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Notice Of Proceeding Under Section 11 Of The A&C Act Is A Mandatory Requirement: Madhya Pradesh High Court

Ausaf Ayyub
31 July 2022 2:30 PM GMT
Notice Of Proceeding Under Section 11 Of The A&C Act Is A Mandatory Requirement: Madhya Pradesh High Court
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The Madhya Pradesh High Court has held that it is mandatory for a High Court to issue notice of application under Section 11 of the A&C Act and non-compliance of which would vitiate the entire proceeding for appointment of arbitrator.

The bench of Justice Anand Pathak was hearing a review petition against an order by which the application under Section 11(6) was allowed and an arbitrator was appointed.

The Court further held that proceedings under Section 11 are judicial in nature, therefore, opportunity of hearing must be equally given to both the parties.

Facts

The parties entered into an agreement in the year 2015 whereby the respondent had to supply the CCTV cameras for installation in the premises of the Indore Bench of the High Court.

The petitioner found the cameras to be of inferior quality, thus, it blacklisted the respondent for a period of 1 year. The respondent filed a writ petition against the order of blacklisting which was dismissed by the High Court and the review petition against that order was also dismissed, thereafter, the respondent preferred an SLP that dismissed with the liberty to respondent to file a fresh representation before the petitioner/competent authority.

Again, the representation of the respondent was dismissed by the petitioner and the respondent challenged the decision of the petitioner in a writ petition which was dismissed while giving liberty to respondent to avail the conciliation /arbitration clause available under the agreement in question.

Thereafter, the respondent issued a notice of arbitration and requested the petitioner to appoint the arbitrator. The request of the respondent was turned down by the petitioner, thus, the petitioner approached the Court under Section 11(6) of the A&C Act.

The High Court did not issue a notice of proceeding under Section 11(6) of the A&C Act, however, at the time of passing the impugned order a government pleader was present in the Court.

The respondent preferred a review petition against the impugned order.

The contention of the parties

The petitioner challenged the impugned order on the following grounds:

  • No notice of proceeding was served on the petitioner
  • The state could not file any response to the petition of the respondent and its objections were also not before the Court at the time of passing of the impugned order.
  • Proceeding under Section 11 of the A&C Act is a judicial proceeding; therefore, opportunity of hearing must be given to both the parties.
  • Chapter XIII Rule 8 of the M.P. High Court Rules and Orders, 2008 provides that notice is required to be served to the Government before passing any order.
  • Rule 4-A of the M.P. Arbitration Rules, 1997 requires the Court to issue notice to the opposite party.
  • On merits as well, the matter cannot be referred to arbitration as the agreement between the parties is a 'Works Contract', therefore, as per Section 2 (1) of Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983, the matter ought to have been referred to Arbitration Tribunal, Bhopal.

The respondent countered the submissions of the petitioner on the following grounds:

  • The petitioner failed to appoint the arbitrator on the request of the respondent, therefore, in view of Section 4 of the A&C Act, they have waived their right to object to the appointment of the arbitrator. (Reliance placed on Datar Switchgear v. Tata Finance, (2000) 8 SCC 151.
  • The agreement between the parties if for supply simpliciter, therefore, the objection regarding bar under Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 is without any merit.
  • Further, the government advocate appeared in the case.

Analysis by the Court

The Court held that it is mandatory for a High Court to issue notice of application under Section 11 of the A&C Act and non-compliance of which would vitiate the entire proceeding for appointment of arbitrator. It held that proceedings under Section 11 are judicial in nature, therefore, opportunity of hearing must be equally given to both the parties.

Further, the Court observed that Chapter XIII Rule 8 of the M.P. High Court Rules and Orders, 2008 provides that notice is required to be served to the Government before passing any order. Similarly, Rule 4-A of the M.P. Arbitration Rules, 1997 requires the Court to issue notice to the opposite party.

The Court observed that as no notice was issued to the petitioner, it prejudices the interest of petitioner and cause of justice. Hence, it vitiates order and subsequent proceedings. It held that non-compliance with the requirement of issuing notice of proceeding to the other party is an error apparent on the face of record.

Accordingly, the Court allowed the review petition and restored the matter to be heard afresh.

Case Title: State of Madhya Pradesh v. Nidhi Industries, Review Petition No. 518 of 2021

Citation: 2022 LiveLaw (MP) 193

Date: 28.07.2022

Counsel for the Petitioner: Tejsingh Mahadik and Devesh Sharma

Counsel for the Respondent: Siddharth Sharma

Click Here To Read/Download Order

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