The Supreme Court on Wednesday revisited a dispute that had travelled a long and bumpy road through arbitration centres, the Punjab & Haryana High Court, and now finally the apex court. The matter—arising from a collapsed partnership running Amritsar health facilities—turned sharply on one question: Can an arbitrator terminate proceedings when parties fail to pay revised fees fixed without their clear consent?
The bench, led by Justice J.B. Pardiwala, frequently pressed counsel on whether statutory provisions had been stretched in a way the arbitration law never intended. At one point, the bench observed, “Arbitration is meant to reduce friction, not multiply procedural knots,” echoing a sentiment earlier quoted in the judgment itself.
Background
The dispute began in 2017 when differences erupted between the parties—once partners in Amritsar Health & Hospitality Services. Their partnership deed carried a standard arbitration clause requiring disputes to be referred to two mutually appointed arbitrators. However, when disagreements escalated, the appellants moved the High Court seeking the appointment of a sole arbitrator, which was granted in 2020.
Once arbitration began, the two sides filed a claim of ₹13.65 crore and a counter-claim of a staggering ₹82.78 crore. Because the total dispute value shot up, the arbitrator revised his fee to ₹37.5 lakh—payable equally—under the Fourth Schedule of the Arbitration Act. Neither side paid the full amount, and the claimants repeatedly expressed their inability, saying the business had collapsed. The respondent refused to bear their share. After several adjournments and non-appearances, the arbitrator terminated the proceedings under Section 38 of the Act, citing non-payment.
The High Court later dismissed the appellants’ attempt at initiating fresh arbitration, saying the arbitrator’s mandate had not ended in the way contemplated under Section 15; instead, the remedy lay in seeking recall or challenging the termination.
Court’s Observations
The Supreme Court noted that the case involved a recurring confusion: the difference between termination of proceedings and termination of mandate. As Justice Pardiwala remarked during the hearing, “These expressions appear simple, but their consequences are dramatically different.”
Counsel for the appellants argued that:
- The arbitrator revised fees without their consent—something the Court in Afcons held was impermissible.
- Terminating proceedings on non-payment effectively bound them to an unlawful fee determination.
- Once proceedings end under Section 32, the mandate automatically ends, making Section 15(2) (appointment of a substitute arbitrator) the correct route.
In response, the bench probed whether Section 38 allows termination only of the claim or counter-claim, not the entire proceedings, and whether such termination could extinguish the underlying dispute itself. At one point, the bench observed, “If a party simply cannot afford an arbitrator’s unilateral fee hike, can their legal rights be allowed to evaporate?”—a question that changed the mood in the courtroom.
The judgment text itself acknowledged the “judicial disquiet” over arbitrations derailing due to procedure rather than substance, noting that parties often embrace arbitration in good times, resist it in bad times.
Decision
By the time the hearing reached its final minutes, it was clear the Court was less interested in assigning blame to either party and more concerned about the structural gap: what remedy exists when an arbitrator terminates proceedings on grounds unrelated to the merits?
The Court concluded that the High Court had erred in holding that Section 11(6) was unavailable. The Supreme Court examined the statutory scheme, discussed the limits of Sections 32 and 38, and clarified that an improper termination of proceedings cannot shut the doors of arbitration altogether. It emphasised that the law must strike a balance between the autonomy of arbitrators and the right of parties to have their disputes adjudicated.
The bench ultimately set aside the High Court’s order and held that the appellants were entitled to seek appointment of a substitute arbitrator, restoring the possibility of arbitration instead of letting the lis die merely due to a fee dispute.
Case Title:- Harshbir Singh Pannu and Another vs. Jaswinder Singh
Case Number:- Civil Appeal No. 14630 of 2025
(Arising out of SLP (Civil) No. 10389 of 2025)
