arbitration can terminate if a party dies or becomes insolvent, unless the dispute survives such event (e.g., involving legal heirs or successors).
Tribunal may discontinue if continuation is not legally or practically possible.
4. Termination by Juridical Grounds
If the tribunal finds it lacks jurisdiction, it may terminate proceedings.
If the dispute is settled outside arbitration and parties agree to terminate, tribunal may do so.
Case Law:
M.C. Chockalingam v. State of Tamil Nadu AIR 1978 SC 1237
Termination held valid if tribunal does not have jurisdiction or if parties no longer want to arbitrate.
5. Termination on Failure to Constitute Tribunal (Section 11)
If the arbitral tribunal cannot be constituted within the prescribed time, the proceedings may terminate or the court may intervene.
Courts can appoint arbitrators if parties fail to agree.
6. Termination after Award (Section 31)
Arbitration proceedings naturally terminate after the final award is made.
Once the award is published, the tribunal’s role ends, but enforcement or challenge may follow.
Important Principles Related to Termination:
Party Autonomy: Parties have the right to end arbitration by mutual consent or withdrawal.
Protecting Respondent’s Interest: Tribunal may award costs or damages on withdrawal or discontinuance.
Judicial Supervision: Courts can intervene if tribunal fails to constitute or lacks jurisdiction.
Confidentiality & Finality: Arbitration encourages finality; termination procedures respect this principle.
Landmark Case Law on Termination in Arbitration
S.B.P. and Co. v. Patel Engineering Ltd. (2005) 8 SCC 618
Clarified claimant’s right to withdraw and tribunal’s power to impose costs.
Reaffirmed party autonomy with protection for respondent.
Union of India v. Hybrid Electricals (1993) AIR SC 2338
Consent awards on settlement are binding and enforceable.
Settlement is a valid mode of termination.
Shri Ram Sarup Gupta v. Union of India AIR 1964 SC 381
Arbitration can terminate on death of a party if the claim does not survive.
Court emphasized the need for continuity or legal succession.
National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd. (2009) 1 SCC 267
Court intervened due to failure in constituting tribunal, holding that delay may lead to termination or fresh appointment.
Summary of Termination Proceedings in Arbitration
| Mode of Termination | Relevant Provision | Effect |
|---|---|---|
| Settlement/Consent Award | Section 30(1) | Binding, enforceable award |
| Withdrawal by Claimant | Section 30(2) | Tribunal may terminate, impose costs/damages |
| Death/Insolvency of Party | Section 32 | Termination unless legal successors continue |
| Lack of Jurisdiction | Judicial Principles | Tribunal may terminate |
| Failure to Constitute Tribunal | Section 11, Court Intervention | Possible termination or appointment by court |
| After Final Award | Section 31 | Natural termination |
RELATED Blog
0 comments