December 3, 2020

CONDUCT OF ARBITRAL PROCEEDING: SECTION 21

S.21- Commencement of arbitral proceedings

STATEMENT:

Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondents.

NOTICE:

A perusal of section 21 would make it abundantly clear that it is not necessary that the request should be made expressly in writing. Request could be made by conduct of the parties and it has to be understood in that manner. If the notice of invocation is not received by the respondent, arbitration proceedings cannot commence. In Nea Agrex SA vs. Baltic Shipping Co. Ltd. (1976), it had been held that the purpose of notice was to require the other party to do something in order for it to be sufficient or at least should be one from which it can be inferred that there is an implied request. Notice for the purposes of this section will be the first ever notice sent demanding arbitration. The fact that a request is repeated in a subsequent letter cannot wipe out the first demand made.

COMMENCEMENT OF PROCEEDINGS:

The Supreme Court in the case of Milkfood Ltd. vs. GMC Ice Cream (P) Ltd. (2004), observed that a notice of arbitration or the commencement of an arbitration may not bear the same meaning, as different dates may be specified for commencement of arbitration for different purposes. What matters is the context in which the expressions are used. Having in regard for purpose of Section 21, the commencement is for certain purpose starts with notice and is required to be interpreted which would be determinative as regards the procedure under the Act or the other required to be followed. In case of Delhi Transport Corp. Ltd. vs. Rose Advertising (2003), request for appointment of arbitrator was made by a party to the agreement prior to 25th January 1996 when the new act came into being. However, the arbitrator was appointed when the new Act had come into force. The arbitration agreement clearly stipulated that the parties shall be governed by the law as in force at the relevant time. The parties, by their conduct, acted under the 1996 Act inasmuch as even the arbitrator proceeded on that basis and gave his award in pursuance of 1996 Act. Held that the Award would be governed by 1996 Act.

The new Act came into force on January 25, 1996 and it is this date which would determine in each case whether the arbitration matter would be governed by the new Act or the old Act. For resolving the controversy, reference may be made to this section which lays down that unless otherwise agreed to between the parties, the arbitration suit in respect of arbitration dispute commenced on the date on which the request for referring the disputes for arbitration were moved for consideration of the respondent on and after 26th January 1996 or prior thereto. If such a request was made prior to that date, then on conjoint reading of section 21 and 85(2)(a) of the 1996 Act, it must be held that the proceedings will be governed by the 1940 Act as also reaffirmed by the Supreme Court in the case of Shetty’s Const. Co. Pvt. Ltd. vs. Konkan Railway Const. (1998).

TIME LIMIT:

If there is no agreement between the parties as to the date of commencement of arbitral proceedings, the arbitral proceedings shall commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. The parties have been given total freedom to agree between themselves as to the date from which the proceedings shall be deemed to have commenced. It is stated that determination of the date of commencement is of critical importance to the parties in view of the applicability of the Law of Limitation. Once the date of commencement of arbitration proceedings is determined, time stops running and thus there can be no question of the time limit subsequently expiring as regards cause of action included in the reference.

In the case of W.J. Alan and Co. Ltd. vs. El Nasr Export and Import Co. (1971), arbitrators found that the request for arbitrators found that a request for arbitration by sellers was made outside the conceptual time limit. The sellers challenged the award. The time bar clause plainly dealt with the buyers’ complaints. It was held that the time bar clause was limited to the claims made by the buyers and there was no time limit of the sellers’ request for arbitration.

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Author Details: Vaibhav Goyal (BA LLB Student, Panjab University)

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