Application For Appointment Of Arbitrator Can't Be Rejected Due To Vague Notice Invoking Arbitration: Gujarat High Court

The Single Bench of Chief Justice Aravind Kumar held that the provisions of Section 21 of the A&C Act do not even remotely suggest that the nature of dispute has to be enumerated or explained in the notice invoking the arbitration clause.

The petitioner- Hemlata Jain, and the respondents entered into a Partnership Deed. After certain disputes arose between the partners in respect of the Partnership Deed, the petitioner issued a notice invoking the arbitration clause contained in the Partnership Deed. The petitioner filed an application under Section 11(6) of the A&C Act before the Gujarat High Court seeking appointment of an arbitrator.

The respondent- Padmavati Analkumar Mishra, submitted before the High Court that the said Partnership Deed is unregistered and therefore, the application for appointment of arbitrator must be dismissed in view of the bar contained in Section 69 of the Partnership Act, 1932.

The respondent added that the arbitration notice issued by the petitioner lacked material particulars. Hence, she argued that the application filed by the petitioner under Section 11(6) of the A&C Act must be dismissed.

The petitioner- Hemlata Jain, relying upon the decision of the Apex Court in Umesh Goel versus Himachal Pradesh Cooperative Group Housing Society Limited (2016), contended that the bar contained under Section 69 (3) of the Partnership Act, would not be applicable to the proceedings under the A&C Act.

The Court noted that in view of Section 69(1) of the Partnership Act, no suit can be instituted in any Court by a partner, against the firm or against another partner, to enforce a right arising from a contract or under the Partnership Act, unless the firm is registered. Further, as per Section 69(3), the bar contained under Section 69(1) shall also apply to a claim of set-off or other proceedings to enforce a right arising from a contract.

Referring to the decision of the Supreme Court in Umesh Goel versus Himachal Pradesh Cooperative Group Housing Society Limited (2016), the Court observed that the Supreme Court has ruled that arbitral proceedings will not come under the expression "other proceedings", as provided under Section 69(3) of the Partnership Act. Hence, the High Court reiterated that the bar imposed under Section 69 would have no application to the arbitral proceedings and the arbitral award.

Further, the bench ruled that the contention that the notice issued under Section 21 of the A&C Act, invoking the arbitration clause, was vague or bereft of material particulars, cannot be a ground to reject the application seeking appointment of an arbitrator.

The Court held that the provisions of Section 21 of the A&C Act do not even remotely suggest that the nature of dispute has to be enumerated or explained in the notice invoking the arbitration clause.

"A plain reading of the above provision would indicate that arbitral proceedings in respect of a particular dispute would commence on the date on which a request for that dispute is to be referred to arbitration is received by respondent. In order to give cause of action for initiating the proceedings, Section 21 can be taken recourse to. A plain reading of the said provision does not even remotely suggests that the nature of dispute has to be enumerated or explained in the notice so issued seeking for the dispute being referred to arbitral tribunal."

Perusing the notice issued by the petitioner, the Court observed that the said notice indicated that the petitioner was seeking reference of the disputes arising under the Partnership Deed to the arbitral tribunal.

While holding that the notice issued by the petitioner fell within the four corners of the notice invoking arbitration, as required under Section 21 of the A&C Act, the Court allowed the petition and appointed a Sole Arbitrator.

Case Title: Hemlata Jain versus Padmavati Analkumar Mishra

Citation: 2022 LiveLaw (Guj) 395

Dated: 07.10.2022 (Gujarat High Court)

Counsel for the Petitioner: Mr. Maulik Nanavati for Ms. Manvi A Damle

Counsel for the Respondent: Mr. Darshankumar R Kabra, Mr. Shakti S Jadeja, Mr. SP Majmudar

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