COMMENCEMENT OF ARBITRATION

[Mr. M. GOVINDARAJAN]

Section 21 of the Arbitration and Conciliation Act, 1996 (‘Act’ for short) provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. 

If there is a specific provision in the arbitration agreement as to the time of commencement of arbitration then the agreed date will be the commencement of arbitration.  Otherwise the arbitration commences on the date on which a request for that dispute to be referred to arbitration is received by the respondent.

In M.S. OIL INDIA LIMITED VERSUS M.S. BADRI RAI AND COMPANY - 2024 (2) TMI 1009 - GAUHATI HIGH COURT, there is a provision in the Contract that in case the claim exceeds Rs. 5 crores, the Tribunal would be constituted by three members.  Therefore after the constitution of the Arbitral Tribunal the arbitration proceedings would be commenced.

In the above said case the respondent claimant has issued a notice dated 27.09.2022 to the petitioner for referring the dispute arised between them to the arbitrator as per the procedure contained in the contract.  In the notice the claimant stated that he appointed a nominee (arbitrator) since the claim exceeds Rs.5 crore.  The respondent also sent a copy to the said nominee. The respondent obtained necessary prior consent from the nominee appointed by him.  In response to the notice the petitioner sent a communication to the nominee of the respondent on 19.08.2023.  The respondent changed the nominee and appointed a new person and the same was communicated to the petitioner.

The Presiding Officer also sent a communication to the petitioner on 13.11.2023 by which a declaration required under Section 12 of the Arbitration and Conciliation Act, 1996 (Act) has been made.

The petitioner filed a writ petition before High Court, Gauhati under Section 11(6) of the Act.  The petitioner made the following prayers-

• to allow the present petition and appoint an Arbitral Tribunal in accordance with law and as per the procedure prescribed under Section 15(2) of the Conciliation Arbitration and Act, 1996 and as per Clause 15 of the Contract No. 6208760 dated 10.01.2019 to adjudicate upon the disputes between the parties arising out of Contract No. 6208760 dated 10.01.2019 and/or;
• to pass any such order or orders as the High  Court may deem fit and proper in the facts and circumstances of this case.

The petitioner submitted the following before the High Court-

• The arbitral proceeding in respect of a particular dispute commences from the date on which a request for that dispute to be referred to arbitration is received by the respondent.
• The first notice dated 27.09.2022 having contained the genesis of the claim and the same being received by the present petitioner would mean that the arbitral proceeding has commenced.
• Unless the procedures prescribed in the Act as well as the Contract are duly followed, the present Tribunal cannot proceed with the matter.

The petitioner also referred to Clause 15.0 with regard to settlement of dispute and arbitration.  Clause 15.5 provides that if any of the Arbitrators so appointed dies, resigns, becomes incapacitated or withdraws for any reason from the proceedings, it shall be lawful for the concerned party/arbitrators to appoint another person in his place in the same manner as aforesaid. Such person shall proceed with the reference from the stage where his predecessor had left if both parties consent for the same; otherwise, he shall proceed de novo.

The High Court heard the submissions of the petitioner.  The High Court raised a specific query as to whether this petition, under Section 11 (6) of the Act, would be maintainable.  The High Court also wanted to peruse the order/communication of appointment of the Presiding Arbitrator which presupposes that the nominee Arbitrator of both the parties in dispute have agreed upon the said appointment.  However the said copy is not available with the petitioner.

Therefore the High Court made a presumption that there is consent by the nominee Arbitrators of both the parties towards the appointment of the Presiding Arbitrator in absence of which such Presiding Arbitrator will not assume jurisdiction to adjudicate the dispute and for that matter, issue a declaration under Section 12 of the Act.

The High Court did not accept the arguments of the petitioner that on receipt of the claim by the respondent, the arbitral proceeding is deemed to be commenced.  The High Court observed that in the present case there is a provision in the Contract that in case the claim exceeds Rs. 5 crores, the Tribunal would be constituted by three members.  The High Court held that unless and until the Arbitral Tribunal is constituted, the question of commencement will not arise at all.

The petitioner relied on a judgment of the Supreme Court in HUAWEI TECHNOLOGIES CO. LTD. VERSUS STERLITE TECHNOLOGIES LTD. [2015 (9) TMI 866 - SUPREME COURT].  The High Court was the opinion that the case law relied on by the petitioner would not have any application in the present case.  Rather, on reading of the contents of paragraph 8, a different interpretation would be available which will not come to the aid of the petitioner.

The High Court was of the opinion that a challenge of this nature would not be maintainable under the provision of Section 11 (6) of the Act and unless a petition is presented before the appropriate forum under the appropriate provisions of law, such challenge cannot be maintained.  The High Court dismissed the writ petition.