Naveen Bathla vs. M/S Youth Destination & Anr.

Facts

The petitioner, owner of a property at Dr. Mukherjee Nagar, Delhi, filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator. A Rent Deed was executed on April 16, 2019, for a three-year term commencing May 1, 2019, with monthly rent escalating annually, exclusive of water bills, electricity bills, and GST. Due to the COVID-19 pandemic, rent was mutually reduced and not increased thereafter. The petitioner issued a notice on June 9, 2021, for rent increment and arrears, and subsequently terminated the Rent Deed on July 14, 2021, after receiving no response. A commercial suit filed by the petitioner was withdrawn on September 16, 2022, due to an arbitration clause in the Rent Deed. The petitioner invoked the arbitration clause via a notice dated December 3, 2022, which also went unanswered.

Held

The Court held that an arbitration agreement containing an even number of arbitrators does not invalidate the agreement. Citing the Supreme Court judgment in Narayan Prasad Lohia v. Nikunj Kumar Lohia, the Court reasoned that parties are free to determine the number of arbitrators, provided it is not an even number. If an even number is stipulated, such as two arbitrators, they are expected to appoint a third arbitrator to act as the presiding arbitrator under Section 11(3) of the Act. The Court found that even if two arbitrators are appointed, their consensus award would be valid, and allowing a party to resile from the agreement later would be unfair. Given the consent of both parties, the Court found it appropriate to appoint a Sole Arbitrator to adjudicate all disputes arising from the Rent Deed. Ms. Radhika Bishwajit Dubey was appointed as the sole arbitrator. The arbitrator was directed to comply with Section 12(1) of the Act, and her fees were to be as per the Delhi International Arbitration Centre (DIAC) Rules. Parties were to appear before the arbitrator within 10 days. All contentions of the parties were expressly kept open.

Key Issues

1. Whether the arbitration agreement, which stipulates a panel of two arbitrators, is in violation of Section 10 of the Arbitration and Conciliation Act, 1996, rendering it invalid for the appointment of an arbitrator? (Question of law) Petitioner's contention: The petitioner sought the appointment of a Sole Arbitrator, having invoked the arbitration clause after the respondents failed to respond to notices regarding rent arrears and termination of the Rent Deed. The petitioner relied on the existence of an arbitration clause in the Rent Deed. Respondent's contention: The respondent opposed the petition, arguing that Clause 12 of the Rent Deed, which provides for a panel of two arbitrators, violates Section 10 of the Arbitration and Conciliation Act, 1996. However, the respondent conceded that the dispute is arbitral in nature and had no objection to the Court appointing an independent Sole Arbitrator.