The Bombay High Court stepped in to dissolve a long-stalled arbitration between S.S. Trading Company Limited and S.N.C. Trading Company. Justice Somasekhar Sundaresan found that the sole arbitrator’s prolonged suspension of proceedings-combined with unilateral fee hikes and an unusual demand for an apology-effectively brought the arbitration to a dead end.
Background
The dispute stems from a 2019 Business Agreement between the two trading companies. The petitioner, S.S. Trading, acts as a "super stockist" of FMCG products, while the respondent works as a consignee agent. According to the pleadings, the petitioner accused the respondent of defrauding it of roughly ₹1.05 crore.
Though arbitration formally began in September 2022, the process immediately became rocky. The respondent skipped several early hearings. The arbitrator, taking a stern view, imposed fines and even warned the respondent of additional fees for every missed sitting.
Matters became more complicated after April 2023, when the arbitrator suddenly changed course and directed the petitioner-not the absentee respondent-to deposit penalties and costs "due to the defendant," even though the fines were imposed on the respondent in the first place. The arbitrator then suspended the entire arbitration until the petitioner paid.
Court’s Observations
During the hearing, Justice Sundaresan dug into the timeline and noted several troubling aspects. The arbitrator had left the case in limbo for nearly two years, even after the petitioner agreed to pay under protest. No hearing was scheduled, and the arbitrator instead demanded a written apology from the petitioner.
The Court found the arbitrator’s handling of fees particularly concerning. Citing the Supreme Court’s 2024 ruling in ONGC vs Afcons, the judge reminded that arbitrators cannot unilaterally increase their remuneration. As the Court put it, "A unilateral determination of fees violates the principles of party autonomy." The bench observed, "The Tribunal is in no position to carry out arbitration proceedings at its own costs," but also stressed that such frustration cannot justify indefinitely suspending the matter.
Another critical factor was time. Under Section 29A of the Arbitration Act, once pleadings are completed, arbitrators must conclude proceedings within twelve months unless the parties jointly extend the deadline. Here, the respondent delayed its defence for years, and even when it belatedly filed one in April 2023, the tribunal refused to take it on record until fees were paid. By the Court’s calculation, the mandate had already expired by operation of law.
Justice Sundaresan remarked that the arbitrator had several lawful options: resign, proceed with the case and later exercise lien over the award, or continue hearings despite fee disputes. Instead, he did none of the above. The bench observed, "Doing neither, and keeping the proceedings in suspended animation, also expired with the expiry of the mandate by efflux of time."
inding that the arbitrator had effectively withdrawn from office-and that the mandate had automatically terminated-the Court appointed Presolv360 to select a fresh sole arbitrator.
The judge issued detailed operational directions: all proceedings must now be conducted online; the petitioner must forward the order to Presolv360 within a week; and both parties must share updated contact details for smooth communication. Costs of the new arbitration will be shared equally at first, subject to final allocation through the award.
Before concluding, Justice Sundaresan clarified that the new arbitrator will take over the matter exactly at the stage where the previous proceedings froze.
And with that, the Court ended the order.
Case Title: S.S. Trading Company Limited vs. S.N.C. Trading Company
Case Number: Arbitration Petition No. 196 of 2024