Himachal Pradesh High Court Stays Arbitration Proceedings Commenced Without Fulfilling The Pre-Arbitration Condition Of Negotiation

The bench of Justice Tarlok Singh Chauhan observed that when the dispute resolution clause in the agreement mandates the parties to explore negotiation before resorting to arbitration, and the arbitration would commence only on the failure of the negotiation, the parties have to act in terms of the agreement and not directly invoke the arbitration.

Facts

There was a tripartite agreement between the parties. Clause 5 of the agreement provided for resolution of disputes. It provided that before resorting to arbitration, the parties shall try and settle the dispute by way of negotiation.

A dispute arose between the parties, consequently, the respondent issued a notice of arbitration dated 10.07.2023 intimating the petitioner of the appointment of an arbitrator. Aggrieved thereby, the petitioner approached the Court under Section 9 of the A&C Act praying for injuncting the respondent from acting on the notice of arbitration and for stay on the arbitral proceedings before the named arbitrator.

Decision

The Court while exercising jurisdiction under Section 9 of the A&C Act granted ex-parte stay on the arbitration proceedings pending before a former judge of the Calcutta High Court. The Court held that the arbitral proceedings could have been resorted to only after the failure of settlement by way of negotiation and it was incumbent upon the respondent to have exhausted the remedy provided under the agreement.

The Court observed that when the dispute resolution clause in the agreement mandates the parties to explore negotiation before resorting to arbitration, and the arbitration would commence only on the failure of the negotiation, the parties have to act in terms of the agreement and not directly invoke the arbitration.

Case Title: M/s Kundlas Loh Udhyog vs. M/s SRMB Srijan Pvt Ltd.

Citation: 2023 LiveLaw (HP) 58

Date: 04.08.2023

Counsel for the Petitioner: Mr. Shrawan Dogra, Sr. Advocate with Mr. Vinod Thakur and Mr. Yudhbir Singh Thakur, Advocates, for the petitioner.

Counsel for the Respondent: N/A

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