The Bombay High Court has clarified that prolonged inactivity in arbitral proceedings, unaccompanied by any affirmative effort to resume them, may amount to abandonment under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996, thereby extinguishing the reference and precluding appointment of a substitute arbitrator. This ruling reinforces the principle that arbitration is not a dormant mechanism to be revived after years of silence.
Background & Facts
The Dispute
The dispute arose from the dissolution of the partnership firm M/s. Shree Ranka Kothari Kanugo Realtors, governed by a Partnership Deed dated 14 October 2010. The parties - Applicants (Kanugo Group) and Respondents (Ranka Group) - were locked in multiple disputes concerning asset distribution, financial contributions, and management control. To resolve these, the parties approached the Bombay High Court for arbitration.
Key Facts
- The partnership firm was formed in 2010 and dissolved amid acrimonious disputes by 2014.
- On 17 September 2014, the Bombay High Court referred all disputes arising from the Partnership Deed to the sole arbitration of Mr. E.P. Bharucha, Senior Advocate.
- The Court’s order directed the arbitrator to "endeavour to pass his Award within a period of nine months from the date of the first meeting."
- A second reference was made on 17 March 2015, covering disputes between the Kanugo Group and Ranka Group, without any time limit.
- Arbitration proceedings commenced, with statements of claim and defence filed, and affidavits of evidence exchanged.
- The last arbitration meeting was held on 25 July 2017.
- From 26 July 2017 until 2 January 2026 - nearly nine years - no further meetings, communications, or procedural steps occurred.
- No party sought an extension of time, filed for dismissal, or approached the arbitrator to fix dates.
- On 2 January 2026, Respondent No. 6 (legal heir of a deceased partner) emailed the arbitrator seeking to resume proceedings, but this email was not copied to the Ranka Group or the Applicants.
- The Applicants filed the present application on 28 March 2026 under Section 11 read with Section 14 of the Arbitration Act, seeking termination of the arbitrator’s mandate and appointment of a substitute.
Procedural History
- 14 October 2010: Partnership Deed executed.
- 17 September 2014: Bombay High Court refers disputes to arbitration; directs arbitrator to "endeavour" to pass award within 9 months.
- 17 March 2015: Second reference made for disputes between Kanugo and Ranka Groups; no time limit imposed.
- 25 July 2017: Last arbitration meeting held; parties jointly sought adjournment for settlement talks.
- 26 July 2017 to 1 January 2026: No communication, no hearings, no filings, no requests to the arbitrator.
- 2 January 2026: Respondent No. 6 emails arbitrator seeking resumption; not shared with Applicants or Ranka Group.
- 28 March 2026: Applicants file CARAP 242 of 2026 under Section 11 r/w Section 14 seeking substitute arbitrator.
- 8 May 2026: Judgment delivered by Justice Sandeep V. Marne.
The Parties' Positions
- Applicants (Kanugo Group): Argued that the arbitrator’s advanced age and non-response to the 2026 email constituted "de facto inability" under Section 14. They claimed the proceedings were merely suspended, not abandoned, and sought continuation from the stage of cross-examination.
- Respondents (Ranka Group): Contended that the nine-year silence, absence of any communication, and failure to seek dates amounted to abandonment under Section 32(2)(c). They argued that the "endeavour" clause in the 2014 order, though directory, was treated as a timeline by the parties, and the lapse of time without action extinguished the reference.
- Respondents Nos. 4 to 9 (Kanugo Group): Did not oppose the application and supported substitution.
Relief Sought
The Applicants sought:
- Termination of Mr. E.P. Bharucha’s mandate as sole arbitrator.
- Appointment of a substitute arbitrator under Section 11 r/w Section 14.
- Continuation of arbitration proceedings from the stage they stood on 25 July 2017.
- Costs of the application.
The Legal Issue
The central question was whether the prolonged inactivity of nearly nine years, with no communication or effort to resume arbitration, constitutes abandonment of arbitral proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996, thereby extinguishing the reference and barring appointment of a substitute arbitrator under Section 11 or Section 14.
