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Failure to Request Hearing Date does not Automatically Terminate Arbitration Proceedings: Supreme Court

Case Name: Dani Wooltex Corporation & Ors v. Sheil Properties Pvt Ltd. & Anr 

Case No.: Civil Appeal No.6462 of 2024 

Dated: May 16, 2024 

Quorum: Justice Abhay S Oka and Justice Pankaj Mithal 

FACTS OF THE CASE: 

T The first appellant is a partnership company called Dani Wooltex Corporation, and it possessed some land in Mumbai. Sheil Properties, a private limited company, was the initial respondent and was involved in the development of real estate. Another limited corporation in the consumer goods industry is the second respondent, Marico Industries, or simply “Marico.”  

Under the terms of the Development Agreement, dated August 11, 1993 (referred to as “the Agreement”), Sheil was allowed to develop a portion of the first appellant’s property. The first appellant consented to sell Marico another piece of its property through the execution of a Memorandum of Understanding (MOU) between the two parties. Marico was granted a specific amount of FSI/TDR as per the terms of the MOU. 

Marico published a notice informing the public that objections were welcome. Sheil responded with one, stating that the Agreement would govern any business dealings between Marico and the first appellant.  

Due to the disagreement between Sheil and the first appellant, Sheil filed a lawsuit (Suit No. 2541 of 2006) demanding the particular performance of the MOU as amended by the purported consent provisions. In the aforementioned lawsuit, Marico and the first appellant were parties. Additionally, Sheil was named as a party defendant in a lawsuit that Marico filed (Suit No. 2116 of 2011) against the first appellant in this case.  

The learned Single Judge overturned the Arbitral Tribunal’s order to terminate the proceedings and instructed the arbitral tribunal to carry on with the proceedings by means of the contested judgement and order. It is noteworthy to mention that I.A. no. 180843 of 2023 indicates that on July 26, 2023, the experienced lone arbitrator notified the parties of his unwillingness to continue serving as the sole arbitrator. 

 LEGAL PROVISIONS:  

  • Section 32(2)(c) of the Arbitration Act- conferred a residual authority on the Arbitral Tribunal to end the proceedings in the event that it determines that their continuance is no longer necessary or feasible for any other reason. 

 CONTENTIONS OF THE APPELLANTS: 

The learned counsel for the appellants fiercely and strongly argued that In the case of Kothari Developers v. Madhukant S. Patel, the learned Single Judge of the High Court of Judicature at Bombay held that the Arbitral Tribunal was entitled to invoke its power under Section 32(2)(c) of the Arbitration Act if it is proven that the proceedings have become unnecessary due to the claimant’s inaction.  

This was brought up by the learned senior counsel appearing on behalf of the first appellant. He argued that the Arbitration Act’s Section 14 does not give the Court the authority to review the Arbitral Tribunal’s ruling, particularly when that ruling is supported by the evidence and a reasonable argument.  

The experienced senior attorney went on to say that the Arbitral Tribunal made an effort to guarantee Sheil’s attendance at Marico’s arbitration. Following the Marico case ruling, Sheil opted not to attend the Arbitral Tribunal sitting on March 11, 2020.  

It is argued that no information is in the record indicating that Sheil’s claim arbitration was scheduled to take place following Marico’s arbitration, nor is there any evidence supporting that allegation. In his submission, he stated that the Arbitral Tribunal’s factual findings on Sheil’s position could not be overturned by the Court. 

 CONTENTIONS OF THE RESPONDENTS: 

The arguments put forward by the learned counsel for the appellants were sharply and passionately rejected by the learned counsel for the respondents that the authority granted by Section 32(2)(c) of the Arbitration Act cannot be used unless a clear determination is made that it is either impractical or impossible to carry on with the procedures.  

The learned senior counsel argued that the Court must consider the legality of the Arbitral Tribunal’s termination of its mandate in order to exercise its authority under Section 14(2) of the Arbitration Act. The Court’s decision in the case of Lalitkumar V. Sanghavi & Anr. v. Dharamdas V. Sanghavi & Ors served as support for this claim. He argued that it is not possible to infer desertion.  

He argued that because the lawsuits Marico and Sheil brought were distinct from one another, the arbitral processes were also distinct. Sheil and Marico have not filed a claim for relief from one another. 

