2014 (1) TMI 1014 - HC - Companies Law

Court upholds arbitration agreement in favor of petitioner, appoints new arbitrator under Arbitration Act

NOVATIUM SOLUTIONS PVT LTD. Versus BHARAT SANCHAR NIGAM LTD.

The court ruled in favor of the petitioner, finding that the notice triggered the arbitration agreement, and the appointment of an arbitrator after the ... Demand of appointment of arbitrator - Demand issued after initiation of proceedings - Whether the petitioner made a demand for appointment of an arbitrator and if so, by which communication/ notice - Held that:- A careful perusal of the clause would show that once disputes or differences have arisen between the parties then, the matter is required to be referred for arbitration by the Chairman and Managing Director of the respondent or any other person appointed by him. The petitioner, undoubtedly, in the notice dated 04.02.2013, raised disputes to which no response was admittedly issued by the respondent - if arbitration had been demanded vide notice dated 04.02.2013, ordinarily there would be no need for issuance of second notice dated 07.05.2013, though such a conduct by itself cannot lead to any definitive conclusion either, especially in the circumstances that there was a gap of at least three (3) months between the two notices - Therefore, the appointment by the respondent, of a sole arbitrator vide communication dated 07.06.2013, would be of no relevance as, the petitioner had moved this court much after the expiry of the thirty (30) days from the date of receipt of the first notice dated 04.02.2013 by the respondent. What made the respondent’s case worse was the fact that the appointment of an arbitrator was sought to be made post the date of institution of the present petition. The petitioner is thus entitled to relief not only under Section 11(4) and 11(5) but also under Section 11(6) of the Act - Decided in favour of Petitioner. Issues:1. Interpretation of arbitration agreement triggering appointment of an arbitrator.2. Consideration of demand for arbitration and appointment of arbitrator timeline.3. Prematurity of petition filing and subsequent appointment of arbitrator.4. Relief sought under Sections 11(4), 11(5), and 11(6) of the Arbitration and Conciliation Act, 1996.Analysis:Issue 1: Interpretation of Arbitration AgreementThe primary issue in this case was whether the notice dated 04.02.2013 triggered the arbitration agreement between the parties. The arbitration clause, as per the agreement, required disputes to be referred to the Chairman and Managing Director (CMD) of the respondent or any appointed person. The petitioner clearly raised disputes in the notice dated 04.02.2013, demanding arbitration as per the agreement. This triggered the arbitration agreement, as evident from the language used in the notice.Issue 2: Demand for Arbitration and Appointment TimelineThe respondent argued that the appointment of an arbitrator on 07.06.2013 was within the thirty-day timeframe from the receipt of the notice dated 04.02.2013. However, the petitioner's contention was that the second notice dated 07.05.2013 reiterated the demand for arbitration since there was no response to the first notice. The court found that the appointment post the petition's institution was irrelevant, as the demand for arbitration was clear from the first notice.Issue 3: Prematurity of Petition FilingThe respondent claimed the petition was premature, but the court ruled that the appointment of an arbitrator after the petition filing did not affect the petitioner's entitlement to relief under Sections 11(4), 11(5), and 11(6) of the Act. The respondent's delayed appointment of an arbitrator did not impact the petitioner's right to seek relief through the court.Issue 4: Relief under the Arbitration ActThe court allowed the petition and appointed an arbitrator, terminating the previous appointment. The parties were directed to follow the fee schedule and rules of the Delhi International Arbitration Centre. The court confirmed the order passed in the main petition and granted liberty to the petitioner to address the bank guarantee issue before the arbitrator.In conclusion, the judgment clarified the demand for arbitration, the timeline for appointment, and upheld the petitioner's right to relief under the Arbitration and Conciliation Act, appointing a new arbitrator and directing the parties to proceed accordingly.