APHC010409932024 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI ARBITRATION APPLICATION NO: 21 of 2024 [3441] City Market Shop Owners Welfare Association ...Applicant Vs. NS Vaishno Devi Developers India Pvt Ltd and Others ...Respondent(s) ********** Advocate for Applicant: Mr. Guttapalem Vijaya Kumar Advocate for Respondent: Mr. T B L Murthy CORAM : THE CHIEF JUSTICE DHIRAJ SINGH THAKUR DATE : 18th July 2025 P C : This is an application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as “the Act”) for referring the disputes arising out of various agreements of construction entered into between the respondents and the members of City Market Shop Owners Welfare Association, which is a Society registered under the Societies Registration Act, 2001. The applicant Association represents 73 shop owners, who had entered into separate agreements of construction for construction of their respective shops by the respondents. These shop owners had 2 HCJ Arb. Appl.No.21_2024 purchased undivided share in the property, which was being developed by the respondents, which was a commercial-cum-residential building project called „City Market‟ to be constructed over an extent of 15,730 Sq. Yds. 2. According to the agreements executed between the shop owners and the respondents, the respondents were bound to provide all the specified amenities mentioned in Schedule „C‟ & „D‟ of the Agreement and complete the construction of the building complex within 24 months with a grace period of five months, from the date of approval of plans. It was also agreed to pay a compensation of Rs.5,000/- per month or Rs.10,000/- per month to the respective shop owners for default in not completing the construction in the specified period. 3. The allegation is that the respondents did not complete the construction of the building complex as per the plan approved and as per the specifications agreed upon between the parties to the Agreement. The respondents had also not obtained the Completion Certificate from the Municipal Corporation, Guntur. Assurances extended by the respondents for early completion of the project, it is stated, were all belied by the respondents. 3 HCJ Arb. Appl.No.21_2024 In the aforementioned backdrop, it is stated that the shop owners, who are the members of the City Market Shop Owners Welfare Association (the applicant herein) in its meeting held on 19.05.2024, 26.05.2024 and 23.06.2024, decided to invoke the arbitration clause as was contained in their respective agreements and nominated the Association to represent them in the arbitration proceedings. 4. Pursuant to the decision taken in the meeting held on the dates mentioned hereinabove, a notice invoking the arbitration clause, dated 31.07.2024, was stated to have been served by the applicant Society on the respondents, which service is not denied by the respondents. Failure on the part of the respondents to follow the procedure despite the service of notice under Section 21 of the Act is stated to be the reason for filing the present application under 11(6) of the Act. 5. In response to the application under Section 11(6) of the Act, the respondents have taken a preliminary objection regarding the maintainability of the present Arbitration Application. The objection further taken is that the Society, which is alleged to be representing 73 individual parties to the arbitration, is not shown to be possessing any authority to pursue the arbitration matter on behalf of its members as per its bye-laws/memoranda. Further that a Society being a separate legal 4 HCJ Arb. Appl.No.21_2024 entity from its members, its internal resolution or declarations cannot authorize the Society to represent its members, unless the Society was authorized to represent its members in arbitration matters. 6. A rejoinder has been filed to the objections in which the applicant places reliance on the term „shop owner‟, which finds a mention in the agreement of construction, which expression is stated to include the legal heirs, representatives, agents, attorneys, assignees, executors, administrators, successors and the kind. It is thus stated that the Society could come under the term „representative‟ of the shop owners and therefore, the present application in that context is stated to be maintainable. 7. The preliminary issue that is required to be dealt with is regarding the maintainability of the present application. 8. Section 11(6) of the Act, 1996, envisages as under: “11. Appointment of arbitrators. …. (6) Where, under an appointment procedure agreed upon by the parties, — (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, [a party may request 1 [the 5 HCJ Arb. Appl.No.21_2024 Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court]to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment] (6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement. (6B) ….” 9. On a bare reading of Section 11(6) of the Act, 1996, it is thus clear that an application under Section 11(6) can be filed by a „party‟, which, in terms of the definition under clause 2(h), means a party to an arbitration agreement. Although the Society may have the shop owners as its members, yet the Society is a separate legal entity, which certainly is not a party to the Agreements executed between the shop owners and the respondents. Apart from this, it is now fairly well settled that an application under Section 11 of the Act can be filed only after a notice of arbitration, in respect of the claims sought to be referred to arbitration as otherwise contemplated under Section 21 of the Act, has been issued and that there is failure to make the appointment. Reference in this regard can be 6 HCJ Arb. Appl.No.21_2024 made to the judgment of the Apex Court in the case of Bharat Sanchar Nigam Ltd. V. Nortel Networks India Pvt. Ltd.1 Considering the clear intent and language in Section 11(6) of the Act, this Court has no hesitation in holding that the application under Section 11(6) could be maintainable only if it were filed by a party, who was a party to the arbitration agreement, and since the applicant Society was certainly not a party to the arbitration agreement, the present arbitration application is held to be not maintainable. Notwithstanding the above, it would be open to the respective parties, who have entered into separate construction agreements with the respondents, to initiate action under the Arbitration and Conciliation Act, 1996, individually after invoking the arbitration clause by service of notice individually in terms of Section 21 of the Act. Pending miscellaneous applications, if any, shall stand closed. No costs. DHIRAJ SINGH THAKUR, CJ akn 1 (2021) 5 SCC 738 7 HCJ Arb. Appl.No.21_2024 HON’BLE MR.JUSTICE DHIRAJ SINGH THAKUR, CHIEF JUSTICE Arbitration Application No:21 of 2024 DATE : 18.07.2025 AKN 395