Case Note & Summary
The petitioner, Quick Heal Technologies Limited, filed an Arbitration Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of a sole arbitrator to resolve disputes arising from a Software Distribution Agreement dated 2nd April 2011 with the respondents, NCS Computech Private Limited and Innovative Edge. The agreement contained an arbitration clause (Clause 17) providing for amicable resolution within 30 days, followed by arbitration by a mutually appointed sole arbitrator, failing which a three-member tribunal. Disputes arose regarding the distribution of the petitioner's anti-virus software. The petitioner sent a notice invoking arbitration, but the respondents did not respond. The respondents opposed the petition, arguing that the pre-arbitration amicable resolution clause was mandatory and not complied with, and that the petition was premature. The court examined the language of Clause 17(a), which used the word 'may' for referring disputes to arbitration after 30 days, and held that the clause was directory, not mandatory. The court also noted that the respondents had not responded to the notice, indicating no willingness to amicably resolve. The court appointed a sole arbitrator, Justice S.J. Kathawalla (Retired), to adjudicate the disputes, with the arbitration to be conducted in Pune in English. The petition was allowed.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - Pre-arbitration amicable resolution clause - The court held that Clause 17(a) of the Software Distribution Agreement, which requires disputes to be amicably discussed for 30 days before arbitration, is directory and not mandatory. The failure to comply with this clause does not bar the maintainability of a Section 11 petition. The court relied on the principle that such clauses are meant to encourage settlement but do not create a condition precedent to arbitration. (Paras 1-10) B) Arbitration Law - Appointment of Arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - Failure to mutually appoint arbitrator - The court noted that the parties failed to mutually appoint a sole arbitrator as per Clause 17(b). Since the respondents did not respond to the petitioner's notice, the court appointed a sole arbitrator to adjudicate the disputes, overriding the default mechanism for a three-member tribunal. (Paras 1-10)
Issue of Consideration
Whether the Arbitration Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 is maintainable when the pre-arbitration amicable resolution clause (Clause 17(a)) was not complied with, and whether a sole arbitrator should be appointed despite the agreement providing for a three-member tribunal.
Final Decision
The court allowed the Arbitration Petition and appointed Justice S.J. Kathawalla (Retired) as the sole arbitrator to adjudicate the disputes between the parties. The arbitration shall be conducted in Pune in English, and the arbitrator's fees shall be as per the Bombay High Court Rules.
Law Points
- Arbitration agreement
- Section 11(6) of Arbitration and Conciliation Act
- 1996
- pre-arbitration amicable resolution clause
- mandatory vs. directory
- maintainability of Section 11 petition
- appointment of sole arbitrator
