No Individual Can Be Made A Party To Arbitral Proceedings When He/She Is Not A Party To Agreement In Personal Capacity: Delhi HC
The Delhi High Court held that no individual can be made a party to the arbitral proceedings when he/she is not a party to the agreement in the personal capacity.
The Court held thus in an arbitration petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (A&C Act), seeking appointment of an Arbitrator, arising out of an agreement.
A Single Bench of Justice Prathiba M. Singh observed, “Insofar as the prayer for deletion of Respondent No.2 - Dr. Anil Sethi from the array of parties in the application i.e. I.A. 24445/2023 is concerned, the agreement would show that it is between two entities i.e. Pokhrama Foundation and M/s DM Construction. Both would have to be represented by their respective officials in the arbitral proceedings. However, no individual can be made a party to the arbitral proceedings when the said individual is not a party to the agreement in the personal capacity.”
The Bench said that it is in fact hypocritical to argue that the party ought to approach the Project Manager, especially when the contract itself is terminated and there is no Project Manager at this point.
Advocate Subhasish Bhowmick appeared for the petitioner while Advocate Satendra K. Rai appeared for the respondents.
In this case, as per the agreement, the petitioner person was to set up a school subject to certain payments to be received from the Pokhrama Foundation (respondent). It was averred that the disputes arose between the parties when the respondents failed to clear the bills and vide a letter, the said contract was terminated by them. The petitioner replied to the said letter, refuting various contentions and asserted claims regarding the release of GST value for amounts on which the respondents deducted and deposited TDS.
It was further averred in the letter that a late fee of Rs. 50/- per day, along with 18% interest, is being levied. In respect of other amounts, claims were raised in terms of an Annexure attached to the said letter. Since no payments were received, the petitioner invoked arbitration vide a letter and in reply, the main contention, which was taken by the respondent, was that the required procedure, in terms of an arbitration clause, was not followed by the petitioner.
The High Court in the above context noted, “A perusal of the above clause would show that if any dispute arises, the matter was to be referred to the Project Manager first for conciliation and thereafter, arbitration clause had to be invoked. However, this sole objection, which has been raised by the Respondent, when considered in the light of the termination notice issued on 13th November, 2022, would show that the same would not be tenable. In fact, in the said letter of termination dated 13th November, 2022, the Respondent No.2-Dr. Anil Seth himself terminates the contract”
The Court further said that the conciliation mechanism was given a go-by, by the respondent itself as his signatures are there on the termination notice. It added that the Respondent has not resorted to approaching the Project Manager before terminating the contract.
“Under such circumstances, no resolution or settlement or conciliation through Project Manager would be possible in this matter. The Termination letter, in fact, concludes by stating that any amount that may be held to be outstanding after risk and costs, is intended to be paid by the Respondent. There are, clearly, claims by the Petitioner, which require to be adjudicated by arbitration in view of the clear clause between the parties”, it also noted.
The Court observed that the present is a case wherein the Sole Arbitrator would be liable to be appointed for adjudicating the disputes and hence, appointed an Advocate present in court as Sole Arbitrator for adjudicating disputes. It concluded that the petitioner is free to summon any person including the Managing Trustee, who has issued the termination letter as a witness, if it deems appropriate, however, the arbitral proceedings would only be between the petitioner and foundation.
Accordingly, the High Court disposed of the petition.
Cause Title- Gajendra Mishra v. Pokhrama Foundation & Anr. (Neutral Citation: 2024:DHC:291)
Appearance:
Petitioner: Advocate Manisha Pandey
Respondents: Advocate Saloni Sharma
