Issues On Merits, Should Be Raised Before Arbitrator, Not In Section 11 Proceedings ; Delhi High Court
The Delhi High Court bench of Justice Neena Bansal Krishna held that objection regarding the insufficiency of service is considered to be on merits and therefore should be raised before the Arbitrator. Brief Facts: The petitioner, Delhivery Limited, and the Respondent, Far Left Retail Private Limited, entered into a Service Agreement, which later resulted in a dispute. The...
The Delhi High Court bench of Justice Neena Bansal Krishna held that objection regarding the insufficiency of service is considered to be on merits and therefore should be raised before the Arbitrator.
Brief Facts:
The petitioner, Delhivery Limited, and the Respondent, Far Left Retail Private Limited, entered into a Service Agreement, which later resulted in a dispute. The Petitioner claimed that the Respondent failed to make payments for invoices raised in accordance with the terms and conditions of the Service Agreement. Despite multiple email communications from the Petitioner between November 10, 2022, and January 24, 2023, the Respondent, through emails acknowledged the arrears. However, the Respondent did not settle the dues. The Petitioner issued a Demand Notice to the Respondent, who failed to resolve the dispute amicably and did not pay the outstanding amount of Rs. 8,69,743.78, including delay interest as specified in Clause 5.3 of the Service Agreement.
In compliance with Section 21 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), and Clause 19 of the Service Agreement, the Petitioner issued a notice to the Respondent invoking arbitration. Despite this, the Respondent did not respond or make the payments as required. Consequently, the Petitioner approached the Delhi High Court (“High Court”) and filed an application under Section 11(5) of the Arbitration Act for the appointment for the arbitrator.
The Petitioner received an advance reply and an application for condonation of delay from the Respondent, although it was not formally filed. This reply highlighted two main objections from the Respondent: the Petitioner allegedly did not first seek an amicable settlement as required by the arbitration clause, and the services provided by the Petitioner were unsatisfactory.
Observations by the High Court:
The High Court noted that the Petitioner demonstrated a clear effort to achieve an amicable settlement prior to initiating arbitration proceedings. Therefore, there was sufficient compliance with the arbitration clause.
Further, the High Court noted that the Respondent's second objection, concerning the alleged insufficiency of service, pertained to the merits of the case. The High Court held that such objections can be raised before the appointed arbitrator. It allows the Respondent's concerns to be adequately addressed within the arbitration process.
Recognizing the existence of a valid arbitration agreement between the parties, the High Court directed the Coordinator of the Delhi International Arbitration Centre to appoint an arbitrator in accordance with the provisions of the Arbitration Act.
Case Title: Delhivery Limited Vs. Far Left Retail Private Limited
Citation: 2024 LiveLaw (Del) 632
Case Number: ARB.P. 481/2024
Advocate for the Petitioner: Mr. Sukrit R. Kapoor and Mr. Aviral Tripathi, Advocates.
Advocate for the Respondent: None