Srei Infrastructure Finance Limited v. Tuff Drilling Private Limited
Background
An arbitral tribunal terminated arbitration proceedings under Section 25(a) of the Arbitration and Conciliation Act, 1996 after the claimant (the respondent here) repeatedly failed to file its statement of claim. The claimant then applied to the tribunal to recall that termination order and grant an extension of time, but the arbitrator held he had no power to recall his own order once passed. The Calcutta High Court, exercising its supervisory jurisdiction under Article 227 of the Constitution, set aside the tribunal's refusal to recall, and the appellant brought the matter to the Supreme Court.
Decision Breakdown
The Supreme Court surveyed conflicting High Court decisions and held that an arbitral tribunal does have the power to recall its own order terminating proceedings under Section 25(a) for failure to file a claim, if sufficient cause is shown by the defaulting party: the tribunal does not become "functus officio" (having exhausted its authority) merely by passing such a termination order, since holding otherwise would leave an affected party with no remedy before the tribunal itself. On that basis, the Court held the arbitral tribunal had wrongly refused to even consider the claimant's recall application. The civil appeal itself was dismissed, the earlier interim stay was discharged, and the tribunal was directed to now proceed to decide the pending recall application; the parties were left to bear their own costs.
Lesson Learnt
An arbitrator who terminates arbitration proceedings for a party's default (such as failing to file its claim) is not automatically barred from later recalling that order and reviving the case if the defaulting party shows a genuine, sufficient reason for the earlier default: arbitration is not meant to end in a dead end with no avenue for a party to explain a lapse.