Absence of Monetary Claim Does Not Negate Dispute in Arbitration: Delhi High Court

 

Introduction In a significant ruling, the Delhi High Court held that the absence of a monetary claim in a Section 21 notice does not negate the existence of a dispute between parties. The court emphasized that a dispute, even without a financial claim, can still be subject to arbitration under the Arbitration and Conciliation Act, 1996.

Facts of the Case The case involved a petition filed by Celsius Healthcare Pvt. Ltd. under Sections 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996, seeking to refer disputes with the respondent, Deepti Gambhir, to arbitration. The dispute arose from an agreement between the two parties, which included a dispute resolution clause (Clause 19) mandating arbitration in case mutual discussions fail. The arbitration was to be conducted under Indian law, with Delhi as the seat of arbitration, and the arbitrator's decision would be final and binding.

The petitioner issued a notice under Section 21 of the Arbitration Act on January 6, 2023, seeking to refer the disputes to arbitration. However, the respondent denied the existence of any arbitral dispute, leading the petitioner to approach the Delhi High Court to resolve the issue.

Arguments by the Respondent The respondent contended that no arbitrable dispute existed since the petitioner did not raise any claim against the respondent but merely disputed the legitimacy of the respondent's claim. The respondent argued that this was not a valid dispute that could be referred to arbitration under the Arbitration Act.

Arguments by the Petitioner On the contrary, the petitioner argued that the Section 21 notice clearly demonstrated the existence of a dispute between the parties. The petitioner also highlighted the respondent’s engagement of third parties using coercive measures, which further supported the need for arbitration.

Court’s Observations The Delhi High Court, led by Justice C. Hari Shankar, examined the scope of the term "dispute" under the Arbitration and Conciliation Act. The court held that the term should be interpreted broadly, and a dispute could exist even in the absence of a monetary claim. Consequently, the absence of a financial demand in the Section 21 notice did not preclude the existence of a dispute, making it inappropriate to assert that no arbitrable dispute existed.

The court referred to the Supreme Court's ruling in SBI General Insurance Co Ltd v. Krish Spinning, which narrowed the scope of the court's role under Section 11(6) of the Arbitration Act. According to this decision, the court's function is limited to determining whether an arbitration agreement exists between the parties and whether the petition was filed within the statutory period.

Judgment After confirming that an arbitration agreement was in place and that the petition had been filed within the statutory timeframe, the High Court ruled in favor of the petitioner. Since the parties failed to agree on the appointment of an arbitrator, the court referred the dispute to the Delhi International Arbitration Centre (DIAC) for arbitration. The DIAC would supervise the arbitral proceedings, and the appointed arbitrator would follow the DIAC's fee schedule.

Conclusion This ruling reiterates the broad scope of "dispute" under arbitration law, affirming that the absence of a monetary claim does not negate the existence of a dispute. The judgment reinforces the principle that parties must adhere to their arbitration agreements and resolve disputes as per the arbitration mechanism agreed upon, regardless of the nature of the claims involved.

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