Section 11(6) Petition Not Maintainable Without Prior Section 21 Notice In Arbitration Proceedings: Delhi High Court

The bench noted that the notice serves the crucial purpose of informing the opposing party about the claims asserted, allowing for potential acceptance, clarification of claims, assertion of defenses, or identification of counter-claims.

Brief Facts:

M/s Kotak Mahindra Prime Ltd (Petitioner) approached the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 and sought the appointment of an Arbitrator to resolve disputes between the parties. The Petitioner argued that the appointment should proceed without a statutory notice under Section 21 of the Arbitration Act which typically triggers the commencement of arbitral proceedings by one party notifying the other unless mutually agreed otherwise.

It contended that previous litigation history justified bypassing the Section 21 notice requirement. It referred to a previous attempt to arbitrate where an arbitrator was unilaterally appointed via letter which resulted in an unenforceable award.

The Respondent argued that arbitral proceedings cannot commence until a Section 21 notice is issued.

Observations by the High Court:

The High Court referred to the decision of the Supreme Court in BSNL v. Nortel Networks (India) Private Limited (2021) 5 SCC 738 where the Supreme Court held that an application under Section 11 of the Arbitration Act can only be entertained subsequent to the issuance of a notice of arbitration concerning the specific claims or disputes intended for arbitration.

The High Court also referred to the decision of Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd where it was held that issuance of Section 21 notice is pivotal not only for determining the commencement date of arbitration but also for ensuring procedural fairness.

Further, the Supreme Court in Arif Azim Co. Ltd. v. Aptech Ltd. differentiated between the limitation period for commencing arbitral proceedings and the need for a valid Section 21 notice to initiate the process of appointing an arbitrator.

Consequently, the High Court noted that since no such notice was issued in the case, the petition was unmaintainable. Therefore, the High Court dismissed the petition.

Case Title: M/S Kotak Mahindra Prime Ltd Vs Manav Sethi & Anr.

Citation: 2024 LiveLaw (Del) 805

Case Number: ARB.P. 946/2024 and I.A. No.32486/2024

Advocate for the Petitioner: Mr. Balvinder Singh and Mr. Janender K. Chumbak

Advocate for the Respondent: Ms. Anu Monga, Mr. Rahul Goel, Mr. Shobhit Sharma and Ms. Astha Baderiya

Date of Judgment: 15.07.2024

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