Chandra Shekhar Jaiswal vs Shashi Shekhar Jaiswal
2017 Latest Caselaw 3463 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Court No. - 30
 

 
Case :- ARBITRATION AND CONCILI. APPL.U/S11(4) No. - 48 of 2015
 

 
Applicant :- Chandra Shekhar Jaiswal
 
Opposite Party :- Shashi Shekhar Jaiswal
 
Counsel for Applicant :- Ashish Kumar,Manish Goyal
 
Counsel for Opposite Party :- Amit Saxena,Arvind Kumar Singh
 

 
Hon'ble Suneet Kumar,J.

Heard learned counsel for the parties.

By the instant application filed under Section 11(4) of Arbitration and Conciliation Act, 1996 (for short, Act 1996), applicant seeks appointment of an arbitrator to settle the dispute between the parties.

The applicant and the opposite party are brothers, they entered into a partnership on 25th April, 2002 to manage and carry on the business of 'Sangam Motors'. It was, inter alia, agreed between the parties that the firm will be trading in motorcycles/scooters, spare parts and running the work shop. The profit and loss of the firm were to be shared equally amongst the parties. The partnership deed included an arbitration clause with regard to settlement of dispute.

The opposite party instituted original Suit No. 194/2001 before the Civil Judge, Senior Division, for permanently injuncting the applicant from taking possession of a plot purchased jointly by the parties under the partnership over which a new firm in name and style 'Sangam Automobiles' was set up, which according to the opposite party is the sister concern of 'Sangam Motors'.

Applicant entered appearance and filed objection under Section 8 of Act, 1996 contending that civil court lacked jurisdiction to settle the dispute in view of arbitration clause in the partnership deed. The civil court came to decide the issue of maintainability of the suit in favour of the applicant by order dated 23rd December, 2011, holding that subject matter of the suit is referable to the arbitration agreement, therefore, Arbitrator needs to be appointed by the parties in terms of the arbitration clause.

Pursuant thereof, applicant proposed names of two arbitrators but the opposite party neither proposed any name nor consented to the names proposed by the applicant. Thereafter, the present application under Section 11 of the Act, 1996 was filed seeking appointment of an arbitrator.

The opposite party does not dispute that the partnership deed incorporates an arbitration clause for settlement of disputes but would submit that applicant had not sent any notice to the answering respondent for appointment of an arbitrator in terms of Section 11(4) of Act, 1996. Thus, it is urged that the instant application under Section 11 is premature and not maintainable.

I have perused the contents of the application and counter affidavit. The allegations and counter allegations made therein would reflect that there is dispute between the parties with regard to the business of the firms arising from the partnershipdeed.

The sole point for determination is as to whether as per the agreed procedure applicant made a request for appointment of an arbitrator.

The arbitration clause reads as follows:

"20. That any dispute or differences between partners whether during or after the termination of the partnership relating to any matter whatsoever touching the partnership affairs shall be referred to an Arbitrator, if they are able to agree upon one and failing such agreement, to two or more Arbitrators to be nominated one each by the parties to the dispute and an Umpire to be nominated by the Arbitrators before entering upon the reference and decision of such arbitrator or Arbitrators or parties to the dispute and the firm, subject to the provision of Indian Arbitration Act, 1940 or any statutory modification thereof for the time being in force. No partner shall taken any legal action without first exhausting the arbitration proceedings. All matters shall be subject to the exclusive jurisdiction of the court at Allahabad only."

In the application under Section 11 of Act, 1996, it is nowhere pleaded that any request was made in terms of the arbitration clause by the applicant to the opposite party for appointment of a sole Arbitrator and upon disagreement to appoint two or more arbitrators to be intimated one each by the parties to the dispute.

