Isabella Mariam

The High Court of Bombay Single Bench of Justice Somasekhar Sundaresan held that an arbitrator who indefinitely halted the proceedings on the basis of unpaid, unilaterally revised fees and thereafter failed to hold hearings must be treated as having stepped away from the assignment under Section 15 of the Arbitration Act. The Court also concluded that the mandate had lapsed independently because the statutory period for completion expired under Section 29A, making the appointment of a replacement necessary. The dispute concerns claims of financial loss arising from a commercial arrangement between a supplying party and a distributing party. The Court directed an online dispute-resolution institution to appoint a new sole arbitrator, who will continue the matter from its present stage with both sides sharing initial costs.

The dispute arose from a Business Agreement between a supplying entity and its distributing counterpart. The agreement contained an arbitration clause, and disputes were referred to a sole arbitrator who entered reference in September 2022. The claimant filed its statement alleging financial loss caused by the opposing party. Interim relief was granted, including directions to freeze certain bank accounts. The arbitrator recorded repeated non-attendance by the respondent, imposed costs, and noted failure to file the statement of defence within the stipulated timelines.

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From January to April 2023, the arbitrator issued further directions regarding fees, costs, and filing requirements. The respondent eventually filed its defence in April 2023 along with a request to withdraw earlier cost orders. Shortly thereafter, the arbitrator suspended the proceedings, stating that continuation would depend on payment of amounts he considered due toward increased fees.

Between May and August 2023, the claimant raised objections to the revised fee demands, sought online hearings because the arbitrator had relocated, and later requested consent from the opposing party for substitution of the arbitrator. The respondent declined to consent and refused to bear additional fees. The claimant then approached the Court invoking provisions of the Arbitration Act, including Sections 11, 14, 15 and 29A, contending that the arbitrator had ceased to act and that the mandate stood terminated.

The Court examined the statutory framework governing termination of an arbitrator’s mandate and stated that Section 15(1)(a) allows termination where an arbitrator “withdraws from office for any reason” and that Section 14(1)(a) addresses situations where an arbitrator “fails to act without undue delay.” It noted that Section 29A imposes strict timelines for completion of pleadings and proceedings, failing which the mandate automatically ends unless extended.

Reviewing the factual record, the Court observed repeated delays in filing the statement of defence and noted the arbitral tribunal’s order recording that the defence was filed belatedly but was not acted upon because the tribunal had suspended the proceedings. It then captured the statutory consequence of such delay, holding that “Even assuming the Statement of Defence were accepted, twelve months from that date would be April 14, 2024 and the mandate would stand expired by reason of Section 29A of the Act. While there may have been an impasse since then, with a war of words between the arbitrator and the Petitioner making matters worse, and the arbitrator neither resigning nor conducting the proceedings, evidently, the mandate stood terminated by operation of law.”

The Court noted that despite dissatisfaction over fee-related issues, the arbitrator chose neither to resign nor to proceed with the arbitration, thereby leaving the matter “in suspended animation.” It also referred to the arbitrator’s own statement that the tribunal was “in no position to carry out arbitration proceedings at its own costs” and that the “quoted price of the arbitration being too low in the beginning itself” made it difficult to continue, indicating conduct consistent with withdrawal from office.

The Court then relied on the Supreme Court’s judgment in ONGC v. Afcons and reproduced the principle that “Arbitrators do not have the power to unilaterally issue binding and enforceable orders determining their own fees. A unilateral determination of fees violates the principles of party autonomy and the doctrine of the prohibition of in rem suam decisions, i.e., the arbitrators cannot be a judge of their own private claim against the parties regarding their remuneration.”

Applying that principle, the Court held that “the Learned Arbitral Tribunal's unilateral revision of the fees could at best a proposal. When the parties do not accept it, the Learned Arbitral Tribunal could well resign and refuse to entertain the arbitration. To hold on to it and also not conduct it, would inexorably lead to the time ticking under Section 29A to have its eventual inexorable effect.”

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The Court allowed the petition and disposed of in the following terms:

• “Presolv360, an independent online dispute resolution institution is directed to appoint a sole arbitrator to adjudicate upon the disputes and differences between the parties arising out of and in connection with the Agreement referred to above and administer the same.”

• “A copy of this Order will be communicated to Presolv360 by the Advocates for the Petitioner within a period of one week from today.”

• “Presolv360 being an ODR institution, all proceedings will be conducted online through electronic mode, unless otherwise agreed between the appointed Arbitrator and the parties, with appropriate notification to the administration of Presolv360.”

• “The administration of Presolv360 is requested to appoint an independent arbitrator in compliance with the Act and its own rules consistent with the Act as soon as possible and in any event within a period of two weeks from receipt of a copy of this Order.”

• “All arbitral costs and fees of the arbitration shall be borne by the parties equally in the first instance, and shall be subject to any final Award that may be passed by the Tribunal in relation to costs.”

• “The seat of the arbitration shall be deemed to be the same as the seat discernible from the Agreement while the arbitration shall primarily be conducted online.”

“The substituted Arbitrator shall take over the proceedings from the stage at which they are, and continue with the proceedings.”

Advocates Representing the Parties

For the Petitioners: Mr. Aliabbas Delhiwala a/w Ms. Ankita Karmokar i/b L.R. & Associates
For the Respondents: Mr. Makarand M. Kale

Case Title: S.S. Trading Company Limited v. S.N.C. Trading Company
Neutral Citation: 2025:BHC-AS:49194
Case Number: Arbitration Petition No. 196 of 2024
Bench: Justice Somasekhar Sundaresan