But because the two referrals had similar questions about whether the agreement requirements could be enforced, the parties decided to move forward with Sheil’s reference after Marico’s reference was resolved. The sole arbitrator in the Sheil reference did not offer any more instructions following the preliminary directives that were given on November 8, 2011, concerning the submission of pleadings, he further submitted. 

 COURT’S ANALYSIS AND JUDGMENT: 

The court said that the Arbitration Act’s chapter V covers provisions pertaining to the conduct of arbitral procedures, as noted by the court. Under subsection (1) of Section 23, the Arbitral Tribunal has the authority to set the deadlines for filing pleadings in the event that the parties cannot agree on the dates for filing statements of claim and defence.  

It was further observed that Section 23, subsection (4), which became effective on October 23, 2015, stipulates that the filing of pleadings, or statements of claim and defence, must be finished within six months of the date on which the learned arbitrator—or all of the learned arbitrators, as the case may be—receive written notice of their appointment. 

The authority granted by clause (c) of subsection (2) of Section 32 of the Arbitration Act may only be used in the event that it is no longer necessary or feasible to continue the proceedings for whatever reason.  

The authority granted by clause (c) of subsection (2) of Section 32 cannot be used unless the Arbitral Tribunal certifies, on the basis of the evidence on file, that the proceedings are no longer required or feasible. The fundamental purpose of passing the Arbitration Act will be defeated if the aforementioned power is used carelessly. 

The court has also examined that even if the parties to the proceedings do not desire a hearing, it is the Arbitral Tribunal’s responsibility to schedule one. The Arbitral Tribunal’s responsibility is to make a decision regarding the dispute that has been referred to it. In the event that parties fail to show up for a scheduled conference or hearing without a valid reason, the Arbitral Tribunal retains the right to invoke pertinent provisions of the Arbitration Act, including Section 25.  

It is difficult to deduce the abandonment. When stated or proven facts are so clear-cut that the only conclusion that can be made is that there has been an abandonment, there is an implied abandonment. An inference of abandonment can only be made if a claimant’s documented behaviour is such that it points exclusively to the conclusion that the claimant has given up on the matter. Even in cases where it is to be inferred, there must be solid facts on file that support the conclusion that the person was abandoned.  

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Judgment reviewed by Riddhi S Bhora. 

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The Delhi High Court Orders Detailed Oversight of Share Transfers in Corporate Dispute: Share Allotment Nullified, Directed Proceeds to Court Registry

Case Title – Morgan Securities & Credits Pvt. Ltd. Vs. BPL Limited & Ors.

Case Number – FAO (OS)(COMM) 174/2023 & CM APPL. 43309/2023

Dated on – 15th May, 2024

Quorum – Justice Rajiv Shakdher & Justice Amit Bansal

FACTS OF THE CASE
In the case of Morgan Securities & Credits Pvt. Ltd. Vs. BPL Limited & Ors., whirls around a dispute between Morgan Securities & Credits Pvt. Ltd. (the Appellant herein) and BPL Limited & Ors. (the Respondents herein) concerning the transfer of shares in a subsidiary company (Defendant No. 2 herein). The Appellant is a company engaged in lending monies and providing the bill discounting services whereas the Respondent No.1 is a company engaged in various businesses, inclusive of healthcare. The Appellant initiated arbitration proceedings against the Respondent No.1 due to its default in discharging its liabilities under certain agreements. Orders permitting the Respondent No.1 to transfer its healthcare business to the Respondent No.2, subject to provision of certain securities, were passed by the Arbitral Tribunal. The Appellant challenged these orders in the court of law, alleging that the subsequent actions by the Respondent No.1, inclusive of the share allotments, were violative of the orders of the court. The court found the Respondent No.1 and its directors guilty of the offense of contempt for intentionally violating the orders of the court concerning the shareholding in the Respondent No.2. Despite of which, the transfers and share allotments continued, leading to the Appellant instituting a suit seeking for a declaration that the allotments made by the Respondents in favour of certain parties be declared null and void.

ISSUES
The main issue of the case whirled around whether the allotments of share made by the Respondent No.1 to the other parties were violative of the orders of the court?

