Calcutta High Court
Kakali Khasnobis vs Mrs Reeta Paul And Anr on 21 August, 2024
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
OCD-11
ORDER SHEET
AP-COM/701/2024
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISION
KAKALI KHASNOBIS
VS
MRS REETA PAUL AND ANR.
BEFORE:
The Hon'ble JUSTICE SABYASACHI BHATTACHARYYA
Date: 21st August, 2024.
Appearance:
Mr. Aritra Basu, Adv.
Mr. Somnath Bose, Adv.
Mr. Shubham Khan, Adv.
..for the petitioner
Mr. Sanjay Mukherjee, Adv.
Mr. Arghadip Das, Adv.
..for the respondents
The Court: The present application under Section 11 of the Arbitration
and Conciliation Act, 1996 has been challenged on two-fold grounds. First, on
the ground that the same is barred by limitation and secondly, that the
petitioner did not comply with the mandatory provision of Section 11(5) and
Section 21 of the 1996 Act by issuing a prior notice to the respondents
requesting the appointment of an Arbitrator.
Insofar as the first issue is concerned, learned counsel for the
respondents places reliance on certain dates and points out that an application
under Section 9 of the 1996 Act was taken out by the petitioner on July 26,
2021 where an interim order was passed on July 27, 2021. Ultimately, the said
application was dismissed for not taking effective steps for appointment of
Arbitrator, on July 6, 2024. It is argued that the present application under
Section 11 has been filed only on July 16, 2024 and, as such, is hopelessly
time-barred.
On the issue of non-compliance of the pre-requisite of giving a notice to
the respondents for appointment of an Arbitrator, learned counsel for the
respondents cites a judgment of a learned Single Judge of the Delhi High Court
in the matter of Alupro Building Systems Pvt. Ltd. vs. Ozone Overseas Pvt. Ltd.
reported at 2017 SCC OnLine Del 7228. Learned counsel also cites a co-
ordinate Bench judgment of this Court in the matter of Sri Arun Kumar Bhunia
vs. Badal Midya reported at 2019 SCC OnLine Cal 9410.
In support of his contentions, learned counsel for the respondents also
relies on a judgment of another co-ordinate Bench of this Court in the matter
of West Bengal Power Development Corporation Limited vs. Sical Mining Limited
reported at 2022 SCC OnLine Cal 3036 and a judgment of the Bombay High
Court in Malvika Rajnikant Mehta and Others vs. JESS Constructions reported
at 2022 SCC OnLine Bom 920.
While controverting such arguments, learned counsel for the petitioner
points out that the petitioner would be entitled to the Covid-19 relaxations
granted by the Supreme Court in its judgments, which subsisted throughout
the period between March 15, 2020 and February 28, 2022.
Moreover, learned counsel points out that the non-compliance of the
provisions of Section 9 with regard to not referring the matter to arbitration
could only affect the outcome of the Section 9 application. However, insofar as
the present application is concerned, the same was filed on July 16, 2024
which in any event is before the expiry of three years from July 26, 2021, when
the Section 9 application was filed.
Insofar as the second objection is concerned, learned counsel, by placing
reliance on the invocation of arbitration clause by the petitioner dated July 20,
2021 and the reply thereto by the respondents dated August 16, 2021, submits
that the same comprised of sufficient compliance of Section 11(5) of the 1996
Act. It is argued that although the petitioner's letter dated July 20, 2021 was
addressed to the appointed Arbitrator, copies thereof were also forwarded to
the present respondents, which according to the petitioner comprised of
sufficient compliance of Section 11(5) and Section 21 of the 1996 Act.
The learned counsel for the petitioner also cites the stand taken by the
respondents in their written reply dated August 16, 2021, where the request of
the petitioner to appoint a particular person as an Arbitrator was clearly
repudiated.
Learned counsel for the petitioner relies, in turn, on a judgment of a
learned Single Judge of the Delhi High Court in the matter of De Lage Landen
Financial Services India Pvt. Ltd. vs. Parhit Diagnostic Private Limited and Others
reported at 2021 SCC OnLine Del 4160 and a coordinate Bench judgment of
this Court in Universal Consortium of Engineers Pvt. Ltd. vs. Kanak Mitra and
Another reported at AIR 2021 Cal 127.
Heard learned counsel.
