The sole arbitrator concluded that the dispute was not time-barred as the agreement contemplated mediation as a pre-condition to the arbitration and therefore, the arbitration was not ‘appropriate’ for commencement until after the mediation requirement was complied with. {Para 89}
90. The Appeal Judge agreed with the arbitrator and specifically observed that “[i]f the claim is the kind of claim that can be remedied by another and more effective method provided for in the statute, then a civil action will not be appropriate until that other method has been used.” It was held that the interpretation of the word ‘appropriate’ to initiate arbitration depended on “the parties’ choice to have their disputes resolved by arbitration if mediation as a precondition [was]
unsuccessful.” The Court of Appeal for Ontario agreed with the findings of the Appeal Judge below and held that as per the interpretation of the word ‘appropriate’ and the given factual matrix, “the parties would only know that arbitration was appropriate when the mediation requirement had been exhausted.” The Court of Appeal, therefore, dismissed the appeal.
91. It is also apposite to bear in mind that the legislative as well as judicial policy is to promote mediation and encourage the parties to make a serious endeavor for an amicable resolution of the disputes before commencing any adversarial proceedings. Section 12A of the Commercial Courts Act, 2015 makes it mandatory for the parties to exhaust the remedy of mediation prior to institution of the suit in such manner as may be prescribed. Sub-Section (3) of Section 12A of the Commercial Courts Act, 2015 expressly provides that the period during which the parties remained occupied with the pre-institution mediation would not be computed for the purpose of limitation under the Limitation Act.
92. In the facts of the present case, the Arbitration Clause expressly required the parties to attempt resolving the disputes and differences by mutual negotiations. If the efforts to resolve the disputes did not yield fruit within a period of one month from the date the same had arisen, the parties were bound to refer the disputes to their respective Chief Executives. The parties could refer the disputes to arbitration only if the Chief Executives failed to arrive at a consensus.
96. Welspun was not expected to immediately institute the dispute resolution mechanism on the Completion Certification being issued on 30.11.2010. The letter dated 10.09.2012 indicates that the controversy between the parties had crystalized after 30.11.2010. However, it is also clear from the letter dated 10.09.2012 that the disputes had arisen between the parties and the parties had failed to resolve the same. Within a period of three months after receipt of the letter dated 10.09.2012, Welspun invoked the dispute resolution mechanism and by a letter dated 26.11.2012, made a request for their respective Chief Executives to meet to resolve the disputes.
97. It is not clear as and when the negotiations between the parties to amicably resolve the disputes commenced and failed. However, it is clear that Welspun had escalated resolution of the disputes to the second tier by seeking a reference to the respective Chief Executives well within the period of limitation. Clearly, Welspun could not have sought a reference to arbitration prior to referring the disputes for resolution to the respective Chief Executives. Concededly, an attempt to resolve the disputes by the Chief Executives failed on 21.12.2012. It is on the said date that the right to refer the disputes arose in favour of Welspun. Welspun could not have referred the disputes prior to exhausting the remedies of referring the disputes to the respective Chief Executives for resolution. The period of limitation for referring the disputes to arbitration thus, must commence from the said date, that is, 21.12.2012. Welspun commenced arbitration on 27.01.2014, that is, after a period of thirteen months and six days, which was within the period of three years from the date on which the right to refer the disputes to arbitration arose.
IN THE HIGH COURT OF DELHI AT NEW DELHI
FAO(OS)(COMM) No.9/2019 & CM No.2239/2019
M/S WELSPUN ENTERPRISES LTD Vs M/S NCC LTD.
CORAM
HON’BLE MR JUSTICE VIBHU BAKHRU
HON’BLE MR JUSTICE AMIT MAHAJAN
Author: VIBHU BAKHRU, J
Dated: 10.10.2022
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