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“Revolutionizing Arbitration”: IIAC Launches Groundbreaking Regulations for Micro and Small Enterprises

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Background –

On June 7, 2024, the India International Arbitration Centre (IIAC) introduced the India International Arbitration Centre (Conduct of Micro and Small Enterprises Arbitration) Regulations 2024. Recognizing the importance of micro and small enterprises in the Indian economy, these regulations aim to enhance the efficiency and speed of dispute resolution within this crucial sector.

Update –

The IIAC has acknowledged the necessity of promoting quicker and more effective dispute resolution mechanisms for micro and small enterprises. These newly established regulations are part of IIAC’s ongoing efforts to facilitate arbitration in this significant economic segment. According to a press release, the regulations underscore the importance of swift and efficient dispute resolution processes.

Key features –

  1. Fee Structure – There are no filing fees for claims or counterclaims, and the arbitrator’s fees are set at a rate lower than that specified in the Fourth Schedule of the Arbitration and Conciliation Act, 1996. Additionally, the administration fees charged to parties are kept to a minimum.
  2. Fast Track Procedure – The default method for all arbitrations is a fast track procedure based on the pleadings, documents, and submissions provided by the parties. Oral hearings are held only if all parties request them or if the Arbitral Tribunal deems them necessary for clarifying issues. The arbitral award is to be issued within six months from the date the Registrar informs the parties about the constitution of the Arbitral Tribunal. Parties can request that the fast-track procedure not be followed, subject to the Arbitral Tribunal’s approval.
  3. Appointment of Arbitrator – A Sole Arbitrator is appointed by the IIAC Chairperson, advised by the Advisory Panel. The selection process ensures that the arbitrator is independent, impartial, and capable of conducting the arbitration efficiently and promptly.
  4. Legal Aid – Micro and small enterprises experiencing financial difficulties can apply for legal aid by submitting supporting documents to IIAC. Approved applications may result in a waiver of up to 50% of the IIAC’s administration fee. Additionally, a counsel may be provided at no cost, subject to the Arbitral Tribunal’s decision on arbitration costs.
  5. Use of Artificial Intelligence – IIAC plans to implement Artificial Intelligence software developed by Digital India Bhashini Division, an Independent Business Division within the Digital India Corporation under the Ministry of Electronics and Information Technology. This technology aims to simplify and enhance the transparency of the arbitration process across India, irrespective of the parties’ regional or linguistic differences. Features include real-time translation of documents and speech in various languages listed in the Eighth Schedule of the Indian Constitution to English/Hindi, marking the first use of such technology in dispute resolution in India.
    “PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”Written by – Anurag Das
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Sikkim High Court: Commercial Court exceeds it’s Lakshman Rekha by examining and modifying Arbitral Award

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CASE TITLE – Union of India vs. M/s M.G. Contractors Pvt. Ltd. & M/s M.G. Contractors Pvt. Ltd. vs. Union of India

CASE NUMBER – Arb. A. No.1 of 2022 and Arb. A. No.2 of 2022

DATED ON – 03.05.2024

QUORUM – The Hon’ble Justice Biswanath Somadder & The Hon’ble Chief Justice Bhaskar Raj Pradhan

 

