Hindustan Petroleum Corporation Ltd v. M/S Madan Lal Wadhwa and Co

SUVIR SEHGAL, J.

1.    This order shall dispose of both the abovementioned petitions as  they involve common questions of law and fact.

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2.    For  the  sake  of  convenience,  factual  position  is  being  taken from ARB-313-2021.

3.    Instant  petition  has  been  filed  under  Section  11  (6)  of  the Arbitration and Conciliation Act, 1996, (for short "the Act) for appointment of an Arbitrator.

4.    Counsel  for  the  petitioner  submits  that  a  Memorandum  of Agreement  (MOA)  dated  18.08.1986,  Annexure  P-1,  was  entered  into between the parties, whereby the petitioner was appointed as a dealer for retail  sales  and  supply  of  kerosene  for  domestic  purposes  and  industrial diesel, etc. He submits that a dispute arose between the parties and a civil suit  was  filed  by  the  respondent.  Upon  appearance,  petitioner  filed  an application  under  Section  8  of the  Act  for  reference  of  the matter  to  an Arbitrator. Respondent filed a reply opposing the application and by order dated 10.10.2011, the Trial Court accepted the application and referred the dispute for adjudication to an Arbitrator, however, the proceedings before the Arbitrator could not conclude as the statutory period for the completion of  the  proceedings  expired.  He  submits  that  the  matter  travelled  to  this Court. By judgment dated 31.12.2020, Annexure P-3, passed in CR-1605-2017, this Court accepted the revision petition filed by the respondent, set aside the impugned orders and directed the parties to take appropriate steps for appointment of a new Arbitrator as per the MOA, Annexure A-1. SLP filed by the respondent was dismissed by the Supreme Court by order dated

12.04.2021,  Annexure  P-4.  Counsel  submits  that  as  the  mandate  of  the earlier appointed Arbitrator stood terminated, petitioner is entitled to seek Sheetal appointment of a new Arbitrator.

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5.    Upon notice by this Court, the petition has been resisted by the respondent  by  filing  a  reply,  wherein  besides  contesting  the  petition  on merits, it has been submitted that the petitioner has not served any notice under Section 21 of the Act prior to invoking the power of this Court under Section 11 (6), ibid. A stand has been taken that the claim of the petitioner is barred by time.

6.    I  have  heard  counsel  for  the  parties  and  considered  their respective submissions.

7.    Section 21 of the Act stipulates as under:- "21.Commencement  of  arbitral  proceedings-  Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on  which  a  request  for  that  dispute  to  be  referred  to arbitration is received by the respondent."

8.    It is evident from the above provision that arbitral proceedings in  respect  of  a  dispute  commence  on  the  date  on  which  a  request  for referring that dispute to arbitration is received by the respondent. Notice is, therefore, a sine qua non and a precondition for initiating the proceedings under the Act. If notice invoking the arbitration clause is not served upon the respondents, arbitration proceedings cannot commence.

9.    Reference can also be made to the observations of the Delhi High Court in Alupro Building Systems Pvt. Ltd. vs. Ozone Overseas Pvt. Ltd. 2017 SCC Online Del 7228:- "25.  A  plain  reading  of  the  above  provision indicates that except where the parties have agreed to the contrary,  the  date  of  commencement  of  arbitration Sheetal proceedings would be the date on which the recipient of

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the notice (the Petitioner herein) receives from the claimant a request for referring the dispute to arbitration. The object behind the provision is not difficult to discern. The party to the arbitration agreement against whom a claim is made, should know what the claims are. It is possible that in response to the notice, the recipient of the notice may accept some of the claims either wholly or in part, and the disputes between the parties may thus get narrowed down. That is one aspect of the matter. The other is that such a notice provides an opportunity to the recipient of the notice to point out if some of the claims are time barred, or barred by any law or untenable in fact and/or that there are counter-claims and so on.

¶26Thirdly, and importantly, where the parties have agreed on a procedure for the appointment of an arbitrator, unless there is such a notice invoking the arbitration clause, it will not be possible to know whether the procedure as envisaged in the arbitration clause has been followed. Invariably, arbitration clauses do not contemplate the unilateral appointment of an arbitrator by one of the parties. There has to be a consensus. The notice under Section 21 serves an important purpose of facilitating a consensus on the appointment of an arbitrator.

