Notice To Appoint Another Arbitrator To Continue Arbitration Proceedings Satisfies Mandate Of S.21Of A&C Act: Kerala High Court

The Kerala High Court bench of Justice Syam Kumar V.M., while hearing a Section 11 petition, has held that a notice to revive a stalled arbitration proceedings by appointing another arbitrator satisfies the mandate of Section 21 of the A&C Act. Facts: The petitioner and respondent were partners of a firm named Orchard Builders and Developers; the same was registered with the Registrar of Firms, and a copy of the acknowledgement of firm registration was issued by the Registrar's office. The objectives of the partnership were acquiring, constructing, and selling properties. A parcel of land in Coonoor, Tamil Nadu, was purchased, and construction began on the site. However, a dispute arose between the parties pertaining to various aspects of the partnership. The petitioner filed a Section 9 petition seeking an injunction against alienation of the subject property when the petitioner developed an apprehension that the respondent was taking steps to alienate the subject matter to a third party. While hearing the Section 9 petition, the respondent entered an appearance before the District Court, Manjeri, and filed a counter in the said petition. The District Court granted a temporary injunction after being satisfied with the partnership deed and the arbitration agreement therein. After the withdrawal of the arbitrator due to doubts regarding their independence were raised by the respondent, the temporary injunction granted was vacated by the District Court. Subsequently, the respondent alienated the subject matter from third parties. The petitioner issued notice nominating another arbitrator and requesting the respondent to duly respond. The respondent replied to the said notice, denying the existence of the partnership agreement. Pursuant to this, the petitioner filed the Section 11 application seeking the appointment of an arbitrator. Submissions: The petitioner made the following submissions: The petitioner had met all expenses and had put in personal efforts to further the construction work, while the respondent showed little interest in the partnership. Furthermore, the respondent did not object to the arbitration clause being invoked and the appointment of the arbitrator. The arbitration clause, clause 21 of the partnership deed, was invoked, and the arbitrator entered on reference and issued notice to the parties. The petitioner filed their claim petitioner before the arbitrator on 16.03.2002, and the respondent filed a statement in counter. The arbitration came to a standstill after the arbitrator withdrew following the respondent's petition, doubting the arbitrator's independence. The respondent made the following submissions: The partnership agreement is a forged one, and there was no consensus regarding the appointment of any arbitrator. Furthermore, the petitioner has not issued a Section 21 notice for the commencement of a valid arbitral proceeding.The injunction order granted has lapsed since the arbitration proceedings had not commenced within 90 days of the date of the order. The claim petition before the arbitrator was filed on 16.03.2020, which falls outside the stipulated period. Furthermore, the arbitral request is barred by limitation since more than three years have lapsed from the date of the cause of action. Analysis of the Court: The court observed that the questions relating to the validity of the partnership agreement cannot be looked into by a referral court. The Supreme Court in SBI General Insurance Co. Ltd. v. Krish Spinning (2024) has limited the scope of the referral court to ascertain whether a Section 11 application has been filed within three years. The court cannot go into the arbitrability of the dispute, and such questions are for the tribunal to adjudicate. The court further observed that the dispute between parties arose in 2018, which is evident from the filing of the Section 9 petition dated 09.07.2018 before the District Court, Manjeri, the respondent filed a counter dated 01.02.2019, and a temporary injunction was issued on 19.10.2019. An arbitrator was appointed, a notice of appointment was issued, and the claim petition was filed on 16.03.2020. The respondent entered into an appearance and filed vakalatnama and a counter statement dated 06.06.2020. Subsequently, on 04.05.2023, the arbitrator withdrew from the arbitration proceedings based on the respondent's objection. On 06.11.2023, the District Court vacated the temporary injunction. These dates showcase that the parties went into arbitration till the arbitrator withdrew. Thereafter, the petitioner issued a letter dated 06.11.2023 to the respondent seeking to continue the stalled arbitral proceedings by appointing another arbitrator. This notice satisfies the mandate of Section 21 of the A&C Act. In view of the above facts, the petition u/s 11(6) of the A&C Act cannot be treated as being barred by ...

Notice To Appoint Another Arbitrator To Continue Arbitration Proceedings Satisfies Mandate Of S.21Of A&C Act: Kerala High Court

Mohd Talha Hasan

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