Under Section 11, court refers disputes to arbitration if agreement exists and not non-arbitrable; procedural defences for tribunal.

ORDER

Relying on clauses 23 and 24 of the contract between the parties, the petitioner has applied for appointment of an arbitrator after issuing notice dated 22.11.2024 under Section 21 of the Arbitration and Conciliation Act, 1996 (The A & C Act).

2. Learned counsel for the petitioner invited my attention to the arbitration clause and to the Section 21 notice. He pointed out that such notice was replied to by the respondent on 14.01.2025 stating that the notice had been issued after the lapse of more than three years and that the cause of action does not survive.

3. Learned counsel for the respondent responded to these contentions by referring to the earlier suit filed by the petitioner before the District Judge, Commercial Court, Delhi in C.S.(Comm.) No.606 of 2024. Learned counsel points out that said suit was withdrawn by the petitioner herein/plaintiff therein without obtaining leave of the Commercial Court to initiate arbitral proceedings. Relying on Order XXIII Rule 1(3) and (4) of Code of Civil procedure, 1908, learned counsel submits that without obtaining leave, the petitioner is not entitled to initiate arbitral proceedings and that the filing of a civil suit tantamounts to giving a go-by to the arbitration clause. He has relied on the following judgments in support of the contention:

(i) Magma Leasing Limited vs. NEPC Micon Limited and another (1997 SCC OnLine Cal 268)

(ii)Raj & Associates vs. Videsh Sanchar Nigam Limited and others (2004 (76) DRJ 60)

4. According to learned counsel, the proposition laid down in both these judgments is that a party choosing to institute a civil suit in spite of an arbitration agreement does not have the option thereafter to seek a reference either under Section 8 of the statute or otherwise.

5. Considering the rival contentions, the question that falls for consideration is whether the request for appointment of an arbitrator should be declined in view of the defence raised by the respondent. The scope of Section 11 of A & C Act has been elucidated in multiple judgments, including judgments of the Supreme Court. In Vidya Drolia and Others Vs. Durga Trading Corporation [(2021) 2 SCC 1] (Vidya Drolia), the Supreme Court held that while considering such a petition, the Court should examine whether an arbitration agreement exists between the parties and whether the dispute is manifestly non-arbitrable. It was also held that refusal to refer should be limited to removal of dead wood. Both parties agree that Clauses 23 and 24 provide for resolution of disputes by arbitration. For the sake of clarity, said clauses are set out below:

23. RESOLUTION OF DISPUTES:

All disputes of difference of opinions, on account of interpretation of clauses, technical specifications etc shall be resolved through direct and mutual discussions, in the case of difference of opinion is still persisting, then the matter shall be referred to arbitration in accordance with the provision of the Arbitration and Conciliation Act 1996 as amended from time to time. Such arbitration proceedings will take place in Chennai and shall be subject to jurisdiction of the Courts in Chennai.

24.ARBITRATION All disputes and differences arising out of the connections(s) with this order failing amicable settlement shall be referred to be arbitration under the Indian Arbitration & Conciliation Act 1996 or any statutory modification thereof in force at that time. The venue of such arbitration shall be at Chennai. However the work as contracted shall not be suspended during the proceedings.

6. The principal ground on which the request for appointment of an arbitrator is resisted is the filing of a civil suit by the petitioner. Such civil suit was withdrawn by the p