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CASE ANALYSIS; LEEPEE ENTERPRISE Vs MEHUL INDUSTRIES R/FIRST APPEAL NO. 5216 of 2019
LEEPEE ENTERPRISE Vs MEHUL INDUSTRIES
R/FIRST APPEAL NO. 5216 of 2019
INTRODUCTION
Arbitration happens when two parties come before an arbitrator to settle a dispute. There is the formation of the tribunal, the constitution of the panel, and the appointment of the members that are connected with this. This case analyses the situation when such a procedural aspect is challenged by a party who did not participate in the arbitration proceedings. The question of the existence of an arbitration agreement and of whether a person who missed two occasions can object to the tribunal's jurisdiction under Section 34 was enumerated by the court.
FACTS
The instant petition was made against a judgement and order made by the additional district judge. There was an arbitration proceeding and the award under such a proceeding was first challenged before the lower court. After hearing the petition, the lower appellate court dismissed the application preferred by the appellant under section 34 of the Arbitration Act to set aside the arbitral award.
ISSUE
Whether there is a valid arbitration agreement?
Whether the arbitrator has jurisdiction in the instant case?
LAWS INVOLVED
Section 11 of the Arbitration and Conciliation Act 1996.
Section 34 of the Arbitration and Conciliation Act 1996.
APPELLANTS ARGUMENTS
- They contended that there was no valid bipartite arbitration agreement between the appellant and respondent.
- The delivery was made using challan and in challan, there was no arbitration clause
- The invoice was signed by the respondent but not the appellants. that bare reading of the arbitration clause contained in the invoice makes it clear that such clause is in respect of a particular invoice alone. Thus, that arbitration clause was unilateral and hence was not valid arbitration.
- The arbitration proceedings were not competent as there were no separate arbitration proceedings initiated.
- The appellant has not signed the invoice, parties were not consensus and idem regarding the appointment of the Arbitrator.
- Because the jurisdiction of the Arbitrator is a legal question that may be raised at any point in the process, the appellant is free to bring up the jurisdictional issue in a petition under Section 34 of the ACA or in the current appeal even if they did not participate in the arbitration.
- The appellants hence conclude that as the matter is submitted without jurisdiction, the same will be null and void.
- In this regard, reliance was placed on Alupro Building Systems Pvt Ltd Vs Ozone Overseas Pvt Ltd[1], Rameshwar Dass & Sons (HUF) Vs M/s Caravel Logistics Pvt Ltd[2] and IMV India Pvt Ltd Vs Stridewel International[3]
RESPONDENTS ARGUMENTS
- The respondents supported the judgement of the lower court. The respondents assert that the respondent did not address the matter and instead accepted the products in line with the terms of the invoice, which included an arbitration provision. He says this was done in violation of the terms of the invoice.
- The appellant has said in its response to the legal notice that the whole sum has been paid, and that there are no outstanding debts to respondent No. 1. he contends that the appellant is no longer in a position to argue that the parties did not have a bipartite arbitration agreement in place. He bases this on the fact that the appellant no longer has standing to make this claim.
JUDGMENT
The judge took into consideration the failure on the part of the appellant to respond to the notice which was issued for the appointment of the arbitrator. Also, after the appellant made their first appearance before the arbitrator, they did not engage in the arbitration procedures other than asking for more time. This is a fact according to the judge. The court also stressed the obviousness that such behaviour on the part of the appellant cannot be overlooked when taking into consideration the arguments on the kind of arbitration provision that is included in the invoice.
As to the existence of an arbitration agreement, the court looked into the different invoices that were circulated in the course of trade. The very first legal notice that respondent No. 1 sent for payment of the overdue amount seems to have made no specific reference to the arbitration clause included in any of the invoices. The notice stated that the respondent would be compelled to refer the issue to a single arbitrator if the payment was not made. The appellant made a general denial in response to the aforementioned information that there is no agreement between the parties regarding the selection of an arbitrator to settle any disagreements involving accounts or commodities. Additionally, it appears that the appellant has not replied to the notice sent by the respondent under section 11 of the Arbitration Act. The appellant objected that there was no party agreement for the appointment of the arbitrator and that the clause in the invoice was unilateral and not binding on the appellant. Furthermore, the appellant here raised an argument without participating in the proceedings. The appellant should have brought up the question of the arbitrator's jurisdiction as soon as it was possible. The court while looking through the use of section 34 of the Arbitration and Conciliation Act, dismissed the petition.
ANALYSIS
The Gujarat High Court determined that the issue of the arbitrator's jurisdiction needed to be raised as soon as possible, i.e., when the notice essential by Section 11 of the A&C Act is served for the appointment of the arbitrator, in the case of Leepee Enterprise v. Mehul Industries. Because the party had not raised the issue of the arbitrator's lack of jurisdiction when responding to the observation that was issued under Section 11 of the A&C Act or when it was involved in the arbitration proceedings, the court concluded that the arbitral award could not be revoked under Section 34 of the Act on that basis. The court decided that the arbitral verdict could not be quashed as a consequence.
The above-mentioned approach taken by the court is right and accurate as otherwise there will be a waste of time in the final settlement of the affairs. Only if the question of jurisdiction is brought at the earliest, corrective actions can be taken and otherwise, there will be grave miscarriage of justice.
CONCLUSION
According to the Gujarat High Court, when the notice required by Section 11 of the 1996 A&C is given to nominate the Arbitrator, the issue of the Arbitrator's jurisdiction must be raised at the very first opportunity that arises. This decision made by the Gujarat High Court will help in the institution of the suit properly and without improper delay.
References
[1] MANU/DE/0495/2017.
[2] Reported in 2015 C/FA/5216/2019.
[3] MANU/DE/1621/2018.
- The issue of the Arbitrator's jurisdiction must be raised at the very first opportunity that arises
- This case will help in institution of suit properly and without improper delay
- The question of existence of arbitration agreement and of whether a person who missed two occasions can raise objection against tribunal's jurisdiction under Section 34 was enumerated by the court .
