The High Court
Case Details
IN THE HIGH COURT OF ORISSA AT CUTTACK ARBP No. 75 of 2022 M/s. Dipti Associate and others ..…... Petitioners Mr. R. Banerjee, Advocate on instruction of Mr. A. Dash, Advocate -Versus- M/s .Grihasti Udyog Pvt. Limited and others … Opposite Parties Mr. B. Panigrahi, Advocate CORAM: THE CHIEF JUSTICE ORDER 18.08.2023 Order No. 07. 1. 2. This matter is taken up through hybrid mode.
Legal Reasoning
Heard Mr. R. Banerjee, learned counsel appearing on instruction of Mr. A. Dash, learned counsel for the petitioners and Mr. B. Panigrahi, learned counsel appearing for the Opposite Parties. 3. This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of the Arbitrator for adjudication of the dispute as raised by the petitioner. 4. There is no dispute that the Clause 15 of the Memorandum of Understanding dated 27.10.2019 provides the arbitration clause in the following manner: 2 “…..in the event of any dispute arising between the parties to the present MOU, the same shall be earnestly endeavored to be mutually and amicably settled between the parties hereto. However, in case there still exists or arises any matter of dispute in respect of the subject matter of this MOU, the same shall be referred to the Arbitrator through mutual consultations and agreements by the parties to the Agreement.” 5. The dispute was raised by the letter dated 17.05.2022, Annexure-9 to this petition. By the said letter, after giving the background of the disputes, it has been demanded that the Opposite Parties shall transfer the shares under reference immediately but not later than two days from the date of the letter, failing which the MOU and the SPA shall stand terminated. The Opposite Parties shall be required to pay damages. The notice is without prejudice to the right of the petitioners to claim interest, penalty and damages. 6. It has been stated by the petitioners that the demand was not complied with. In sequel to the letter dated 17.05.2022, the petitioners had given further letter styling the same as a notice under Section 21 of Arbitration and Conciliation Act, 1996. 7. The arbitration clause was invoked and Mr. Jagmohan Pattanaik, Advocate of Cuttack High Court was nominated as the Arbitrator to adjudicate the dispute arising from the said MOU and SPA. In response to the said letter Page 2 of 7 3 dated 21.05.2022, Annexure-10 to this petition, the Opposite Parties have stated inter alia that ‘most unfortunately for the reasons best known when we commenced repayments of your investments, you started demanding transfer of our shares followed with proceedings before the NCLT and criminal case in the Court of S.D.J.M., Rourkela and both the proceedings are still subjudiced.’ By the said letter, the Opposite Parties have further claimed that they have already refunded a substantial sum. They had also assured that they would liquidate the entire amount within a short period of time by maintaining the continuity of their regular repayments. Thereafter, it has been stated as follows: “In the back ground of the aforesaid facts and circumstances, your unilateral appointed of a unknown person/arbitrator of your choice without out consent does not make any sense.” In this perspective facts, the present petition has been filed by the petitioner seeking the reference to the Arbitrator for adjudicating the dispute as noted above. 8. Mr. B. Panigrahi, learned counsel appearing for the Opposite Parties has raised serious objection regarding the maintainability of this petition under Section 11 (6) of the Arbitration and Conciliation Act, 1996. According to him, there is no notice under Section 21 of the Arbitration and Conciliation Act, 1996. The notice under Section 21 of the Arbitration and Conciliation Act, 1996 has to be raised in Page 3 of 7 4 terms of the arbitration clause as referred above. The said arbitration clause provides how to embark on arbitration. First of all, there shall be an attempt to conciliate the dispute and in the event of the failure of such conciliation, there shall be a mutual consultation in respect of nomination of the Arbitrator. But such consultations did never take place in the case in hand, on the contrary the petitioner has unilaterally nominated one Advocate as the Arbitrator. Even the said Arbitrator had sent notice to the Opposite Parties to appear before him. Mr. Panigrahi, learned counsel has referred a decision of the High Court of Delhi in Alupro Building Systems Pvt. Ltd. vs. Ozen Overseas Pvt. Ltd.: 