Nine Years Of Silence In Arbitration Equals Abandonment Under Section 32(2)(c): Bombay High Court

The Bombay High Court on 8 May held that prolonged inactivity in arbitral proceedings, coupled with absence of any steps for nearly nine years, amounted to implied abandonment, resulting in termination of proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996.

Justice Sandeep V. Marne dismissed the plea seeking appointment of a substitute arbitrator, holding that the arbitral proceedings stood terminated and could not be revived. He observed:

“It is incomprehensible that settlement talks can go on for 9 long years. It is not that the Applicants were writing to the learned arbitrator about progress of the settlement talks or have even kept the arbitrator informed about settlement talks happening.”

The dispute arose from a partnership deed dated 14 October 2010 governing Shree Ranka Kothari Kanugo Realtors. On 17 September 2014, the Bombay High Court referred disputes between the parties to arbitration under Section 11 of the Arbitration and Conciliation Act and appointed senior advocate E.P. Bharucha as sole arbitrator. A further order dated 17 March 2015 referred additional disputes to the same arbitrator.

The arbitral proceedings initially progressed with filing of pleadings, evidence, and counterclaims. The last arbitral sitting was held on 25 July 2017, after which proceedings remained dormant.

Supama Realtors LLP and the Kanugo Group contended that settlement discussions were ongoing between the parties, which led to the suspension of hearings. They later approached the High Court under Sections 11 and 14 seeking termination of the arbitrator's mandate and appointment of a substitute arbitrator, citing the arbitrator's advanced age and inability to continue.

They further argued that the proceedings had not formally terminated since no award had been passed and no order under Section 32 had been recorded. It was also contended that the arbitration, being initiated prior to the insertion of Section 29A, was not subject to statutory timelines.

The Ranka Group opposed the application, arguing that the parties had abandoned the arbitration entirely, given the complete absence of any meaningful steps from 25 July 2017 to 2 January 2026, when correspondence seeking revival was sent.

Justice Marne distinguished between termination of an arbitrator's mandate under Sections 14 and 15 and termination of arbitral proceedings under Section 32. The Court held that substitution of an arbitrator is not permissible once proceedings stand terminated under Section 32(2)(c).

Relying on Dani Wooltex Corporation v. Sheil Properties Pvt. Ltd., the Court reiterated that abandonment cannot be inferred lightly from delay alone. However, on facts, it held that the prolonged inactivity and conduct of the parties left no doubt that the proceedings had been abandoned. It held:

“The conduct of the Claimants during the past 9 years has been such that the only inference that can be drawn would be that of abandonment.”

Accordingly, the Court concluded that the arbitral proceedings were terminated under Section 32(2)(c) and dismissed the application seeking appointment of a substitute arbitrator, with no order as to costs.

Appearances for applicants (Supama Realtors LLP and others): Advocates Akshay Patil, Vinayak Siraskar, Karishma Shah, Devika Mahadekar instructed by Kiran Jain & Co.

Appearances for respondents (Mulchand Kaluchand Ranka and others): Advocates Amit Mehta, Vedant Rane for Respondent Nos. 1 to 3; Advocates Neuty Thakkar, Dhavall Ghandy instructed by Tushar Goradia for Respondent Nos. 4 to 9.