No need for notice to invoke fresh arbitration under Section 21 of the Arbitration and Conciliation Act, 1996 where analogous arbitral proceedings pending

In the matter of Prime Interglobe Private Limited vs Super Milk Products Private Limited (ARB. P. 337/2023) decided by the Hon’ble Delhi High Court on 12.12.2023

FACTS: The matter pertained to disputes arising from the Franchise Agreements between Petitioner and Respondent. The Petitioner asserted that an initial Master Franchise Agreement designated the Petitioner as the ‘Master Franchisee’ for the franchise business in the territories of Punjab (including Chandigarh Tri-city), Gujarat, and Maharashtra. Subsequently, 14 additional Franchise Agreements were executed between the parties to govern the operation of outlets, which were later terminated. Arbitration clause was invoked, and sole arbitrator was appointed to adjudicate the dispute between the parties. The proceedings before the Arbitrator were terminated in terms of section 25(a) of Arbitration and Conciliation Act 1996, which act was challenged before the High Court. In the said petition, the High Court appointed another arbitrator.

The appointment of arbitrator was challenged on the ground that the petition lacked a prerequisite notice under Section 21 of the Arbitration Act, which is required to invoke arbitration. Importantly, disputes arising from the Master Franchise Agreement were previously referred to the Arbitral Tribunal, resulting in the issuance of an award. Additionally, disputes related to 12 out of the 14 Franchise Agreements were also referred to the arbitral tribunal, and the proceedings were pending.

ISSUE: Whether a fresh arbitration is to be invoked by issuing an invocation letter under Section 21 of the Arbitration Act when arbitral proceedings regarding the similar agreements are pending.

OBSERVATIONS: The Hon’ble Court highlighted the difference between Section 11(5) and 11(6) of the Arbitration Act while placing reliance on the judgment of Zion Promoters and Developers Pvt. Ltd. v. Ferrous Infrastructure Pvt. Ltd [2016 SCC OnLine Del 1668] wherein it was observed that there was a clear distinction in the scope of Sections 11(5) and 11(6) of the Arbitration and Conciliation Act. That Section 11(5) can be invoked where one party has failed to appoint an arbitrator despite notice to appoint. However, there is no requirement of notice in Section 11(6) which provides for failure of procedure/ mechanism for appointment meaning thereby that a party can invoke Section 11(6) even if no notice has been given provided any of the three circumstances mentioned in Clauses (a), (b) or (c) has taken place.

In the present case it was observed that as the Arbitration had already been invoked, the present matter was also referred to the same Arbitrator before whom the disputes relating to the other agreements were pending.