Failure To Name Arbitrator In Legal Notice Does Not Invalidate Arbitration Invocation: Rajasthan High Court
The Rajasthan High Court bench comprising Dr. Justice Nupur Bhati has held that the invocation of an arbitration clause, which required the Applicant to name an Arbitrator, is valid under Section 11 of the Arbitration and Conciliation Act, 1996, even without naming an arbitrator in the legal notice, as long as the existence of an arbitration agreement is prima facie established....
The Rajasthan High Court bench comprising Dr. Justice Nupur Bhati has held that the invocation of an arbitration clause, which required the Applicant to name an Arbitrator, is valid under Section 11 of the Arbitration and Conciliation Act, 1996, even without naming an arbitrator in the legal notice, as long as the existence of an arbitration agreement is prima facie established. The Court reiterated the principle of minimal judicial interference in arbitration matters.
Facts:
On 11.01.2023, the petitioner and respondent entered into a registered Lease Deed, which provided for the transfer of possession of the 5th and 6th floors of Chetak Mall in Udaipur to the petitioner.
After the petitioner took possession on 01.05.2023, the respondent allegedly attempted to create third-party rights over the leased premises and removed the petitioner's signage. The Petitioner invoked the arbitration clause contained in Clause 12.10 of the Lease Deed through a legal notice dated 02.06.2023.
The petitioner subsequently sought interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, from the Commercial Court in Udaipur, which ordered the respondent to maintain the status quo of the property.
As the respondent failed to comply, the petitioner filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator.
Observations:
Referring to the Supreme Court's judgment in Cox & Kings Ltd. v. SAP India Pvt. Ltd., the Court held that the requirement under Section 11 of the Act is the prima facie existence of an agreement. The Court found that the Lease Deed contained a valid arbitration clause (Clause 12.10), which was sufficient to establish the existence of an arbitration agreement between the parties. The Petitioner's legal notice was deemed a sufficient invocation of the arbitration clause, despite the absence of a specific arbitrator's name.
The Court considered the judgment of the Supreme Court in BSNL & Anr. v. Nortel Networks India (P) Ltd. [(2021) 5 SCC 738], reaffirmed in NTPC Ltd. v. M/S SPML Infra Ltd. [Civil Appeal No. 4778 of 2022], which held that the Court should only interfere under Section 11 of the Arbitration and Conciliation Act when the application is ex-facie time-barred, dead, or when no subsisting dispute exists, which was not the case in this matter.
The Court also referred to the judgment passed by the Supreme Court in In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899, where reiterating the principle of minimal judicial interference in arbitration matters, it was held that “a referral court at Section 8 or Section 11 stage can only enter into a prima facie determination.”
The Court noted that an existing arbitration agreement was in place between the Petitioner and the Respondent, which had been invoked by the Petitioner through a legal notice dated 02.06.2023.
The Court allowed the application. It appointed Hon'ble Justice Shri. Prakash Chandra Tatia (former Chief Justice) as the Sole Arbitrator to adjudicate the dispute between the parties.
Case Title: Movie Time Cinemas Pvt. Ltd. v. M/s Chetak Cinema
Case Number: S.B. Arbitration Application No. 48/2023
Citation: 2024 LiveLaw (Raj) 263
Counsel for Petitioner: Mr. Avin Chhangani
Counsel for Respondent: Mr. Rajat Dave
Judgment Pronounced On: 11.09.2024