[Arbitration Act] Mere Sending of Notice Under Section 21 Not Enough, Receipt of Notice Essential: Delhi High Court

Section 21 of the Arbitration and Conciliation Act, 1996:

"21. Commencement of arbitral proceedings:

Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent."

Brief Facts:

Indian Spinal Injuris Centre (“Petitioner”) approached the Delhi High Court (“High Court”) and filed an application under Section 11(6) read with Section 11(8) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) for appointment of an arbitral tribunal comprising a Sole Arbitrator to resolve disputes.

The Petitioner contended that an agreement, containing an arbitration clause, was executed between it and M/s Galaxy India ('Respondent”) which was followed by the issuance of a purchase order on the same date. Subsequently, a dispute arose which led to the issuance of a notice invoking arbitration by the Petitioner. The Petitioner argued that due to the presence of an arbitration clause and the existence of a dispute subject to arbitration, the matter should be referred for arbitration.

On the other hand, the Respondent argued that the notice under Section 21 of the Arbitration Act was not properly served. It highlighted that the notice was sent to an incomplete address, T-5, Mangol Puri Industrial Area, Phase I, New Delhi, whereas the correct and complete address of the Respondent is T-5/237, Mangol Puri, Industrial Area, Phase-I, New Delhi-110083, as specified in the agreement between the parties. Consequently, the Respondent contended that without proper service of notice under Section 21, the petition under Section 11 cannot be entertained.

Observations by the High Court:

The High Court held that mere dispatch of the notice isn't adequate; it's the actual receipt of the notice by the Respondent that triggers the commencement of arbitration proceedings. The High Court referred to its decision in Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd, where the High Court underscored the mandatory nature of the notice under Section 21. It held that the purpose of this notice is multifold: it ensures that the party against whom a claim is made is aware of the claims, facilitates the possibility of narrowing down disputes, enables the party to respond to claims, and, aids in establishing a consensus on the appointment of an arbitrator.

The High Court in Alupro Building Systems Pvt. Ltd held that the notice under Section 21 serves the interests of natural justice by ensuring informed participation in the arbitration process. It enables parties to identify and respond to claims, thereby streamlining the arbitration process and preventing potential disputes over arbitrator appointments. Furthermore, the High Court noted that the notice is integral to demonstrating a failure by one party to adhere to arbitration procedures.

Therefore, the High Court held that since the notice was sent to the complete address as required, the service of the notice under Section 21 was incomplete.

“notice has not been sent at the complete address which results in incomplete service of the notice under section 21 of the A&C act which is a mandatory pre-requisite.”

Consequently, the petition under Section 11 was dismissed by the High Court.

Case Title: Indian Spinal Injuries Centre Vs M/S Galaxy India

Citation: 2024 LiveLaw (Del) 714

Case Number: ARB.P. 848/2023, I.A. 15490/2023

Advocate for the Petitioner: Mr.Sandeep Kapoor

Advocate for the Respondent: Mr.Anshul Goel, Mr.Sanjeev Kumar and Mr.Ashok Goel

Date of Judgment: 08.05.2024

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