The Supreme Court has
reaffirmed that arbitration legally begins when the notice invoking arbitration
is received by the opposing party, and not when a court is approached for the
appointment of an arbitrator. Setting aside a contrary view taken by the
Karnataka High Court, the court held that linking the start of arbitral
proceedings to a judicial filing would run counter to the structure and intent
of the Arbitration and Conciliation Act, 1996.
A Bench comprising
Justice Dipankar Datta and Justice Augustine George Masih ruled that the High
Court had erred in vacating interim relief granted under Section 9 of the Act
on the ground that arbitration had not commenced within the prescribed period.
The court clarified that Section 21 of the Act exhaustively defines the
commencement of arbitration as the date on which a request to refer disputes to
arbitration is received by the respondent, and this definition cannot be
displaced by reference to proceedings under Sections 9 or 11.
The Bench cautioned that
treating a Section 11 petition, filed for the appointment of an arbitrator, as
the trigger for commencement would distort the statutory framework and dilute
the role assigned to Section 21.
Emphasising the settled
position of law, the court observed that the start of arbitral proceedings is a
statutory event and does not depend on the initiation of any court process.
The ruling arose from a
dispute stemming from a 2019 franchise agreement for the operation of a hotel
in Srinagar between Regenta Hotels Private Limited and Hotel Grand Centre
Point. After alleging interference in hotel operations by certain partners of
the firm, Regenta obtained ad interim protection from a Bengaluru trial court
on February 17, 2024.