Arbitration requests deemed premature due to lack of fresh notice under Section 21 of the Arbitration and Conciliation Act, 1996
In a significant ruling, the Kerala High Court has reinforced the necessity of issuing a fresh notice under Section 21 of the Arbitration and Conciliation Act, 1996, before initiating new arbitral proceedings following the nullification of a previous arbitral award. The judgment was delivered in the case of M/s. Agro Indus Credits Limited versus Mangalan S @ Jagan Mangalan and others, where the court dismissed the arbitration requests as premature due to the absence of a fresh notice, emphasizing the procedural requirements laid out in the Act.
The petitioner, a non-banking finance company, had entered into loan agreements with the respondents, who allegedly defaulted on repayment. Initial arbitration proceedings resulted in awards passed by an in-house arbitrator, which were later challenged and nullified by the Commercial Court, Ernakulam, due to the unilateral appointment of the arbitrator. Seeking resolution, the petitioner approached the Kerala High Court for appointing a new arbitrator.
The respondents contested the maintainability of the arbitration request, arguing that the absence of a fresh notice under Section 21 rendered the request invalid. They maintained that the previous arbitral proceedings were terminated with the awards, necessitating a new notice to mark the commencement of subsequent proceedings.
Justice S. Manu, presiding over the matter, upheld the respondents' objections, clarifying that once an arbitral award is set aside, the tribunal's jurisdiction ceases, and fresh proceedings must be initiated with a new notice. The judgment elucidated the statutory framework under Sections 21, 32, and 43(4) of the Act, underscoring the importance of demarcating the commencement of arbitration for calculating limitation periods.
The court’s decision aligns with precedents set by the Supreme Court, which highlight the necessity of a clear notice of arbitration to establish the timeline for limitation and ensure procedural integrity. The ruling serves as a reminder of the meticulous adherence required to statutory provisions in arbitral proceedings.
The judgment concluded with the rejection of the arbitration requests, allowing the petitioner to refile after fulfilling the statutory requirement of issuing a fresh notice to the respondents.
Bottom Line:
Arbitration - Fresh notice under Section 21 of the Arbitration and Conciliation Act, 1996 is indispensable to initiate fresh arbitral proceedings after an arbitral award is set aside or declared nullity by a competent court.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 11, 21, 32, 43(4)