Arguments Presented
For the Appellant/Petitioner
The Applicants relied on Dani Wooltex Corporation v. Sheil Properties to argue that mere delay or failure to request dates does not imply abandonment. They contended that the 2026 email from Respondent No. 6 affirmed intent to resume proceedings, and that the hiatus was mutual and consensual. They emphasized that Section 29A does not apply retrospectively and that the 9-month "endeavour" clause was directory, not mandatory. They further argued that abandonment must be pleaded with specificity and proven by clear conduct, not inferred from silence.
For the Respondent/State
The Ranka Group contended that the nine-year inactivity, coupled with no effort to communicate with the arbitrator or seek adjournments, demonstrated unequivocal abandonment. They cited Nalin Vallabhbhai Patel v. Athrava Realtors to argue that revived proceedings after such delay are impermissible. They stressed that the Applicants never approached the arbitrator, never sought extension, and never informed the tribunal of settlement progress. They maintained that Section 32(2)(c) was triggered because continuation of proceedings had become unnecessary or impossible.
The Court's Analysis
The Court undertook a detailed analysis of Sections 14, 15, and 32 of the Arbitration Act, distinguishing between termination of an arbitrator’s mandate and termination of arbitral proceedings. It affirmed that while Section 14 permits substitution of an arbitrator due to inability, Section 32 governs the termination of the entire reference.
"The failure of a claimant to appear before the Arbitrator after filing of the claim, does not render the proceedings unnecessary or impossible."
The Court relied heavily on Dani Wooltex Corporation v. Sheil Properties (2024) 7 SCC 1, which held that abandonment must be either express or implied, and that implied abandonment requires "convincing circumstances" leading to an "inevitable inference" that the claimant has given up the claim. The Court noted that in Dani Wooltex, the claimant had actively participated in related proceedings and the tribunal had failed to schedule hearings - factors absent here.
In contrast, the Applicants in the present case did not:
- Communicate with the arbitrator for nine years.
- Seek any extension or adjournment.
- Inform the tribunal of settlement progress.
- File any application to bring heirs on record.
- Even request a meeting after July 2017.
The Court observed that the 2026 email was sent by a legal heir who was not even a party to the arbitration, and was not shared with the Applicants. The Applicants themselves never sought to resume proceedings. The Court concluded:
"The conduct of the Applicants during the past 9 years has been such that the only inference that can be drawn would be that of abandonment."
It further held that Section 32(2)(c) was triggered because continuation of proceedings had become unnecessary or impossible - not due to external factors, but due to the Applicants’ own inaction. The Court rejected the argument that the "endeavour" clause in the 2014 order had any binding effect, noting that even without it, the nine-year silence was fatal.
The Verdict
The Applicants’ application was dismissed. The Court held that the arbitral proceedings were abandoned under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996, due to the Applicants’ nine-year inactivity and failure to take any steps to resume proceedings. Consequently, the mandate of the arbitrator could not be terminated under Section 14, nor could a substitute arbitrator be appointed under Section 11, as the reference itself had been extinguished. No order as to costs was made.
What This Means For Similar Cases
Abandonment Requires More Than Silence
- Practitioners must now demonstrate active, affirmative steps to preserve arbitration references during prolonged delays.
- Mere non-communication, even for years, without any explanation or effort to resume, will be treated as abandonment under Section 32(2)(c).
- Settlement talks alone, without documentation or communication to the tribunal, are insufficient to justify inactivity.
Procedural Vigilance Is Non-Negotiable
- Parties must file applications for extension of time if proceedings exceed reasonable timelines, even if no statutory deadline exists.
- If a party wishes to preserve its claim, it must periodically communicate with the arbitrator - even if only to request a status update.
- Failure to do so risks automatic termination of the reference, regardless of the merits of the claim.
Substitute Arbitrator Not a Salvage Tool
- Section 11 and Section 14 cannot be used to revive an extinguished reference.
- Once Section 32(2)(c) is triggered, the only remedy is to initiate fresh arbitration, not seek substitution.
- Courts will not permit parties to "reset" arbitration after years of neglect under the guise of arbitrator incapacity.
