Petition Under S. 11(6) Of The A&C Act Would Be Premature When The Precondition Of Conciliation Is Not Fulfilled: Karnataka High Court

The Bench of Chief Justice Ritu Raj Awasthi dismissed the arbitration petition for the appointment of an arbitrator on the ground that the petitioner had directly approached the Court without taking recourse to the precondition of conciliation.

Facts

The parties entered into a Work Order dated 15.01.2014 whereby the petitioner was to do some construction work on the plots of respondent 1. Clause 11 of the Work Order provided for the resolution of disputes through arbitration. However, it mandated the parties to conciliate before taking recourse to arbitration.

A dispute arose between the parties regarding the payment for the work done by the petitioner. The petitioner invoked Clause 11 and nominated its arbitrator. The respondent nos. 2 to 9 replied to the notice of the petitioner and denied their liability to pay. Consequently, the petitioner approached the Court for the appointment of the arbitrator.

The Contention Of The Petitioner

The petitioner sought the appointment on the following grounds:

• The petitioner has been denied its legitimate consideration for the work done by it.
• The respondent has failed to reply to the several notices issued by the petitioner; therefore, it has failed to act in terms of the arbitration agreement.
• There is a valid arbitration agreement between the parties.
• The Court exercising jurisdiction under Section 11 of the A&C Act has to only examine the existence of an arbitration agreement and an elaborate review of facts is not permissible at this stage.

Analysis By The Court

The Court examined Clause 11 to observe that the Clause makes it manifestly clear that parties have mutually made an arrangement to initiate conciliation to resolve the dispute and if differences were still left unresolved after the stage of conciliation, then the dispute was agreed to be referred to arbitration.

The Court held that in terms of Section 62 of the A&C Act, a conciliation proceeding commences when a party sends a notice to the other party to that effect and the other party accepts the invitation to conciliate. However, the petitioner has not taken any steps to begin the conciliation and directly issued the notice of arbitration.

The Court held that the petitioner is trying to bypass or skip this preceding condition of taking recourse to conciliation, thereby making an attempt to render the substance of Clause 11 of the work order ineffectual.

The Court relied on the judgment of the Supreme Court in M.K. Shah Engineers v. State of M.P. (1999) 2 SCC 594 to hold that pre-arbitral steps in the nature of conciliation are essential in nature and must be complied with.

Accordingly, the Court dismissed the petition as premature.

Case Title: Sobha Ltd. v. Nava Vishwa Shashi Vijaya and Ors.    C.M.P. No. 24 of 2022

Date: 10.06.2022

Citation: 2022 LiveLaw (Kar) 202

Counsel for the Petitioner: MADHUKAR M DESHPANDE, ADVOCATE

Counsel for the Respondent: N/A

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