The Supreme Court has encouraged Parliament to establish a clear statutory remedy against such termination decisions and to remove the long-standing ambiguity regarding arbitral tribunals' authority to end proceedings under the Arbitration and Conciliation Act, 1996.
A bench of justices JB Pardiwala and R Mahadevan stated on Tuesday that it was "indeed very sad" that the issue, which originated in the UNCITRAL Model Law (a template created by the UN to harmonize arbitration standards worldwide) and was adopted almost 40 years ago, still exists under both the 1996 Act and the proposed Arbitration and Conciliation Bill, 2024, which is intended to replace the current law.

The bench declared, "It is time that the ambiguity surrounding the arbitral tribunal's authority to end the proceedings under the various provisions of the Act, 1996 is either consolidated into a single provision...or the contradictory phraseology used in the various provisions is tweaked to make the provisions consistent."
The bench emphasized that the new Bill must clearly specify the nature and impact of termination decisions, including whether the tribunal retains the ability to consider a recall application, calling the lack of remedies "a lacuna that must be addressed." It stated, "A proper remedy against an order terminating the proceedings is the need of the hour."

The court stated that it was depressing that such basic procedural problems still plague the Indian arbitration scene nearly 30 years after the 1996 Act replaced the 1940 law with the promise of speed and efficiency.

The Department of Legal Affairs has now once more suggested that the current laws be replaced. The court stated, "Unfortunately, not even the new Bill has done anything to improve the legal position regarding the termination of proceedings."
While the Bill is still being considered, the court directed the Ministry of Law and Justice's Department of Legal Affairs to "seriously look" at India's arbitration system and take action. It voiced worry that this fundamental flaw is not addressed by the Bill.

In line with the SIAC Rules, which include defaults, settlements, withdrawals, impossibility, and non-payment of deposits, the bench recommended that the Bill combine all termination provisions into a single, streamlined clause. It also noted that in addition to offering a statutory appeal against termination orders, like to appeals allowed when the tribunal affirms a jurisdictional plea, the proposed law should specify the nature and effect of termination decisions, including whether the tribunal may recall them.
It also demanded clarification on post-termination recourse, including whether a party should be denied "a second bite at the cherry" or whether claims may be renewed.

The ruling was praised by arbitration law specialist advocate Abhishek Gupta, who noted that the regulations pertaining to the early and sudden conclusion of the arbitral processes have become a "unwieldy horse."

The Supreme Court's guiding principles give the matter much-needed clarity and encourage the legislature to think about a suitable solution. The clouds of uncertainty and ambiguity surrounding the aftermath of termination would largely disappear with the implementation of an appropriate statutory redressal process. The courts, in my opinion, are best suited to determine whether a termination order is legitimate and tenable while weighing the rights and interests of all parties involved.

The court made these conclusions when ruling on a petition to reappoint an arbitrator, which prompted the bench to look into the legal ambiguity and the larger framework controlling the termination of arbitral proceedings.
The bench pointed out that the 1996 Act makes no mention of a party's remedy in the event that the arbitral tribunal ends proceedings. Although Section 15 allows for the appointment of a replacement arbitrator in the event that the mandate expires as a result of the parties' agreement or withdrawal, there is no comparable procedure when proceedings are ended in accordance with other legal laws.
The court remarked that this silence has led to conflicting judicial perspectives, citing differing opinions held by the Supreme Court and other high courts.

Citing its decision in the Gayatri Balasamy case (2025) that ambiguity in arbitration law damages the regime's credibility, the bench characterized this "cleavage of opinion" as abhorrent to industry and trade.
The court suggested a purposive interpretation of Section 14(2) of the Act, which enables a court to determine whether an arbitrator's duty has lawfully expired, until Parliament steps in. The bench stated that challenges to termination orders themselves should be covered by this clause.
It outlined a three-step remedial process: the aggrieved party must first file a recall application with the arbitral tribunal; if the recall is denied, the party may then petition the court, which has the authority to either set aside the termination order and resume proceedings or designate a new arbitrator.Additionally, the bench cautioned that permitting "mischievous parties" to purposefully let proceedings lapse in order to reinitiate arbitration for tactical benefit would have a "chilling effect" and worsen delays in an already overworked system.
The bench stated that "arbitration is not infinite" and that a party's "obdurate stance" should normally prohibit it from starting the process again.