Arbitration | Absence Of Monetary Claim In Section 21 Notice Doesn't Negate Existence Of Dispute: Delhi High Court
The Delhi High Court bench of Justice C. Hari Shankar has held that due to the broad interpretation of the term "dispute," the court cannot definitively conclude that no dispute exists between the parties, even in the absence of a monetary claim by the Petitioner against the Respondent in the notice issued under Section 21 of the Arbitration and Conciliation Act, 1996.
Section 21 specifies that arbitral proceedings begin when a party sends a notice to the other party requesting the appointment of an arbitrator.
Brief Facts:
The matter pertained to a petition filed under Sections 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996 seeking reference of disputes between Celsius Healthcare Pvt Ltd (Petitioner) and Deepti Gambhir (Respondent) to arbitration. The dispute arose from an agreement executed between the two parties. Clause 19 of the said agreement contained a dispute resolution mechanism, which provided that any dispute between the parties, including questions regarding the existence, validity, or termination of the agreement, should first be resolved through mutual discussion at the corporate office of the company. Failing such resolution, the disputes are to be referred to arbitration, with the seat of arbitration exclusively at Delhi, governed by Indian law. The arbitration is to be conducted by a sole arbitrator appointed by the company and the arbitrator's decision would be final and binding on both parties.
On 6 January 2023, the Petitioner issued a notice under Section 21 of the Arbitration Act seeking to refer the disputes to arbitration. In response, the respondent denied the existence of any arbitral dispute and refused the request for arbitration. As the parties were unable to reach a consensus on the matter, the Petitioner filed the petition in the Delhi High Court under Sections 11(5) and 11(6).
The Respondent contended that there is no arbitrable dispute between the parties. She argued that the Petitioner has not raised any claim against the Respondent, but rather disputed the legitimacy of the Respondent's claim against the Petitioner. According to her, this does not constitute a valid dispute that can be referred to arbitration.
On the other hand, the Petitioner refuted the Respondent's arguments. It submitted that the notice issued under Section 21 clearly indicated the existence of disputes between the parties. Further, it argued that the Petitioner's grievances, particularly with regard to the Respondent's engagement of third parties using coercive measures against the petitioner, constitute a valid basis for arbitration.
Observations by the High Court:
The High Court addressed the issue of whether a dispute exists between the parties. The High Court acknowledged the broad scope of the term "dispute" and, accordingly, held that it would not be appropriate to definitively assert the absence of any dispute between the Petitioner and the Respondent. The High Court held that this conclusion stands, even though no monetary claim was raised by the petitioner in the notice issued under Section 21 of the Arbitration Act. The High Court, therefore, found itself unable to dismiss the possibility that a dispute, in some form, exists between the parties.
The High Court referred to the decision of the Supreme Court in SBI General Insurance Co Ltd v. Krish Spinning. The High Court noted that, following this decision, its role under Section 11(6) of the Arbitration Act, is narrowly confined to determining the existence of an arbitration agreement between the parties. According to Paragraph 114 of the Supreme Court's decision, the court is restricted to this consideration alone. In addition to the presence of an arbitration agreement, the court must also ensure that the petition under Section 11(6) has been filed within the stipulated time frame—within three years of the issuance of the Section 21 notice that initiated the arbitral proceedings. In the case, the High Court held that both these conditions were satisfied.
As the parties had not been able to reach an agreement on the appointment of an arbitrator, the High Court noted that it was necessary for judicial intervention. Consequently, the high Court directed that the dispute be referred to arbitration under the supervision of the Delhi International Arbitration Centre (DIAC) which would regulate the arbitral proceedings according to its established rules and procedures.
The High Court further ordered that the arbitrator appointed through DIAC would be entitled to charge fees as per the fee schedule maintained by the centre.
Case Title: Celsius Healthcare Pvt Ltd Vs Deepti Gambhir Proprietor Of S P Distributors And Anr
Case Number: ARB.P. 1012/2024 and anr
Advocate for the Petitioner: Ms. Kirti Mewar, Adv.
Advocate for the Respondent: Mr. Rishab Raj Jain and Mr. Sharique Hussain, Advs.
Date of Judgment: 04.09.2024