FACTS OF THE CASE

Tender was invited by CPWD, Chungthang, for construction of ITBP road sometime in the year 2010. In response, M/s M.G. Contractors Pvt. Ltd. submitted its tender which was found to be lowest, accepted and awarded in its favour. The value of work awarded under the contract was Rs.70,65,65,490/- which was 24.55% above the estimated cost put to tender of Rs.56,72,94,653/- Twenty-four months to be reckoned from 22nd day after the date of issue of acceptance letter dated 10.09.2010 was the time allowed for carrying out the work. The stipulated date of start of work was 02.10.2010 and the date of completion was 01.10.2012. The Agreement was executed in the year 2011. The work was delayed due to various reasons and finally completed on 30.06.2015. Certain disputes arose between the parties and M/s M.G. Contractors Pvt. Ltd. invoked Arbitration Clause 25 of the Agreement. The Sole Arbitrator was appointed who entered reference vide letter dated 14.03.2020. M/s M.G. Contractors Pvt. Ltd. made 15 claims by filing their Statement of Claims. The Union of India did not prefer any counter-claim. The total claim made by M/s M.G. Contractors Pvt. Ltd. was Rs.29,11,26,419/-  along with interest, GST and cost as actual. Claim No.7 was for an amount of Rs.8,16,41,135/- claimed as due and payable for escalation compensation for period October 2012 to June 2015.  Claim No.13 was for interest at the rate of 18% from due date to date of payment. Claim No. 14 was the claim for GST at applicable rate as per actual on the claim amounts. The learned Sole Arbitrator vide his Award dated 23.3.2021, awarded a sum of Rs.12,80,94,368/- along with interest and GST under Claim No.13 and Claim No.14 in favour of M/s M.G. Contractors Pvt. Ltd. The Sole Arbitrator did not grant Claim Nos. 2, 4, 5, 8, 10, 11 and 12. 7. The Union of India filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 before the learned Commercial Court, being Arbitration Case No. 1 of 2021, in the matter of Union of India vs. M/s M.G. Contractors Pvt. Ltd. The Union of India prayed for setting aside Claim No.7 and associate interest under Claim No. 13 and associate GST under Claim No.14 granted in favour of M/s M.G. Contractors Pvt. Ltd on the ground that it was barred by limitation. By the impugned judgment dated 27.12.2021, the learned Commercial Court concluded that the Award delivered by the learned Sole Arbitrator under Claim No.7 and associate interest under Claim No.13 and associate GST under Claim No.14 are not barred by law of limitation. This is herein refereed to this part of the impugned judgment as its first part.

The learned Commercial Court, however, was of the opinion that the decision given under Claim No.13, awarding interest at the rate of 8% per annum to the claimant under Claim No.1, 3, 6, 7 and 9 with effect from 17.02.2020 till the date of Award, i.e., 23.03.2021, is contrary to the provisions of Section 31(7) (b) of the Arbitration and Conciliation Act, 1996. Accordingly, the learned Commercial Court modified the Award to the extent that M/s M.G. Contractors Pvt. Ltd. is entitled for interest under Claim No. 1,3,6,7 and 9 at the rate of 8% per annum with effect from 23.03.2021 till payment of Award as per Section 31(7) (b) of the Arbitration and Conciliation Act, 1996 barring the time period consumed during proceedings of the case before the learned Commercial Court. The learned Commercial Court, however, did not find any illegality in awarding Claim No.14. Thus, the Application under Section 34 of the Arbitration and Conciliation Act, 1996 was partly allowed. We shall refer to this part of the impugned judgment as the second part.

 

ISSUE

  1. Whether the arbitrator erred in determining the start date for the limitation period for Claim No. 7?
  2. Whether the interest awarded by the Sole Arbitrator from February 17, 2020, is not consistent with the provisions of Section 31(7)(b).

 

LEGAL PROVISIONS

Section 31(7)(b) of the Arbitration and Conciliation Act, 1996, specifies that if the arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at a rate it deems reasonable, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.