Insofar as the first issue of limitation is concerned, it is evident from the
list of dates supplied by the respondents themselves that the application under
Section 9 of the 1996 Act was filed by the petitioner on July 26, 2021 on which
date, it may as such be construed, the cause of action for reference to
arbitration first arose. As the application under Section 11 has been filed on
July 16, 2024, just before the expiry of three years therefrom, it cannot be said
that the same is ex facie barred by limitation. It has been held time and again
by the Supreme Court and several High Courts that in the absence of any other
provision, the residual provision of Article 137 of the Schedule to the Limitation
Act is applicable to an application under Section 11 and as such, the period of
three years having not elapsed, it cannot be said that the present application is
time-barred.
That apart, the petitioner is also justified in arguing that the Pandemic
relaxations granted by the Supreme Court from the period between March 15,
2020 and February 28, 2022 are also applicable to the petitioner, upon which
the period in between has to be added to the limitation period. Thus, the first
objection raised by the respondents is turned down.
Insofar as the second issue is concerned, a perusal of the judgment of
the Delhi High Court in De Lage Landen (supra) shows that there were certain
other circumstances which also coloured the judgment of the Delhi High Court.
As for example, it has been narrated in the said judgment that the arbitration
clause in the said case, as worded, conferred complete discretion on the
petitioner-lender to make an appointment. The Court proceeded to observe
that in the light of the facts of the said case, it would be a non-issue as to
whether a notice under Section 21 was necessary in the said case. That apart,
the Court also took into consideration the fact that the petitioner had written to
the respondents therein independently of the unilateral invocation of
arbitration, by a communication/notice dated May 13, 2019, that it intended to
take recourse to legal proceedings under the agreement which was construed
by the learned Single Judge of the Delhi High Court as sufficient indication to
invoke the arbitration clause. Such considerations being absent here, it
cannot be said that the ratio laid down therein can be applied to the present
case in an undiluted form.
The learned coordinate Bench, in the matter of Universal Consortium of
Engineers Pvt. Ltd. (supra), had arrived at the finding that the Court was
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. The Court also placed reliance on
the judgment of Alupro Building Systems (Supra) in support of its observations.
Further, the learned Single Judge relied on a decision of the Apex Court in
State of Goa where it was held, according to the learned Single Judge, that an
application under Section 11 of the 1996 Act is itself a request by the petitioner
for arbitration.
However, with utmost respect, the ratio of Alupro Building Systems
appears to be a little bit different to me.
With regard to Section 21 not containing any provision that a Section 11
application will not be maintainable unless a notice under the said section was
served, the said logic does not, with utmost respect, appeal to me since
restriction, if any, in such context would be required to be embodied not in
Section 21 but in Section 11 itself.
Insofar as Alupro Building Systems (supra) is concerned, the same would
presently be dealt with here and I agree with the proposition that the decision
of the Delhi High Court in the said case does not squarely apply in the present
context.
In State of Goa (supra) as pointed by respondents' counsel in the present
case, the context was counter claims, where it was held that an application
under Section 11 of the 1996 Act is itself a request for arbitration.
It would be a circular logic and take us into infinite regress if such logic
is adopted in the present context. If adopted, it would mean that an
application under Section 11 should be construed as a notice for itself, which
is an absurd proposition. Moreover, the said observations were not only made
in the context of counter claim but also in the context of Section 21 of the 1996
Act, which commences an arbitral proceeding.
It would be apt to consider a different aspect of the matter at this
juncture. There is a difference between the requirements of Section 21 and
Section 11 as well as in the context in which the two Sections operate.
Whereas Section 21 is the commencement of the arbitral proceeding itself,
Section 11(5) contemplates a different requirement, being once step prior to the
commencement of the arbitral proceeding. Section 11(5) requires a request of
appointment of Arbitrator to be made whereas Section 21 requires such a
request to be made for the purpose of reference to arbitration.
Whereas the request under Section 11(5) is merely a precursor for the
actual appointment of Arbitrator by the Court, only upon which the arbitral
proceeding commences, the Section 21 operates as the commencement of the
arbitral proceeding itself.
Thus, there is no scope of confusing the requirements of Section 21 on
the one hand and Section 11 on the other, which operate in somewhat different
perspectives.
Seen in such perspective, the judgment rendered by the Delhi High Court
in Alupro Building Systems (Supra) might acquire some relevance.
However, a caveat ought to be entered at this stage. Alupro Building
Systems (supra) was not rendered in the context of Section 11 of the 1996 Act,
as correctly pointed out by learned counsel for the petitioner herein. The
context of the same was a challenge under Section 34 of the 1996 Act where
the Court was considering whether a notice under Section 21 is mandatory.
