Calcutta High Court

Universal Consortium Of ... vs Sri Kanak Mitra & Anr on 7 April, 2021

        IN THE HIGH COURT AT CALCUTTA
                       Original Civil Jurisdiction
                              (Original Side)


                           AP 279 of 2020

               Universal Consortium of Engineers Pvt. Ltd.
                                   Vs.
                         Sri Kanak Mitra & Anr.



Before: The Hon'ble Justice Arijit Banerjee



For the Petitioner           : Mr. Uday Chandra Jha, Adv.
                               Mrs. Maheswari Sharma, Adv.
                               Ms. Tulika Roy, Adv.

For the Respondents          : Mr. Manab Ranjan Sarbadhikari, Adv.

Mr. Soupal Chatterjee, Adv.

Heard On                     : 04.02.2021, 10.02.2021 & 12.02.2021


CAV On                       : 12.02.2021


Judgment On                  : 07.04.2021



Arijit Banerjee, J.:

1. This is an application under Section 11 of the Arbitration and

Conciliation Act, 1996 (in short 'the Act of 1996'), for appointment of an

arbitrator for adjudication of disputes and differences that have arisen

between the parties in relation to a Development Agreement dated December

15, 2006 (in short, 'the said Agreement') entered into by and between the

parties. It is not in dispute that the said Agreement contains an arbitration

clause for resolution of disputes and differences between the parties

touching the said Agreement.

2. Schedule 'F' to the Development Agreement dated 15.12.2006 which

contains the Arbitration Clause reads as follows:

                      "                   SCHEDULE 'F'

                                      ARBITRATION

1. All disputes and differences between the parties

hereto arising out of this agreement regarding this

constructing or interpretation of any of the terms and

conditions herein contained or determination of any

liability or touching these presents shall be referred to

the arbitration and the same shall be deemed to be a

reference within the meaning of the Arbitration and

Conciliation Act, 1996 or any statutory enactment or

modification thereunder and the Award so delivered

shall be conclusive and binding on the parties hereto.

2. The Arbitrator shall have summary power.

3. The parties hereto agree and covenant with each other

that they have full trust and faith in the Arbitrator and

agree not to challenge and / or dispute the same in

any manner whatsoever or howsoever."

3. The respondents opposed the application primarily on two grounds.

Firstly, it was argued that no notice under Section 21 of the Act of 1996 was

given by the petitioner to the respondents. In the absence of such a notice,

the present application is premature and not maintainable. Secondly, the

respondents have filed a complaint against the petitioner before the National

Consumer Forum, New Delhi, in relation to disputes arising out of the said

Agreement. It was submitted that initiation of an arbitration proceeding by

appointment of an arbitrator would mean that there will be parallel

proceedings which ought not to be permitted. Although a third ground has

been indicated in the written notes of argument filed by the respondents,

i.e., the said Agreement is not registered as required under Section 17 of the

Registration Act, this point was not argued when the matter was heard. In

any event, this point can be rejected at the threshold since the said

Agreement being of the year 2006, there was at that time no requirement for

registering the said Agreement.

4. In support of his contention that for initiation of an arbitration

proceeding, issuance of notice under Section 21 of the Act of 1996 is

mandatory, learned Counsel appearing for the respondents has relied on

several decisions. Prior to noting such decisions, it may be helpful to set out

Section 21 of the Act of 1996:

"21. Commencement of arbitral proceedings.-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. "

5. Learned Counsel relied on the decision of the Delhi High Court in the

case of Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd.:

2017 SCC Online Del 7228. Learned Counsel particularly relied on

Paragraphs 25 and 30 of the said judgment which are set out hereunder:

"25. A plain reading of the above provision indicates that

except where the parties have agreed to the contrary, the

date of commencement of arbitration proceedings would

be the date on which the recipient of the notice (the

Petitioner herein) receives from the claimant a request for

referring the dispute to arbitration. The object behind the

provision is not difficult to discern. The party to the

arbitration agreement against whom a claim is made,

should know what the claims are. It is possible that in

response to the notice, the recipient of the notice may

accept some of the claims either wholly or in part, and the

disputes between the parties may thus get narrowed

down. That is one aspect of the matter. The other is that

such a notice provides an opportunity to the recipient of

the notice to point out if some of the claims are time

barred, or barred by any law or untenable in fact and/or

that there are counter-claims and so on.

