Facts of the Case

M/s Venad Associates entered into an agreement with Buildnext Construction Solutions Pvt. Ltd. on 09.03.2020, under which the petitioner agreed to function as a "Sale Partner" of the respondent. Subsequently, disputes arose between the parties regarding the execution of the agreement.

The agreement contained an arbitration clause requiring disputes to be resolved through arbitration after an attempt at settlement through discussions between the senior management of both parties. Since the parties failed to reach a consensus regarding the appointment of a Sole Arbitrator, the petitioner invoked the arbitration clause by issuing a notice under Section 21 of the Arbitration and Conciliation Act, 1996.

Despite receipt of the notice, the respondent neither replied nor participated in the process. Consequently, the petitioner approached the Kerala High Court seeking appointment of an Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.

Issues Involved

  1. Whether the High Court should exercise its powers under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of a Sole Arbitrator.
  2. Whether the respondent's failure to respond to the arbitration notice justified judicial intervention for constitution of the Arbitral Tribunal.
  3. Whether the arbitration agreement between the parties was enforceable.

Petitioner's Arguments

  • The agreement executed between the parties contained a valid arbitration clause.
  • Disputes had arisen regarding the agreement, making arbitration necessary.
  • A notice invoking arbitration under Section 21 of the Arbitration and Conciliation Act, 1996 had been duly served upon the respondent.
  • The respondent failed to respond to the notice and no consensus could be reached regarding appointment of the Sole Arbitrator.
  • Therefore, the Court should appoint an Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.

Respondent's Arguments

Despite service of notice by the High Court, the respondent did not enter appearance and no submissions were made before the Court.

 

Court Order / Findings

The Kerala High Court observed that Clause 16A of the agreement clearly provided for settlement of disputes through arbitration in case discussions between the senior management failed.

The Court held that:

  • A valid arbitration agreement existed between the parties.
  • Disputes had admittedly arisen.
  • The petitioner had invoked arbitration by issuing a notice under Section 21.
  • The respondent neither responded to the notice nor participated in the proceedings.

Accordingly, the Court found no reason to refuse appointment of an Arbitrator and ordered as follows:

  • Advocate Sri. Sanjeevan R. was provisionally nominated as the Sole Arbitrator.
  • The Arbitrator was directed to submit the disclosure statement under Sections 11(8) and 12(1) of the Arbitration and Conciliation Act, 1996.
  • The Registry was directed to place the disclosure before the Court for confirmation of appointment.
  • The Arbitrator's fees were directed to be governed by Schedule IV of the Arbitration and Conciliation Act, 1996.

The Court expressly left open the rival contentions of both parties to be decided by the Arbitrator.

Important Clarification

  • Failure of parties to mutually appoint an Arbitrator despite the existence of an arbitration clause enables the High Court to exercise jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996.
  • Issuance of a notice under Section 21 invoking arbitration is an important procedural requirement before seeking appointment through the Court.
  • Non-participation by the respondent does not defeat arbitration where a valid arbitration agreement exists.
  • Appointment of an Arbitrator does not amount to adjudication on the merits of the dispute, which remain open before the Arbitral Tribunal.

Sections Involved

  • Section 11 of the Arbitration and Conciliation Act, 1996
  • Section 11(8) of the Arbitration and Conciliation Act, 1996
  • Section 12(1) of the Arbitration and Conciliation Act, 1996
  • Section 21 of the Arbitration and Conciliation Act, 1996
  • Schedule IV of the Arbitration and Conciliation Act, 1996

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785566915_2521compressed.pdf  

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.