Whether the Respondent No.7 and the Respondent No.8 could transfer their shareholding in Respondent No.2?
Whether the declaration of the share allotment to be declared null and void, appropriate and justified given the situation of the case and the alleged violations of the orders of the court?

LEGAL PROVISIONS
Section 34 of the Arbitration and Conciliation Act, 1996 prescribes the provision of Application for setting aside the arbitral awards

Section 37 of the Arbitration and Conciliation Act, 1996 prescribes the provision of Appealable orders
Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 prescribes Granting or refusing to grant an interim measure under Section 17
Order XXXIX Rule 4 of the Code of Civil Procedure, 1908 states that the Order for injunction may be discharged, varied or set aside

CONTENTIONS OF THE APPELLANT
The Appellant, through their counsel, in the said case contented that the allotments made by the Respondent No.1 were violative of the orders of the court restraining the Respondent No.1 from diluting its shareholding in Respondent No.2.

The Appellant cited a previous order by a Single Bench holding Respondent No.1 and its director guilty of contempt for intentionally violating the orders of the court and further sought a restoration of the status quo prevailing before the allotments were made.

CONTENTIONS OF THE RESPONDENT
The Respondents, through their counsel, in the said case contented that they should be allowed to transfer their shareholding in Respondent No.2, subjective of certain conditions, as they were not responsible for any illegality in subscribing to the rights issue of the Respondent No.2.

Further the Respondents asserted that the interim order restraining the Respondent No.1 from diluting its shareholding would not apply after the arbitration award had been passed.

COURT ANALYSIS AND JUDGMENT
The court in the case of Morgan Securities & Credits Pvt. Ltd. Vs. BPL Limited & Ors., observed that the Respondent No. 7 and the Respondent No.8 were directed to deposit the entire sale consideration of their shareholding in the Respondent No.2 before transferring the shares. The court also directed Respondent No.7 and the Respondent No.8 to undertake not to seek deletion of their names as defendants, allowing the court to pass the appropriate orders against them, if required. The court further directed that the details of the transferees and the price agreed upon for the shares be furnished to the court, with the Appellant having the liberty to challenge the proposed sale consideration if deemed below the market price and that upon sale of the shares, the consideration received was to be deposited with the court, pending the outcome of the appeal under Section 37 of the Arbitration Act. The court clarified that its observation in the judgment would not influence the outcome of the other related proceedings. The Appeal and the pending applications were disposed of accordingly.

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Judgement Reviewed by – Sruti Sikha Maharana

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Delhi High Court Rejects Frivolous Petition in Construction Dispute, Pointing to Availability of alternative Remedies

Case Name:  UP State Bridge Corporation ltd. & Anr v. National Highways and Infrastructure 

Case No.: W.P.(C) 3256/2024 & CM APPL. 13420/2024 

Dated: May 08, 2024 

Quorum: Justice Subramonium Prasad 

 

FACTS OF THE CASE: 

The Petitioner has come before this court to contest the Respondent’s communication from February 9, 2024, which declared the Petitioner to be a “Non-Performer” and stated that the Petitioner would not be permitted to bid on any project with the Ministry of Road, Transport, and Highways or any of its executing agencies until their name was taken off the list of Non-Performers.  

Furthermore, the aforementioned communication makes it clear that the Petitioner will also include its joint venture partners and promoters whose qualifications were taken into account when they were approved for the project of “Building of Two Lanes with Paved Shoulders of New Greenfield Alignment from Chochenpheri at Km. 52.000 to Helipad Near Menla at Km. 82.000 of Rhenoc-Menla spur (NH-717 B) Package-III on EPC basis under SARDPNE Phase ‘A’ in the State of Sikkim.” 

The Respondent put out a bid for the project of “Construction of 2 laning with paved shoulder of new Greenfield alignment from Chochenpheri at Km. 52.000 to Helipad near Menla at Km. 82.000 of Rhenoc-Menla spur (NH-717 B) Package-III on EPC basis under SARDP-NE Phase ‘A’ in the State of Sikkim”. 

