The Supreme Court has set aside a judgment of the Karnataka High Court which had vacated an ad-interim injunction on the ground that the appellant failed to “initiate” arbitral proceedings within 90 days of the interim order. The Apex Court held that the “commencement” of arbitral proceedings is determined solely by Section 21 of the Arbitration and Conciliation Act, 1996 (“Act”), i.e., the date on which the request for arbitration is received by the respondent, and not by the date of filing a petition under Section 11.
A Bench comprising Justice Dipankar Datta and Justice Augustine George Masih allowed the appeal filed by Regenta Hotels Private Limited, observing that the High Court erred in conflating the “commencement” of proceedings with the filing of a petition for the appointment of an arbitrator.
The Supreme Court dealt with the interpretation of Section 9(2) of the Act read with Rule 9(4) of the Arbitration (Proceedings Before the Courts) Rules, 2001 (“2001 Rules”). The core issue was whether the mere issuance and receipt of a notice invoking arbitration constitute the “commencement” or “initiation” of proceedings sufficient to sustain an interim order, or whether a party must file a Section 11 petition within the 90-day statutory period if the appointment of an arbitrator fails. The Court ruled that arbitral proceedings commence upon the receipt of the notice under Section 21, and consequently, the interim order does not stand vacated if such notice is served within the prescribed 90-day period.
Background of the Case
The dispute involved Regenta Hotels Private Limited (Appellant) and M/s Hotel Grand Centre Point (Respondent No. 1), a partnership firm. The parties entered into a Franchise Agreement on March 23, 2019, under which the Appellant was to facilitate the business of the Respondent’s hotel in Srinagar.
The dispute arose when Respondent No. 2 (a partner in the firm) allegedly started interfering with the hotel’s operations. Consequently, the Appellant filed an application under Section 9 of the Act before the Trial Court (IXth Additional City Civil and Sessions Judge, Bengaluru) seeking injunctive reliefs.
- February 17, 2024: The Trial Court granted an ad-interim injunction restraining Respondent No. 2 from interfering with the hotel’s functioning.
- April 11, 2024: The Appellant issued an Arbitration Notice invoking Clause 19.1 of the Franchise Agreement.
- April 23, 2024: Respondent No. 2 replied, refusing to concur with the appointment of the arbitrator and denying the agreement.
- June 28, 2024: The Appellant filed a petition under Section 11(6) of the Act before the High Court for the appointment of an arbitrator.
- October 01, 2024: The Trial Court dismissed the Section 9 application and vacated the interim order, holding that the Appellant failed to produce documents showing Respondent No. 2’s consent to the agreement and failed to initiate arbitral proceedings within the mandated period.
The Appellant challenged this order before the Karnataka High Court. On November 14, 2024, the High Court dismissed the appeal, holding that under Section 9(2) of the Act read with Rule 9(4) of the 2001 Rules, arbitral proceedings must be “initiated” within 90 days. The High Court reasoned that since the Section 11 petition was filed on June 28, 2024—beyond the 90-day period expiring on May 17, 2024—the interim order stood automatically vacated.
Arguments of the Parties
The Appellant contended that arbitral proceedings commence on the date of receipt of the notice under Section 21 of the Act. Reliance was placed on Supreme Court precedents including Sundaram Finance Ltd. v. NEPC India Ltd. and Arif Azim Company Limited v. Aptech Limited. The counsel argued that the Section 11 petition is merely a subsequent step and its filing date does not determine the “commencement” of arbitration.
The Respondent No. 2 argued that Section 21 is a deeming provision primarily for the purpose of limitation under Section 43(2). It was submitted that “commencement” in Section 21 is not for the purpose of Section 9(2). The Respondent further argued that since the appointment of the arbitrator was not agreed upon, the proceedings could only be considered “initiated” when the Section 11 petition was filed.
Court’s Analysis
The Supreme Court examined the interplay between Section 9(2), Section 21 of the Act, and Rule 9(4) of the 2001 Rules.
1. Commencement under Section 21 The Court reiterated the “principled and consistent line of authority” established in cases like Milkfood Ltd. v. GMC Ice Cream (P) Ltd. and Geo Miller and Company Private Limited. The Bench observed:
“The settled position as emerged is that the commencement of arbitral proceedings is a statutory event defined exclusively under Section 21 of the Act, wherein the respondent’s receipt of a request to refer the dispute to arbitration sets the arbitral proceedings in motion and no judicial application i.e. whether under Section 9 or Section 11 petition, constitutes commencement.”
2. Interpretation of Rule 9(4) of the 2001 Rules The High Court relied on Rule 9(4), which states that if arbitral proceedings are not “initiated” within three months of a Section 9 application, any interim order stands vacated. The Supreme Court clarified the meaning of “initiated” in this context:
“Rule 9 has been framed in aid of, and to give procedural effect to, Section 9 of the Act, and therefore the terminology employed therein must be construed harmoniously with the parent provision… Consequently, for the purposes of Rule 9(4), the expression ‘initiated’ has necessarily to be read as ‘commenced’ within the meaning of Section 21 of the Act.”
3. Section 11 Petition is Not Commencement The Court explicitly rejected the High Court’s view that filing a Section 11 petition constitutes the commencement of proceedings for the purpose of Section 9(2).
“If the date of filing of the Section 11 petition is to be treated as the date of commencement of arbitral proceedings, as has been observed by the High Court in the Impugned Judgment, that would result into the displacement of commencement of arbitral proceedings as provided under Section 21 and would be contrary to the text and purpose of the Act.”
The Court noted that the Appellant served the notice invoking arbitration on April 11, 2024, and the Respondent replied on April 23, 2024. The 90-day period under Section 9(2) ended on May 17, 2024. Since the notice was received well before this date, the proceedings had validly commenced within the statutory timeframe.
Decision
The Supreme Court allowed the appeal and set aside the Impugned Judgment of the Karnataka High Court dated November 14, 2024.
- The Order of the Trial Court dated October 01, 2024, vacating the ad-interim injunction was set aside.
- The earlier Order dated February 17, 2024, granting the ad-interim injunction was restored.
- The Court requested the High Court to expeditiously decide the pending Section 11 petition.
Justice Masih, writing for the Bench, concluded:
“The arbitral proceedings, as commenced by the Appellant, is well within the statutory time frame provided under Section 9(2) of the Act and the rigor of Rule 9(4) of the 2001 Rules cannot be attracted to the Appellant.”
Case Details:
- Case Title: Regenta Hotels Private Limited v. M/s Hotel Grand Centre Point and Others
- Case Number: Civil Appeal No. of 2026 (Arising out of SLP (Civil) No. 30212 of 2024)
- Coram: Justice Dipankar Datta and Justice Augustine George Masih
