Too much technicality should not be resorted to in interpreting an Arbitration notice - Calcutta High Court

Case title: Universal Consortium of Engineers Pvt. Ltd. vs. Kanak Mitra and Ors. (07.04.2021 - CALHC) : MANU/WB/0265/2021

Brief facts:

1. 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. It is not in dispute that the said Agreement contains an arbitration clause for resolution of disputes and differences between the parties touching the said Agreement.

3. 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.

Sequitur by the Court:

11. By a letter dated 08.01.2019 the respondent no. 1 raised certain disputes pertaining to the area of the owner's allocation, the amount to be received by him in terms of the Development Agreement, quality of the building materials, etc. In the said letter it was stated that unless the grievances were redressed, the respondent no. 1 would take appropriate steps. The said letter was replied to by the petitioner by its letter dated 28.01.2019 followed by a letter dated 01.02.2019. In the letter dated 01.02.2019, it was specifically stated that the respondent no. 1 had been handed over more area than what he was entitled to under the Agreement and he was required to pay for the same. ... It was further stated as follows:

"Even after receipt of this letter if you are not satisfied about the explanation you have option to refer the dispute to the Arbitrator. In case you feel the matter should be referred to the Arbitrator, we are ready to do the same in terms of the Agreement entered into by and between the par ties."

12. Learned Counsel for the petitioner submitted that after receipt of the said letter, the respondent no. 1 wrote a letter dated 19.03.2019 repeating the same allegations. As such, it is clear that there are disputes between the parties which are continuing.

13. Learned Counsel submitted that the letter dated 01.02.2019 was sufficient compliance with Section 21 of the Act of 1996. In this connection he relied on the following two decisions: (i) Nea Agrex S.A. v. Baltic Shipping Company Ltd.: MANU/UKWA/0026/1976 : 1976 2 ALL ER 842, (ii) Unreported judgment of Delhi High Court in the case of Badri Singh Vinimay Pvt. Ltd. v. MMTC Ltd., delivered on 06.01.2020 in O.M.P 225 / 2015. Learned Counsel also relied on the Supreme Court decision in State of Goa v. Praveen Enterprises: MANU/SC/0812/2011 : (2012) 12 SCC 581 in support of his submission that an application under Section 11 of the Act of 1996 is itself a request for arbitration and is sufficient compliance with Section 21 of the Act.

18. .... in my opinion, 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.

Too much 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, that 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.

In the case of Nea Agrex S.A. (Supra) which involved a charterparty, the charterers' agents presented to the owners' agents a detailed claim for damages demanding immediate payment and then they said "please advise your proposals in order to settle this matter, or name your arbitrators." The English Court of Appeal consisting of Lord Denning, M.R., Goff L.J. and Shaw L.J., while considering whether such a communication could be considered as a notice requiring arbitration, held as follows:

"30. Mr. Rokison says that the request is equivocal. It gives the ship-owners an alternative. It does not amount to an unequivocal request for arbitration. So it cannot be deemed to be the commencement of the arbitration. That seems to me too legalistic an approach. In a commercial dispute, a letter requesting arbitration should not be construed too strictly. The writer should not be impaled on a time-bar because he writes in polite and courteous terms, or because he leaves open the possibility of settlement by agreement.

Suppose the characters had written to the owners: "Unless you are prepared to settle the matter amicably, we must ask you to agree to the appointment of an arbitrator". That would, to my mind, be quite sufficient. When such a letter follows upon a genuine claim promptly made, it should be interpreted as a request for arbitration-a request made then and there-coupled with a willingness to come to an amicable settlement. The arbitration is deemed to commence with the sending of the letter, and time no longer runs against him.

31. Likewise with the letter in this case, it can and should be construed as a request for the difference to be submitted to arbitration-with a saving that the request will be withdrawn if a settlement can be reached. That is sufficient to commence the arbitration."

19. The decision in Alupro Building Systems Pvt. Ltd. (Supra) has been distinguished by a Learned Judge of the Delhi High Court in the case of Badri Singh Vinimay Pvt. Ltd. (Supra). In that case, Prateek Jalan, J. held that the communication issued by the party wanting arbitration was clear enough and amounted to a notice under Section 21 of the Act of 1996. The Learned Judge distinguished the decision in Alupro Building Systems Pvt. Ltd. (Supra) on facts and noted that in that case there was no notice to the respondents at all. However, in the present case, as I have recorded my opinion above, the petitioner's letter dated 01.02.2019 clearly contemplated disputes between the parties and resolution of such disputes through the process of arbitration, in the event the disputes were not resolved amicably.

20. In view of the aforesaid, all the objections raised by the respondents to resist this application fail. This application is allowed.

21. Mr. Samrat Sen (9830173356), Senior Advocate, Bar Library Club, Calcutta High Court, is appointed as sole Arbitrator to adjudicate the disputes between the parties in relation to the Development Agreement dated 15.12.2006. The Arbitrator will be free to fix his own remuneration. He will also be at liberty to engage secretarial staff to assist him in conducting the arbitral proceedings and to fix their remunerations. 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.

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