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Harshbir Singh Pannu & Anr. vs Jaswinder Singh

Not available · 2025 INSC 1400Decided 8 Dec 2025
Not available
Justice J.B. Pardiwala · Justice R. Mahadevan

Background

The appellants and respondent were partners in a hospitality/healthcare business in Amritsar. When disputes arose over capital contributions and management, the appellants invoked the arbitration clause in the partnership deed, and the High Court appointed a sole arbitrator. The arbitrator fixed his fees under the Fourth Schedule of the Arbitration Act (first on the claim, then a higher amount once the respondent filed a large counter-claim). When the appellants said they could not afford to pay their share of fees on the counter-claim and neither side was willing to cover the other's share, the arbitrator terminated the arbitral proceedings under Section 38 of the Act. The High Court held that the appellants' only remedy was to challenge termination of the arbitrator's mandate under Section 14, and the appellants approached the Supreme Court.

Decision Breakdown

In a detailed 269-page judgment, the Supreme Court examined how termination of arbitral proceedings works across Sections 25, 30, 32 and 38 of the Arbitration Act, and held that Section 32 is the exhaustive source of the tribunal's power to terminate proceedings: the other sections merely describe the triggering circumstances, but the legal effect (the tribunal's authority ending) is the same in each case. The Court laid down that a party aggrieved by a termination order must first seek recall of that order before the same arbitral tribunal (which can correct a procedural error but not reopen the merits); only if the recall application is rejected can the party approach the court under Section 14(2) to have the mandate examined, with the court then able to set aside the termination, remand to the tribunal, or appoint a substitute arbitrator. On the facts, since the fees had been fixed under the binding Fourth Schedule with the parties' consent, the appellants were not entitled to simply refuse payment; however, given the years that had elapsed and to ensure the dispute was not left unresolved, the Court partly allowed the appeal and remanded the matter for the appointment of a substitute arbitrator to hear the claims and counter-claims afresh.

Lesson Learnt

If an arbitrator terminates proceedings, including for non-payment of fees, the correct first step is to apply for recall before the same arbitral tribunal, not to go straight to court; only a rejected recall application opens the door to a Section 14 challenge. Also, once arbitral fees are fixed under the Fourth Schedule with the parties' consent, that fixation is binding, and a party facing genuine financial hardship should ask the tribunal to suspend (not simply refuse to fund) the proceedings.

Official source (sci.gov.in)View Judgment (PDF)

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