COURT ANALYSIS AND JUDGEMENT

The Hon’ble High Court of Sikkim stated that in Arbitration Case No. 1 of 2021, The Union of India cannot effectively seek to modify parts of the Award that they had previously accepted and that the learned Commercial Court does not have the power to modify the Award in such a manner. After referring to judgment of the Hon’ble Supreme Court in Project Director, National Highways No.45E and 220, National Highways Authorities of India vs. M. Hakeem and another and S.V. Samudram vs. State of Karnataka and Another, modifying the Award would be outside the purview of the powers granted under Section 34, which allows for setting aside an arbitral award on specific grounds but does not extend to modifications of an accepted Award. The Commercial Court can review and set aside an arbitral award if it falls within the grounds specified under Section 34. However, since the Union of India had accepted most of the claims, including the interest and GST components, their request to set aside or modify specific parts of the Award, such as Claim No. 7 and the related interest and GST, was beyond the court’s power. This means that the Union of India is bound by the terms of the Award as accepted and cannot seek further modification or setting aside of specific parts. The Hon’ble High Court in Arbitration Case No. 1 of 2021, was of the opinion that in a proceeding under Section 37 of the Arbitration and Conciliation Act, 1996, they are not authorised to disturb concurrent findings of facts and law by the learned Sole Arbitrator and the learned Commercial Court. The learned Sole Arbitrator concluded that the work was completed on 30.06.2015, bill was finalised on 9.03.2017 and arbitration was sought before the Chief Engineer of the Union of India on 17.02.2020 and thus, the arbitration was invoked within limitation period of three years from the date of finalisation of the bill. The learned Commercial Court once again examined the issue raised by the Union of India, the relevant clauses and concluded that M/s M.G. Contractors Pvt. Ltd. completed its work on 30.06.2015 and finalised the bill on 09.03.2017. Accordingly, the learned Commercial Court was also of the opinion that the Award under Claim No.7 and its associate interest under Claim No.13 and associate GST under Claim No.14 was not barred by the law of limitation. In the circumstances, the court noticed that the Union of India has failed to make out a case for interference either under Section 34 or under Section 37 of the Arbitration and Conciliation Act, 1996. The Hon’ble High Court concluded that the first part of the impugned judgment of the learned Commercial Court, vis-à-vis, the challenge of the Union of India in its application under Section 34 of the Arbitration and Conciliation Act, 1996 need not be interfered with and accordingly, dismissed Arb. A. No. 1 of 2022. Whereas for the second part of the impugned judgment, the court learned that the Commercial Court on its own examined the Award minutely and modified the Award, vis-à-vis, Claim No.13 and while doing so the learned Commercial Court exceeded its jurisdiction. Hence allowing, Arb. A. No. 2 of 2022.

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Judgement Reviewed by – Gnaneswarran Beemarao

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Necessary evidence to be produced in front of the District judge: Rajasthan HC remanded the case back as it held that the decision could not be considered contradictory to the evidence

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CASE TITLE – Akha Ram & Ors. v. National Highway Authority of India

CASE NUMBER – S.B. Civil Misc. Appeals No. 1805/2023, 1806/2023, 1807/2023, 1808/2023, 1993/2023, 1994/2023, 1996/2023 & 1999/2023

DATED ON – 22.05.20244

QUORUM – Hon’ble Justice Rekha Borana

 

FACTS OF THE CASE

The present appeals have been filed against the orders passed by the District Judge, Jalore whereby the applications/objections under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act of 1996’) as filed by the claimants-objectors have been rejected as being non-maintainable. A Notification dated 20.08.2018, in terms of Section 3A of the National Highways Act, 1956 (hereinafter referred to as ‘the Act of 1956’) was issued for acquisition of land for the purposes of construction of National Highway No.754K of Amritsar-Kandla Project under Bharat Mala Project in Jalore District. Vide the said notification, the khatedari land of the claimants was proposed to be acquired. The objections qua the said acquisition were invited vide communication dated 07.09.2018 and the objections were even filed by the claimants on 18.09.2018. However, the said objections were rejected and the final declaration in terms of Section 3D of the Act of 1956 was made on 05.08.2019. The gazette publication of the said declaration was made on 06.08.2019. the acquisition proceedings were finalised and the amount to be paid qua the acquisition was determined by the Competent Authority i.e. the Land Acquisition Officer cum Sub Divisional Officer, Jalore on 21.11.2019. The said amount was determined on basis of the DLC rates as prevalent at that point of time. An application was preferred by the claimants before the Collector on 24.06.2021. The said application was nomenclated to be under Section 18 of the Land Acquisition Act, 1894 (hereafter referred to as ‘the Act of 1894’). However, an application for an amendment was preferred subsequently with the prayer for the said application to be read to be one under Section 64 of Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (hereinafter referred to as ‘the Act of 2013’). Ultimately, the application as preferred before the Collector was decided vide order dated 25.08.2022, the Collector proceeded on to dismiss the application as preferred by the claimants while observing that the arbitration application as preferred by the claimants stands rejected. Aggrieved of the order dated 25.08.2022 as passed by the Collector vide which, the determination/Award dated 21.11.2019 was affirmed, application/objections under Section 34 of the Act of 1996 was/were preferred by the claimants before the District Judge, Jalore. Vide Order dated 19.08.2023, the learned District Judge, Jalore proceeded on to reject the said application/objections on the premise that the same was/were not maintainable before the Court.