30. Considering that the running theme of the Act is the

consent or agreement between the parties at every stage,

Section 21 performs an important function of forging such

consensus on several aspects viz. the scope of the

disputes, the determination of which disputes remain

unresolved; of which disputes are time-barred; of

identification of the claims and counter-claims and most

importantly, on the choice of arbitrator. Thus, the

inescapable conclusion on a proper interpretation of

Section 21 of the Act is that in the absence of an

agreement to the contrary, the notice under Section 21 of

the Act by the claimant invoking the arbitration clause,

preceding the reference of disputes to arbitration, is

mandatory. In other words, without such notice, the

arbitration proceedings that are commenced would be

unsustainable in law. "

6. Learned Counsel relied on a decision of the Bombay High Court in the

case of Bombay Gas Company Ltd. v. Parmeshwar Mittal & Ors.: AIR

1998 Bombay 118. Reliance was placed particularly on Paragraph 10 of the

said judgment. With great respect I have not been able to appreciate as to

why the said judgment was relied upon. In the context of Sections 34 and 21

the Arbitration Act, 1940, the learned Judge held that an application under

Section 34 surely implies readiness and willingness of the party to go for

arbitration, but it cannot be equated with a notice under Section 21 which

constitutes commencement of an arbitral proceedings. In my opinion the

said decision is not relevant for the purpose of the present case.

7. Learned Counsel also referred to a decision of this Court in the case of

Magma Leasing Ltd. v. NEPC Micon Ltd. & Anr: AIR 1998 Calcutta

1994. Again in my opinion, this case has no relevance to the case in hand.

The learned Judge was considering the meaning of the phrase 'not later than

when submitting his first statement on the substance of the dispute', which

appears in Section 8(1) of the Act of 1996.

8. Mr. Sarbadhikari then referred to the Hon'ble Supreme Court decision

in the case of M/s. Sundaram Finance Ltd. v. M/s. NEPC India Ltd.: AIR

1999 SC 565. Again, with great respect, that case is in no way germane to

the facts of the present case. In that case the Hon'ble Supreme Court

explained that the Court can pass interim orders under Section 9 of the

1996 Act before or during the arbitral proceedings, i.e., even before notice

under Section 21 of the 1996 Act is received by the respondents.

9. Finally learned Counsel referred to the judgment of the Hon'ble

Supreme Court in the case of Union of India v. Parmar Construction

Company: 2019 (3) CHN (SC) 343. This case also, in my opinion, is in no

way relevant for the purpose of deciding the issue in hand.

10. The facts of the case as placed before the Court by Learned Counsel

for the petitioner and not disputed by Learned Counsel for the respondents,

are that a Development Agreement dated 15.12.2006 was entered into by

and between the petitioner (the Developer) and the respondents (owners of

the land in question). Construction of the proposed building was completed

and the owners' share was handed over to them on 20.01.2018, 24.02.2018

and 11.04.2018.

11. By a letter dated 08.01.2019 the respondent no.1 raised certain

disputes pertaining to the area of the owner's allocation, the amount to be

received by him in terms of the Development Agreement, quality of the

building materials, etc. In the said letter it was stated that unless the

grievances were redressed, the respondent no.1 would take appropriate

steps. The said letter was replied to by the petitioner by its letter dated

28.01.2019 followed by a letter dated 01.02.2019. In the letter dated

01.02.2019, it was specifically stated that the respondent no.1 had been

handed over more area than what he was entitled to under the Agreement

and he was required to pay for the same. It was further stated that the

petitioner had invested a huge amount of money for removing the tenants

(which was the responsibility of the owners as per the Agreement) and

further that the unnecessary allegations against the petitioner were causing

loss of reputation and goodwill to the company. It was further stated as

follows:

"Even after receipt of this letter if you are not satisfied

about the explanation you have option to refer the dispute

to the Arbitrator. In case you feel the matter should be

referred to the Arbitrator, we are ready to do the same in

terms of the Agreement entered into by and between the

parties."

12. Learned Counsel for the petitioner submitted that after receipt of the

said letter, the respondent no.1 wrote a letter dated 19.03.2019 repeating

the same allegations. As such, it is clear that there are disputes between the

parties which are continuing.

13. Learned Counsel submitted that the letter dated 01.02.2019 was

sufficient compliance with Section 21 of the Act of 1996. In this connection

he relied on the following two decisions: (i) Nea Agrex S.A. v. Baltic

Shipping Company Ltd.: 1976 2 ALL ER 842, (ii) Unreported judgment of

Delhi High Court in the case of Badri Singh Vinimay Pvt. Ltd. v. MMTC

Ltd., delivered on 06.01.2020 in O.M.P 225 / 2015. Learned Counsel also

relied on the Supreme Court decision in State of Goa v. Praveen

Enterprises: (2012) 12 SCC 581 in support of his submission that an

application under Section 11 of the Act of 1996 is itself a request for

arbitration and is sufficient compliance with Section 21 of the Act.

