Have you filed an arbitration case and suddenly received a notice saying the proceedings are “terminated”? Whether you’re an investor in dispute with your broker or a trader caught in a financial conflict, termination of arbitration proceedings can seem confusing, especially if you’re unsure what it means.
Now, if you have filed an arbitration, then you need to know that not every case ends with a final award.
Sometimes, the process is closed midway, either because both parties have reached a mutual settlement, the claim is withdrawn, or one party fails to cooperate.
But the impact of this termination depends on how and why it happens, and in some cases, it could even close the door on future legal remedies.
In this blog, we’ll simplify when and how arbitration proceedings are terminated, especially under SEBI-regulated exchanges, and what you should watch out for before letting your case end without a decision.
What do You Mean By Termination of Arbitration Proceedings?
Before getting into the details of the reasons and procedures of the termination of arbitration proceedings, let’s first understand its meaning.
In the stock market, termination of arbitration proceedings simply means the end to the arbitration process without proceeding to a final judgment.
There are different reasons of termination like:
- Mutual resolution between two parties.
- Failure of the appearance of one party
- Incomplete documentation
In some cases, termination also occurs due to administrative lapse, like the absence of an arbitrator in hearings, etc.
Once terminated, the arbitrator’s role ends, and unless the dispute is revived within the limitation period, one cannot seek redress again.
When Arbitration Proceedings Are Terminated?
Under SEBI’s framework and exchange-specific arbitration rules (like those of NSE or BSE), arbitration proceedings can be terminated in the following scenarios:
1. Settlement Between Parties
Now, the purpose of arbitration is to provide a resolution by listening to both parties and passing on fair judgment.
However, if both parties arrive at a mutual agreement during the process, the arbitration is closed. The arbitrator may record the settlement and pass a consent award or a formal termination order.
2. Withdrawal of Claim by Applicant
If the applicant (usually the investor or complainant) chooses to withdraw the claim voluntarily, and there’s no objection from the other party, the arbitrator can terminate the case.
3. Non-Appearance or Non-Cooperation
If either party fails to appear for hearings or submit documents despite repeated notices, the exchange or arbitrator may terminate the case. This is called administrative closure.
4. Ineligibility or Technical Grounds
If the dispute is found to be outside the scope of arbitration it can be dismissed and closed.
5. Death or Inability of a Party (rare cases)
If one party dies and no legal representative steps forward, the matter may be closed depending on the nature of the claim.
How Can the Arbitral Proceedings be Terminated
It is clear that what circumstances can lead to the termination of arbitration proceedings, but the question is, how?
Here are some of the common ways of termination:
1. Termination by Arbitrator: The arbitrator issues a termination order with reasons, usually in cases of settlement, withdrawal, or technical dismissal.
2. Administrative Termination by Exchange: If procedural lapses occur (e.g., the party doesn’t appear, fails to submit papers), the exchange may terminate the case. A formal closure report or intimation is sent to both parties.
Effect of Termination of Arbitration Proceedings
Wondering what consequences you have to bear if you remain unaware of the termination?
Here are some:
- No final award is passed, so no binding decision is enforceable
- If the claim is withdrawn, it may not be raised again unless specifically allowed
- If terminated due to non-participation, the claimant may lose the opportunity to recover the money
In case of administrative closure, the investor may refile the claim. However, it needs to be refiled within the limitation period, i.e., 3 years.
What Should You Do Before Termination of Arbitration Proceedings?
If you have decided to settle the case mutually, then follow the right steps before withdrawing complaint.
- Always document settlements in writing, preferably signed by both parties
- Avoid withdrawal unless your issue is 100% resolved
- If you’re unable to attend hearings or submit documents, inform the exchange in writing
- Seek extension or representation to avoid administrative closure
Conclusion
SEBI arbitration is a powerful tool to seek justice as a retail investor. But if proceedings are terminated prematurely, especially due to neglect, withdrawal, or unclear settlement, you may lose your chance to recover losses.
Always know your options, document everything, and proceed with caution.
