The High Court determined that an ongoing IBC proceeding does not bar the initiation of arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996 and that a notice under Section 21 of the 1996 Act need not quantify claims for arbitration to proceed.
The Telangana High Court Bench of Chief Justice Alok Aradhe was hearing Arbitration Applications and observed that Section 21 of the 1996 Act requires a party to indicate disputes but not necessarily to quantify the amount in the notice. The Single-Juge Bench held that a petition under the IBC does not preclude the initiation of arbitration proceedings under the 1996 Act.
In the recent High Court order, the Court addressed two arbitration applications filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator to resolve disputes arising from agreements between the parties. The dispute originated from a Facilities Service Agreement and a Catering Service Agreement, which were terminated on May 23, 2023. Following the termination, the respondent issued a notice under Section 8 of the Insolvency and Bankruptcy Code (IBC), leading to an ongoing petition under Section 9 of the IBC. The applicant responded with a notice under the 1996 Act and subsequently filed these arbitration applications.
The applicant's counsel argued that despite the pending IBC proceedings, the arbitration applications were maintainable and should be considered on merits, noting that the notice under Section 21 of the 1996 Act need not quantify claims. Conversely, the respondent contended that the applications were a countermeasure to the IBC proceedings and claimed that the arbitration request lacked sufficient detail to proceed.
The High Court reviewed the submissions and clarified that Section 21 of the 1996 Act requires a party to indicate disputes but not necessarily to quantify the amount in the notice. Citing precedents, the Court held that a petition under the IBC does not preclude the initiation of arbitration proceedings under the 1996 Act. Consequently, the Court appointed Mr. Justice P. Naveen Rao as the sole arbitrator to adjudicate the dispute and directed the parties to appear before the arbitrator on July 13, 2024. The arbitration applications were allowed, and any pending miscellaneous applications were closed.
Subscribers can access the Case, including Case Analysis, Ratio Decidendi, Headnotes, Briefs, Case Research, Cited Case Laws, Case Law Cross-references, and the latest updates on Statutes, Notifications, Circulars, Guidelines Press Release and more.
Click on the Citation/Link to access these resources
Comments