16 May 2024 Arbitration Law >> Business & Commercial Law   |   Civil Appeals >> Civil & Consumer Law  

A recent Indian court case sheds light on when arbitration proceedings can be terminated due to a party's inactivity. The case involved Dani Wooltex Corporation, Sheil Properties, and Marico Industries, entangled in a complex land development deal with interwoven claims.

Separate arbitration proceedings were initiated for each dispute: Marico against Dani Wooltex, and Sheil against Dani Wooltex. Marico's claim concluded first with an award in May 2017. However, Sheil's claim remained pending.

Dani Wooltex argued that Sheil had abandoned their claim due to a lack of activity and requested termination under the Arbitration Act. The Arbitrator agreed and terminated the proceedings. Sheil contested this decision in court.

The court sided with Sheil, reviving the arbitration. The key point revolved around Section 32(2)(c) of the Arbitration Act, which allows termination when continuing proceedings becomes "unnecessary or impossible." The court clarified that the Arbitrator cannot simply assume abandonment based on inactivity. There must be concrete evidence to support such a conclusion.

The court's judgment emphasized several crucial points:

• Abandonment Requires Proof: Simply failing to request a hearing date doesn't equate to abandoning a claim. The party's actions (or lack thereof) must convincingly demonstrate an intention to give up the claim altogether.
• Arbitrator Has a Duty to Act: The Arbitrator cannot remain passive and wait for parties to take initiative. It's their responsibility to schedule hearings and move the proceedings forward.
• Inaction Has Consequences: While absence or lack of action doesn't automatically equal abandonment, parties cannot indefinitely stall arbitration due to their own passivity.

This case serves as a reminder that abandonment is a high bar in arbitration. Parties cannot expect proceedings to halt indefinitely due to their own inaction. However, the onus remains on the Arbitrator to actively manage the process and not simply terminate proceedings based on assumptions.

  Arbitration and Conciliation Act, 1996