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Delhi High Court: In a petition filed under Section 11(6), Arbitration and Conciliation Act, 1996 (the Act), seeking appointment of an independent Sole Arbitrator to adjudicate disputes arising between the parties in relation to the partnership deed dated 1 September 2016 and a connected petition instituted under Section 9 of the Act seeking interim protection in relation to the collateral security furnished by the partnership firm, the Single Judge Bench of Om Prakash Shukla, J., allowed the Section 11(6) petition and appointed Justice (Retd.) Ravindra Bhatt as Sole Arbitrator, holding that in light of parties’ prior Section 9 proceedings, failed mediation and earlier attempts to secure a mutually agreed appointment, the agreed appointment procedure under Clause 14 had failed.
The Court held that where the parties have agreed upon an appointment procedure, but the agreement prescribes no fixed period, Section 11(6) does not require the Court to mechanically wait for a specified number of days after a Section 21 notice. Whether there has been a “failure to act” must be determined by examining the circumstances as a whole and whether a reasonable time had elapsed for performance of the agreed appointment procedure. The Court also held that a party cannot indefinitely frustrate constitution of the Arbitral Tribunal through inaction; insisting upon an express refusal in such circumstances would “elevate form over substance”.
Background
The petitioner and the respondents are members of the same family and partners in Aero Enterprises. The petitioner holds 50 per cent of the partnership shares, while Respondents 1 and 2 hold 25 per cent each.
The partnership firm forms part of a group of family-held businesses. As part of the financial arrangements among those businesses, properties belonging to the partnership firm had been furnished as collateral security for credit facilities availed by Ratna Sagar Private Limited, another family-held entity. This security arrangement had been subsisting since 2013.
Disputes subsequently arose concerning the affairs and management of the partnership firm. The petitioner alleged that he was denied access to the firm’s financial records. A further dispute arose in September 2025 concerning the existing cross-mortgaging/security arrangement. According to the petitioner, Respondent 1 sought discontinuation of the arrangement and release of the securities furnished by the partnership firm. The petitioner objected, but subsequent communications were addressed to Punjab National Bank seeking alteration of the security arrangement and release of the partnership firm’s properties.
The controversy continued in 2026. The petitioner asserted that the respondents again approached PNB for release of the partnership firm’s properties from the existing security arrangement. On 19 May 2026, PNB informed the petitioner that the credit facilities could not be renewed owing to the communication made by Respondent 1. The petitioner thereafter placed his position on record by letter dated 21 May 2026 and email dated 1 June 2026.
In view of the continuing disputes and the perceived threat to the security arrangements, the petitioner approached the High Court under Section 9 of the Act seeking interim protection in relation to the collateral security furnished by the partnership firm. By order dated 27 July 2026, the Court referred the parties to mediation before the Delhi High Court Mediation and Conciliation Centre, SAMADHAN, to explore an amicable resolution.
Mediation was conducted on 30 July 2026, 10 August 2026 and 13 August 2026, but no settlement could be reached. On 13 August 2026, the petitioner proposed that the parties mutually appoint a Sole Arbitrator in accordance with Clause 14 of the Partnership Deed. However, no consensus was reached.
On 16 August 2026, the petitioner formally invoked the arbitration agreement by issuing a notice under Section 21 of the Act. An effort was made to arrive at a mutually acceptable appointment. The respondents proposed a person for appointment as Sole Arbitrator, but the proposal was not acceptable to the petitioner, who communicated his decision by email dated 16 August 2026.
Consequently, the petitioner approached the High Court under Section 11(6) of the Act seeking appointment of an independent Sole Arbitrator to adjudicate disputes arising between the parties
The respondents opposed the petition primarily on the ground that it was premature. It was contended that the Section 21 notice had been issued only on 16 August 2026 and that they had neither refused to appoint an Arbitrator nor been afforded sufficient time to act pursuant to the agreed appointment procedure.
Issues for Determination
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Whether, in the circumstances of the case, the respondents had “failed to act” in accordance with the agreed appointment procedure within the meaning of Section 11(6) of the Act, so as to enable the High Court to appoint a Sole Arbitrator?
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Whether the Section 11 petition was premature merely because the respondents had not expressly refused to appoint an Arbitrator?
Analysis
Limited scope of examination under Section 11
At the outset, the Court noted that the scope of examination by a referral court at the Section 11 stage is narrow and circumscribed. It reiterated that the referral court is required to examine only the prima facie existence of an arbitration agreement, leaving other matters to the Arbitral Tribunal.
While referring to Maharashtra State Electricity Distribution Co. Ltd. v. R.Z. Malpani, 2026 SCC OnLine SC 553 and SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 SCC OnLine SC 1754, wherein it was held that questions such as accord and satisfaction, limitation, dishonesty and frivolity, arbitrability of the subject-matter, ordinarily fall within the domain of the Arbitral Tribunal under Section 16.
