Source: Rajasthan High Court 

Why in News?

Recently, the Rajasthan High Court in the matter of Movie Time Cinemas Pvt. Ltd. v. M/s Chetak Cinema has held that if the presence of valid arbitration agreement is established then it can be invoked by the parties even without naming the arbitrator. 

What was the Background of Movie Time Cinemas Pvt. Ltd. v. M/s Chetak Cinema Case? 

• In the present case, the petitioner and respondent entered into a registered lease deed where the two floors of a building were leased by the respondent to the petitioner. 
• The petitioner took possession of the leased premises. 
• Thereafter, the respondent alleged that the leased property has third party rights and tried removing the signs of the petitioner from the lease deed. 
• The same led to invocation of arbitration clause by the petitioner mentioned in the lease deed. 
• The petitioner filed the application under Section 9 of the Arbitration and Conciliation Act, 1996 (A& C Act) before the commercial court. 
• The Commercial Court ordered the respondent to maintain the Status quo of the leased property. 
• Due to non-compliance of the Commercial Court’s order by the respondent the petitioner filed an application under Section 11 of the A & C Act for appointment of arbitrator. 

What were the Court’s Observations? 

• The Rajasthan High court observed that to invoke an arbitration clause there must be an arbitration agreement. 
• The Rajasthan High Court added that the lease deed between the parties had valid arbitration clause and therefore the petitioner can invoke the same. 
• The Rajasthan High Court further held that despite the absence of the name of the arbitrator, the petitioner served sufficient notice. The Court applied the principle of minimum judicial interferences in arbitration matters. 
• The Rajasthan High Court relied upon various Judgements. 
• The Rajasthan High Court therefore accepted the application of the petitioner and appointed the sole arbitrator to adjudicate the dispute between the parties. 

What are the Case Laws Referred in Movie Time Cinemas Pvt. Ltd. v. M/s Chetak Cinema Case? 

• Cox & Kings Ltd. v. SAP India Pvt. Ltd (2022): In this case it was held that the requirement of the court under Section 11 of A & C Act is the establishment of valid arbitration agreement. 
• NTPC Ltd. v. M/S SPML Infra Ltd. (2022): In this case it was held that the Court under Section 11 of the A & C Act should only interfere when the case is ex-facie time-barred and dead or, there is no subsisting dispute. 
• In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act (1899): In this case it was held that a referral court at Section 8 or Section 11 of A & C Act stage can only enter into a prima facie determination. 

What is an Arbitration Agreement? 

• Arbitration agreement is defined under Section 7 of the A & C Act. 
• Section 7 of the A & C Act states that an “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. 
• Arbitration Agreement means when two or more parties agree together to refer to the arbitrator in case any dispute arises between them out of the legal relationship. 

What is Section 11 of A & C Act? 

• Nationality of Arbitrators:   
  • Any person of any nationality can be an arbitrator, unless the parties agree otherwise.  
  • Appointment procedure:   
  • Parties are free to agree on a procedure for appointing arbitrators, subject to subsection (6).  
  • In the absence of an agreement, for a three-arbitrator tribunal, each party appoints one arbitrator, and the two appointed arbitrators select the third (presiding) arbitrator.  
• Role of Arbitral Institutions:   
  • The Supreme Court and High Courts can designate graded arbitral institutions for appointing arbitrators.  
  • In jurisdictions without graded institutions, the Chief Justice of the High Court may maintain a panel of arbitrators.  
  • These arbitrators are deemed to be arbitral institutions and are entitled to fees as specified in the Fourth Schedule.  
• Appointment in Case of Failure:   
  • If a party fails to appoint an arbitrator within 30 days of receiving a request, or if the two appointed arbitrators fail to agree on the third within 30 days, the appointment is made by the designated arbitral institution.  
  • For international commercial arbitration, the Supreme Court designates the institution; for other arbitrations, the High Court does so.  
• Sole Arbitrator Appointment:   
  • If parties fail to agree on a sole arbitrator within 30 days, the appointment is made as per subsection (4).  
• Failure to Act under Agreed Procedure:   
  • If a party, the appointed arbitrators, or a designated person/institution fails to perform under the agreed procedure, the court-designated arbitral institution makes the appointment.  
  • Disclosure Requirements:   
  • Before appointing an arbitrator, the arbitral institution must seek a written disclosure from the prospective arbitrator as per Section 12(1).  
  • The institution must consider any qualifications required by the parties' agreement and the contents of the disclosure.  
• International Commercial Arbitration:   
  • For sole or third arbitrator appointments in international commercial arbitrations, the designated institution may appoint an arbitrator of a nationality different from the parties.  
• Multiple appointment requests:   
  • If multiple requests are made to different institutions, the one receiving the first request is competent to appoint.  
• Time frame for appointment:   
  • The arbitral institution must dispose of an application for appointment within 30 days of serving notice on the opposite party.  
• Fees Determination:   
  • The arbitral institution determines the arbitral tribunal's fees and payment manner, subject to rates in the Fourth Schedule.  
  • This doesn't apply to international commercial arbitrations or where parties have agreed on fee determination as per arbitral institution rules.  
• Non-delegation of Judicial Power:   
  • The designation of a person or institution by the Supreme Court or High Court is not considered a delegation of judicial power.