The High Court · 2025

SRI G. VENU GOPAL Counsel for the Respondent: SRI M.V. PRATAP KUMAR The Court made the following: ORDER ]E THE HON'BLE THE ACTING CHIEF JUSTICE SUJOY PAUL ARBITRATION APPLICATION No.163 of 2024 ORDER: Sri Rakesh Kaidala, learned counsel appearing for Sri G.Venu Gopal, learned counsel for the alrplicant and Sri M.V.Pratap Kumar, learned counsel for the resp,:rndent.

2. Wittr the consent, frnally heard.

3. This is an application under Section 1 I (6) of the Arbitration zLr-rd the Conciliation Act, 1996 (for short ,the Act,).

4. The case of the learned counsel for the appJicant is that there exists an arbitration clause and also a ,jispute and therefore, in view of the demand of the ap olicant, the respondent should have agreed to appoint an arbitr-ator. Since the responder-rt failed to do so, this Court in exercise of power under SectiorL I 1(6) of the Act cal appoint an arbitrrrtor.

5. Learned counsel for the applicant placed reliance on clause 12.12 cl the 'Facilities Sharing Agreement, (hereinafter referred to as, 'the AgreementJ dated. 2I.OL.2O2O. He submits th,at in view' ol clause I2.2 of the Agreement, a legal notice dated l 2 3O.O8.2O23 was sent to the respondent for invoking the arbitration clause under the said Agreement. The respondent did not respond to the said legal notice and therefore, the present application is filed

6. Learned counsel for the applicant placed reliance on the judgment of the Supreme Court in Milkfood Limited v. GMC Ice Cream (Pl Limitedt and the judgment of the High Court of ) Delhi in Bharat Chugh v. M.C.Agrawalz.

7. By placing reliance on pa-ragraph No.51 of the decision in Milkfood Limited (supra), learned counsel for the applicant submitted that once there exists an arbitration clause, indisputably, the service of notice and/or issuance of request for appointment of an arbitrator must be held to be determinative of the commencement of the arbitral proceeding. By placing reliance on paragraph No.25 of the decision in Bharat Chugh (supra), learned counsel for the applicant submitted that sending a notice informing the addressee that civil and criminal legal remedies would be available in the event I l2oo4) 7 scc 288 2 2o2l SCC OnLine Del 5373 r,-;lii I I I I I I I 3 of failure, czmnot, in the view of the judgment of Delhi High Court, consl.itute a notice invoking arbitration B. Learned counsel for the respondent opposeC the prayer mainly on the ground that although there exists an arbitration clause, the erpplicalt, in the event of demanding ap pointment of arbitrator, should have said so specifically in its notice.

9. Bv tat-ing this Court to the language used in paragraph No.11 of the notice dated 30.08.2023, it is urged b1. the learned counsel for the respondent that the said notice v,,as basically sent demanding pay,rnent of compensation amount w-ithin the stipulated tr rne, failing which, the applicant will proceed to appoint an arbitrator and initiate appropriate proceedings. Subsequently, no such action or demand for apJ:ointment of arbitrator r.vas initiated, when the respondent failerl to pay the compensatior.. Thus, this legal notice, by no stretch of imaginatiorL, oan be treated to be a notice in cons,nance with clause 12.2" af the Agreement. In support of his submissions, learned counsel for the respondent placed reliance on the - _J,${Sments of the High Court of Delhi in Alupro Buitding 4 Systems Private Limited v. Ozone Overseas Private Limitede and Shriram Transport Finance Company Limited v Narender Singha.

10. It is urged that in Alupro Building Systems Private Limited (supra), learned Single Judge of the High Court of Delhi opined that the choice of arbitrator must be reflected from the notice. The view taken in Alupro Building Systems Private Limited (supra) got a stamp of approval by the Division Bench of High Court of Delhi in Shriram Transport Finance Company Limited (supra). Hear'y reliance is placed on paragraph Nos.32 and 33 of Shriram Transport Finance Company Limited (suPra).

11. The parties have confined their arguments to the extent indicated above and no other point is pressed'

12. I have heard the parties at length and perused the relevant documents.

13. There is no dispute between the parties that there exists a dispute resolution clause i'e', clause 12'2 of the Agreement' which reads thus:- r 4 2017 scc online Del 7228 2022 SCC Online Del 3412 I 5 "A1l disl:utes and differences arising between the parties hereto including any dispute or difference in ret4ard to the in terpretation of any provision or term or the mean ing thereof, or in regard to any claim of onrl parfy againsl the other or in regard to the rights ernd for obligertions of any party or parties heretJ und,:r this shall be referred to arbitration bv a sole Agreemr:nt to be appointed by thi Partres anc; such arbitrat(lr arbitrat:on shall be governed by the provision of the Arbitration and Conciliation Act, 1996. The venue of the zLrbitration will be in Hyderabad only and the language or arbitration shall be English. The co Lrrts in Hvdera t,ad shall have jurisdiction.,, (emphasis supplied) 14 . It is etlso not in dispute that the legal notice dated 3O.O8.2O23 \^.ras sent by the applicant. This noti:e, indeed, mentions in i:s subject ,,Legal notice invoking arbitriltion under the facilities sharing agreement dated 2 1 .0 1 . 2020" . However, reliance is plar:ed on paragraph No.1 1 of the said notice, which reads thus:- "ln ligh r of the time and effort invested and the huge expenclitrrre incurred by our Client in the progress and grorvth 'rf the Unit and your breach of the terts ,rf the Agreentent, you are called upon to make a payment of the Compensation Amount, within ""o.r, 1Oitr duy" from the receipt of this Notice, failing which, olr Client shall proceed to appoint an ar-bitrator and initiate - appropdate proceedings urder the Arbitration and Conciliation Act, l=9gO, u. amr,:ndeci up to rlale. If you chose to ignore this Notice, yoL may do so at )'our own risk and peiil.,, (emphasis; supplied) 6

