Notice Under S. 21 Must Be Unequivocal, Should Leave No Doubt In Mind Of Noticee, Punjab & Haryana High Court Dismisses Section 11(6), A&C Act Application

Brief Facts:

The Petitioner entered into a tripartite agreement with Doaba Cooperative Milk Producers Union Ltd. (“Respondent No. 1”) and M/s Bharat Petroleum Corporation Ltd. (“Respondent No. 2”) for the conversion of furnace-fired boilers into LPG Dual Fired Burner System (FO + LPG) and the supply of packaged LPG to Respondent No.1. The Petitioner fulfilled its obligations under the agreement by converting the boilers and supplying LPG. However, Respondent No.1 allegedly began using coal instead, causing a decline in LPG consumption. Efforts to resolve the dispute, through communication and legal notices, were unsuccessful as Respondent No.1 rejected the Petitioner's demands for reimbursement of financial losses incurred due to non-usage of LPG since April 2022. Feeling aggrieved, the Petitioner approached the Punjab and Haryana High Court (“High Court”) and applied Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) for the appointment of an independent arbitrator.

In response, Respondents No. 1 and 3 filed separate replies contesting the matter. They argued that the Petitioner did not invoke the arbitration clause, and even if it did, any arbitrator must be appointed under Section 55(3) of the Punjab Cooperative Societies Act, 1961. Respondent No.1 specifically asserted that an arbitrator cannot be appointed under the Arbitration Act.

Observations by the High Court:

The High Court noted that the arbitration clause outlined in the agreement between the parties, had a provision for the resolution of disputes through mutual discussion and, if necessary, referral to the Registrar of Cooperative Societies for adjudication.

The Petitioner's contention was based on its assertion that it had invoked arbitration by issuing a legal notice, specifically emphasizing its demand for reimbursement of financial losses and its intent to commence arbitration proceedings if the issue persisted. However, upon examining the legal notice, the High Court found that while the Petitioner expressed grievances regarding the non-usage of LPG and demanded compensation for losses, the notice did not unequivocally indicate an intent to invoke the arbitration clause.

Referring to Section 21 of the Arbitration Act, the High Court held that there is a necessity for a clear notice as a precondition for initiating arbitration proceedings under Section 11(6) of the Arbitration Act. It highlighted that the initiation of arbitration proceedings hinges upon the service of a notice by the claimant to the respondent, intimating an intention to seek arbitration as per the agreement's stipulations. The High Court held that as the petitioner had not served the required notice, the arbitration proceedings could not commence.

Examining the notice's language, the High Court held that the Petitioner's intention to invoke arbitration was not apparent. Rather, the notice primarily focused on recovering alleged losses and urging Respondent No.1 to resume using the LPG-based furnace. The High Court noted that while the notice included a provision for invoking arbitration in the future, if necessary, there was no evidence of a subsequent notice being sent after the specified period.

Consequently, the petition was dismissed. The petitioner was granted liberty to serve a notice under the relevant provision if permissible and in accordance with the law.

Case Title: M/s SAARC Communication Private Ltd. vs The Doaba Cooperative Milk Producers Union Ltd. and Others

Case Number: ARB-111-2023 (O&M)

Advocate for the Petitioner: Karan Bhardwaj

Advocate for the Respondent: Arun Gosain and Athar Ahmed

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