 

ISSUE

Whether the claimants can challenge the award passed by the Collector/Arbitrator in terms of Section 3G(5) of the Act of 1956 by filing objections under Section 34 of the Act of 1996.

 

LEGAL PROVISIONS

Section 3G (5) of the National Highways Act, 1956, lays down the specifications for determination of compensation by Arbitrator.

Section 3G (6) of the National Highways Act, 1956, lays down the process by which Objections to Arbitrator’s award under Section 34 of the Arbitration and Conciliation Act, 1996 can be made.

Section 34 of the Arbitration and Conciliation Act, 1996, lays down the process to challenge an arbitration award.

 

CONTENTIONS BY THE APPELLANTS

The Learned counsel for the appellants admitted that the application as preferred before the Collector was inadvertently nomenclated first, to be under Section 18 of the Act of 1894 and subsequently under Section 64 of the Act of 2013. Counsel submitted that, in fact, the said application was in terms of Section 3G(5) of the Act of 1956 and even the Collector decided the same treating it to be under the said provision only. He submitted that the operative portion of the order as passed by the Collector makes it clear that the Collector treated the application to be under Section 3G(5) of the Act of 1956 and he, acting as an Arbitrator, dismissed the application treating it to be so. Therefore, in terms of Section 3G(5) of the Act of 1956, once an application under the said provision is rejected, i.e. the claim of the claimants is rejected by the Arbitrator, objections in terms of Section 34 of the Act of 1996 would lie as that was the only remedy available to the claimants in terms of Section 3G(6) of the Act of 1956. Counsel submitted that admittedly, the acquisition in question was an acquisition in terms of the Act of 1956 for the purposes of a National Highway and hence, the acquisition or the proceedings for compensation would be governed by the said act only. Even if the claimants preferred any application under any provision of the Act of 1894, the same could not have governed the dispute and such wrong mentioning of the provision could not have made the Act of 1894 applicable. Counsel further submitted that Section 3G(5) of the Act of 1956 provides that if the amount determined by the competent authority is not acceptable to either of the parties, the same shall be determined by the Arbitrator to be appointed by the Central Government on an application by either of the parties. Therefore, the application as preferred by the claimants was definitely in terms of the said provision. The learned counsel for the appellants submitted that the Order impugned deserves interference even for the reason that no such objection pertaining to jurisdiction or maintainability of the objections was raised even by the respondent Union of India.

 

CONTENTIONS BY THE RESPONDENTS

The Learned counsel appearing for the NHAI submitted on merits that the award in question is totally in conformity with law and does not deserve any interference. However, counsel was not in a position to refute the submission as made by learned counsel for the appellants that the application/objections as preferred by the claimants was/were very much maintainable before the District Judge in terms of Section 34 of the Act of 1996.

 

