Date of judgement:
30th September, 2022
Bench:
Honourable Justices M.R. Shah and Krishna Murari
Parties:
Petitioner – EMAAR INDIA LTD.
Respondent – TARUN AGGARWAL PROJECTS LLP
OVERVIEW
In the present case the Apex Court analyzed the scope of Section 11 of the Arbitration and Conciliation Act and laid down the extent to which the Court can interfere under Section 11.
FACTS
- In the present case, an appeal was filed against the decision of the Delhi High Court whereby the Delhi High Court had appointed arbitrators to resolve the dispute between the concerned parties under section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter "the Act").
- The parties had entered into a Collaboration Agreement for the development of a residential colony. Later, an addendum agreement was entered into by the parties.
ARGUMENTS BY THE RESPONDENTS
- The respondents (original petitioners) contended that the appellants had not complied with the obligations of the addendum agreement.
- Subsequently, a dispute between the parties and the respondents appointed a retired Judge on the High Court as an arbitrator. However, the appointment was denied by the appellants. Consequently, the respondents approached the Delhi High Court for the appointment of the arbitrators by virtue of Clause 36 of the Addendum Agreement.
- The respondents contended that it is the arbitrator under Section 16 of the Act who will determine whether the dispute is arbitrable or not.
ARGUMENTS BY THE APPELLANTS
- The primary contention raised by the appellants was that the concerned dispute fell under Clause 36 of the Addendum Agreement and not Clause 37.
- The appellants pleaded that Clause 36 of Addendum Agreement provided that if any dispute arose with respect to Clauses 3, 6 and 9, the other party would have the right to get the agreement enforced through a court of law.
- However, the High Court appointed the arbitrators under Clause 37 by holding that Clause 36 read with Clause 37 envisaged that while the parties had the right to get the agreement enforced through a court of law, they were not barred from getting the dispute settled by appointment of arbitrators under Section 11 the Act.
- It was the case of the appellants that since the dispute was with respect to Clauses 3, 6 and 9, it fell within the ambit of Clause 36 and not Clause 37 and hence, was not arbitrable.
- The appellants further submitted that where the arbitration agreement is not in writing or where the dispute is beyond the scope of the agreement, the appointment of arbitrators can be refused. The appellants relied on the case of Uttarakhand PurvSainik Kalyan Nigam Limited Vs. Northern Coal Field Limited; (2020) 2 SCC 455 in support of their argument.
- The appellants relied on the case of Vidya Drolia and Ors. Vs. Durga Trading Corporation; (2021) 2 SCC 1 and contended that the Court can interfere under Section 11 only where it is ex-facie certain that the arbitration agreement did not exist or is invalid and the disputes are unarbitrable. The parties cannot be forced to arbitrate when the dispute is "demonstrably non-arbitrable".
RELEVANT PROVISIONS
- Section 11: Appointment of arbitrators
- Section 16:Competence of arbitral tribunal to rule on its jurisdiction
ISSUES RAISED
- Whether the High Court was justified in appointing the arbitrators under Section 11 of the act without conducting a preliminary inquiry?
JUDGMENT ANALYSIS
- The court referred to the case of Oriental Insurance Co Ltd. Vs. Narbheram Power and Steel (P) Ltd., (2018) 6 SCC 534 noted that the parties are bound by the clauses of the agreement and the Court cannot transplant any equity into the agreement by modifying the clauses. The arbitration clauses need to be construed strictly.
- The provisions of the contract need to be interpreted literally and a party cannot claim in excess of what is provided in the terms of the contract.
- The court noted that the issue of non-arbitrability of a dispute relates to the jurisdiction of the arbitral tribunal.
- The court head that the question of non-arbitrability of the dispute can be decided by the court at the reference stage. Where the facts are disputable, the Court is expected to force the parties to comply with the provisions of the arbitration agreement.
CONCLUSION
The Court concluded that the High Court should have conducted a preliminary enquiry to determine whether the dispute was arbitrable or not. Resultantly the Court satisfied the order passed by the High Court and remitted the matter to the High Court for conducting a preliminary inquiry to determine whether the dispute is arbitrable or not.
