Participation in Earlier Arbitration Defeats Notice Objection: Delhi HC

De Lage Landen Financial Services India Pvt. Ltd. Vs Parhit Diagnostic Private Limited & Ors. (Delhi High Court)

Summary: The Delhi High Court allowed the lender’s petition under Sections 11(4) and 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of an independent Sole Arbitrator in disputes arising from a Loan and Hypothecation Agreement and two Guarantee Agreements dated 31st July, 2018. The agreements contained identically worded arbitration clauses empowering the lender to appoint the Sole Arbitrator at its absolute discretion. The lender had initially appointed an arbitrator unilaterally, but those proceedings were withdrawn in view of the Supreme Court ruling in Perkins Eastman Architects DPC v. HSCC India Ltd. The respondents opposed the fresh Section 11 petition principally on the ground that arbitration had not been validly invoked through a notice under Section 21 and that no separate invocation had been made under the Guarantee Agreements.

The Court held that, although a Section 21 notice serves important purposes and ordinarily must communicate resort to arbitration, the facts demonstrated that the respondents had due notice of the arbitration. The lender had sent its invocation dated 29th August, 2019 to the unilaterally appointed arbitrator with copies to the respondents, who thereafter appeared, participated and filed their Statement of Defence without objecting to absence of a pre-arbitration notice. The Court distinguished Alupro Building Systems Pvt Ltd v. Ozone Overseas Pvt Ltd, where there had been no invocation notice at all, and noted the similar approach in Badri Singh Vinimay Pvt. Ltd. v. MMTC Ltd. The Court also found no limitation prejudice: the agreements were executed on 31st July, 2018 and invocation was within three years of the disputes arising.