The Bombay High Court held that the provisions of the Insolvency and Bankruptcy Code (IBC) would not bar the appointment of an arbitrator until the Adjudicating Authority under Section 7 of the IBC had passed an order admitting the application.
Justice Avinash G. Gharote of the Bombay High Court (Nagpur Bench) recently heard an Application under Section 11(6) of the Arbitration and Conciliation Act, 1996, for appointing an arbitrator based on an arbitration clause in an agreement between the parties.
In the present case, Mr. Ashutosh Dharmadhikari represented the applicant, and Mr. Rahul Bhangde represented the respondent. The High Court ruled to make the case returnable forthwith with the consent of both parties' counsels. Mr. Rahul Bhangde, on behalf of the respondent, waived the service of notice on merits.
The application before the High Court was under Section 11(6) of the Arbitration and Conciliation Act, 1996, for appointing an arbitrator based on an arbitration clause (no. 15) in the agreement dated 30/08/2019 between the parties, which was not disputed.
Mr. Ashutosh Dharmadhikari argued that once the conditions for appointing an arbitrator were met, there was no other option but to appoint one. He also contended that the proceedings initiated by the respondent under the Insolvency and Bankruptcy Code, 2016, should not prevent the court from entertaining and deciding the application. Moreover, he cited previous court judgments to support his contention.
On the other hand, Mr. Rahul Bhangde, representing the respondent, opposed the appointment of an arbitrator, claiming that the provisions of the Insolvency and Bankruptcy Code would render Section 11(6) of the Arbitration and Conciliation Act inapplicable. He argued that Section 7 of the Insolvency and Bankruptcy Code had primacy and that the present application was an attempt to avoid the proceedings before the National Company Law Tribunal.
The High Court, after considering the arguments, held that the provisions of the Insolvency and Bankruptcy Code would not bar the appointment of an arbitrator until the Adjudicating Authority under Section 7 of the Code had passed an order admitting the application. The High Court referred to previous judgments and rejected Mr. Bhangde's argument.
Furthermore, Mr. Bhangde contended that there was no dispute between the parties, referring to an email from the applicant admitting the liability to pay. However, the High Court held that the matter needed to be considered in its entirety, and the existence of a dispute was a matter for the arbitrator to determine based on all available evidence.
Regarding the limitation of the application, the High Court ruled that it was not beyond the time limit, as the arbitration clause was invoked in the applicant's reply on 15/09/2020, and the present application was filed on 23/10/2020.
The High Court allowed the application and appointed Mr. Justice Z.A. Haq as the arbitrator to resolve the disputes between the parties. Both parties were directed to appear before the arbitrator on a specified date, and the processing charges were to be paid as a condition precedent. The High Court made the rule absolute, and no costs were awarded.
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