Case Note & Summary
This is an application under Section 11 of the Arbitration and Conciliation Act, 1996 filed by Tech Mahindra Ltd. against Tata Communications Transformation Services Ltd. seeking appointment of an arbitral tribunal. The parties had entered into a Long Form Procurement Agreement dated 2 September 2015, which was terminated by the respondent by letter dated 12 December 2017. The arbitration agreement is contained in clause 24(b) of the agreement, which provides for amicable resolution through negotiation before arbitration. The applicant sent a notice invoking arbitration on 28 January 2019, but the respondent did not respond. The respondent opposed the application on the ground that the pre-arbitral negotiation clause was a condition precedent that had not been complied with. The court held that the pre-arbitral negotiation clause is directory and not mandatory, and that the court can appoint an arbitrator under Section 11 if it is satisfied that disputes exist and the arbitration agreement is valid. The court appointed a sole arbitrator to adjudicate the disputes between the parties.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11 of the Arbitration and Conciliation Act, 1996 - Pre-Arbitral Negotiation Clause - The court considered whether a clause requiring parties to negotiate in good faith before arbitration is a mandatory condition precedent. Held that such clauses are directory and not mandatory, and the court can appoint an arbitrator if it is satisfied that disputes exist and the arbitration agreement is valid. (Paras 2-5)
B) Arbitration Law - Condition Precedent - Section 11 of the Arbitration and Conciliation Act, 1996 - The court held that pre-arbitral procedural requirements like negotiation are not mandatory conditions precedent to invoking arbitration, especially when the respondent has not responded to the notice invoking arbitration. (Paras 4-5)
Issue of Consideration
Whether the pre-arbitral negotiation clause in the agreement is a mandatory condition precedent to invoking arbitration, and whether the court can appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 despite non-compliance with such clause.
Final Decision
The court allowed the application and appointed a sole arbitrator to adjudicate the disputes between the parties.
Law Points
- Section 11 of the Arbitration and Conciliation Act
- 1996
- pre-arbitral negotiation clause
- condition precedent
- appointment of arbitrator
- commercial dispute
Case Details
Commercial Arbitration Application No.67 of 2019
Mr.Aditya Pimple with Mr.Aditya Khandeparkar and Mr.Deepak Singh i/b.M/s.Khandeparkar Law Office for Applicant, Mr.Siddharth Ranade and Mr.Ketan Gaur i/b. M/s.Trilegal for Respondent
Tata Communications Transformation Services Ltd.
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Nature of Litigation
Application under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitral tribunal
Remedy Sought
Appointment of an arbitral tribunal to adjudicate disputes arising under the Long Form Procurement Agreement dated 2 September 2015
Filing Reason
Disputes arose between the parties under the agreement, which was terminated by the respondent by letter dated 12 December 2017; the applicant invoked arbitration but the respondent did not respond
Issues
Whether the pre-arbitral negotiation clause in clause 24(b) of the agreement is a mandatory condition precedent to invoking arbitration.
Whether the court can appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 despite non-compliance with the pre-arbitral negotiation clause.
Submissions/Arguments
Applicant submitted that disputes exist and the arbitration agreement is valid; the pre-arbitral negotiation clause is not a condition precedent.
Respondent opposed the application on the ground that the pre-arbitral negotiation clause is a condition precedent that has not been complied with.
Ratio Decidendi
Pre-arbitral negotiation clauses are directory and not mandatory conditions precedent to invoking arbitration; the court can appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 if it is satisfied that disputes exist and the arbitration agreement is valid.
Judgment Excerpts
This is an application under Section 11 of the Arbitration and Conciliation Act, 1996 (for short, “the ACA”) whereby the applicant prays for appointment of an arbitral tribunal to adjudicate the disputes and differences which have arisen between the parties under the Long Form Procurement Agreement dated 2 September 2015 (for short, “the said agreement”), which came to be terminated by the respondent by its letter dated 12 December 2017.
The arbitration agreement between the parties is contained in clause 24(b)...
Procedural History
The applicant filed Commercial Arbitration Application No.67 of 2019 under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitral tribunal. The respondent opposed the application. The court heard both sides and delivered judgment on 10 April 2019.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 11