COURT ANALYSIS AND JUDGEMENT

The Hon’ble High Court of Rajasthan noted that it is an admitted position on record that acquisition of the land in question was for the purposes of National Highways in terms of the Act of 1956. Meaning thereby, the provisions of Section 3G of the Act of 1956 would govern the procedure for determination of compensation. They held that the provision under the Act of 1996, which provides for a challenge to an award passed by the Arbitrator, is definitely Section 34. Therefore, the application as moved before the District Judge in the present case, raising a challenge to the award as passed by the Collector/Arbitrator in terms of Section 3G(5) of the Act of 1956, was definitely in terms of Section 34 of the Act of 1996. The fact that the application as preferred before learned Collector was infact in terms of Section 3G(5) of the Act of 1956 was also evident to them from the fact that no prayer for reference of the same in terms of Section 64 of the Act of 2013 was made in the same. The High Court stated that had the application been intended to be made under Section 64 of the Act of 2013, a prayer for reference of the same definitely would have been made, which was clearly not made. They stated that the provisions of the Act of 2013, relating to the determination of the compensation in accordance with the First Schedule, rehabilitation and resettlement in accordance with the Second Schedule and infrastructure amenities in accordance with the Third Schedule were only made applicable to all cases of land acquisition under the enactments specified in the Fourth Schedule to the said Act. Meaning thereby, all aspects contained under Sections 26 to 28 of the Act of 2013, for determination of compensation, were made applicable to the National Highways Act, 1956 also. The effect of the Act of 2015 was that the beneficiary provisions of Sections 26 to 28 of the Act of 2013 were made applicable to all the land acquisition proceedings. But then, only the said provisions of the Act of 2013 were made applicable to the Act of 1956 and nothing more than that. Meaning thereby, Section 64 of the Act of 2013 as relied upon by the learned District Judge was not applicable in the present matter. And so far as the finding of learned Judge regarding there being no notification in terms of Section 3G(5) of the Act of 1956 appointing an Arbitrator is concerned, the High Court held that the finding cannot be said to be contrary to the material as no such notification was placed on record before the learned District Judge. And since it had been placed before the High Court, due to which the orders impugned were quashed and set aside, and held that the matter is remanded back to the learned District Judge, Jalore for decision afresh on the application/objections as preferred by the claimants treating them to be under Section 34 of the Act of 1996.

 

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Judgement Reviewed by – Gnaneswarran Beemarao

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Delhi High Court Affirms Tribunal’s Decision, stating that the Arbitral Tribunal’s discretion was exercised appropriately and not arbitrarily.

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Delhi High Court Affirms Tribunal’s Decision, stating that the Arbitral Tribunal’s discretion was exercised appropriately and not arbitrarily.

 

Case title:  ROADWAY SOLUTIONS INDIA INFRA LIMITED VS NATIONAL HIGHWAY AUTHORITY OF INDIA

Case no.: ARB. A. (COMM.) 18/2024 & I.A. 7167/2024, I.A. 7168/2024, I.A. 7169/2024

Dated on: 28th May 2024

Quorum:  Hon’ble. MR JUSTICE ANUP JAIRAM BHAMBHANI

FACTS OF THE CASE

The present appeal filed under section 37(2)(b) of the Arbitration & Conciliation Act 1996 (“A&C Act‟), the appellant (claimant in the arbitral proceedings) impugns order dated 27.03.2024 made by a 03-Member Arbitral Tribunal, on an application under section 17 of the A&C Act seeking certain interim reliefs. As perusal of the impugned order shows that the learned Tribunal has dealt with the matter in considerable detail and has addressed all three principal prayers made in the application individually. The learned Tribunal has dealt with each of the reliefs sought in the section 17 application in the following way Insofar as the relief of injuncting the respondent from proceeding with the fresh RFPs and NITs is concerned, the learned Tribunal has held that that relief had become infructuous since the respondent has already gone ahead and awarded the contract to a third-party, and the validity of termination of the appellants contract is required to be decided in the main proceedings. The learned Tribunal has then proceeded to decide the interim prayer against threat of the appellant being disqualified from participating in future RFPs/NITs. In this behalf, suffice it to say, the learned Tribunal has held in favour of the appellant, and after a fairly detailed discussion, has come to the conclusion that the appellant satisfies all three tests, viz. of making-out a prima-facie case, of satisfying the learned Tribunal that balance of convenience lies in the appellants favour, and also that irreparable loss and injury would be suffered by the appellant as a consequence. Accordingly, the learned Tribunal has held in favour of the appellant, granting a limited interim protective order as to the appellants entitlement to participate in future tenders that may be issued by the respondent. Thereafter, the learned Tribunal goes-on to consider the statements filed by each of the parties, in relation to the value of the work completed by the appellant, as indicated in certain Interim Payment Certificates. The learned Tribunal observes that there is huge variation between the amount claimed by the appellant to be due and the amount that the respondent says is payable.

 ISSUES

  1. Whether the Arbitral Tribunal’s order dated 27.03.2024, concerning the application for interim relief under section 17 of the A&C Act, warrants interference by the court under the limited scope of section 37 of the A&C Act.

