[Arbitration Act] Friendly Consultation Necessary Before Issuing Section 21 Notice: Delhi High Court

The Delhi High Court bench of J. C. Hari Shankar has held that in the present case there is no scope for negotiation between the parties, much less friendly negotiations. Brief facts of the case: The present dispute arises vis-à-vis a Lease Deed dated 30.07.2021, in which certain premises were leased by the petitioner to the respondent. Article 16 of the deed states that parties should resolve disputes by arbitration. Then, the petitioner addressed various emails to the respondent raising monetary claims, but the dispute remains unresolved. The petitioner invoked the arbitration clause present in the Lease Deed, by sending notice under Section 21 of the Arbitration & Conciliation Act, 1996. After that the respondent replied by denying any liability and further stated that the reference to arbitration was premature since the petitioner had not attempted any friendly consultation with the respondent before sending Section 21 notice. That's why, the present petition was filed under Section 11(6) of the Arbitration Act for reference of the dispute between the parties to arbitration. Observation of the Court: The court noted that pre-invocation process of negotiation is necessary before invoking the arbitration clause but in the present case the petitioner had addressed various emails to the respondent before issuing the Section 21 notice. Further, the court held that there is no scope for negotiations between the parties, much less friendly negotiations. The court relied on the decision of Supreme Court in Visa International and Demerara Distilleries which held that arbitral clause which envisages an undertaking of exercise of negotiation between the parties before arbitration is invoked, have to be realistically interpreted. Where the parties have joined issue on the entitlement of one to claims from the other, and the Section 21 notice issued by one has either not been responded or refuted by the other, it would be futile to relegate the parties to “friendly negotiations” at this stage. The court also relied on the decision of Supreme Court in SBI General Insurance Co Ltd v. Krish Spinning wherein it was held that Section 21 court has to examine whether there exists an arbitration agreement and whether the Section 11(6) petition has been filed within 3 years of the issuance of Section 21 notice. The petition was allowed and the court appointed Ms. Neeru Vaid, Advocate as the Arbitrator. Case Title: M/S N. J. GARMENTS PRIVATE LIMITED Versus M/S CAPITALGRAM MARKETING AND TECHNOLOGY PVT LTDCitation: 2024 LiveLaw (Del) 1384 Case Number: ARB.P. 642/2024 Advocate for the Petitioner: Mr. Zeeshan Hashmi, Mr. S.A. Hashmi, Mr. Salman Hashmi and Ms. Sana Hashmi, Advs. Advocate for the Respondent: Ms. Mansi Binjrajka, Adv. Date of Judgment: 09.08.2024Click Here To Read/Download The Order

[Arbitration Act] Friendly Consultation Necessary Before Issuing Section 21 Notice: Delhi High Court

Soumya Chakrabarti

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