¶27Fourthly, even assuming that the clause permits one of the parties to choose the arbitrator, even then it is necessary for the party making such appointment to let the other party know in advance the name of the person it proposes to appoint. It is quite possible that such person may be 'disqualified' to act an arbitrator for various reasons. On receiving such notice, Sheetal the recipient of the notice may be able to point out this

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defect and the claimant may be persuaded to appoint a qualified person. This will avoid needless wastage of time in arbitration proceedings being conducted by a person not qualified to do so. The second, third and fourth reasons outlined above are consistent with the requirements of natural justice which, in any event, govern arbitral proceedings.

¶28Lastly, for the purposes of Section 11(6) of the Act, without the notice under Section 21 of the Act, a party seeking reference of disputes to arbitration will be unable to demonstrate that there was a failure by one party to adhere to the procedure and accede to the request for the appointment of an arbitrator. The trigger for the Court's jurisdiction under Section 11 of the Act is such failure by one party to respond."

10.    2"e >(d+ ent of t"e De-"i <i+" )o(rt "as &een fo--o*ed in Malvika  Rajnikant  Mehta  versus  J SS  !onstru"tion  #$##  S!!  Online Bom%ay &#$ and in 'est Bengal Po(er )evelopment !orporation Limited versus Si"al Mining Limited #$## S!! Online !al *$*+.

11.    D(rin+  t"e  %endenc3  of  t"is  %etition#  %etitioner  "as  fi-ed  a isce--aneo(s a%%-ication statin+ t"at as an o&>ection "as &een raised &3 t"e res%ondent and in order to a$oid an3 tec"nica- +-itc"es# t"e %etitioner "as ser$ed  a  notice  of  de and  dated  14.02.2024#  Anne;(reA-1#  (%on  t"e res%ondent.  6t  is#  t"erefore#  a%%arent  t"at  no  notice  *as  ser$ed  on  t"e res%ondent %rior to a%%roac"in+ t"is )o(rt (nder !ection 11(7) of t"e Act. 2"e ser$ice of a notice (nder !ection 21 of t"e Act d(rin+ t"e %endenc3 of t"e instant %etition does not  eet t"e  andate of !ection 21 of t"e Act. 2"e %re-condition for in$o/in+ !ection 11 (7) of t"e Act (nder t"e stat(te is a I attest to the accuracy andnotice (%on t"e ot"er side and in case *it"in t"e %eriod of t"irt3 da3s of its

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service, the respondent does not appoint an Arbitrator, a cause accrues to the petitioner to file a petition seeking appointment. In the absence of notice under Section 21 of the Act, the instant petition is premature and is not maintainable.

12.    As the essential requirement of Section 21 of the Act has not been complied with, instant petition is dismissed as premature. However, liberty is granted to the petitioner to approach this Court again, if so advised, after complying with the requirements of the statute.

13.    All the pending applications are disposed of.

15.05.2024            (SUVIR SEHGAL) sheetal              JUDGE

ARB-314-2021 (O & M) -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH 112-2 cases 1. ARB-313-2021 (O & M) Date of decision:15.05.2024 Hindustan Petroleum Corporation Ltd. ...Petitioner Versus M/s Madan Lal Wadhwa and Co. ...Respondent 2. ARB-314-2021 (O & M) Hindustan Petroleum Corporation Ltd. ...Petitioner Versus M/s Barkat Ram Amrit Lal ...Respondent CORAM: HON'BLE MR. JUSTICE SUVIR SEHGAL Present: Mr. Raman Sharma, Advocate for the petitioner in both cases. Mr. Gaurav Chopra, Senior Advocate with Mr. Anurag Chopra, Advocate, Ms. Gauri C. Kaushal, Advocate, Mr. Jaskaran Singh, Advocate and Ms. Seerat Saldi, Advocate for the respondents in ARB-313-2021. None for the respondents in ARB-314-2021. ****