Case Title: Shriram Transport Finance Co. Ltd. v. Narender Singh
According to the Delhi High Court, a notice that a party issues merely stating its right to begin arbitral proceedings, which it would do if the other party failed to make payment, is a unilateral communication that is ineligible for notice under Section 21 of the Arbitration and Conciliation Act, 1996. (A&C Act).
The A&C Act does not allow for the unilateral appointment of an arbitrator by one of the parties; instead, the appointment of the arbitrator must be agreed upon by all parties, according to the Division Bench of Justices Rajiv Shakdher and Tara Vitasta Ganju. The Court further stated that, as per Section 21 of the A&C Act, the beginning of arbitral proceedings is contingent upon the receipt of such a request or notice.
While ruling that the arbitration notice must not only be sent but also received by the opposing party, the Court stated that if no notice is received, no arbitral proceedings can be initiated.
Referring to the Delhi Court's decision in Alupro Building Systems Pvt. Ltd. vs. Ozone Overseas Pvt. Ltd. (2017), the Court reiterated that the A&C Act does not permit the unilateral appointment of an arbitrator by one of the parties and that such appointment must be agreed upon by all parties. Furthermore, the notice required by Section 21 of the A&C Act serves an important function in facilitating such an agreement on the appointment of an arbitrator. Furthermore, the Court stated that, while the parties may choose to waive the requirement of notice under Section 21 of the A&C Act, Section 21 must be given full effect in the absence of such a waiver.
As a result, the bench determined that in the absence of a notice of the commencement of arbitral proceedings, a party seeking to refer disputes to arbitration will be unable to proceed under Section 11(6) of the A&C Act if the opposing party fails to comply with such request for arbitration.
While ruling that the appellant's letter to the respondent was a unilateral communication that merely stated the appellant's right to initiate arbitration proceedings, the Court held that the letter did not qualify as a notice under Section 21 of the A&C Act.
Furthermore, the High Court considered the fact that the Sole Arbitrator was a regular arbitrator who had worked on numerous occasions for the appellant corporation; nevertheless, this information was not revealed to the parties in the format specified in the A&C Act. As a result, the arbitrator did not make the obligatory declaration under Section 12 of the A&C Act, saying that it had previously appeared as an arbitrator for the appellant-Company.
"As previously stated, the Appellant Company failed to comply with Section 21 of the Act in the current matter. Furthermore, the Arbitrator's disclosure, as required by Section 12 of the Act and the Act's Fifth and Sixth Schedules, is missing. As a result, any Award made by such an Arbitrator cannot be upheld," the bench stated.
As a result, the Court dismissed the appeal.