Court Cannot Assume Jurisdiction To Appoint Arbitrator Unless Request For Reference Of Dispute Is Received By Respondent: Bombay High Court

The Bombay High Court bench of Justice R. M. Joshi has held that compliance with Section 21 of the Arbitration and Conciliation Act, 1996 is mandatory and that the court cannot assume jurisdiction to appoint an Arbitrator under Section 11 unless a request for a reference of dispute is received by the respondent. Brief Facts: The dispute arose with respect to a sub-contract between the parties. Clause No. 32 of the sub-contract provides for the settlement of dispute amicably and, on failure thereto, to settle the dispute through an Arbitrator. The present application was filed under Section 11 of the Arbitration and Conciliation Act, 1996 for the appointment of an Arbitrator on behalf of the respondents since it is the case of the applicant that in spite of the invocation of the arbitration clause and appointment of an Arbitrator by the applicant, the respondent has failed to appoint co-arbitrator within the stipulated time. The applicant contended that notices dated 28.03.2023 and 25.09.2023 are sufficient for recording due compliance with Section 21 of the Act. In the first notice dated 28.03.2023, it was clearly indicated that in case of failure on the part of the respondent to appoint a co-arbitrator in 30 days, further action under the provisions of the Act would be initiated. The applicant also referred to a letter dated 25.09.2023 to the respondent giving the final 15 days' notice forthe appointment of an Arbitrator. However, the respondent argued that the letter dated 28.03.2023 is not an unequivocal invocation of the arbitration clause. Also, the consequent notice dated 25.09.2023 does not contemplate compliance with Section 21 of the Act. The respondent relied on the judgment in D. P. Construction vs. Vishvaraj Environment Pvt. Ltd. (2022). Observation of the court: The court observed that Section 21 of the Act clearly shows that unless otherwise agreed between the parties, arbitration proceedings in respect of a particular dispute commences on the date on which the request for that dispute to be referred to arbitration is received by the respondent. Here in this case, parties have agreed that before referring the dispute to arbitration, an amicable settlement must be attempted. In light of the agreement between parties, it is necessary to see whether there is compliance with this provision. Additionally, the court noted that it was specifically stated in the notice dated 28.03.2023 that the applicant had no intention of going into uncalled arbitration and had asked for an amicable settlement. It was also stated that if the date for amicable settlement is not communicated in 15 days, it shall be presumed that there is no possibility of settlement and in this situation, the Arbitrator came to be appointed. After this communication, there were settlement talks between the parties to resolve disputes between them amicably. Having regard to the specific wording of the notice dated 28.03.2023, it was observed that the said notice was a conditional notice. The presumption of no possibility of settlement did not survive. Consequently, the appointment of an Arbitrator at that stage has become inconsequential, the court said. Case Title: Sri Sathe Infracon Private Limited v. M/s Rudranee Infrastructure Ltd. & another (ARBITRATION APPLICATION NO. 9 OF 2024)Citation: 2025 LiveLaw (Bom) 36 Counsel for the Applicant: Mr. Anshuman R. Asare, Advocate for the Applicant. Counsel for the Respondents: Mr. Amit A. Yadkikar, Advocate for Respondent No. 1. Ms. Nikita N. Gore, Advocate for Respondent No. 2. Click Here To Read/Download The Order

Court Cannot Assume Jurisdiction To Appoint Arbitrator Unless Request For Reference Of Dispute Is Received By Respondent: Bombay High Court

Soumya Chakrabarti

Tags