Delhi High Court: No Fresh Notice Required When Analogous Arbitral Proceedings Exist

Delhi High Court: No Fresh Notice Required When Analogous Arbitral Proceedings Exist

Justice Manoj Kumar Ohri of the Delhi High Court has observed that in instances where analogous arbitration proceedings pertain to other agreements, initiating fresh arbitration by issuing a notice under Section 21 of the Arbitration Act is unnecessary. The Court affirmed that Section 11(6) of the Arbitration and Conciliation Act, 1996, does not mandate a notice requirement.

The case involves disputes stemming from franchise agreements between the petitioner and the respondent. The petitioner contended that an initial Master Franchise Agreement designated them as the ‘Master Franchisee’ for the franchise business in Punjab (including Chandigarh Tri-City), Gujarat, and Maharashtra. Following this, 14 additional franchise agreements were entered into between the parties to regulate outlet operations. Subsequently, disputes emerged between them. Seeking resolution, the petitioner approached the Delhi High Court and filed a petition under Section 11(6) of the Arbitration and Conciliation Act ("Arbitration Act"), seeking the appointment of a sole arbitrator.

Nevertheless, the respondent contested the petition, raising an objection to its validity. The objection, centered on the absence of a mandatory notice under Section 21 of the Arbitration Act, is a prerequisite for initiating arbitration proceedings.

Conflicts stemming from the Master Franchise Agreement had been previously submitted to the Arbitral Tribunal, leading to the issuance of an award. Furthermore, disputes associated with 12 out of the 14 franchise agreements had also been referred to the arbitral tribunal, and the proceedings were currently pending.

The central issue before the High Court was whether, prior to filing the petition under Section 11(6), the petitioner was obligated to initiate arbitration anew by issuing a notice under Section 21 of the Arbitration Act. The court referenced the decision in Zion Promoters and Developers Pvt. Ltd. v. Ferrous Infrastructure Pvt. Ltd. , highlighting the differentiation between Sections 11(5) and 11(6) of the Arbitration Act. It stressed that Section 11(6) grants authority to a "party" to approach the court for the appointment of an arbitrator without the necessity of a notice, provided certain conditions are met. The court concluded that once an arbitration agreement has been activated by one party, it cannot be invoked again by another party.

The High Court determined that the current case comes within the purview of Section 11(6)(c) and not under Section 11(5). Considering that arbitration had already been initiated, the High Court deemed it suitable to refer the matters to the same arbitrator, who was already adjudicating disputes related to other agreements between the parties.