Since Section 21 is the commencement of the arbitral proceeding itself,
the rigours applicable to the same are of a much higher standard than a
request under Section 11(5) of the 1996 Act, since the latter is merely a prior
step intimating the intention to arbitrate and appoint an Arbitrator to the
respondents, which would indeed be followed by the actual appointment of
Arbitrator and the Arbitrator thereafter entering into the arbitral proceeding.
Thus, the tests applicable to Section 11(5) ought to be tested on a much
liberal anvil in favour of arbitration, as contemplated in the object and purpose
of the Arbitration Act, 1996, than that of Section 21, which is the actual
commencement of the arbitral proceeding itself and has its effect on nothing
less than the veracity and validity of the arbitral proceeding and the award.
While considering a challenge under Section 34, the Delhi High Court in
Alupro Building Systems (supra) held that a plain reading of Section 21
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 receives from the claimant a request for referring the
dispute to arbitration. The Court held that inherently the arbitration clauses
do not contemplate the unilateral appointment of an Arbitrator by one of the
parties and there has to be a consensus for which the notice under Section 21
serves an important purpose of facilitating a consensus on the appointment of
an arbitrator.
The Court also held that for the purposes of Section 11(6) of the 1996
Act, without the notice under Section 21 of the Act, a party seeking reference of
disputes to arbitration will be unable to demonstrate that there was a failure
by one party to adhere to the procedure and accede to the request for the
appointment of an arbitrator. The trigger for the Court's jurisdiction under
Section 11 of the Act is such failure by one party to respond.
However, with utmost respect to the erudition par excellence of the
learned judge who rendered the said judgment, being Justice Muralidhar, this
Court is of the clear and unambiguous opinion that the said observation vis-à-
vis Section 11(6) of the 1996 Act in the judgment was palpably obiter dictum,
since the entire context, as enumerated in the judgment itself, was an
application under Section 34 of the 1996 Act and not a Section 11 scenario.
That apart, the Court cannot read into the statute something which is
not intended by the Legislature itself. Section 11 nowhere stipulates that there
has to be a prior request of reference to arbitration under Section 21 of the
1996 Act. Section 11(5) clearly envisages a prior request for appointment of an
Arbitrator, which would necessarily be followed by the actual appointment and
thereafter commencement of the arbitral proceeding.
Seen in such context, Alupro Building Systems (supra) cannot be a
binding precedent in the present case.
In Sri Arun Kumar Bhunia (supra), a learned Single Judge of this Court,
inter alia, observed, although in a different context, that Section 11(6)(a) of the
1996 Act stipulates that when the procedure for appointment of the Arbitrator
has been agreed upon by the parties, the Chief Justice or his designate can
appoint an Arbitrator only when one of the parties fails to act as required
under the agreed procedure. In such light, it went on to observe that there
cannot be any doubt that issuance of a valid notice under Section 21 of the Act
of 1996 for referring the dispute between the parties to arbitration is a
condition precedent for commencement of a valid arbitral proceeding.
The context there was somewhat different than the present. Although
the incentive for the Court to embark on the judgment was an application
under Section 11(6) of the 1996 Act, in the said case, the parties had already
participated in an arbitral proceeding upon entering into a reference.
Thereafter, an issue was raised by the respondents therein to the effect that the
appointment of the Arbitrator was unilateral which, in the absence of a valid
notice under Section 21, was held by the learned Single Judge to be invalid. At
the risk of repetition, as discussed above, the context of commencement of an
arbitral proceeding being invalid in absence of a prior notice under Section 21
and in view of a unilateral appointment of Arbitrator is entirely different from a
Section 11(5) situation, where only a prior notice is required for the purpose of
appointment of an Arbitrator and not for the initiation of the proceeding itself.
In Malvika Rajnikant Mehta (supra) the Bombay High Court was
considering an application under Section 11(5) read with Section 15 of the
1996 Act. There it was observed that without a notice under Section 21 of the
Act, a party seeking reference of the disputes to arbitration would be unable to
demonstrate that there was a failure by one party to adhere to the procedure
and accede to the request for the appointment of an arbitrator. In the said
case, there was no dispute as to whether there was actually a prior request
under either Section 21 or Section 11(5) of the 1996 Act. The Court considered
that there were several correspondences between the parties which was
ultimately relegated to the arbitrator himself by the Court for consideration
whether there was a prior notice under Section 21 of the 1996 Act. Thus, I do
not find any reason to proceed on the premise that the ratio of the said
judgment is conclusive for the present purpose.
