Petition Under Section 11 Of The A&C Act Would Be Non-Maintainable After Filing Of An Application Under Section 13 Of The Act: Himachal Pradesh High Court

The Single Bench of Justice Sandeep Sharma held once the petitioner has failed to respond/object to the arbitration notice wherein the name of the arbitrator was mentioned within 30 days, there would be deemed consent on its behalf and it cannot object to the appointment of the named arbitrator at a later stage.

Facts

The parties entered into a Pre-Implementation Agreement (PIA) dated 26.05.2011 for execution of Malana-III Hydro Electric Project (30 MW) in Kullu District, Himachal Pradesh.

The respondent deposited a sum of Rs. 6 Crores with the petitioner as an upfront amount. Thereafter, it submitted a Detailed Project Report (DPR) to the petitioner in terms of PIA. However, later it found the project to be technically and financially unviable, it in terms of Clause 12 of PIA sought refund of the upfront amount vide communication dated 21.01.2019.

The petitioner responded to the request of the petitioner for refund of the upfront amount and terminated and cancelled the PIA and forfeited the upfront premium amount of Rs. 6 Crores.

Aggrieved by the action of the petitioner in terminating the PIA, the respondent served on it a legal notice dated 30.10.2019 and stated that if the amount is not refunded within 15 days, it shall be treated as notice invocation of dispute resolution clause under Clause 53 of the PIA. The respondent had also mentioned the name of the arbitrator in the said legal notice.

The petitioner did not respond to the notice, consequently, the respondent sent a letter of request to the named arbitrator to commence the arbitration proceedings.

Thereafter on 13.12.2109, the petitioner sent a letter to the respondent raising its objections to the appointment of the arbitrator and stated that it did not consent to the appointment of the arbitrator.

Thereafter on 19.12.2019, the arbitrator issued notice to both the parties to join the preliminary hearing, however, by a subsequent communication addressed to the respondent, the petitioner communicated its intention to file a Section 11 application for the appointment of an independent arbitrator.

Accordingly, the petitioner filed the petition under Section 11(6) of the A&C Act, however, subsequently, it appeared before the arbitrator and filed an application under Sections 13(2) &(3) of the A&C Act challenging the appointment of the arbitrator. The arbitrator restrained itself from holding any hearing till the decision on application under Section 11(6) of the Act.

The Contention of the Parties

The petitioner sought the appointment of the arbitrator on the following grounds:

• The unilateral appointment made by the respondents is not sustainable in the eyes of the law.
• The appointment is invalid in law as the petitioner had intimated the respondent that it cannot unilaterally appoint the arbitrator and the petitioner is going to approach this court under S.11(6) of the Act, for appointment of arbitrator.
• Since the appointment is invalid in law, the petitioner is well within its right to approach the High Court under Section 11 of the A&C Act.

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

• The petitioner has already filed an application under Section 13(2) of the Act, therefore, it is estopped from filing the petition for the appointment of the arbitrator.
• Till the petition under Section 13(2) is decided, the present petition cannot be entertained.
• The petitioner had failed to respond to the arbitration notice of the respondent within 30 days, it cannot object to the appointment and the only challenge can be under Section 13 of the Act.

Analysis by the Court

The Court observed that the petitioner had failed to respond, to the arbitration notice issued by the respondent wherein it had also provided the name of the arbitrator, within a period of 30 days, therefore, there was a deemed consent of the state qua the named arbitrator and it could not object to its appointment at a later stage.

The Court held that failure of a party to respond within 30 days to the letter of the other party requesting the appointment of the arbitrator and the name of the arbitrator is provided in the notice of arbitration, there would be a deemed consent on its part to the appointment of the arbitrator.

The High Court relied on the decision of the Hon'ble Supreme Court in SP Singla Construction v. State of Himachal Pradesh (2019) 2 SCC 488 and Swadesh Kumar Agarwal v. Dinesh Kumar Agarwal, Civil Appeal Nos. 2935-2938 of 2022 to hold that once parties have invoked arbitration proceedings and arbitrator has been appointed, subsequent application under S.11(6) of the Act, 1996, shall not be maintainable.

The Court further relied on the judgment of the Supreme Court in Antrix Corporation Limited v. Devas Multimedia Private Ltd. (2014) 11 SCC 560 to hold that where in terms of the agreement, arbitration clause has already been invoked by one of the parties thereto, provisions of sub-section (6) of S.11 cannot be invoked and, in that case, the aggrieved party has the remedy to file petition under S.13 of the Act.

The Court held that the petitioner has subjected itself to the jurisdiction of the arbitrator by filing an application under Section 13 of the Act, therefore, a subsequent application under Section 11(6) is not maintainable.

Accordingly, the Court dismissed the application as non-maintainable in law.

Case Title: State of H.P. v. BMD Pvt Ltd. Arbitration Case No. 5 of 2020

Date: 02.07.2022

Counsel for the Petitioner: Mr. Sudhir Bhatnagar, Additional Advocate General

Counsel for the Respondent: Mr. Manish Kumar and Mr. Vishal Verma

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