LEGAL PROVISIONS

Arbitration and Conciliation Act, 1996

Section 17: This section empowers an Arbitral Tribunal to order interim measures of protection as it deems necessary at the request of a party. This includes ordering a party to provide a deposit for the costs of arbitration or granting interim relief similar to those that courts can grant.

Section 37(2)(b): This section provides for appeals against orders of an Arbitral Tribunal granting or refusing to grant interim measures under Section 17. The scope of judicial intervention under this section is limited to ensure that the Tribunal’s discretion is not unduly interfered with unless it is shown to be arbitrary, capricious, irrational, or perverse.

CONTENTIONS OF THE APPELLANT

Mr. Arvind Nayar, learned senior counsel appearing for the appellant Mr. Arvind Nayar, learned senior counsel appearing for the appellant further argues, that as the record would show, in the proceedings filed for interim relief in this court, both the Co-ordinate Bench as well as the Division Bench, were pleased to hold in favour of the appellant and had restrained encashment of the bank guarantees, which position has now been reversed by the learned Tribunal. Mr. Nayar also points-out that the learned Tribunal has given no reasons for its conclusion, permitting invocation of the bank guarantees. Senior counsel argues that once the learned Tribunal had applied the triple-test and held in favour of the appellant in relation to other reliefs, the relief against invocation of the bank guarantees was in fact, a consequential relief, which ought to have followed.

CONTENTIONS OF THE RESPONDENTS

Mr. Ankur Mittal, learned counsel is present on behalf of the respondent on advance copy; but has not been called-upon to address the court. Upon a careful consideration of the submissions made by Mr. Nayar, this court is of the opinion that the learned Tribunal was in no way bound by the interim orders granted by the Co-ordinate Bench or by the Division Bench of this court in the various proceedings referred to above. In fact, concededly the Division Bench had extended the interim order restraining the invocation of bank guarantees only till the first sitting of the learned Arbitral Tribunal. That order was however continued by the learned Tribunal till the final decision on the section 17 application. In the meantime, the very constitution of the learned Tribunal also came to be changed; during which period also the invocation of the bank guarantees remained stayed. The interim order passed by the Division Bench had therefore long outlived its intent and purpose.

COURT’S ANALYSIS AND JUDGEMENT

As observed above, all three reliefs sought by way of the section 17 application have been considered in detail by the learned Arbitral Tribunal, and after due consideration and reasoning, the learned Tribunal has held that insofar as staying the effect of the termination notice is concerned, that relief has been rendered infructuous, since in the meantime not only did the contract stand terminated, but fresh NITs and RFPs had been issued and a fresh contract had been awarded to a third-party. That being said, the learned Tribunal has observed that the validity of the termination would, of-course, be considered on its merits in the course of the arbitral proceedings. Insofar as the other relief of debarring the appellant from participating in future tenders is concerned, the learned Tribunal has held in favour of the appellant, thereby granting interim protection and assuring the appellants entitlement to participate in future tenders. However, as far as invocation of the bank guarantees is concerned, after giving due consideration to the value of the work claimed to be completed by the appellant; and the respondents version thereon, the learned Tribunal has come to the conclusion that, at the interim stage, there is no basis to injunct invocation of the bank guarantees. The discussion in the impugned order would also show that the appellant had failed to even allege a case of „fraud‟; and had also failed to make-out a case of „special equities‟ in its favour that would warrant restraining invocation of the bank guarantees. It is also needs no detailed articulation, that interference by court under section 37(2)(b) of the A&C Act is warranted only in exceptional circumstances, when the court finds that the use of the discretionary power under section 17 of the A&C Act by an Arbitral Tribunal is palpably arbitrary, capricious, irrational or perverse. This Bench has itself so held in India bulls Housing Finance Ltd. & Anr. vs. Shipra Estate Ltd. and connected matters, while explaining the scope of interference by court under section 37 of the A&C Act. In the circumstances of the present case, this court is of the view that no ground is made-out for interfering with order dated 27.03.2024 passed by the learned Arbitral Tribunal on the application under section 17 of the A&C Act, within the limited ambit and scope of the jurisdiction of this court under section 37 of the A&C Act. The appeal is accordingly dismissed in-limine without however any order as to cost. Pending applications, if any, also disposed-of.

