What Constitutes 'Dispute' Under Arbitration & Conciliation Act? Madhya Pradesh High Court Explains

It further explained,

"Whether the assertion made by one and the denial made by the other leaves to passing of any particular order by one of the party is not necessary for arising of a dispute. An assertion by one and denial/said assertion by another is enough for germination of the concept of a dispute."

Background

The Bench was essentially dealing with an Arbitration Appeal, wherein the Appellant had challenged an order passed by Commercial Court, Jabalpur, whereby the application moved by the Respondent U/S 9(1)(d) of the Act for interim measures by the Court was allowed.

The case of the Appellant (Indian Oil Corporation Ltd.) was that it had issued a show-cause notice to the Respondent for termination of dealership. It received a reply from the Respondent refuting the notice and also afforded them a personal hearing. However, the Appellant did not take a final decision with regard to the termination.

Thereby, they submitted, no cause of action arose to the Respondent to invoke Section 9(1)(d) of the Act.

Findings

The Court however held that even in the absence of termination of dealership, a show-cause notice regarding termination and a subsequent reply to the same enables a party to invoke Section 9 of the Act.

The Court agreed with the submission made by the Respondent (Tatpar Petroleum Centre) that the very fact of a show-cause notice having been issued to them and they having refuted the same, the matter had risen to the concept of dispute.

Referring to the Black's Law Dictionary, the Court observed that the word 'dispute' is defined as "to argue about, to contend ... words; an argument; a debate; a quarrel", whereas Cambridge and Collins' Dictionaries define the term as "a disagreement or argument between two people, groups or countries." and "an argument or disagreement between people or groups.", respectively.

In this backdrop, the Court noted,

From the aforesaid dictionary meaning of expression 'dispute', it is evident as daylight that for a dispute to arise there should exist an assertion/claim which is refuted by the other side. Thus, dispute is a bilateral contract where atleast two rival parties have disagreement over a particular aspect. A dispute cannot arise when only one party asserts and other remains silent. Whether the assertion made by one and the denial made by the other leaves to passing of any particular order by one of the party is not necessary for arising of a dispute. An assertion by one and denial/said assertion by another is enough for germination of the concept of a dispute.

Applying its understanding of the term 'dispute' to the matter at hand, the Court observed that in their reply as well as during the personal hearing, the Respondent refuted the contents of the show cause notice and sought for its withdrawal.

This act of assertion, the Court noted, by way of show cause notice and refuting by way of reply by the Respondent gave rise to dispute as contemplated in the relevant clause of the dealership agreement.

Therefore, the Court held that the Respondent was within their rights to invoke Section 9 of the Act for seeking the remedies provided therein, before arbitral proceedings are commenced. The Court thus concluded-

From the above discussion, it is vivid that on the IOC issuing a show cause notice and respondent refuting the same by way of reply and in the personal hearing, dispute between the rival parties germinated making available cause of action to the respondent to invoke Section 9 of the 1996 Act. Consequently, filing of the application under Section 9(1)(d) of the 1996 Act before the Court by the respondent and the Court deciding the same do not suffer from any jurisdictional error.

Accordingly, the Court decided not to interfere with the order, thereby dismissing the Appeal.

Case Title: Indian Oil Corporation Ltd. and others v. M/s Tatpar Petroleum Centre