15. A microscopic reading of paragraph No.1l of the a-foresaid notice makes it clear that the argument of the leamed counsel for the respondent has substantial force. The bone of contention in the notice was to get compensation within seven d.ays, failing which the applicant reserved its right to proceed to appoint an arbitrator and initiate appropriate proceedings' When the respondent, admittedly, failed to make the payment of compensation, it was open to the applicant to invoke the arbitration clause as threatened in the notice. However, no such document is placed on record to show that any such notice was subsequentlY issued.

16. The curtains on this aspect were drawn by the Division Bench of the High Court of Delhi in Shriram Transport Finance Company Limited (supra). The relevant portion of the said judgment reads thus:- consensus for such appoin tment an notice under Section 21 of the Act serves an important such a consensus on the u appointm ent of an arbitrator. It was furthE eld in Atupro Building ca-se IAlupro Building Sgstems (P) Ltd. v. facilitatin se of d as such, r w 7 Ozone ()uerseas (P) Ltd.2Ol7 SCC Online Del 7 2:),81 that the pa rties may opt to waive the requirement o 1' notice under Section 21 of the Act. However, in the absence of such a waiver, this provision must be given full eifect to. 33. V/e are in agreement with the princiJ:les as expre'ssed in the decision of Alupro Btilding case lAlupro Buildir4l Sysrems (P) Ltd. v. Ozone Ouerseas (P) L;d.2Ol7 SCC Orrline Del 7228) , which are enunciated below: (f The party to the arbitration agreement agains I whom a clainr is made should know what the claims are. The notice under Section 2 1 of the Act provi< les an opport u nity to such party to point out if some of the claims irre time-barred or barred by law or untenable in fact cr if there are counterclaims. (irJ Where the parties have agreed on a procedure for apporntment, whether or not such procedure h:r.s been follov,ecl, will not be known to the other party unless such a :-rotice is receivcd. (lu) It-ig neccssary for the parW makin an appoL.Itme nt to let ttLe other oartv know in advance the name of the person who it proposes to appoint as an arbitrat<rr. This wrll cn1ure that the suitability of the person is known to osite parW includin the o person ed or disqualified to act as an arbitrator for th reasons set forth in the Act. Thus , the notice varlotx; facilita!:s the parties in arriving at a consens,us for appointLng an arbilrator. (iu) Ltnless such notice of commencement of z.Lrbitral roceedinqs is issued , a parw seekin q reference of dis utc arw to adhere to such request will be unable to proceed under Sectior 11 6 of the Act Further, the party sending the notice cf commencement may be able to proceed under the pr<,r,isions of sub-section 5 of Section 1 1 of r he Act for the appointment of an arbitrator if such notice does not egol:e any response. tration uoon failure o (emphasis supplied)

17. Clause. (iii) of paragraph No.33 of the aforesairl judgment, in no uncertain terms, makes it ciear that the necessity for a party making an appointment is to inform the other p{r$ in 8 advance about the name of person who is proposed to be appointed as an arbitrator. This condition is made so that the suitability of that person is known to the opposite side in advance and he cal examine and decide about his suitability, etc.

18. In the instant case, admittedly, the applicant's notice mentioned hereinabove is not relating to a demand of appointment of an arbitrator, although it suggests so in the clause of 'subject'. Apart from this, the applicant has not suggested any name of the arbitrator to the other side.

19. So far the judgments cited by the learned counsel for the applicant are concerned, the judgment of Supreme Court in Milkfood Limited (supra) does not improve the case of the appticant in view of no demald and suggestion of name of arbitrator in the legal notice with accuracy and precision' Similarly, the judgment of the learned Single Judge of the High Court of Delhi in Bharat Chugh (supra) is of no assistance in view of the Division Bench Judgment of the High Court of Delhi in- Shriram Transport Finance Company Limited (supra). * ,..i 9 In this vier,"' of the matter, no case is mirde out for

20. exerclse of j:,l risdiction under Section 1 1(6) of th<:: Act. The applicant has failed to comply with the prere,:luisites for appointment of an arbitrator.

21. Accorclingly, the arbitration application is dismissed. However, this order will not come in the way of the applicant to send appropriate notice to the respondent in accordance with law. Interlocutory applications, if any pending, shall also stand closed SD/-K.SRINIVASA RAO JOIN'T REGISTRAR /1TRUE COPY// \,i .VSECTION OFFICER One CC to Sri (i Venu Gopal, Acjvocate [OpUC] !/ One CC to Sri l\1 V. Pratap Kurrar, Advocate [OPUC] Ti,,"o CD Copies 'Ii 1 2 3 Plp/PS l i l To, HIGH COURT DATED:0410412.025 ORDER ARBAPPL. No.'l 63 of 2024 __--:-:::1:i::_\ i.,f' 14: -I (6 il-l ? fl iPF 2625 \ , i' '- '''t '\ -':;--- -r" ,'.i * "':/" DISMISSING THE ARBITRATION APPLICATION 7,D21-