HC Reiterates: If Agreement contained an Arbitration Clause and Notice was presented, constitution of Arbitral Tribunal can't be unilateral [Read Judgment]

A single-judge bench of the Madras High Court comprising of Mr. Justice Senthilkumar Ramamoorthy allowed an Arbitration Original Petition filed under Section 15(2) of the Arbitration and Conciliation Act, 1996 to substitute the previously appointed arbitrator with a new one.

The agreement between the parties had an arbitration-clause and the respondents agreed that there was a notice presented to them under Section 21 of the Act.

However, due to their claim of unilateral constitution of the arbitration tribunal, the arbitrator recused. The court held that since there was the clause and a notice was presented, the matter must be referred to the arbitration tribunal.

Facts:

The petitioner states that credit facilities were availed of by the respondent under a loan agreement dated 14.05.2018. Clause 18 of the said agreement is relied upon to establish that the agreement provides for dispute resolution by arbitration. Learned counsel refers to the notice dated 17.09.2020 and points out that the said notice qualifies as a notice under Section 21 of the Arbitration and Conciliation Act 1996. Upon constitution of the arbitral tribunal, it is stated that the respondents raised objections to the unilateral constitution of the arbitral tribunal. In those circumstances, learned Arbitrator recused. The petitioner seeks substitution of the former arbitrator by this Court.

Contentions of the Respondents:

Learned counsel for respondents admits that the loan agreement provides for dispute resolution by arbitration. He submits that the respondents had challenged the authority of the former arbitrator because of the unilateral constitution of the arbitral tribunal. Without prejudice to contentions on merits, he submits that this Court may substitute the arbitrator.

Observations of the Court:

Clause 18 of the loan agreement read with the schedule thereof provides for dispute resolution by arbitration at Chennai. The respondents admit receipt of the Section 21 notice dated 27.10.2020. In these circumstances, the petitioner is entitled to succeed.

Decision:

Arb.O.P.(Com.Div.) No.486 of 2022 was allowed by substituting the former arbitrator by a new arbitrator.

Case: M/S Shriram City Union Finance Limited vs S. Natesan and another

Citation: Arb. O.P. (Com. Div.) No. 486 of 2022

Coram: Mr. Justice Senthilkumar Ramamoorthy

Pronounced on: 21.11.2022

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