NOTICE OF PROCEEDINGS UNDER SECTION 11 OF THE A&C ACT IS A MANDATORY REQUIREMENT: MADHYA PRADESH HIGH COURT

The Madhya Pradesh High Court in the case State of Madhya Pradesh v. Nidhi Industries observed and has held that it is mandatory for a High Court to issue notice of application under Section 11 of the A&C Act and non-compliance of which would vitiate the entire proceeding initiated for appointment of arbitrator.

The bench comprising of Justice Anand Pathak observed while reviewing a review petition against an order by which the application under Section 11(6) was allowed and an arbitrator was appointed.

Further, the court held that proceedings under Section 11 are judicial in nature, however, opportunity of hearing must be equally given to both the parties.

FACTS OF THE CASE

In the year 2015, the parties entered into an agreement, whereby the respondent had to supply the CCTV cameras for installation in the premises of the Indore Bench of the High Court.

The petitioner blacklisted the respondent for a period of 1 year as the petitioner found the cameras to be of inferior quality. A writ petition was filled by the respondent against the order of blacklisting which was dismissed by the High Court and the review petition against that order was also dismissed, However, the respondent preferred an SLP that dismissed with the liberty to respondent to file a fresh representation before the competent authority/ petitioner.

The petitioner dismissed the representation of the respondent and the respondent challenged the decision of the petitioner in a writ petition which was dismissed while giving liberty to respondent to avail the arbitration/ conciliation clause available under the agreement in question.

A notice of arbitration was issued by the respondent and has requested the petitioner to appoint the arbitrator. The request of the respondent was turned down by the petitioner, therefore, the petitioner approached the Court under Section 11(6) of the A&C Act.

However, the High Court did not issue a notice of proceeding under Section 11(6) of the A&C Act at the time of passing the impugned order a government pleader was present in the Court.

A review petition was preferred by the respondent against the impugned order.

Contentions Made By Parties:

The impugned order was challenged by the petitioner on the following grounds:

The notice of proceedings was not served to the petitioner.

Any response to the petition could not be filled by the state of the respondent and its objections were also not before the Court at the time of passing of the impugned order.

Therefore, opportunity of hearing must be given to both the parties, proceedings under Section 11 of the A&C Act is a judicial proceeding.

The M.P. High Court Rules and Orders, 2008, Chapter XIII Rule 8 provides that notice is required to be served to the Government before passing any order.

The M.P. Arbitration Rules, 1997, Rule 4-A requires the Court to issue notice to the opposite party.

However, the matter cannot be referred to arbitration as the agreement between the parties is a ‘Works Contract’, therefore, as per Section 2 (1) of Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983, the matter is to be referred to Arbitration Tribunal, Bhopal.

The submission of the petitioner was countered by the respondent on following grounds:

The petitioner on the request of the respondent failed to appoint the petitioner therefore, in view of Section 4 of the A&C Act, they have waived their right to object to the appointment of the arbitrator. In Reliance placed on Datar Switchgear v. Tata Finance, (2000) 8 SCC 151.

Therefore, the objection regarding bar under Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 is without any merit as the agreement between the parties if for supply simpliciter.

In the case the government advocate appeared.

COURT ANALYSIS

It was held by the Court that it is mandatory for a High Court to issue notice of application under Section 11 of the A&C Act and non-compliance for appointment of arbitrator of which would vitiate the entire proceeding. The Court held that proceedings under Section 11 are judicial in nature, therefore, opportunity of hearing must be equally given to both the parties.

Further, it was observed by the court that Chapter XIII Rule 8 of the M.P. High Court Rules and Orders, 2008 provides that before passing any order, a notice is required to be served to the Government. Similarly, Rule 4-A of the M.P. Arbitration Rules, 1997 states that a notice is to be served by the court to the opposite party.

It was observed by the court that as no notice was issued to the petitioner, it prejudices the interest of petitioner and cause of justice. Hence, it vitiates order and subsequent proceedings. It was held that non-compliance with the requirement of issuing notice of proceeding to the other party is an error apparent on the face of record.

Accordingly, the review petition was allowed by the court and restored the matter to be heard afresh.