Arbitration In IndiaMere Non-Mention of the name of an Arbitrator will not invalidate the invocation of Arbitration Clause

The Hon’ble  Rajasthan High Court in Movie Time Cinemas Pvt. Ltd. v. M/s Chetak Cinema 2024 2024 Live Law (Raj) 263  held that mere non-mention of the name of Arbitrator in the notice invoking Arbitration, will not invalidate invocation of an Arbitration clause, under Section 11 of the Arbitration and Conciliation Act, 1996.

FACTS

Movie Time Cinemas Pvt. Ltd (hereinafter referred to as “the Applicant”) executed a  lease deed  on 11.01. 2023, with M/s Chetak Cinema (hereinafter referred to as  “the Respondent”), wherein the Applicant was promised ownership of the fifth and sixth floors of Chetak Mall in Udaipur, Rajasthan, (hereinafter referred to as the “Property”) by the Respondent. After the property was acquired by the Applicant on 01.05.2023, an attempt was made by the Respondent to establish third-party rights over it  being aggrieved by the Respondent’s actions, the Applicant sent  on 17.05.2023, outlining the tasks that required attention. When the issue remained unresolved, the Applicant sent  a formal notice on  02.06.2023, to invoke the Arbitration clause and highlighted the breaches made by Respondent .

In the absence of any attempts made by the Respondent to abide by the contractual obligations as per the registered Lease deed dated 11.01.2023 the Applicant along with filing the applications under different sections has filed the application to appoint the Arbitrator  under section 11(6) of Arbitration and Conciliation Act 1996 (hereinafter referred to as  “A&C”Act).

CONTENTIONS  OF THE PARTIES

The Applicant’s counsel contented that the efforts made by Applicant was unsuccessful to resolve the dispute. Consequently, the Applicant sought interim relief under Section 9 of the A&C Act. As the Respondent was failed to have the compliance, the Petitioner has filed an application under Section 11(6) of the A&C Act, seeking the appointment of an arbitrator. It was argued by the Applicant’s counsel that the Arbitration agreement between the Applicant and the Respondent has been invoked, even though the arbitrator’s name was not included in the legal notice. The existence of the Arbitration agreement cannot be concluded to be invalid.

It was argued by the Respondent’s counsel that the Arbitration clause requires the Applicant to designate an arbitrator first. This requirement was not met, as the name of the arbitrator was not included in the legal notice. It was stated by the Respondent’s counsel that Section 21 of the A&C Act specifies that Arbitration proceedings begin when the Respondent receives a request to refer a dispute to Arbitration. However, in this case, the Arbitration clause and the request for appointing an arbitrator are not mentioned in the notice. Therefore, it was argued that it cannot be claimed that a party has requested Arbitration without a clear request for the parties to be referred to Arbitration.

ISSUES BEFORE THE COURT

1. Whether there exists a valid and enforceable arbitration agreement between the parties as per Clause 12.10 of the registered Lease Deed dated 11.01.2023?
2. Whether the applicant effectively invoked the arbitration clause in the legal notice dated 02.06.2023 by specifying an arbitrator?
3. Whether the applicant is entitled to the appointment of an arbitrator and the initiation of arbitration proceedings to resolve the disputes arising from the lease agreement?

DECISION AND FINDINGS

The Hon’ble Rajasthan High Court held that there was a clear Arbitration agreement between the parties as established in Clause 12.10 of the registered Lease Deed dated 11.01.2023. The Hon’ble High Court emphasized that despite the Respondent’s arguments regarding the invocation of the Arbitration clause, the Applicant had adequately invoked the Arbitration agreement by sending a legal notice dated 02.06.2023.

The Hon’ble High Court noted that the Respondent’s actions, including attempts to create third-party rights over the leased premises and the removal of the Applicant’s signage, constituted breaches of the lease agreement. The Hon’ble high Court recognized the Applicant’s attempts to resolve these disputes amicably but found them to be unsuccessful, justifying the need for Arbitration.

The High  Court relied upon  Cox & Kings Ltd. v. SAP India Pvt. Ltd and held that mere existence of an Arbitration Agreement suffices to trigger the appointment of an arbitrator under Section 11 of the A&C Act. The Hon’ble High Court reiterated the principle that courts should minimize interference in arbitral processes and respect the parties’ autonomy to resolve disputes through Arbitration.

Consequently, the Hon’ble Justice Shri. Prakash Chandra Tatia was appointed as the Sole Arbitrator to adjudicate the disputes between the parties. The Court directed that the Arbitration proceedings be conducted in accordance with the provisions of the Act and that the respondent retains the right to raise all objections before the Arbitrator.

The Hon’ble Court allowed the application for the appointment of an arbitrator and underscored the importance of upholding contractual agreements and the Arbitration process as a means of resolving disputes efficiently and effectively.

AMLEGALS REMARKS

This case exemplifies the judiciary’s commitment to upholding the principles of contractual integrity and the efficacy of Arbitration as a preferred mode of dispute resolution. The Court’s recognition of the Arbitration agreement and its decisive action to appoint a Sole Arbitrator reflects a strong endorsement of the parties’ autonomy to resolve disputes outside of traditional court settings. By emphasizing the importance of timely and efficient dispute resolution, the Hon’ble Court has reinforced confidence in the Arbitration process, ultimately fostering a more conducive environment for business and contractual relationships. This proactive approach not only aids in the swift resolution of conflicts but also promotes a culture of accountability and respect for contractual obligations.

-Team AMLEGALS,

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