Arbitration In IndiaNATURE OF DISPUTE NEED NOT BE NECESSARILY ENUMERATED IN THE NOTICE INVOKING THE ARBITRATION CLAUSE

The Gujarat High Court in Hemlata Jain w/o Deepak Kumar Jain v. Padmavati Analkumar Mishra w/o Anala Kumar Mishra [ C/ARBI.P/194/2021 decided on 07.10.2022 ] held that the notice issued under Section 21 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”), for invocation of the Arbitration Clause need not necessarily enumerate or explain the nature of dispute and the bar under Section 69(3) of the Partnership Act, 1932 (hereinafter referred to as “Partnership Act”) would not be applicable to the arbitration proceedings.

FACTS

Hemlata Jain w/o Deepak Kumar Jain (hereinafter referred to as the “Petitioner”)  and Padmavati Analkumar Mishra w/o Late Anala Kumar Mishra and others (hereinafter referred to as the ”Respondents”) entered into a Partnership Deed (hereinafter referred to as the “Deed”) on 10.12.2018 for carrying on the business of manufacturing, trading, import and export, to act as distributor agent, consignment agent of chemical fertilizers, bio-fertilizers, organic fertilizers etc. The Deed was not registered by the parties. The partnership firm had its registered office at Vadodara.

Due to disputes arising between the parties in respect of the Deed, Respondent No. 2 issued a notice on 03.02.2021 to the Petitioner, and the Respondent No.1 & 3 for settling the disputes amicably, for which the parties had to express their intention to settle the dispute amicably within 15 days.

ISSUES

1. Whether bar under Section 69(3) of the Partnership Act, 1932 would be applicable to the proceedings under the A&C Act?
2. Whether nature of dispute has to be enumerated or explained in the notice under Section 21 of the A&C Act for the invocation of the Arbitration Clause?

CONTENTION OF THE PARTIES

The Petitioner contended that the Deed envisages an Arbitration Clause  for resolution of disputes through arbitration.  The Petitioner had issued a legal notice invoking the  Arbitration Clause on 23.03.2021 and nominated the Arbitrator. The Petitioner submitted that the Respondent No.1 & 3 did not concur to the notice and hence, sought for the appointment of a Sole Arbitrator.

DECISION AND FINDINGS

The High Court analysed the provision of Section 69(3) of the Partnership Act that no suit for enforcement of right can be instituted by a Court if the partnership firm  is unregistered.  The High Court relied on Umesh Goel vs. Himachal Pradesh Cooperative Group Housing Society Limited [(2016) 11 SCC 313] , where the Supreme Court had held that the arbitration proceedings would not be covered under  “other proceedings” indicated in Section 69(3) of the Partnership Act and the bar imposed would have no application to arbitral proceedings.

The High Court further analysed the provision of Section 21 of the A&C Act, under which the notice for invocation of Arbitration Clause is issued. The High Court opined that for the initiation of the Arbitration proceedings, the cause of action is under Section 21 of the A&C Act. The provision does not even remotely ask for the enumeration or explanation of the nature of dispute in the notice.  The High Court held that the Petitioner has invoked the Arbitration Clause by issuance of the notice dated 23.03.2021, seeking the resolution of the dispute and is a valid notice under Section 21 of the A&C Act.

The High Court further held that the parties may claim the claims and counter-claims before the Arbitral Tribunal. The High Court allowed the petition, and appointed a Sole Arbitrator to adjudicate the disputes between the parties in accordance with the Arbitration Centre (Domestic and International), High Court of Gujarat Rules, 2021 and provided the liberty to conduct the proceedings online.

AMLEGALS REMARKS

The High Court has upheld that the Arbitration proceedings under the A&C Act will not be barred by the bar under Section 69(3) of the A&C Act. The bar excludes these proceedings because the A&C Act provides the party autonomy for resolution of disputes.  Moreover, the notice under Section 21 of the A&C Act, for the invocation of the Arbitration Clause need not necessarily enumerate or explain the nature of disputes that can be arbitrated; because the provision does not mandate any such requirement of enumeration or explanation. Thus, the party only has to communicate the intent to arbitrate to the other party.

Thus, in the present case the Hon’ble High Court has upheld the objective of the A&C Act for the amicable settlement and speedy resolution of disputes and have reaffirmed that mere non-disclosure of nature of disputes under the notice invoking arbitration, cannot be ground for rejection of appointment of Arbitrator under Section 11 of the A&C Act.

– Team AMLEGALS assisted by Mr. Niloy Ghosh (Intern)

For any queries or feedback, please feel free to get in touch with rohit.lalwani@amlegals.com or himanshi.patwa@amlegals.com.