2024 (11) TMI 538 - HC - Indian Laws

Seeking constitution of an Arbitral Tribunal to adjudicate the disputes between the parties - cause of action - constitution of an Arbitral Tribunal to adjudicate the disputes between the parties - Section 11 of the Arbitration and Conciliation Act, 1996 - HELD THAT - The understanding of the learned counsel for the respondent that the limitation period for invocation of the arbitration would begin from the date of execution of the MoU dated 14.06.2019 is ex-facie incorrect. It is only after the disputes arose between the parties that the occasion arose for the petitioner to take recourse to arbitration. In the facts of the present case, it cannot be said that the claims sought to be raised by the petitioner are ex-facie barred by the limitation so as to preclude any reference to arbitration. In any event, as held in SBI General Insurance Co. Ltd. v. Krish Spinning 2024 (9) TMI 606 - SUPREME COURT , at the reference stage, all that is required to be examined is whether there exists an arbitration agreement. All other aspects touching upon the merits or maintainability of the claim/s are required to be dealt with by a duly constituted Arbitral Tribunal. Likewise, the fact that there are proceedings pending under Section 138 of the NI Act as also the fact that the petitioner, in the first instance, sought to seek resolution of the matter through pre-litigation mediation under the CC Act, would not preclude the petitioner from taking recourse to arbitration and seek adjudication of the disputes on merit - there is no impediment to constitution of an Arbitral Tribunal to adjudicate the disputes between the parties. A perusal of the arbitration agreement shows that it contemplates a three-member Arbitral Tribunal. At this stage, learned counsel for the respondent submits that a Sole Arbitrator be appointed by this Court. The same request is also made by the learned counsel for the petitioner. The learned Sole Arbitrator may proceed with the arbitration proceedings subject to furnishing to the parties requisite disclosure as required under Section 12 of the A C Act - It is agreed between the parties that the arbitration shall take place under the aegis of and under the rules of Delhi International Arbitration Centre (DIAC). The present petition stands disposed off.

Issues Involved:

1. Timeliness of the arbitration petition.
2. Impact of pending proceedings under Section 138 of the NI Act on arbitration.
3. Effect of pre-litigation mediation efforts on arbitration proceedings.
4. Constitution and appointment of the Arbitral Tribunal.

Issue-wise Detailed Analysis:

1. Timeliness of the Arbitration Petition:

The respondent contended that the arbitration petition was time-barred as it was filed more than three years after the execution of the MoU dated 14.06.2019. However, the court found no merit in this argument, clarifying that the limitation period for invoking arbitration does not begin from the date of the MoU's execution but from when the disputes arose. The judgment referenced the Supreme Court's decision in M/s B and T AG vs. Ministry of Defence, which elucidated that the cause of action accrues when the claimant first becomes entitled to seek relief. Therefore, the petition was not considered time-barred, as the disputes arose after the execution of the MoU, and the arbitration was invoked promptly thereafter.

2. Impact of Pending Proceedings under Section 138 of the NI Act on Arbitration:

The respondent argued that the arbitration proceedings were precluded due to ongoing proceedings under Section 138 of the NI Act. The court dismissed this contention, referencing a Co-ordinate bench decision and the Supreme Court's ruling in Sri Krishna Agencies v. State of A.P. & Anr., which established that arbitration and criminal proceedings under Section 138 arise from separate causes of action. Therefore, the pendency of Section 138 proceedings does not bar the arbitration process. The court emphasized that both proceedings could continue simultaneously without affecting each other.

3. Effect of Pre-litigation Mediation Efforts on Arbitration Proceedings:

The respondent further argued that the petitioner's attempt to resolve the dispute through pre-litigation mediation under the Commercial Courts Act precluded arbitration. The court found this argument unconvincing, stating that unsuccessful mediation efforts do not bar subsequent arbitration. The court highlighted that the petitioner had attempted to amicably resolve the matter before invoking arbitration, which did not affect their right to seek arbitration as per the MoU's arbitration clause.

4. Constitution and Appointment of the Arbitral Tribunal:

The arbitration agreement within the MoU stipulated a three-member Arbitral Tribunal. However, both parties agreed to appoint a Sole Arbitrator. Consequently, the court appointed Mr. Tushar Sannu, Advocate, as the Sole Arbitrator to adjudicate the disputes. The court directed that any preliminary or jurisdictional objections, including those concerning the limitation period, should be addressed by the Arbitrator before proceeding on the merits. The arbitration proceedings are to be conducted under the aegis of the Delhi International Arbitration Centre (DIAC), ensuring compliance with Section 12 of the A&C Act regarding the Arbitrator's disclosure obligations.

The court concluded by clarifying that it had not expressed any opinion on the merits of the disputes and disposed of the petition in accordance with the terms agreed upon by the parties.

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