Purpose Of Section 11(5) A&C Act Is Not To Throw A Spanner In The Wheels Of Arbitration But To Encourage & Facilitate It: Calcutta HC
The Calcutta High Court observed that the purpose of Section 11(5) is not to throw a spanner in the wheels of arbitration but to encourage and facilitate arbitration.
The Court said that the tests applicable to Section 11(5) ought to be tested on a much liberal anvil in favour of arbitration.
The Bench of Justice Sabyasachi Bhattacharyya observed, "The purpose of Section 11(5) is not to throw a spanner in the wheels of arbitration but to encourage and facilitate arbitration. As such, the interpretation of the said section which would be congenial and conducive to arbitration can only be accepted by the Court as valid"
Advocate Aritra Basu appeared for the Petitioner whereas Advocate Sanjay Mukherjee appeared for the Respondents.
An application under Section 11 of the Arbitration and Conciliation Act, 1996 was challenged on two-fold grounds i.e. it was barred by limitation and secondly, that the Petitioner did not comply with the mandatory provision of Section 11(5) and Section 21 of the 1996 Act by issuing a prior notice to the respondents requesting the appointment of an Arbitrator.
For the first issue, the Court has said that it was evident from the list of dates supplied by the Respondents that the application under Section 11 was filed right before the expiry of three years, therefore, it could not be said that the same is ex facie barred by limitation.
“It has been held time and again by the Supreme Court and several High Courts that in the absence of any other provision, the residual provision of Article 137 of the Schedule to the Limitation Act is applicable to an application under Section 11 and as such, the period of three years having not elapsed, it cannot be said that the present application is time-barred.”, the Court held.
As regards the second issue, the Court said that there is a difference between the requirements of Section 21 and Section 11 as well as in the context in which the two Sections operate.
While differentiating between the two sections, the Court said that Section 21 is the commencement of the arbitral proceeding itself, and Section 11(5) contemplates a different requirement, being one step prior to the commencement of the arbitral proceeding. Section 11(5) requires a request for the appointment of an Arbitrator to be made whereas Section 21 requires such a request to be made for the purpose of reference to arbitration.
Further, the Court added that the request under Section 11(5) is merely a precursor for the actual appointment of the Arbitrator by the Court, only upon which the arbitral proceeding commences, Section 21 operates as the commencement of the arbitral proceeding itself. Thus, the Court held there is no scope for confusing the requirements of Section 21 on the one hand and Section 11 on the other, which operate from somewhat different perspectives.
The Court said, “Section 11(5) does not contemplate, under any stretch of the imagination, the commencement of a valid arbitral proceeding but is merely a precursor and the sine quo non for appointment of an arbitrator which would then lead to commencement of the proceeding subsequently and as such, has to be taken in much more liberal context than Section 21, which itself marks the commencement of the arbitral proceeding.”
As regards the facts of the case at hand, the Court observed that the matrix contemplated in Section 11(5) is fully satisfied. The petitioner wrote a letter addressed in the first person to the named Arbitrator but also addressed copies thereof to the respondents who admittedly received the same and replied to the same. In the reply, apart from challenging the unilateral appointment, the respondents made their intention clear that they failed to agree on the Arbitrator, which is the specific language and requirement of sub-Section (5) of Section 11 of the 1996 Act. Thus, the Court said that the respondents could not take the specious objection of non-compliance of Section 11(5) at that stage and argue that the Section 11 application was premature.
“Despite taking into consideration the ratio laid down in all the judgments cited by the parties, we cannot lose sight of the object and purpose of the 1996 Act, in consonance with the contemplation of the UNCITRAL Model Law of Arbitration. Such object and purpose, in no uncertain terms, encourages and facilitates arbitration and seeks to make India an international hub for alternative dispute resolution by the process of arbitration. The purpose of Section 11(5) is not to throw a spanner in the wheels of arbitration but to encourage and facilitate arbitration. As such, the interpretation of the said section which would be congenial and conducive to arbitration can only be accepted by the Court as valid.”, the Court noted.
Accordingly, the Court allowed the petition and appointed an arbitrator in the matter.
Cause Title: Kakali Khasnobis v. Mrs Reeta Paul and Anr.
Appearances:
Petitioner: Advocates Aritra Basu, Somnath Bose and Shubham Khan
Respondents: Advocates Sanjay Mukherjee and Arghdip Das