Madras High Court
A-Id Systems (I) Pvt. Ltd vs M/S.Aartha Technologies ... on 7 September, 2022
Arb.O.P(Com.Div.)No.323 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 07.09.2022
CORAM
THE HONOURABLE Mr.JUSTICE SENTHILKUMAR RAMAMOORTHY
Arb.O.P.(Com.Div.)No.323 of 2021
A-ID Systems (I) Pvt. Ltd.,
Having Office at No.1, KRM Towers
8th Floor, Harrington Road,
Chetpet, Chennai-600 031. ... Petitioner
vs.
1. M/s.Aartha Technologies Services
A Registered Firm, represented by its partners
No.12/1, Jeth Nagar,
3rd Cross Street, R.A.Puram,
Chennai-600 028.
2. Mr.Vijaya Mohanamurali
Partner
M/s.Aartha Technologies Services
No.12/1, Jeth Nagar,
3rd Cross Street, R.A.Puram
Chennai-600 028.
3. Mr.N.S.Bhargav Reddy
Partner
M/s.Aartha Technologies Services
No.10, 1st Main, 14th Cross
HRS Layout, 16th Sector
Bangalore - 560 102.
4. Mr.P.Kishore Kumar
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Arb.O.P(Com.Div.)No.323 of 2021
Partner
M/s.Aartha Technologies Services
No.16, 9th Main, Chairman Layout
Banaswadi, Bangalore - 560 043.
5. Mr.S.Ravikumar
Partner
M/s.Aartha Technologies Services
No.195, 8th Main Road, Sector - 4
HSR Layout, Bangalore - 560 102. ... Respondents
Arbitration Original Petition filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996 praying to appoint a sole Arbitrator
to adjudicate upon the disputes between the petitioner and the respondents
arising out of the Memorandum of Understanding dated 19.05.2016.
For Petitioner : Mr.C.Kaveen
For Respondents : Mr.Ramasubramaniam Raja
for R1, R2, R3 and R5
R4 - No appearance
*****
ORDER
The petitioner entered into a Memorandum of Understanding
[MOU] dated 19.05.2016 with the first respondent herein, which is a
registered partnership firm.
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2. Under the MOU, the petitioner was required to supply products to
the first respondent and payment terms were also specified therein.
Pursuant thereto, the petitioner issued an invoice for a sum of
Rs.66,41,250/- and a dispute arose between the parties in view of non-
payment thereof in full.
3. Therefore, the petitioner issued a notice dated 23.04.2021
demanding payment and informing the respondents that the said notice
should be construed as a notice of arbitration if the demand is not
satisfied.
4. Learned counsel for the petitioner states that respondents
admitted liability vide email dated 08.08.2017 and, thereafter, failed to pay
their dues or respond to the notice dated 23.04.2021.
5. This petition is opposed by the respondents primarily on the
ground that the petition was not preceded by a notice under Section 21 of
The Arbitration and Conciliation Act, 1996 (Act 26 of 1996) [Arbitration
Act]. By drawing reference to notice dated 23.04.2021, learned counsel
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Arb.O.P(Com.Div.)No.323 of 2021
for the respondents contends that the petitioner did not nominate an
arbitrator under this notice and, therefore, the notice does not satisfy the
requirements of Section 21 of the Arbitration Act. In support of this
contention, learned counsel refers to a judgment of the Delhi High Court
in Alupro Building Systems Pvt. Ltd., vs. Ozone Overseas Pvt. Ltd., 2017
SCC Online Del 7228. In particular, paragraph Nos.23, 27 and 28 thereof
were relied on for the proposition that a notice under Section 21 of the
Arbitration Act is mandatory and that such notice serves multiple
purposes, including of letting the counter party know the name of the
person proposed to be appointed as an arbitrator. Learned counsel also
relies upon an order of this Court dated 23.04.2019 in O.P.No.154 of 2016,
wherein the judgment of the Delhi High Court was referred to and
reproduced in relevant part.
6. It is the settled legal position that a notice under Section 21 of the
Arbitration Act is mandatory inasmuch as the date of receipt thereof is the
date of commencement of arbitral proceedings. Such date, consequently,
is critical for determining limitation. In this case, there is no disputation
that clause 13 of the MOU provides for resolution of disputes through
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arbitration. By notice dated 23.04.2021, the petitioner called upon the
respondents to pay a sum of Rs.36,41,250/- and also put the respondents
on notice that the said notice should be construed as the notice of
arbitration under clause 13 if the demand made in the notice is not
complied with. The admitted position is that the notice was not replied to
and that, eventually, the petitioner was constrained to present this petition
in December 2021.
7. The principal object of Section 21 of the Arbitration Act is to put
the counter party on notice that the dispute resolution clause under the
contract has been invoked so as to enable the process of constitution of the
arbitral tribunal to be set in motion. As stated earlier, it also serves the
purpose of determining the date of commencement of arbitral proceedings,
which would function as the end date for limitation purposes. In my view,
the notice dated 23.04.2021 qualifies as a notice under Section 21 of the
Arbitration Act. This is not a case where the respondents replied to such
notice and proposed a sole arbitrator to resolve disputes. If the petitioner
had rushed to Court without endeavouring to constitute the arbitral
tribunal as per contract it could have been concluded that the petition is
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premature. In this case, the petitioner was constrained to approach this
Court after the lapse of almost 7 months because the respondents did not
respond.
8. For the reasons set out above, this petition is liable to be allowed.
Accordingly, Ms.Chitra Narayan, Advocate (Mobile No:90940 31934), is
appointed as the sole Arbitrator to adjudicate the disputes. The sole
Arbitrator is directed to enter upon reference and adjudicate the disputes
in accordance with law. It is open to the learned sole Arbitrator to fix the
fees and expenses in relation to the arbitration proceedings.
07.09.2022
Speaking/Non-speaking order
Index : Yes / No
mk
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SENTHILKUMAR RAMAMOORTHY, J.,
mk
Arb.O.P(Com.Div.)No.323 of 2021
07.09.2022
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