Bombay High Court rules on invocation of arbitration

Bombay High Court rules on invocation of arbitration

The applicant had filed an application under the Arbitration and Conciliation Act

The Bombay High Court has ruled that invocation of arbitration has to be in clear terms, as specified under the Arbitration and Conciliation Act, 1996. A mere reference to the claims and disputes raised by a party and the existence of an arbitration clause, would not mean that arbitration was invoked.

The single-judge bench of Justice Manish Pitale observed that the A&C Act specifically mentioned a request for the dispute to be referred to arbitration as regards the commencement of the arbitral proceedings.

The respondent, Vishvaraj Environment Pvt. Ltd., issued a work order in favor of the applicant D.P. Construction. After the execution of the work by the applicant, certain disagreements occurred between the parties.

The applicant sent a legal notice to the respondent, stating its grievances and claims. The applicant averred that if the payment was not released within a month, the applicant would seek redressal of its grievances by approaching the competent court of law.

The respondent repudiated the claims made by the applicant. Thereafter, the applicant filed an application before the high court under the A&C Act, seeking the appointment of a sole arbitrator.

The respondent raised a preliminary objection before the court. It contended that the application was not maintainable under the Act. The respondent submitted that in the legal notice issued by the applicant, the latter did not make any reference to the arbitration clause.

The respondent averred that no statement was made by the applicant regarding the invocation of arbitration before a sole arbitrator. Hence, the legal notice did not amount to a notice invoking arbitration under the Act. And since the procedure agreed between the parties was not resorted to, the court could not invoke jurisdiction under the Act.

On the other hand, the applicant contended that it had clearly stated the claims in the legal notice. It had demanded a specific amount, along with interest and in case of failure on the part of the respondent to pay the amount, the applicant would seek redressal of its grievances. This amounted to the invocation of arbitration, as contemplated under the Act.

The court held that it could be called upon to exercise jurisdiction under the Act only when the procedure agreed to between the parties regarding the appointment of an arbitrator had failed.

Citing the Supreme Court and the Bombay High Court rulings in earlier cases, the court ruled that the applicant, despite raising the claims and demanding a specific amount along with interest from the respondent, did not refer to the arbitration clause contained in the work order at any place in the legal notice.

The court added that the aspect went to the very root of the matter and hit at the very jurisdiction of the court to entertain the application for the appointment of an arbitrator. It, therefore, dismissed the application.