Insistence On Pre-Arbitral Steps Would Be Meaningless When The Respondent Fails To Give Reply To Notices Issued By The Petitioner: Delhi High Court

Facts

The parties entered into a Redistribution Stockist Agreement dated 14.07.2021 wherein the petitioner was appointed as a Stockist for the respondent. Clause 21 of the agreement provided for a multi-tier dispute resolution clause.

It provided that parties should first attempt to resolve the dispute through amicable settlement and upon failure the dispute should go to an ombudsman and only in the eventuality of failure before ombudsman, the dispute would be resolved through arbitration.

The respondent terminated the agreement on 22.02.2022. A dispute arose between the parties in relation to the dues payable under the agreement. Accordingly, the petitioner issued the notice of arbitration, however, no response to the notice was given by the respondent, instead filed a suit before the Gurgaon District Court.

Thereafter, the petitioner filed an application under Section 11(6) of the A&C Act seeking appointment of the arbitrator.

Submissions by the Parties

The respondent objected to the maintainability of the petition on the following grounds:

• The agreement provides for a multi-tier dispute resolution clause.
• The petition is pre-mature since the pre-arbitral steps are not fulfilled.

Analysis by the Court

The Court observed that the agreement provided that parties should first attempt to resolve the dispute through amicable settlement and upon failure the dispute should go to an ombudsman and only in the eventuality of failure before ombudsman, the dispute would be resolved through arbitration

It observed that the petitioner had issued a notice of dispute to the respondent, however, the respondent did not reply to such notice, instead it chose to file a suit before the Gurgaon District Court.

The Court held that the respondent cannot insist on fulfilment of pre-arbitral steps after it has not replied to the notice of dispute. It held that pre-arbitral steps providing for resolution of disputes through mutual talks or through Ombudsman would lose its relevance when a party fails to give reply to notices issued by the other party seeking amicable settlement.

Accordingly, the Court dismissed the objection and appointed an arbitrator.

Case Title: Akhil Gupta v. Hindustan Unilever Ltd

Citation: 2024 LiveLaw (Del) 456

Date: 08.04.2024

Counsel for the Petitioner: Sanjay Shah

Counsel for the Respondent: Prantar Basu Chowdhury and Ashu Pathak.

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