Undisputed arbitration clause leads to referral of contractual assignment dispute to the arbitral forum

Where an arbitration clause in a share purchase agreement was undisputed, the court held that a dispute over whether one party had assigned its contractual rights under that agreement fell within the arbitral domain. The assignment objection was treated as a matter arising out of the contract and not as an issue for determination in a Section 11 proceeding. The appropriate course was appointment of an arbitrator, with the merits of the assignment dispute to be decided in arbitration. The petition was allowed and the matter referred to arbitration.

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Issues: Whether an arbitrator should be appointed under Section 11(6) when the parties admit the share purchase agreement contains an arbitration clause and the dispute concerns whether the petitioner had assigned his rights under that agreement.

Analysis: The agreement dated 22.12.2004 was not in dispute and it contained an arbitration clause. The respondent's objection that the petitioner had assigned his contractual rights in favour of a third person raised a dispute arising out of the agreement. That question was not fit for determination in the Section 11 proceeding and had to be examined by the arbitrator in the reference.

Conclusion: An arbitrator was required to be appointed, and the objection to appointment was rejected.

Final Conclusion: The petition was allowed and the dispute was referred to arbitration for adjudication by the appointed arbitrator.

Ratio Decidendi: Where the existence of an arbitration clause is undisputed, disputes touching the parties' contractual rights and obligations under the agreement should be referred to arbitration, and such objections are ordinarily to be decided by the arbitral forum.

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