The single-judge bench of the Andhra Pradesh High Court held that to maintain an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 it is required to show that the respondents had failed to act as required under the arbitration clause, and had failed to refer the disputes to the Arbitrator even after a notice invoking the arbitration clause had been served on the respondents.
Brief facts
The factual matrix of the case is that Respondent No. 1 i.e. M/s Oil and Natural Gas Corporation Limited called for tender for hiring of services for carrying out the operations of Respondent No.1. The Petitioner submitted the bid and the same was successful. Then, the agreement was executed between the two. Furthermore, the dispute arose between the parties and the Petitioner issued a letter to the Respondent for referring the matter to the Outside Expert Committee (OEC) for resolution of the issue, however, no further action was taken by the Respondent. Therefore, the present petition is filed for the appointment of an independent arbitrator.
Contentions of the Respondent
The Respondent submitted that the reference for resolution of the dispute was sought through the OEC in accordance with clause 27.3 of the agreement, and the Petitioner had not sought adjudication of the disputes through arbitration and no notice in terms of Section 21 of the Act of 1996 was ever issued or served upon the respondents, which was otherwise also the requirement under clause 27.1.3 of the agreement.
Observations of the court
The Hon’ble Court observed that even though it seems that the petitioner attempted to resolve the disagreements through conciliation by the Outside Expert Committee (OEC), the petitioner does not appear to have formally notified the respondents of the clause requiring arbitration after the 60-day deadline had passed.
It was furthermore observed that according to Section 11(6) of the Arbitration and Conciliation Act, a party may request that the disputes be sent to an arbitrator in cases where, among other things, a party neglects to take action as required by the appointment method that the parties have agreed upon. Therefore, it is evident that in order to sustain an application under Section 11(6) of the Act, the petitioner had to demonstrate that the respondents neglected the arbitration clause and had neglected to submit the disputes to the arbitrator even after they had received notice that the arbitration clause had been invoked.
The court relied upon the judgment titled Bharat Sanchar Nigam Ltd v. M/S Nortel Networks India Pvt. Ltd.
Based on these considerations, the court was of the opinion that as the notice was not served in terms of clause 27.1.3 of the agreement r/w Section 21 of the Act, the disputes as prayed for cannot be referred for adjudication to an independent Arbitrator.
The decision of the court
With the above direction, the court dismissed the application.
Case Title: M/s Shree Swaminarayan Travels V. M/s Oil Natural Gas Corporation Limited
Coram: Hon’ble Mr. Chief Justice Dhiraj Singh Thakur
Case No.: Arbitration Application No.13 of 2023
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