Section 11 Petition Requires Only Existence of Arbitration Clause, 'No More, No Less': Jharkhand High Court

Section 11 of the Arbitration Act pertains to the appointment of arbitrators. It outlines the procedure for the appointment of arbitrators in cases where parties to an arbitration agreement are unable to agree on the selection of an arbitrator or arbitrator.

Brief Facts:

M/s Smart Chip Private Limited (Petitioner) approached the Jharkhand High Court and sought the appointment of a sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 to resolve disputes with the Jharkhand State Cooperative Bank Limited (Respondent).

The Respondent contended that the petitioner was not maintainable. It argued that the Petitioner, being an agent of the Cooperative Bank, fell under the purview of Section 48 of the Bihar Cooperative Societies Act, 1935. According to it, any dispute involving an agent of a cooperative society must be initiated through the Registrar of Cooperative Societies.

It referred to the decision of the Supreme Court in "Indu Builders v. State of Jharkhand" (2003). It specifically referred to paragraph 9 of the judgment, which emphasizes that disputes concerning the business of a cooperative society, including those involving its agents, are within the jurisdiction of the Registrar of Cooperative Societies under section 48(1) of the Bihar Cooperative Societies Act, 1935. It argued that the involvement of an agent, such as the Petitioner, in constructing houses for cooperative society members on their land reinforced the applicability of cooperative laws rather than general arbitration laws.

Observations by the High Court:

The High Court held that the objections raised by the Respondent regarding the maintainability of the petition were not sustainable. The High Court noted that the references made to the case of Indu Builders were inapplicable to the current matter, as it pertain to different factual circumstances. The High Court referred to "Supreme Cooperative Group Housing Society v. H.S. Nag & Associates (P) Ltd." (1996) 9 SCC 492 where the Supreme Court clarified that disputes arising from agreements containing arbitration clauses are arbitrable and emphasized the binding nature of such agreements under Section 2(a) of the Arbitration Act.

The High Court further examined Clause 8 of the "Request for Proposal for Supply, Installation, Commissioning and Management of Micro ATM and Allied Software," which clearly delineated arbitration as the method for resolving disputes arising from the contract between the Petitioner and the Respondent.

Considering the provisions of Section 11 of the Arbitration Act, the High Court stated that it has the authority to appoint an arbitrator when the parties fail to agree on the procedure. Referring to the judgment in "N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd." (2023) 7 SCC 1, the High Court held that its role at the Section 11 stage is limited to confirming the existence of an arbitration clause.

Consequently, the High Court appointed Mr Saibal Kumar Laik, a practising Advocate of the High Court, as the sole arbitrator to adjudicate the dispute.

Case Title: M/s Smart Chip Private Limited vs Jharkhand State Cooperative Bank Limited

LL Citation: 2024 LiveLaw (Jha) 100

Case Number: A. Appl. No. 32 of 2023

Advocate for the Petitioner: Ms. Khushboo Kataruka, Mr. Shubham Kataruk and Mr. Ushma Pandey.

Advocate for the Respondent: Mr. Mrinal Kanti Roy and Mr. Rishi Ranjan Vats.

Date of Judgment: 17th May 2024

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