The Court noted that Clause 14 of the Partnership Deed contemplated reference of disputes or differences between the partners to a Sole Arbitrator to be appointed by the partners. It found the clause to be broadly worded, covering disputes arising during the subsistence of the partnership or thereafter, including disputes concerning interpretation of the partnership deed or “any other matter.” Further, the existence of a valid arbitration agreement was not disputed by the respondents. Therefore, the Court held that the requirement of establishing the prima facie existence of an arbitration agreement for exercising jurisdiction under Section 11 stood satisfied.
Invocation of Section 11(6) and Reasonable Time
The Court distinguished Section 11(6) from Section 11(4) and (5) and noted that while Section 11(4) and (5) contemplate a period of 30 days in the circumstances specified therein, Section 11(6) prescribes no fixed statutory period. The relevant test is whether, under the appointment procedure agreed by the parties, a party has “failed to act as required under that procedure”.
In the present case, Clause 14 required the parties to mutually agree upon the appointment of the Sole Arbitrator. Thus, the Court had to determine whether that agreed appointment procedure had failed.
The Court then distinguished the statutory scheme applicable to Sections 11(4) and (5) from that under Section 11(6). Whereas Section 11(4) and (5) contemplate a specified period of 30 days, Section 11(6) prescribes no fixed statutory period. The relevant enquiry is whether a party has “failed to act as required under” the appointment procedure agreed by the parties.
The Court relied on Adavya Projects (P) Ltd. v. Vishal Structurals (P) Ltd., (2025) 9 SCC 686 and Indian Oil Corpn. Ltd. v. Raja Transport (P) Ltd., (2009) 8 SCC 520, which makes it clear that where an arbitration agreement prescribes an appointment procedure but no time-limit, failure to act within a reasonable time may enable the aggrieved party to invoke Section 11(6).
The Court rejected the proposition that the question of reasonable time could be answered merely by counting the number of days between the Section 21 notice and the filing of the Section 11 petition. It held that what constitutes a reasonable time necessarily depends upon the facts and circumstances of each case. The Court held that
“Where the parties had already been engaged in disputes, court proceedings, mediation and discussion concerning appointment of an Arbitrator, those circumstances must legitimately be taken into account while considering whether the agreed appointment procedure has failed.”
No express refusal necessary for Arbitrator’s appointment
The Court rejected the respondents argued that they had neither expressly accepted nor expressly refused the proposed appointment. It noted that Clause 14 required a mutually agreed appointment. Therefore, the relevant question was not whether the respondents had communicated an express refusal, but whether the agreed procedure had resulted in constitution of the Arbitral Tribunal and it had not, as the parties had failed to agree upon a name.
“Acceptance of such a contention would permit a party, by its own inaction, to defer the constitution of the Arbitral Tribunal and thereby defeat the purpose of Section 11(6) of the Act.”
Therefore, the Court held that insisting upon an express refusal would “elevate form over substance”, particularly in light of the prior proceedings, failed mediation and unsuccessful attempts at mutual appointment.
Maintainability of Petition
Considering the conduct of the parties and the sequence of events as a whole, the Court held that a reasonable time had elapsed for the respondents to act under Clause 14. The respondents had already participated in the Section 9 proceedings and mediation; the petitioner had proposed a mutually appointed Sole Arbitrator before issuing the Section 21 notice; no consensus had been reached; and there had been no subsequent positive step towards an agreed appointment. Consequently, the Court categorised respondents’ actions a “failure to act” within the meaning of Section 11(6) and rejected the respondents’ objection that the petition was premature.
Decision
Accordingly, the Court appointed, Justice (Retd.) Ravindra Bhatt, former Judge of the Supreme Court, as the Sole Arbitrator to adjudicate the disputes between the parties. The Arbitrator to enter upon the reference within two weeks from the date of the order and furnish the requisite disclosures under Section 12(2) within three weeks of entering upon the reference. The arbitration to be conducted under the rules and aegis of the Delhi International Arbitration Centre (DIAC), with the Arbitrator entitled to fees in accordance with the DIAC Schedule of Fees.
Regarding connected petition under Section 9 seeking interim protection concerning the collateral security, including restraint against alteration of its status, obstruction of renewal and unilateral instructions to the bank without the petitioner’s consent, the Court directed that the same to be treated as an application under Section 17 and placed before the Sole Arbitrator. Upon entering the reference, the Arbitrator was directed to consider and decide the application in accordance with law, leaving the parties free to raise their respective contentions before him.
[Sugat Jain v. Amit Jain, 2026 SCC OnLine Del 6467, decided on 21-8-2026]
*Judgment Authored by Justice Om Prakash Shukla
Advocates who appeared in this case :
For the Petitioner: Mr. Saurav Agrawal, Mr. Omar Ahmed, Ms. Manisha Singh, Mr. Harshit Malik, Ms. Sulekha Agrawal, Ms. Anusha Sinha, Mr. Rahul Chatwal, Mr. Aarya Bhat, Mr. Tuhin Dey, Mr. Aadarsh Mittal and Mr. Divyanshu Rana, Advs.
For the Respondents 1 and 2: Mr. Gaurav Gupta, Ms. Shivangi Gupta and Ms. Vallabhi Rastogi, Advs.