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Judgement Reviewed by – HARIRAGHAVA JP

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Delhi High Court Facilitates Arbitration over Unpaid Invoices

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Case Title: DELHIVERY LIMITED Vs. FAR LEFT RETAIL PRIVATE LIMITED

Case No.: ARB.P. 481/2024

Order on: MAY 17, 2024

Coram: NEENA BANSAL KRISHNA J.

Facts
In this case, Delhivery Limited herein, the petitioner filed a petition under Section 11(5) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator. The petitioner entered into a Service Agreement with Far-Left Retail Private Limited herein, the respondent on 17th June 2022. However, disputes arose when the respondent failed to make payments for invoices raised by the petitioner as per the terms of the agreement, amounting to Rs. 8,69,743.78/- along with accrued interest. Despite various attempts by the petitioner to settle the dispute amicably through emails and legal notices, the respondent did not respond adequately. The petitioner invoked arbitration under the Service Agreement on 27th October 2023. Although the respondent admitted the arrears in several communications, they failed to make payments or respond effectively to resolve the matter. Thereafter, the respondent raised objections regarding the procedure followed for amicable settlement and the sufficiency of service, which the court found to be without merit. The court concluded that there was a valid arbitration agreement between the parties and allowed the petition. The Delhi International Arbitration Centre was requested to appoint an arbitrator, and both parties were given the opportunity to present their objections before the arbitrator. The fees of the arbitrator would be determined according to the rules of the Delhi International Arbitration Centre.
Issues 
Whether there is a valid arbitration agreement between the petitioner and the respondent.
Whether the respondent failed to fulfill its payment obligations under the Service Agreement dated 17th June 2022.
Whether the petitioner made sufficient attempts to settle the dispute amicably before invoking arbitration.
Whether the objections raised by the respondent regarding the procedure for amicable settlement and the sufficiency of service are valid.
Legal Provisions
Section 21 of the Arbitration and Conciliation Act, 1996: Deals with the commencement of arbitral proceedings and requests to refer a dispute to arbitration.
Section 12(1) of the Arbitration and Conciliation Act, 1996: Grounds for Challenge.
Contentions of the Appellant
The petitioner, Delhivery Limited, had a deal with Far Left Retail Private Limited. Delhivery provided services, but Far Left Retail didn’t pay up. The petitioner tried to sort things out through emails and notices, but got no proper response. So, they decided to go for arbitration to resolve the dispute. However, Far Left Retail argued that Delhivery didn’t follow the right steps before going to arbitration and also questioned if Delhivery served them properly with legal notices. But the court didn’t consider Far Left Retail’s arguments and ruled in favor of Delhivery, allowing them to proceed with arbitration.
Contentions of the Respondent
The respondent, Far Left Retail Private Limited, raised objections regarding two main points.
Firstly, they argued that the petitioner, Delhivery Limited, didn’t follow the correct procedure for trying to resolve the issue before going to arbitration. They claimed that there was a step in the process meant for trying to settle things amicably, which the petitioner skipped. Secondly, the respondent questioned whether the legal documents were properly delivered to them. They argued that the service of these documents on their behalf was not satisfactory, meaning they might not have received them in the right way. Moreover, the respondent disputed the way the petitioner handled the situation before going to arbitration and raised concerns about how they were officially informed about the legal proceedings.
Court’s Analysis and Judgement
In this case, Delhivery Limited, a logistics company, filed a petition asking the court to appoint an arbitrator because Far Left Retail Private Limited, a company they had a contract with, didn’t pay them as agreed. Delhivery tried to settle the matter by sending emails and notices, but Far Left didn’t respond properly. The court looked at whether there was a valid agreement between the companies and if Delhivery tried hard enough to sort things out before going to court. They found that Delhivery did try, and there was a valid agreement. So, the court allowed Delhivery’s petition, meaning they could appoint someone to solve the problem outside of court. Both companies would have a chance to explain their sides to this person.
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Judgement Reviewed By- Shramana Sengupta

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