Section 11 Can't Be Entertained Without A Notice Under Section 21 of Arbitration Act: Telangana High Court

Brief Facts:

The parties entered into a Franchise Agreement on 26.06.2019, which contained an arbitration clause. Disputes arose, and the applicant sought a refund of ₹16,29,567/- along with certain other demands via a notice sent on 16.01.2024. The respondent replied on 06.02.2024. The applicant then filed an arbitration application under Section 11 of the Arbitration and Conciliation Act, 1996, for the appointment of an arbitrator.

Observations by the Court:

The court noted that while the applicant submitted that the notice dated 16.01.2024 was a valid notice under Section 21 of the Act, the respondent argued that it failed to meet the requirements of Section 21, which is a condition precedent for filing an arbitration application.

Referring to the Bombay High Court's judgment in Malvika Rajnikant Mehta v. JESS Constructions, the court held that the mere existence of an arbitration clause does not waive the requirement for such notice. In that case, the court had observed:

“The notice under Section 21… serves definite purposes. One, it puts the adversary on notice as to the nature of the claim, even when the Arbitrator is named by the parties. Two, it provides an opportunity to the adversary to contest the admissibility of the claims on the threshold. Three, it allows adversary to raise the issue of the impartiality of the Arbitrator and the consequent disqualification. Four, the date of the receipt of the notice has a bearing upon the date of the commencement of the arbitration.”

The court also cited the Supreme Court's decision in M/s. Arif Azim Co. Ltd. v. M/s. Aptech Ltd [(2024) 5 SCC 313], which held that the limitation period for filing an application under Section 11(6) commences only after the issuance of a valid notice under Section 21 and the other party's failure to comply.

The court observed that the notice dated 16.01.2024 did not adequately reference the dispute to be arbitrated and thus, did not fulfill the statutory requirements of Section 21 of the Act. The court held that “in the absence of notice under Section 21 of the Act, the arbitration application under Section 11 of the Act cannot be entertained."

Consequently, the application was dismissed.

Case Title: Mrs. Kurnuda Sreenivasa Sasikanth vs. M/S Ananya Child Development and Early

Case Number: Arbitration Application No.100 of 2024

Appearance:
For the Applicant: Mr. T. Sharath
For the Respondent: Mr. Shravanth Paruchuri (representing Mr. Lakshmikanth Reddy Desai)

Date of Judgment: 6 September, 2024

Click Here To Read/Download Order