2000 (9) TMI 932 - SC - Companies Law

Court orders arbitration based on correspondence, stresses prompt action. Arbitrator to determine agreement existence.

The court, after analyzing the correspondence and documents exchanged between the parties, concluded that the matter should be referred to arbitration for ... Whether the powers under section 11 of the Arbitration & Conciliation Act, 1996 should be exercised or not? Held that:- The power that is exercised by the nominee of the Chief Justice of India under section 11 is in the nature of an administrative order. In such a case, unless the Chief Justice of India or his nominee can be absolutely sure that there exists no arbitration agreement between the parties it would be difficult to state that there should be no reference to arbitration. Further such a view may not be conclusive in view of the nature of the powers that are exercised under section 11(6). In this view of the matter, I do not think it would be possible to accede to the defence raised by the respondent. Keeping open all questions raised in this case, I think it would be appropriate to refer the matter to arbitration Issues:1. Interpretation of the existence and validity of an arbitration agreement under section 11 of the Arbitration & Conciliation Act, 1996.2. Examination of correspondence and documents to determine the existence of a sales contract with an arbitration clause.3. Whether the powers under section 11 of the Act should be exercised or not.4. Clarification on the jurisdiction of the Chief Justice of India or his nominee to decide on the existence of an arbitration agreement.5. Comparison of the powers under sections 11 and 16 of the Act in deciding the existence or non-existence of an arbitration agreement.Analysis:1. The case involves three petitions filed under section 11(5) of the Arbitration & Conciliation Act, 1996, with common facts and legal questions. The primary issue is the interpretation of the existence and validity of an arbitration agreement in a sales contract between the parties.2. The petitioner claims that a sales contract was entered into for the supply of Ferro Vanadium, with an arbitration agreement specifying resolution through arbitration under certain rules. The respondent denies the existence of the sales contract and any legal relationship, leading to a dispute on the arbitration agreement's validity.3. The respondent's denial of the sales contract's existence raises the question of whether the powers under section 11 of the Act should be exercised. The petitioner argues that section 16 empowers the arbitral tribunal to rule on the arbitration agreement's validity, while the respondent contests this position.4. The court examines the correspondence and documents exchanged between the parties regarding the sale and supply of goods to determine if a transaction with an arbitration agreement took place. The court discusses the jurisdiction of the Chief Justice of India or his nominee to decide on the existence of an arbitration agreement under section 11 of the Act.5. Section 7 of the Act defines an arbitration agreement and outlines different forms it can take, emphasizing that the agreement must be in writing. The court compares the powers under sections 11 and 16 of the Act in deciding the existence or non-existence of an arbitration agreement, highlighting the need for clarity in the correspondence and documents exchanged.6. The court references previous judgments to support its decision, emphasizing the importance of setting the arbitral process in motion promptly. The court concludes that the matter should be referred to arbitration for resolution, allowing the arbitrator to assess the existence or non-existence of the arbitration agreement based on the exchanged correspondence and pleadings.