Having placed the highest bid, the petitioner was given the opportunity to complete the job. Petitioner submitted a bid of Rs. 532,52,00,000/-for the contract, which was accepted by Respondent on October 28, 2020, via letter. The petitioner provided the performance security of Rs. 26,62,60,000 and an extra performance security of Rs. 3,16,82,000 in accordance with clause 2.21 of the RFP, in accordance with the conditions of the bid document. The project was set to end on December 10, 2020, and work had to be finished within 36 months of that date. 

First to work was the petitioner. Whether or not the Petitioner was granted the Right of Way (ROW) to complete the construction has been the subject of several disagreements between the Petitioner and the Respondent. The Respondent is not happy with the Petitioner’s performance in numerous other areas as well. Records reveal that the Petitioner was given the opportunity to have personal hearings in order to provide an explanation for the reasons behind the contract’s delay in performance. Documentation in the file also reveals that the Petitioner received two cure notices, dated 24.11.2022 and 11.10. 2023. 

Since the petitioner was designated as a “Non-Performer,” their name has been added to a list of non-performers, and they are not allowed to participate in any bids with the Ministry of Road, Transport, and Highways or any of its executing agencies until they are taken off the list. 

  

LEGAL PROVISION: 

  • Section 5 of the Arbitration and Conciliation Act- Extent of judicial intervention. Regardless of the provisions of any other currently enacted legislation, no judicial authority may get involved in topics covered by this Part unless specifically authorised by this Part. 
  • Section 34 of the Arbitration Act- The sole way to challenge an arbitral award in court is to file an application to have the award set aside in line with subsections (2) and (3). (ii) There is a disagreement between the arbitral ruling and Indian public policy. (iii) It goes against even rudimentary moral or just conceptions. 

 

CONTENTIONS OF THE PETITIONER: 

The learned counsel representing the petitioner argues that the contested communication, dated 09.02.2024, was approved based on a circular dated 06.10.2021, even though the letter of award was sent on October 28, 2020. As a result, the respondent was unable to punish the petitioner because the contract agreement was signed before the date the circular, dated 06.10.2021, was issued, and the petitioner is not covered by it.  

Furthermore, it is stated that the natural justice standards were not followed in the passing of the contested communication. The petitioner claims that in addition to being ordered to stick with the current contract, they have also been forbidden from placing any bids with the Ministry of Road, Transport, and Highways.  

It is also argued the respondent cannot be allowed to hold opposing views at the same time. It further states that the Petitioner cannot be required to fulfil its portion of the contract within a set amount of time as the Respondent has not fulfilled its share of the obligations and has failed to fulfil its share of the reciprocal obligations. 

 

CONTENTIONS OF THE RESPONDENTS: 

The respondent’s attorney brings up the maintainability of the writ petition, pointing out that the contract has an arbitration clause. Furthermore, under paragraph 7 of the Circular dated 06.10.2021, it is specified that the Impugned Communication may be appealed before the Appellate Authority, which is the Secretary, Road Transport and Highway Development. 

It is claimsed that this Court should not hear the current writ petition since the Petitioner has access to an other effective remedy. In addition to addressing the question of the writ petition’s sustainability, the learned attorney representing the respondent also called attention to a number of shortcomings on the part of the petitioner, including the fact that the design and drawings for 3.340 km of the 4.470 km of viaducts have not been provided.  

Furthermore, it is mentioned that project milestone II is not yet completed and that as of November 19, 2023, there has been just 24.04% financial development, although 30% should have been the result. The Petitioner is said to have had multiple opportunities, a personal hearing, and cure notices issued to them, but they have not taken any action. As a result, this Court should not use its discretion under Article 226 of the Indian Constitution because it has been declared that the decision-making process has been equitable. 

 

COURT’S ANALYSIS AND JUDGMENT: 

The court determined that extracting the arbitration clause was pertinent. The dispute resolution procedure is covered in Article 26 of the contract agreement.  

Article 26 states that, in the first instance, any disagreement, argument, or dispute between the Parties regarding any aspect of this Agreement (including its interpretation) shall be tried to be settled amicably through the conciliation process; if that fails, the matter will be referred to arbitration. 

