Delhi HC Prefers Arbitration Process In Capri Global Capital Limited v. Ms. Kiran; Case Analysis

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A bench of the Delhi High Court presided over by Justice Anup Jairam Bhambhani recently addressed significant legal issues concerning arbitration proceedings under the Arbitration and Conciliation Act 1996. The case involved Capri Global Capital Limited (the Petitioner) who sought the appointment of a Sole Arbitrator to adjudicate disputes arising from a Facility Agreement with Ms. Kiran (the Respondent).

The Petitioner approached the Delhi High Court under Section 11 of the Arbitration Act citing clause 13.15 of the agreement between the two entities which mandated that the seat of arbitration will be either Mumbai or Delhi as chosen by the Petitioner. Additionally, clause 13.14 of the agreement stipulated the jurisdiction of competent courts in Mumbai or Delhi also at the Petitioners’ discretion. The agreement further specified that the Sole Arbitrator was to be nominated Capri Global Capital Limited.

Complications arose due to legal precedents particularly influenced by the Supreme Court’s decision in Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd. which rendered the provision allowing the lender to unilaterally appoint an arbitrator untenable under law. Despite the Petitioner invoking arbitration through a Notice, the Respondent contested its validity asserting that the Notice failed to meet the requirements of Section 21 of The Act by not adequately outlining the claims against her. The initial arbitration proceedings resulted in an ex-parte Arbitral Award which was subsequently set aside by a bench of the District Court of South-East Delhi (Saket Court Complex) on grounds that the arbitrator’s appointment was invalid.

Following this, the Petitioner issued a fresh Invocation Notice praying for a specific amount and seeking the Respondent’s consent to appoint an arbitrator. This second notice formed the basis of the petition under Section 11 of The Act.

Justice Anup Jairam Bhambani’s Observations

During the proceedings, the Respondent raised the objection that the Petitioner’s claim was time-barred due to alleged defects in the initial Invocation Notice. In response, the Petitioner argued the validity of the second notice. The High Court in its observations referred to Section 43(4) of the Arbitration Act which excludes the period between the commencement of arbitration and the setting aside of an arbitral award from the computation of time under the Limitation Act for initiating arbitral proceedings on disputed matters. Crucially, the High Court ruled that issues such as whether claims are time-barred should ideally be left for determination by the arbitral tribunal rather than decided summarily under Section 11 proceedings. This decision underscores the court’s preference to defer complex issues like limitation to the arbitration process where the tribunal can thoroughly examine and adjudicate upon them.

Moreover, the High Court affirmed the existence of a valid and enforceable arbitration agreement between the parties based on which it appointed Mr. Amer Vaid Advocate as the Sole Arbitrator to resolve the disputes.

Conclusion

In conclusion, the case before the Delhi High Court highlights the intricacies involved in arbitration proceedings, particularly concerning the appointment of arbitrators and the determination of time-barred claims. It underscores the court’s approach of promoting arbitration as an effective dispute resolution mechanism by minimizing judicial intervention in procedural matters best left to the arbitral tribunal’s expertise. This decision is significant not only for its implications on arbitration practice but also for its interpretation of the interplay between the Arbitration Act and the Limitation Act in resolving disputes under commercial agreements.
The legal document outlines proceedings related to an arbitration case under the Arbitration & Conciliation Act 1996 (A&C Act). The plaintiff sought condonation for a 48-day delay in re-filing the petition which was granted by the court. The petition taken on board seeks the appointment of a Sole Arbitrator to adjudicate disputes arising from a Facility Agreement dated September 28, 2017. The arbitration agreement as per clause 13.15 of the Agreement calls for disputes to be referred to arbitration under the A&C Act with proceedings to be conducted in Mumbai or Delhi. The agreement also includes a provision for the Sole Arbitrator to be nominated by the lender Capri Global Capital Limited.

However, this provision is deemed untenable following the Supreme Court’s decision in Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd.
The petitioner invoked arbitration through a notice dated March 1, 2023 to which the respondent did not reply. The respondent’s main objection was based on a previous invocation notice dated September 13, 2019 which they claimed was faulty and did not properly set out the claim under section 21 of the A&C Act. The first round of arbitral proceedings culminating in an ex-parte Arbitral Award on March 13, 2020 was set aside on October 31, 2022 because the arbitrator had been unilaterally appointed by the petitioner rendering the appointment invalid. Following the setting aside of the arbitral award, the petitioner issued a fresh Invocation Notice on March 1, 2023 claiming an outstanding amount and nominating an arbitrator. This second notice forms the basis of the present petition under section 11 of the A&C Act. The court found no merit in the respondent’s objections regarding this notice.

The respondent also contended that the claim was time-barred due to the faulty first invocation notice. However, the court noted that section 43(4) of the A&C Act provides for the exclusion of time between the commencement of arbitration and the setting aside of the arbitral award when computing the limitation period. Consequently, the claims were not deemed ex-facie time-barred or deadwood. The court referring to the established legal principle stated that if there is any doubt regarding limitation, the matter should be referred to arbitration allowing the arbitral tribunal to address the issue in detail. The court concluded that a valid and subsisting arbitration agreement exists, the court has territorial jurisdiction, and the disputes as outlined in the Invocation Notice dated March 1, 2023 are arbitrable.

Therefore, the petition was allowed, and Mr. Amer Vaid Advocate was appointed as the Sole Arbitrator. The Arbitrator is required to provide disclosures as per section 12 of the A&C Act and any impediments to the appointment can be addressed by filing an appropriate application. The Arbitrator’s fee will be in accordance with the Fourth Schedule of the A&C Act or as agreed upon by the parties with costs shared equally. All rights and contentions regarding the claims and counterclaims remain open for the Arbitrator to decide on their merits. The parties were directed to approach the Arbitrator within four weeks. The petition and any pending applications were disposed of accordingly.

In summary, the Delhi High Court in this case, has delved into the complexities of arbitration proceedings under the Arbitration and Conciliation Act 1996. By upholding the arbitration agreement and appointing a Sole Arbitrator, the court emphasized the preference for arbitration as a dispute resolution mechanism allowing the arbitral tribunal to address procedural matters and substantive issues. This approach minimizes judicial intervention and underscores the interplay between the Arbitration Act and the Limitation Act reinforcing arbitration’s pivotal role in commercial dispute resolution.

Authors: Aditya Ojha & Myiesha Chanana

 

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