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In a commercial dispute, a notice asking for arbitration ought not to be construed too strictly: Calcutta High Court

A notice seeking for arbitration of dispute between the concerned parties should not be shrouded with technicality. The bench in Universal Consortium of Engineers v Sri Kanak Mitra AP 279 of 2020 has delved into the domain of parties seeking arbitration. The single judge bench of Arijit Banerjee J. opined that a notice for arbitration should not be construed with over-emphasis.

This is an application under Section 11 of the Arbitration and Conciliation Act, 1996 (in short ‘the Act of 1996’), for appointment of an arbitrator for adjudication of disputes and differences that have arisen between the parties in relation to a Development Agreement dated December 15, 2006 (in short, ‘the said Agreement’) entered into by and between the parties. The respondents opposed the application primarily on two grounds. Firstly, it was argued that no notice under Section 21 of the Act of 1996 was given by the petitioner to the respondents. In the absence of such a notice, the present application is premature and not maintainable. Secondly, the respondents have filed a complaint against the petitioner before the National Consumer Forum, New Delhi, in relation to disputes arising out of the said Agreement. It was submitted that initiation of an arbitration proceeding by appointment of an arbitrator would mean that there will be parallel proceedings which ought not to be permitted.

As regards the main contention of the respondents that the application could not be allowed since the petitioner has not served any notice under Section 21 of the Act of 1996 on the respondents, the same also is unacceptable. Section 21 merely laid down as to when the arbitral proceedings in respect of a particular dispute will be deemed to have commenced, which is when a request for the dispute to be referred to arbitration is received by the respondent.

The bench further reasoned that, the letter dated 01.02.2019 written by the petitioner, when read in a commercial perspective, clearly constitutes a notice under Section 21 of the Act of 1996. It was opined that over the top technicality should not be resorted to in interpreting such a notice. If the intention of the party issuing the notice is clear that he desires arbitration, it should suffice. An overly legalistic approach is not to be adopted. In a commercial dispute, a notice asking for arbitration ought not to be construed too strictly.

With reference to the second contention of the respondents regarding pending of proceedings between the parties hereto before the National Commission, the same was wholly meritless. The petitioner was a developer and contends that it had mistakenly handed over more constructed area to the respondents than they were entitled to under the Development Agreement. The petitioner, by no stretch of imagination could be considered to be a ‘Consumer’ within the meaning of the Consumer Protection Act. Hence, pendency of the proceedings before the National Commission cannot be a ground for disallowing the present application.

The court thus ruled on the relevant facts that, “In view of the aforesaid, all the objections raised by the respondents to resist this application fail. This application is allowed. The remuneration of the Arbitrator and the secretarial staff will be borne equally by the parties. Since, no venue of arbitration is mentioned in the arbitration clause, the arbitration will be held in Calcutta at a place to be decided by the Arbitrator.”

Click here to read the judgment.

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