In the rejoinder affidavit, however, it has been stated that in the pending suit upon order being passed on Section 8 application; an application was filed by the applicant for appointment of an arbitrator invoking arbitration clause for the said dispute. Therefore, it is contended that the opposite party had full knowledge about the invocation of the arbitration clause. Further, the dispute at the first instance was raised by the opposite party by instituting the suit. The application under Section 8 of Act, 1996 was decided by order dated 23rd March, 2011 in favour of the applicant and against the opposite party, thereafter, court directed the parties to propose the names of agreed arbitrator and in the event they do not agree with the name of sole arbitrator, they may propose two names each.

It is contended that pursuant to the direction of the Court, applicant proposed two names, whereas, the opposite party did not propose any name, therefore, the learned counsel for the applicant would urge that the opposite party failed to appoint or agree to the arbitrator within 30 days from the date of receipt of request to do so, therefore, application under Section 11 would be maintainable.

A bare perusal of Clause-20 of the agreement would merely provide that if parties to the deed are able to agree upon one and failing such agreement, to two or more Arbitrators to be nominated one each by the parties to the dispute and an Umpire to be nominated by the Arbitrators before entering upon the reference, therefore, the provision does not necessarily require that a party seeking invocation of Clause-20 requires to inform other side by a written notice. Section 11(4)(a) & Sub-Section (5) employs the expression "thirty days from the receipt of a request", a party fails to appoint an arbitrator, appointment shall be made upon request of a party by the Supreme Court or, High Court as the case may be. Legislature has not used the word "notice" but merely "receipt of a request". Section 11 read with Section 3 provides for receipt of written communications. Sub clause (1) of Section 3 provides that unless otherwise agreed by the parties, any written communication is deemed to have been received if it is delivered to the addressee personally or his place of business, habitual residence or mailing address. It is not being disputed by the learned counsel for the opposite party that pursuant to the order of trial court passed under Section 8 of Act, 1996, applicant, on the direction of the court, filed an application after due notice to the opposite party proposing name of two arbitrators, however, opposite party did not respond by nominating their arbitrators or consenting to the arbitrator proposed by the applicant. In view of the expression "receipt of the request" used in Section 11 and Section 3 requiring notice to be served personally or by communication, the receipt of request was deemed sufficient by communicating the names of the arbitrators to the opposite party.

The Supreme Court considered the meaning of "notice" in Nilkantha Sidramappa Ningashetti v. Kashinath Somanna Ningashetti1, the Court held:

"We see no ground to construe the expression "date of service of notice" in col. 3 of Art. 158 of the Limitation Act to mean only a notice in writing served in a formal manner. When the Legislature used the word `notice' it must be presumed to have borne in mind that it means not only a formal intimation but also an informal one. Similarly, it must be deemed to have in mind the fact that service of a notice would include constructive or informal notice. If its intention were to exclude the latter sense of the words `notice' and `service' it would have said so explicitly."

The violation of procedural provisions will not vitiate the proceedings unless prejudice is caused to the party complaining of the violation. The right to have the dispute settled by arbitration has been conferred and that right should not be deprived of by technical pleas.

In my opinion, the request for appointing arbitrator in terms of the agreement was duly complied, the moment by an application communicated to the opposite party naming of two arbitrators, upon application under Section 8 being allowed, therefore, it was not required for the applicant to have again served a fresh notice or made a fresh request upon the opposite party. Objection raised by the learned counsel for the opposite party with regard to the maintainability of the application being premature for the reason that request contemplated under Section 11 has not been complied is devoid of merit.

It is clarified that no other point was raised or pressed.

Let Mr. Rajendra Prasad Pandey, a retired District Judge, R/o B-56, Patrakar Colony, Ashok Nagar Extension, Allahabad (UP)-211001, Mobile No. 9415023260 & 8874326404, be appointed as an arbitrator to resolve the dispute, subject to his consent in terms of Section 11(8) of the Arbitration and Conciliation Act.

The registry is directed to obtain consent of the proposed arbitrator in terms of Section 11(8) of the Act within two weeks.

List after eight weeks.

Order Date :- 22.8.2017

Mukesh Kr.