The court, after a reading of the aforementioned paragraph reveals that the High Court may hear a writ petition even in cases where there is a viable alternative remedy, where the writ petition aims to enforce a fundamental right, where natural justice principles are violated, where the contested orders or proceedings are completely without jurisdiction, or where the validity of an Act is being contested. It is well established that when there is a different, effective remedy available and when the parties have mutually agreed to arbitrate their dispute, courts acting under Article 226 of the Indian Constitution generally do not intervene. 

The Court believed that there were contested factual issues in the current case. The only way to establish the contested facts is for both parties to present oral and written evidence; an affidavit cannot be used as the sole means of establishing the facts. 

It was of the view of this Court that the Petitioner has failed to establish a prima facie case supporting its position. In any case, it is improper for this Court to grant a stay on the operation of the contested communication when it is not inclined to entertain the writ petition based on the facts of the case. Section 9 of the Arbitration and Conciliation Act gives the Court of Competent Jurisdiction the authority to decide the matter based on the merits of the case.  

Due to the aforementioned, the Court was hesitant to grant the writ petition, citing the petitioner’s access to an alternative effective remedy. 

 

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Judgment reviewed by Riddhi S Bhora. 

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The Delhi High Court Has Confirmed the Arbitrability of Disputes Related to MOCA: Directed the Involved Parties to Resolve Their Issues Through Arbitration

Case Title – M/s. Oravel Stays Pvt. Ltd. Vs. Nikhil Bhalla

Case Number – FAO (COMM) 212/2023 & CM NO. 54229/2023

Order Number – 23rd April, 2024

Quorum – Justice Vibhu Bakhru and Justice Ravinder Dudeja

FACTS OF THE CASE

In the case of M/s. Oravel Stays Pvt. Ltd. Vs. Nikhil Bhalla, a company in the industry of hospitality namely M/s. Oravel Stays Pvt. Ltd., proffers services expediting the listing of properties on its online platform. Nikhil Bhalla is the owner of a hotel named “The Spruce Mansion” and is tied up in a Marketing and Operational Consulting Agreement (MOCA) with OSPL. The MOCA entailed a provision (Clause 15) that included the Terms and Conditions available on the website of OSPL, which in turn girdled an arbitration agreement (Clause 14). However, disputes arose between Nikhil and OSPL concerning the failure of the obligations relating to the minimum guarantee amounts and the stipulated incentives in the MOCA. As a result of which, Nikhil initiated legal proceedings to retrieve the remaining dues from the OSPL. Responding to the same, OSPL invoked the arbitration clause (Clause 14) within the MOCA, seeking for resolution through the way of arbitration. However, the application of OSPL for arbitration was dismissed by the Commercial Court stating that the arbitration provision did not extend to disputes arising from the non-compliance with the terms and conditions of the MOCA. In effect of the same, the dispute revolved around whether the arbitration clause within the MOCA covered disagreements arising from the alleged breaches of the contractual obligations, such as the failure to meet minimum guarantees and incentives, or if it was limited to other types of disputes.

CONTENTIONS OF THE APPELLANT

  1. The appellant, through their counsel, in the said case contented that the disputes fell under the ambit of the arbitration agreement (Clause 14) as they concerned the “application” of the provisions of the MOCA, including the non-compliance.
  2. The appellant, through their counsel, in the said case contented that any disputes in respect to the failure of fulfilment of obligations under the MOCA would be covered by the arbitration clause.
  3. The appellant, through their counsel, in the said case stressed on the fact that the distinguished terms such as “application” encircled disputes of non-compliance.

CONTENTIONS OF THE RESPONDENT 

  1. The respondent, through their counsel, in the said case contented that the arbitration clause was not specifically incorporated into the MOCA, as there was no specific reference to it in the digitally signed agreement.
  2. The respondent, through their counsel, in the said case relied on the legal precedents to contend that an arbitration clause cannot be inferred by reference unless specifically stated in the agreement.
  3. The respondent, through their counsel, in the said case contented that the link provided in the Clause 15 of the MOCA did not lead to the relevant Terms and Conditions containing the arbitration clause.

 LEGAL PROVISIONS

  1. Section 8 of the Arbitration and Reconciliation Act, 1996 prescribes the power to refer parties to arbitration where there is an arbitration agreement.

ISSUES

  1. The main issue of the case revolved around whether the arbitration agreement (Clause 14) was incorporated validly into the MOCA?
  2. Whether the disputes arose in the suit fell within the ambit of the arbitration agreement?

