Page 1

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION CIVIL  APPEAL NO. 3148 OF 2014

[Arising out of Special Leave Petition (Civil) No.4267 of  2013]

Lalitkumar V. Sanghavi (D) Th. LRs Neeta Lalit Kumar  Sanghavi & Anr.        …Appellants

Versus

Dharamdas V. Sanghavi & Ors. …Respondents

J U D G E M E N T

Chelameswar, J.

1. Aggrieved  by  an  order  dated  24th September,  2010  in  

Arbitration Application No. 44/2008 on the file of the High Court  

of Bombay, the instant SLP is filed by the two children of the  

applicant (hereinafter referred to as “the original applicant”) in  

1

Page 2

the above mentioned application.  The SLP is filed with a delay  

of 717 days.  Therefore, two IAs came to be filed, one seeking  

substitution  of  the  legal  representatives  of  the  deceased  

appellant and the other for the condonation of delay in filing the  

SLP.

2. The 1st respondent is the brother of the original appellant  

and the other respondents are the children of another deceased  

brother of the original applicant.  Respondents are served and  

they have contested both the IAs.   

3. Accepting the reasons given in the applications, we deem  

it appropriate to condone the delay in preferring the instant SLP  

and also substitute the original appellant (since deceased) by  

his  legal  representatives.   Both  the  IAs  are  allowed.   Delay  

condoned.  Substitution allowed.  Leave granted.

4. The  undisputed  facts  are  that  the  parties  herein  are  

carrying  on  some  business  in  the  name  and  style  of  a  

partnership  firm constituted  under  a  partnership  deed dated  

20th October  1962.   The  partnership  deed  provided  for  the  

2

Page 3

resolution of the disputes arising between the partners touching  

the affairs of the partnership by means of an arbitration.  In  

view of certain disputes between the partners (details of which  

are  not  necessary  for  the  present  purpose)  the  original  

applicant  filed  arbitration  application  No.263/2002  under  

Section  11  of  the  Arbitration  and  Conciliation  Act,  1996  

(hereinafter referred to as ‘the Act’, for short) before the Chief  

Justice of the Bombay High Court which was disposed of by an  

order  dated  21st February,  2003  by  a  learned  Judge  of  the  

Bombay High Court, who was the nominee of the Chief Justice  

under  the  Act.   The  relevant  portion  of  the  order  reads  as  

follows:

“Considering  that  applicant  respondent  No.1  have appointed two arbitrators, Justice H. Suresh,  Retired  Judge  of  this  Court  is  appointed  as  presiding  arbitrator.   The  arbitral  tribunal  so  constituted to decide all disputes including claims  and counter claims of the parties arising from the  controversy.  In  case  respondents  do  not  cooperate with the matter of appointment of third  arbitrator,  applicant  initially  to  bear  the  made  part  of  final  award  in  the  position,  application  disposed of accordingly.”

5. By  his  order  dated  29th October,  2007,  the  presiding  

arbitrator  informed  the  appellants  that  the  arbitration  

3

Page 4

proceedings  stood  terminated.   The  relevant  portion  of  the  

order reads as follows:

“The matter  is pending since June, 2003 and  though the meeting was called in between June,  2004 and 11th April,  2007, the Claimant took no  interest in matter.  Even the fees directed to be  given is not paid.

In  these  circumstances  please  note  that  the  arbitration  proceedings  stands  terminated.  All  interim  orders  passed  by  the  Tribunal  stand  vacated.”

6. In  response  to  the  said  communication,  the  original  

applicant, through his lawyer, communicated to the arbitrators  

and also the advocates of the respondents herein that the order  

of the arbitrators dated 29th October, 2007 does not reflect the  

true factual position of the matter.  The relevant portion of the  

letter reads as follows:

“The  Hon’ble  Arbitral  Tribunal  is  therefore  requested to kindly revoke the said letter dated  29th October  2007  and  modify  the  same  and  kindly  record  that  the  proceedings  are  being  terminated  due  to  non  compliance  of  orders/directions as also non payment of fees and  charged by the Respondent No.1”

7. On  17.1.2008,  the  original  applicant  filed  arbitration  

application  No.44/2008  with  prayers  (insofar  as  they  are  

relevant for the present purpose) as follows:

4

Page 5

a) this Hon’ble Court be pleased to appoint some  fit  and  proper  person  as  arbitrator  for  entering  reference and adjudicating upon the disputes in  respect of M/s. Sanghavi Brothers.

b) the  Respondent  No.1  to  4  be  directed  to  deposit  a  sum  of  Rs.1,00,000/-  towards  costs  of  arbitration and fees of the Arbitrator.”