2017 SCC Online Del 7228, where it has laid down that for purposes of Section 11 (6) of the Act, without the notice under Section 21 of the Act, a party seeking reference of disputes to arbitration will be unable to demonstrate that there was a failure by one party to adhere to the procedure and accede to the request for the appointment of an arbitrator. The trigger for the Court's jurisdiction under Section 11 of the Act is such failure by one party to respond. Mr. Panigrahi, learned counsel has robustly argued that the said obligation was never discharged by the petitioner and therefore, this court should not entertain this petition, as the pre-requisite of demand under Section 21 of the Arbitration and Conciliation Act has not been complied by the petitioner. Page 4 of 7 5 9. Having appreciated the submission of the learned counsel for the parties, this court is of the view that the letter dated 17.05.2022, Annexure-9 to the petition, clearly spelt out the dispute and also the demand. True it is that in that letter there is no reference to Section 21 of the Arbitration and Conciliation Act, 1996. Within a period of four days, in sequel to the letter dated 17.05.2022 the said notice under Section 21 of the Arbitration and Conciliation Act, 1996 was issued on 21.05.2022, Annexure-10 to the petition nominating the Arbitrator to adjudicate the dispute as referred in the earlier letter. We should observe that the drawing of the notice under Section 21 may not be happily worded but, once the demand was placed very succinctly by the letter dated 17.05.2022 and in sequel, another notice was issued under Section 21 of the Arbitration and Conciliation Act, 1996 on 21.05.2022, Annexure-10 to the petition, it cannot be allowed to contend that there was no compliance of Section 21. When the first phase of the demand was not fulfilled, the notice under Section 21 was for the appointment of the Arbitrator for adjudication of the dispute. In the Arbitration jurisdiction technicality acquires a paramount position, but this kind of technicality, as raised by the counsel for the Opposite Parties frustrates the very object of the said Act. Even in the decision of the Delhi High Court in Alupro Building Systems Pvt. Ltd. (supra) what the court is held that the dispute should be clearly Page 5 of 7 6 spelt out. That would primarily meet the requirement of Section 21 of the Arbitration and Conciliation Act, 1996. When the unilateral nomination was made by the petitioners, the response of the Opposite Parties was that the petitioners cannot make the unilateral nomination. There should be consultation. But they did not propose any name. If someone has proposed one name, though the word nominated may not have been there, it was the duty of the Opposite Parties to spell out or suggest the name of the Arbitrator or to propose terms of the settlement within a specified time in as much as the Clause 15 also provides for conciliation. The letter dated 17.05.2022 has brought to an end of the conciliation process and therefore, without any reservation, we may treat the letter dated 21.05.2022 as a notice under Section 21 of the Arbitration and Conciliation Act, 1996. As such, the court would proceed to appoint an Arbitrator for adjudication of the disputes as raised by the petitioners. It is also to be noted by this court that the dispute has been squarely admitted by the Opposite Parties. 10. Having observed thus, this court appoints Mr. Gautam Mukherjee, learned Senior Advocate as the Arbitrator. The Arbitrator shall proceed in terms of the provision of the Arbitration and Conciliation Act, 1996 for passing the award following the procedure laid down in the Arbitration and Conciliation Act. The arbitration proceeding Page 6 of 7 7 be carried on under the aegis of the High Court of Orissa Arbitration Centre. The parties shall appear before the Arbitrator on 22nd September, 2023 at 04.30 PM at the High Court of Orissa Arbitration Centre, Cuttack. The Co-ordinator, High Court of Orissa Arbitration Centre shall facilitate the arbitration proceeding. 11. A copy of this order be supplied to Mr. Mukherjee, learned Senior Counsel and the Co-ordinator, High Court of Orissa Arbitration Centre. 12. In terms of the above, this petition stands allowed and
Decision
disposed of. (S. Talapatra) Chief Justice Signature Not Verified Digitally Signed Signed by: LITARAM MURMU Reason: Authentication Location: High Court of Orissa Cuttack Date: 21-Aug-2023 17:45:31 Page 7 of 7