Mentioning Referral Of The Matter To Arbitral Institution Is Sufficient; Party Not Required To Name Arbitrator: Karnataka High Court

The Single Bench of Justice Suraj Govindaraj held that it is sufficient if there is a mention made to refer the matter to the institution for arbitration and that there is no specific requirement that a party should name an arbitrator.

The petitioner M/s Geosmin Studio Sustainable Solutions LLP and the respondent M/s Ethnus Consultancy Services entered into an agreement for 'Interior Architectural Services and Construction', which contained an Arbitration Clause. After certain disputes arose between the parties, petitioner approached the Council of Architecture for appointment of an Arbitrator. However, the Council rejected the claim of the petitioner for appointment of an Arbitrator on the ground that the petitioner being an LLP cannot be a member of the Council, and on the ground that one of the partners of the said LLP was not an architect.

Thereafter, the petitioner filed a petition before the Karnataka High Court for appointment of a Sole Arbitrator to adjudicate the dispute between the parties.

The respondent M/s Ethnus Consultancy Services submitted before the High Court that since the Council of Architecture had refused to appoint an Arbitrator on the ground that one of the partners of the petitioner firm was not an architect and on the ground that the petitioner, being an LLP, could not be a member of the Council; therefore, the Arbitration Clause is non-est and void and cannot be relied upon.

The respondent further contended that in the notice issued by the petitioner under Section 21 of the Arbitration and Conciliation Act, 1996, the petitioner had not specifically invoked the Arbitration Clause but had only stated that the matter would be referred to the Council of Architecture. Therefore, the respondent averred that the parties cannot be referred to arbitration.

The Court observed that the Council of Architecture had refused to appoint an Arbitrator on the ground that the petitioner was registered as an LLP. The Court further noted that the Council had denied the claim of the petitioner to appoint an Arbitrator on the ground that one of the partners of the petitioner firm was not an architect, which was disputed by the petitioner.

The Court ruled that even if one of the partners is an architect registered with the Council of Architecture, the said Council would have the jurisdiction to appoint an arbitrator. The Court, thus directed the Council of Architecture to consider the request of the petitioner for appointment of an Arbitrator.

The Court refuted the contention of the respondent that the refusal by the Council of Architecture to appoint an Arbitrator went to the root of the matter, rendering the Arbitration Clause invalid and non-est. The Court ruled that the said argument was a malafide argument, deserving it to be deprecated in strongest terms. The Court added that a party to an arbitration is entitled to make the contentions which are legally permissible, but not malafide arguments.

The Court held that the notice issued by the petitioner, stating that the matter would be referred to the Council of Architecture, was sufficient for the purpose of invocation of the Arbitration Clause, since the Council of Architecture is an arbitral institution within the meaning of Section 11 of the Arbitration and Conciliation Act, 1996.

The Court added that a party is only required to refer the matter to the said arbitral institution and it is for the institution to appoint an arbitrator. The Court ruled that there is no specific requirement that a party should name an arbitrator, and it is sufficient if there is a mention made to refer the matter to the institution for arbitration.

Reprimanding the respondent for making malafide arguments, the Court said, "Though it is a case for imposition of costs on the respondent for delaying the arbitration, this Court refrains from doing so".

The Court, thus directed the Council of Architecture to consider the request of the petitioner for appointment of an Arbitrator, and consider the facts on record, as placed by the petitioner, proving that one of the partners of the petitioner firm is an architect.

Case Title: M/s Geosmin Studio Sustainable Solutions LLP versus M/s Ethnus Consultancy Services Pvt. Ltd.

Dated: 30.06.2022 (Karnataka High Court)

Citation: 2022 LiveLaw (Kar) 292 

Counsel for the Petitioner: Mr. Rajashekar B.G., Advocate

Counsel for the Respondent: Parikshith Warrier, Advocate for S. Sushant and Venkatesh Rai, Advocates

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