COURT ANALYSIS AND JUDGMENT

 The court in the case of M/s. Oravel Stays Pvt. Ltd. Vs. Nikhil Bhalla, observed that the Clause 15 of the MOCA expressly incorporated the Terms and Conditions, including the Arbitration agreement (Clause 14). The court established that the arbitration clause was indeed a part of the contractual agreement between OSPL and Nikhil. The court in this case, relying on the legal precedents, affirmed that the reference to the Terms and Conditions constituted valid incorporation of the arbitration clause into the MOCA. The court observed that the arbitration agreement was legally binding on both parties and could be invoked to resolve disputes arising from the contract. The court in this case, stated the reason that the disputes concerning non-payment under the MOCA were arbitrable. Additionally, the court stated that such disputes inherently involved the interpretation, construction, and application of the provisions of the MOCA itself. Therefore, they fell in the ambit of matters that could be resolved through arbitration. The court stressed on the fact that a prima facie examination was sufficient to establish the existence of an arbitration agreement. The court in this case, deferred the determination of the arbitrability of the specific disputes to the Arbitral Tribunal. The court referred the parties to arbitration to resolve the dispute between them. The court highlighted that the role of the Arbitral Tribunal would be to determine the arbitrability of the disputes in detail, taking into consideration, the specific facts and circumstances of the case.

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Judgement Reviewed by – Sruti Sikha Maharana

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Central Registrar of Cooperative Societies may choose an arbitrator in accordance with Section 84 of the Multi State Cooperative Societies Act, 2002: Delhi High Court

Case Name: Appolo Handloom Manufacturing Co-Op Society Ltd v. All India Handloom Fabrics Society and Ors 

Case No.: ARB.P. 1261/2023 

Dated: April 8, 2024 

Quorum: Justice Pratibha M Singh 

 

FACTS OF THE CASE: 

For more than thirty years, Apollo Handloom Manufacturing Co-Op. Society Limited, the petitioner, has been a member of the All-India Handloom Fabric Society. The Petitioner filed a petition seeking the appointment of an arbitrator by the Central Registrar of Co-operative Societies, Ministry of Cooperation. 

In order to have an arbitrator appointed by the Ministry of Cooperation’s Central Registrar of Cooperative Societies, the petitioner submitted a petition. Among the disagreements the petitioner brought up are issues, including but not limited to monetary dues, unlawful election of office bearers, and other issues brought up by the respondents. 

Section 84 of the Multi State Cooperative Societies Act, 2002 was cited by the petitioner as the basis for the Arbitration Clause. On May 26, 2023, the petitioner requested the appointment of an arbitrator; however, the Central Registrar did not do so as required by Section 84 of the Act. 

Disappointed by this, the petitioner filed an application under Section 11(6) of the Arbitration and Conciliation Act (A&C Act) requesting the appointment of an arbitrator through the intervention of the court. According to the Court’s ruling, the Central Registrar may be directed to nominate the arbitrator even though it is not permitted to do so itself. 

Apollo Handloom Manufacturing Co-op. Society Limited, the petitioner, complained that the Central Registrar had not appointed an arbitrator in spite of their request. The petitioner was dissatisfied with this inaction and looked for another way to settle the problem. 

The Central Registrar is required by Section 84(4) to designate the arbitrator; but, in the event that the Registrar is unable to do so, the aggrieved party may petition the High Court for guidance. This was clarified by the Court. 

 

CONTENTIONS OF THE PETITIONER: 

The petitioner’s position is that, as a member of respondent, it has a number of disagreements with how respondent operates, including the unpaid balance of certain of the petitioner’s financial obligations. Furthermore, the Attorney maintains that Respondent No. 1’s office bearers were elected in a way that was illegitimate and forbidden.  

A request for the appointment of an arbitrator with another respondent, in the form of a representation, was filed on May 26, 2023. This request pertained to other disputes pertaining to the constituent of Respondent No. 1, for which it had invoked the Arbitration Clause in terms of Section 84 of the Multi State Cooperative Societies Act, 2002 (hereinafter, “the Act”). Moreover, the Petitioner asserts that it has additionally submitted a request for the appointment of an arbitrator on Respondent No. 6-Central Registrar’s website.  

