Dani Wooltex Corporation & Ors. vs Sheil Properties Pvt. Ltd. & Anr.
Background
Dani Wooltex Corporation owned land in Mumbai, part of which it allowed Sheil Properties to develop under a 1993 Development Agreement, while a separate portion was covered by an MOU with Marico Industries. Disputes arose, leading to two civil suits, which were both referred to a common sole Arbitrator by 2011. While Marico's claim proceeded to an award in 2017, Sheil's claim remained inactive for years. In 2020, Dani Wooltex asked the Arbitral Tribunal to dismiss Sheil's claim on the ground that Sheil had abandoned it, and the Tribunal terminated the arbitral proceedings under Section 32(2)(c) of the Arbitration Act. Sheil successfully challenged this termination before a Single Judge of the Bombay High Court, prompting Dani Wooltex's appeal to the Supreme Court.
Decision Breakdown
The Supreme Court examined when an Arbitral Tribunal can terminate proceedings under Section 32(2)(c) on the ground that continuation has become "unnecessary or impossible," including through abandonment of a claim. The Court held that mere inaction or delay by a claimant, by itself, is not proof of abandonment: abandonment (whether express or implied) must be established by clear and convincing circumstances that permit only one inference, that the claimant gave up its claim. Applying this standard, the Court agreed with the Bombay High Court's Single Judge that Sheil's conduct did not meet this high threshold, and dismissed Dani Wooltex's appeal with no order as to costs, directing that a substitute Arbitrator be appointed since the earlier sole Arbitrator had since withdrawn.
Lesson Learnt
In arbitration, a party's silence or delay in pursuing a claim will not automatically be treated as abandoning that claim. Courts and tribunals require clear, convincing evidence pointing unmistakably to a deliberate give-up before shutting a claim out on that ground.