The Delhi High Court, in a recent judgment delivered by Justice S Muralidhar, has clarified and settled that Section 21 of the Arbitration & Conciliation Act 1996, is mandatory to be complied with before reference of disputes to arbitration.
The court laid down the object and purpose of issuing the notice under Section 21 holding that the Section is not limited only for the purpose of determining limitation and a party cannot straightaway file a claim before the arbitrator without issuing the notice under Section 21. The court held that in the absence of an agreement to the contrary, notice under Section 21 of the Act by the claimant invoking the arbitration clause, preceding the reference of disputes to arbitration, is mandatory.
In other words, without such notice, the arbitration proceedings that are commenced would be unsustainable in law.
The court also held that mere acceptance of supplies by a party on the basis of invoices containing an arbitration clause would not amount to acceptance by the party of such arbitration clause. The court clarified that there could not be an arbitration agreement by implication and a mere endorsement of receipt of goods on the invoices cannot lead to an inference that a party agreed to the arbitration clause printed on the said invoices. Holding that the same is not an arbitration agreement which could be validly invoked, the court declared the award as null and void.
The present case raised objections under Section 34 of the Arbitration & Conciliation Act 1996 to an award rendered by an arbitrator, unilaterally appointed by the respondent, without invoking arbitration in terms of Section 21 of Act. Advocates Ekta Mehta and Shreyans Singhvi, appearing for the petitioner/objector, contended that non-compliance of Section 21 rendered the arbitration proceedings unsustainable in law, vitiating the award as null and void and without jurisdiction, and that the purported arbitration clause relied upon by the respondent in its invoices was not a valid arbitration agreement as contemplated in the Arbitration & Conciliation Act 1996.
Read the Judgment here.