Coming back to the present case, we are to look into the documents
annexed to the present application to assess whether there was substantial
compliance with Section 11(5) of the 1996 Act. Section 11(5) does not
contemplate, under any stretch of imagination, the commencement of a valid
arbitral proceeding but is merely a precursor and the sine quo non for
appointment of an arbitrator which would then lead to commencement of the
proceeding subsequently and as such, has to be taken in much more liberal
context than Section 21, which itself marks the commencement of the arbitral
proceeding.
In the communication dated July 20, 2021 made by the petitioner to the
perceived Arbitrator, it was clearly indicated that the petitioner invokes the
arbitration clause and names the Arbitrator as the principal noticee to settle
the dispute as indicated in the said communication itself. There is no dispute
to the fact that copies thereof were forwarded to the present respondents as
well. The receipt of the said communication by the respondents is undisputed,
since the respondent chose the give a reply thereto in writing which is also
annexed the present application at page 43. In the reply dated August 16,
2021, the respondents, for all practical purposes, also construed the said
notice as one seeking invocation of the arbitration clause. However, what was
challenged by the respondents in the said reply was not that the said
communication of the petitioner was not a request under Section 11(5), being
addressed to the Arbitrator and not to the respondents, but that the said
unilateral appointment which was witnessed by the communication was not
valid in the eye of law.
Thus, the challenge in the reply of the respondents was confined to the
unilateral appointment of the Arbitrator himself, which has been obviated by
virtue of the petitioner seeking the appointment of an independent Arbitrator
by the present application under Section 11. Insofar as the last paragraph of
the reply of the respondent dated August 16, 2021 is concerned, the
respondents stated that question of acceptance of the alleged office of
arbitration and/or to initiate a proceeding as per provision of law with any
immediate effect by the unilateral named Arbitrator does not and/or cannot
arise at all. Further, the respondents stated that they denied and disputed the
same and as such the appointment of the particular learned advocate as
Arbitrator from the petitioner's side belonging to the same Bar Association was
not beyond question and the respondents did not accept the same since there
was every likelihood of manipulation and pressure on the mind of the said
learned advocate being the Arbitrator from the petitioner's side.
Thus, the matrix contemplated in Section 11(5) is fully satisfied in the
facts of the case. Section 11(5) envisages the failure of any agreement referred
to in sub-Section (2) and if the parties fail to agree on the Arbitrator within 30
days from receipt of a request by one party from the other party to so agree, for
the appointment to be made.
Here, the petitioner wrote a letter addressed in the first person to the
named Arbitrator but also addressed copies thereof to the respondents who
admittedly received the same and replied to the same. In the reply, apart from
challenging the unilateral appointment, the respondents made their intention
clear that they failed to agree on the Arbitrator, which is the specific language
and requirement of sub-Section (5) of Section 11 of the 1996 Act.
Thus, the respondents cannot now take the specious objection of non-
compliance of Section 11(5) at this stage and argue that the Section 11
application is premature.
Despite taking into consideration the ratio laid down in all the judgments
cited by the parties, we cannot lose sight of the object and purpose of the 1996
Act, in consonance with the contemplation of the UNCITRAL Model Law of
Arbitration. Such object and purpose, in no uncertain terms, encourages and
facilitates arbitration and seeks to make India an international hub for
alternative dispute resolution by the process of arbitration. The purpose of
Section 11(5) is not to throw a spanner in the wheels of arbitration but to
encourage and facilitate arbitration. As such, the interpretation of the said
section which would be congenial and conducive to arbitration can only be
accepted by the Court as valid.
In the context of the above discussions, I am of the clear opinion that the
requirements of Section 11(5) have been complied with in the present case and
the application is not premature.
Hence, both the objections taken by the respondents to the present
application are turned down.
A bare perusal of the arbitration clause indicates that the same covers
the dispute now sought to be raised between the parties and the dispute so
raised is otherwise arbitrable.
Accordingly, AP-COM/701/2024 is allowed, thereby appointing Mr.
Sagar Bandyopadhyay (Mob No. 9830068294), an Advocate practising in this
Court, as the sole Arbitrator to resolve the disputes between the parties,
subject to obtaining a disclosure under Section 12 of the Arbitration and
Conciliation Act, 1996 from the said Arbitrator. The learned Arbitrator shall, in
consultation with the parties and in consonance with the provisions of the
1996 Act and its Fourth Schedule, fix his own remuneration.
It is further made clear that all questions are kept open for being
adjudicated by the learned Arbitrator on merits and this Court has not entered
into the merits any of the issues involved, including any objection regarding
maintainability of the claims, if raised by the respondents, and all such issues
will be decidedly independently by the learned Arbitrator.
(SABYASACHI BHATTACHARYYAJ.)
bp/R Bhar/B.Pal