14. As regards the other contention of the respondents, Learned Advocate

for the petitioner submitted that the Consumer Forum does not have

jurisdiction to entertain the petitioner's counter claim. Hence, if the

petitioner's request for arbitration is declined on the ground that

proceedings between the parties are pending before the National

Commission under the Consumer Protection Act, the petitioner's claim will

suffer casualty without being adjudicated.

15. I have given my anxious consideration to the rival contentions of the

parties.

16. With reference to the second contention of the respondents regarding

pending of proceedings between the parties hereto before the National

Commission, the same is wholly meritless. The petitioner is a Developer and

contends that it has mistakenly handed over more constructed area to the

respondents than they were entitled to under the Development Agreement.

On that account, the petitioner has a money claim against the respondents.

This cannot be adjudicated by the National Commission under the

Consumer Protection Act. The petitioner, by no stretch of imagination can be

considered to be a 'Consumer' within the meaning of the Consumer

Protection Act. Hence, pendency of the proceedings before the National

Commission cannot be a ground for disallowing the present application.

17. As regards the main contention of the respondents that this

application cannot be allowed since the petitioner has not served any notice

under Section 21 of the Act of 1996 on the respondents, the same also is

unacceptable. Section 21 merely lays down as to when the arbitral

proceedings in respect of a particular dispute will be deemed to have

commenced, which is when a request for the dispute to be referred to

arbitration is received by the respondent. I am unable to read into Section

21 any mandate to the effect that a Section 11 application will not be

maintainable unless a notice under Section 21 has been served by the

petitioner on the respondent. To that extent, with respect, I am unable to

agree with the decision of the Delhi High Court in the case of Alupro

Building Systems Pvt. Ltd. (Supra). Further, as I have understood the

decision of the Hon'ble Apex Court in State of Goa (Supra) it is, inter alia,

to the effect, that an application under Section 11 of the Act of 1996 is itself

a request by the petitioner for arbitration.

18. However, the above discussion becomes academic since, in my

opinion, the letter dated 01.02.2019 written by the petitioner, when read in

a commercial perspective, clearly constitutes a notice under Section 21 of

the Act of 1996. Too much technicality should not be resorted to in

interpreting such a notice. If the intention of the party issuing the notice is

clear that he desires arbitration, that should suffice. An overly legalistic

approach is not to be adopted. In a commercial dispute, a notice asking for

arbitration ought not to be construed too strictly. In the case of Nea Agrex

S. A. (Supra) which involved a charterparty, the charterers' agents

presented to the owners' agents a detailed claim for damages demanding

immediate payment and then they said "please advise your proposals in

order to settle this matter, or name your arbitrators." The English Court of

Appeal consisting of Lord Denning, M.R., Goff L.J. and Shaw L.J., while

considering whether such a communication could be considered as a notice

requiring arbitration, held as follows:

"30. Mr. Rokison says that the request is equivocal. It

gives the ship-owners an alternative. It does not amount to

an unequivocal request for arbitration. So it cannot be

deemed to be the commencement of the arbitration. That

seems to me too legalistic an approach. In a commercial

dispute, a letter requesting arbitration should not be

construed too strictly. The writer should not be impaled on

a time-bar because he writes in polite and courteous

terms, or because he leaves open the possibility of

settlement by agreement. Suppose the characters had

written to the owners: "Unless you are prepared to settle

the matter amicably, we must ask you to agree to the

appointment of an arbitrator". That would, to my mind, be

quite sufficient. When such a letter follows upon a genuine

claim promptly made, it should be interpreted as a request

for arbitration - a request made then and there - coupled

with a willingness to come to an amicable settlement. The

arbitration is deemed to commence with the sending of the

letter, and time no longer runs against him.

31. Likewise with the letter in this case, it can and should

be construed as a request for the difference to be

submitted to arbitration - with a saving that the request

will be withdrawn if a settlement can be reached. That is

sufficient to commence the arbitration."

19. The decision in Alupro Building Systems Pvt. Ltd. (Supra) has been

distinguished by a Learned Judge of the Delhi High Court in the case of

Badri Singh Vinimay Pvt. Ltd. (Supra). In that case, Prateek Jalan, J.

held that the communication issued by the party wanting arbitration was

clear enough and amounted to a notice under Section 21 of the Act of 1996.

The Learned Judge distinguished the decision in Alupro Building Systems

Pvt. Ltd. (Supra) on facts and noted that in that case there was no notice to

the respondents at all. However, in the present case, as I have recorded my

opinion above, the petitioner's letter dated 01.02.2019 clearly contemplated

disputes between the parties and resolution of such disputes through the

process of arbitration, in the event the disputes were not resolved amicably.

20. In view of the aforesaid, all the objections raised by the respondents to