That  application  came  to  be  dismissed  by  the  order  under  

appeal in substance holding that such an application invoking  

Section 11 of the Act is not maintainable - with an observation  

that “the remedy of the application is by filing a writ petition  

not an application under Section 11 of the Act”.

8. Within a couple of weeks thereafter, the original applicant  

died on 7.10.2012.  The question is whether the High Court is  

right in dismissing the application as not maintainable.  By the  

judgment under appeal, the Bombay High Court opined that the  

remedy of the appellant lies in invoking the jurisdiction of the  

High Court under Article 226 of the Constitution.   In our view,  

such a view is not in accordance with the law declared by this  

Court in  S.B.P. & Co. v.  Patel Engineering Ltd.,  (2005) 8  

SCC 618. The relevant portion of the judgment reads as under:

5

Page 6

“45.   It  is  seen  that  some  High  Courts  have  proceeded on the basis that any order passed by  an  arbitral  tribunal  during  arbitration,  would  be  capable of  being challenged under  Article  226 or  227 of the Constitution of India. We see no warrant  for  such  an  approach.  Section  37  makes  certain  orders  of  the arbitral  tribunal  appealable.   Under  Section 34, the aggrieved party has an avenue for  ventilating  his  grievances  against  the  award  including  any  in-between orders  that  might  have  been passed by the arbitral  tribunal  acting under  Section 16 of the Act. The party aggrieved by any  order of the arbitral tribunal, unless has a right of  appeal  under  Section  37  of  the  Act,  has  to  wait  until  the  award  is  passed  by  the  Tribunal.  This  appears to be the scheme of the Act. The arbitral  tribunal  is  after  all,  the  creature  of  a  contract  between  the  parties,  the  arbitration  agreement,  even though if the occasion arises, the Chief Justice  may constitute  it  based on the contract  between  the parties. But that would not alter the status of  the arbitral tribunal. It will still be a forum chosen  by  the  parties  by  agreement.  We,  therefore,  disapprove  of  the stand adopted by some of  the  High Courts that any order passed by the arbitral  tribunal is capable of being corrected by the High  Court under Article 226 or 227 of the Constitution  of India. Such an intervention by the High Courts is  not permissible.”

That need not, however, necessarily mean that the application  

such as the one on hand is maintainable under Section 11 of  

the Act.  

9. Learned  senior  counsel  for  the  appellants,  Shri  Shyam  

Divan,  submitted that  if  application under Section 11 is  also  

held not maintainable, the appellants would be left remediless  

6

Page 7

while  their  grievance  subsists.   On  the  other  hand,  learned  

senior counsel for the respondents Shri  C.U. Singh submitted  

that  the  appellant’s  only remedy is  to  approach the  arbitral  

tribunal  seeking  a  recall  of  its  decision  to  terminate  the  

arbitration proceedings.

10. Chapter  III  of  the  Act  deals  with  the  appointment,  

challenge to the appointment and termination of the mandate  

and substitution of the arbitrator etc.  Section 11 provides for  

the  various  modes  of  appointment  of  an  arbitrator  for  the  

adjudication of the disputes which the parties agree to have  

resolved by arbitration.  Broadly speaking, arbitrators could be  

appointed either by the agreement between the parties or by  

making an application to the Chief Justice of the High Court or  

the  Chief  Justice  of  India,  as  the  case  may  be,  as  specified  

under  Section  11  of  the  Act.   Section  12(3)  provides  for  a  

challenge to the appointment of an arbitrator on two grounds.  

They are - (a)  “that circumstances exist” which “give rise to  

justifiable doubts as to” the “independence or impartiality” of  

the  arbitrator;  (b)  that  the  arbitrator  does  not  “possess  the  

7

Page 8

qualification agreed to by the parties”.  Section 14 declares that  

“the  mandate  of  an  arbitrator  shall  terminate”  in  the  

circumstances specified therein.  They are-

“14. Failure or impossibility to act.—(1) The mandate  of an arbitrator shall terminate 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 the 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.”

11. Section  14(2)  provides  that  if  there  is  any  controversy  

regarding the termination of the mandate of the arbitrator on  

any  of  the  grounds  referred  to  in  the  clause  (a)  then  an  

application  may  be  made  to  the  Court  –  “to  decide  on  the  

termination of the mandate”.  

12. Section 32 of the Act on the other hand deals with the  

termination of arbitral proceedings.1

1 Section 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).

8

Page 11

the mandate of the arbitral tribunal which in turn is based upon  

an  order  dated  29th October,  2007  by  which  the  arbitral  

proceedings were terminated.  

18. The appeal is dismissed.

……………………………………..…J.                                         ( Dr. B.S. CHAUHAN )

…………………………………..……J.                                         ( J. CHELAMESWAR )

.……………………………………….J.                                          ( M.Y. EQBAL ) New Delhi; March 04, 2014

11