Case Note & Summary
The applicants, Sanjeev Kumar Kailash Prasad Agarwalla and Maya Sanjeev Kumar Agarwalla, filed two applications under Section 11(5) read with Sections 14 and 15 of the Arbitration and Conciliation Act, 1996, seeking termination of the mandate of the sole arbitrator, Mr. Vasant Narayanrao Lothey (Patil), and appointment of a new arbitrator. The respondent, Bharat Co-operative Bank (Bombay) Limited, had initiated arbitration proceedings against the applicants before the arbitrator, who was appointed by the Registrar of Co-operative Societies, Maharashtra, Pune under Section 84 of the Multi State Co-operative Societies Act, 2002. The applicants contended that the arbitration was invalid because no notice under Section 21 of the Arbitration Act was issued before invoking arbitration, and the arbitrator was de jure ineligible to act due to non-disclosure of circumstances affecting his independence and impartiality under Section 12 read with Schedules 5 and 7. The court analyzed the mandatory nature of Section 21 notice and the disclosure requirements for arbitrators. It held that the absence of a Section 21 notice vitiated the commencement of arbitration, and the arbitrator's failure to disclose his appointment by the Registrar, who is a party to the dispute, created justifiable doubts about his impartiality. Consequently, the court terminated the arbitrator's mandate and appointed a new arbitrator to adjudicate the disputes between the parties.
Headnote
A) Arbitration - Commencement of Arbitration - Section 21 Notice - The court held that a valid notice under Section 21 of the Arbitration and Conciliation Act, 1996 is a mandatory precondition for commencement of arbitration proceedings. The arbitrator's mandate was terminated as the respondent bank failed to issue a Section 21 notice before invoking arbitration. (Paras 1-10)
B) Arbitration - Arbitrator's Disclosure - Section 12, Schedule 5 and 7 - The court held that an arbitrator must disclose any circumstances that give rise to justifiable doubts as to his independence or impartiality. The arbitrator's failure to disclose his past appointment by the Registrar of Co-operative Societies, which is a party to the dispute, rendered him de jure ineligible to act. (Paras 11-20)
C) Arbitration - Appointment by Registrar - Multi State Co-operative Societies Act, 2002 - Section 84 - The court held that the appointment of an arbitrator by the Registrar under Section 84 of the Multi State Co-operative Societies Act, 2002 does not override the provisions of the Arbitration and Conciliation Act, 1996, and the arbitrator must still comply with the disclosure requirements under the Arbitration Act. (Paras 15-18)
Issue of Consideration
Whether the mandate of the arbitrator should be terminated for lack of a valid Section 21 notice under the Arbitration and Conciliation Act, 1996, and whether the arbitrator is de jure ineligible to act due to non-disclosure under Section 12 read with Schedules 5 and 7.
Final Decision
The court allowed the applications, terminated the mandate of the sole arbitrator Mr. Vasant Narayanrao Lothey (Patil), and appointed a new arbitrator to adjudicate the disputes between the parties.
Law Points
- Section 21 notice is mandatory for commencement of arbitration
- Arbitrator must disclose independence and impartiality
- De jure ineligibility under Schedule 5 and 7 of Arbitration Act
- Appointment by Registrar under Multi State Co-operative Societies Act does not override Arbitration Act
Case Details
2023 LawText (BOM) (01) 93
Arbitration Application (L) No. 26495 of 2022 with Interim Application (L) No.26866 of 2022 and Arbitration Application (L) No.26496 of 2022 with Interim Application (L) No.26897 of 2022
Mr. Aniruddha Mitra with Amritam Mandal, Anukul Seth, Nishtha Malik and Sonali Kochar i/b NAS Legal for the applicants; Mr. Yatin Shah with Veer Kankaria and Sunil Shukla i/b Apex Juris LLP for the respondent
Sanjeev Kumar Kailash Prasad Agarwalla and Anr; Maya Sanjeev Kumar Agarwalla and ors
Bharat Co-operative Bank (Bombay) Limited
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Nature of Litigation
Arbitration application seeking termination of arbitrator's mandate and appointment of new arbitrator
Remedy Sought
Termination of the mandate of the learned Arbitrator and appointment of another arbitrator to adjudicate the disputes between the parties
Filing Reason
Lack of Section 21 notice and de jure ineligibility of the arbitrator due to non-disclosure under Section 12 of the Arbitration Act
Issues
Whether the mandate of the arbitrator should be terminated for lack of a valid Section 21 notice under the Arbitration and Conciliation Act, 1996?
Whether the arbitrator is de jure ineligible to act due to non-disclosure under Section 12 read with Schedules 5 and 7 of the Arbitration Act?
Submissions/Arguments
The applicants argued that no notice under Section 21 of the Arbitration Act was issued before invoking arbitration, rendering the proceedings invalid.
The applicants argued that the arbitrator failed to disclose circumstances affecting his independence and impartiality, making him de jure ineligible under Section 12 read with Schedules 5 and 7.
The respondent argued that the appointment by the Registrar under Section 84 of the Multi State Co-operative Societies Act was valid and the arbitrator was not required to make additional disclosures.
Ratio Decidendi
A valid notice under Section 21 of the Arbitration and Conciliation Act, 1996 is a mandatory precondition for commencement of arbitration proceedings. An arbitrator must disclose any circumstances that give rise to justifiable doubts as to his independence or impartiality under Section 12 read with Schedules 5 and 7. Failure to do so renders the arbitrator de jure ineligible to act, and the mandate can be terminated under Sections 14 and 15.
Judgment Excerpts
By the two applications filed under Section 11(5) read with Section 14 and 15 of the Arbitration and Conciliation Act, 1996, the two applicants... seek the following reliefs...
The applicants proceed to narrate... that on receipt of the communication from the Sole Arbitrator, dated 25/11/2021, the applicants were informed about initiation of arbitration by the respondent Bank...
The court held that a valid notice under Section 21 of the Arbitration and Conciliation Act, 1996 is a mandatory precondition for commencement of arbitration proceedings.
Procedural History
The applicants received a communication from the Sole Arbitrator dated 25/11/2021 informing them of the initiation of arbitration by the respondent Bank. The applicants then filed the present applications under Section 11(5) read with Sections 14 and 15 of the Arbitration and Conciliation Act, 1996 seeking termination of the arbitrator's mandate and appointment of a new arbitrator.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 11(5), Section 12, Section 14, Section 15, Section 21, Schedule 5, Schedule 7
- Multi State Co-operative Societies Act, 2002: Section 84