The petitioner claims that because the Central Registrar did not appoint an arbitrator, this court’s jurisdiction is invoked under Section 11(6) of the Arbitration and Conciliation Act, 1996, and a petition has been filed seeking the appointment of an arbitrator in accordance with Section 84 of the Act.  

By way of representation, the petitioner claims that on May 26, 2023, a request was made for the appointment of an arbitrator alongside another respondent. In accordance with Section 84 of the Multi State Cooperative Societies Act, 2002 (hereinafter, “the Act”), Respondent No. 1 had invoked the Arbitration Clause in relation to various conflicts involving its constituent under consideration. In addition, Petitioner also states that it has also filed a request on Respondent No. 6-Central Registrar’s website for the appointment of an arbitrator. 

Under Section 84 of the Act of 2002, the disputes were addressed. Section 84(5) requires the appointment of an arbitrator, which the Central Registrar, as the appointing authority, failed to accomplish. In the absence of an arbitrator, the petitioner was left with no option except to request the appointment through the court. 

 

CONTENTIONS OF THE RESPONDENTS: 

First, the argument is made that the claims and conflicts that need to be sent to arbitration are unclear. The Counsel for Respondent No. 1 further argues that the Petitioner did not provide the Respondent with any notice pursuant to Section 21 of the Arbitration and Conciliation Act, 1996. 

In support of Respondent Nos. 2 through 4, it is argued that an office bearer’s election may only be contested within 30 days and not after that. A petition under Section 11 of the Arbitration Act may also be contested as unmaintainable in light of Section 84(5) of the Act. Respondent Nos. 2 to 4’s legal counsel argues that the petition itself cannot be maintained in light of the Supreme Court’s decision in a precedent-setting ruling that is currently before the highest court. 

The petition’s maintainability was contested by the respondent for the following reasons: It is purported that the petitioner did not supply enough information on the parties’ disagreement. Prior to submitting the application, no notification under Section 21 of the A&C Act was given. The petition under Section 11(6), according to the respondent, could not be maintained because the Central Registrar alone had the authority to appoint.  

 

LEGAL PROVISIONS: 

  • Section 84 of the Multi State Cooperative Societies Act, 2002: This provision, which addresses arbitration in cooperative groups, was cited by the petitioner. It offers a way for conflicts in these kinds of communities to be settled through arbitration. 
  • Section 11(6) of the Arbitration and Conciliation Act (A&C Act): An application under this section was filed by the petitioner. It gives the court the ability to step in and appoint an arbitrator in the event that the authorised authority—in this example, the Central Registrar—fails to act. 

 

COURT’S ANALYSIS AND JUDGMENT: 

Counsels representing each party were present, and the court reviewed the documentation. The provisions of the Arbitration Act would only be applicable in the absence of any additional provisions enacted under the Act, as far as maintainability under Section 84(5) of the Act is concerned.  

The Central Registrar of Co-operative Societies, Ministry of Cooperation, is required by Section 84(4) of the Act to designate an arbitrator; the court noted that this need cannot be questioned. On the other hand, if the Central Registrar is unable to choose an arbitrator, the Petitioner may be left without recourse. It cannot be maintained that the Court lacks the authority to refer the case to the Central Registrar for the appointment of an arbitrator in such circumstances.  

According to Section 84(5) of the Act, the court ruled that there was a clear arbitration clause. As a result, the claim that a petition under Section 11(6) of the Arbitration Act could not be maintained was dismissed. The High Court is authorised under Section 11(6) of the Arbitration Act to take the required actions to ensure the appointment of an arbitrator, particularly in cases where a person or organisation, in this instance, the Central Registrar, has neglected to take the necessary actions n accordance with the protocol outlined in Section 84 of the Act. 

Regarding Respondent Nos. 2 through 4, this Court believes that they are individual office bearers of Respondent No. 1, which is a society. Thus, the primary legal relationship is that of the Petitioner and Respondent No. 6. The Central Registrar, the aforementioned respondent, has only informed the court that it will choose an arbitrator in two weeks without contesting the maintainability of the current case.  

 

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Judgment reviewed by Riddhi S Bhora. 

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