2024 (9) TMI 688 - SC - Indian Laws

Former Chief Justice appointed as sole arbitrator after petition succeeds under Section 11(6) of Arbitration Act

COX & KINGS LTD. Versus SAP INDIA PVT. LTD. & ANR.

The SC allowed a petition seeking appointment of an arbitrator under Section 11(6) read with Section 11(12)(a) of the Arbitration Conciliation Act, 1996. ... Seeking appointment of an arbitrator for the adjudication of disputes and claims - Section 11(6) read with Section 11(12)(a) of the Arbitration & Conciliation Act, 1996 - whether the application of the petitioner for the appointment of an arbitrator deserves to be allowed? - HELD THAT:- In a recent decision in SBI GENERAL INSURANCE CO. LTD. VERSUS KRISH SPINNING [2024 (9) TMI 606 - SUPREME COURT], it was observed that the arbitral tribunal is the preferred first authority to look into the questions of arbitrability and jurisdiction, and the courts at the referral stage should not venture into contested questions involving complex facts. The respondents have raised a number of objections against the present petition, however, none of the objections raised question or deny the existence of the arbitration agreement under which the arbitration has been invoked by the petitioner in the present case. Thus, the requirement of prima facie existence of an arbitration agreement, as stipulated under Section 11 of the Act, 1996, is satisfied - Once the arbitral tribunal is constituted, it shall be open for the respondents to raise all the available objections in law, and it is only after (and if) the preliminary objections are considered and rejected by the tribunal that it shall proceed to adjudicate the claims of the petitioner. Shri Justice Mohit S. Shah, former Chief Justice of the High Court of Judicature at Bombay is appointed to act as the sole arbitrator. The fees of the arbitrator including other modalities shall be fixed in consultation with the parties - petition allowed. Issues Involved:1. Existence of Arbitration Agreement2. Group of Companies Doctrine3. Prima Facie Determination by Referral Court4. Impleadment of Non-Signatory Party5. Pending Arbitration Proceedings6. Scope of Referral Court's PowersDetailed Analysis:1. Existence of Arbitration Agreement:The petitioner sought the appointment of an arbitrator under Section 11(6) read with Section 11(12)(a) of the Arbitration & Conciliation Act, 1996, based on Clause 15.7 of the GTC agreement. The court noted that the arbitration agreement's existence was not contested by the respondents, thereby satisfying the prima facie requirement under Section 11 of the Act, 1996.2. Group of Companies Doctrine:The court examined whether the Group of Companies doctrine could be applied to bind the non-signatory respondent no. 2 to the arbitration agreement. The matter was referred to a larger bench to clarify the interpretation of the phrase 'claiming through or under' in Sections 8, 35, and 45 of the Act, 1996. The court noted that economic concepts alone cannot bind a non-signatory without express consent.3. Prima Facie Determination by Referral Court:The court reiterated that its role at the referral stage is limited to examining the prima facie existence of an arbitration agreement. It cited previous judgments, including Lombardi Engg. Ltd. v. Uttarakhand Jal Vidyut Nigam Ltd. and SBI General Insurance Co. Ltd. v. Krish Spinning, to emphasize that the referral court should not delve into complex questions of arbitrability and jurisdiction, which are better left to the arbitral tribunal.4. Impleadment of Non-Signatory Party:The court observed that the question of whether respondent no. 2, a non-signatory, could be bound by the arbitration agreement should be determined by the arbitral tribunal. The complexity of the matter, involving terms of agreements and email exchanges, warranted a detailed examination by the tribunal, as per the doctrine of competence-competence.5. Pending Arbitration Proceedings:The respondents argued that similar contentions and claims were already pending before another arbitral tribunal. The court noted that the petitioner had filed counterclaims in the ongoing arbitration but did not find this as a bar to appointing an arbitrator for the current petition. The tribunal would consider all available objections in law once constituted.6. Scope of Referral Court's Powers:The court highlighted that its jurisdiction under Section 11(6) of the Act, 1996, is limited to prima facie examining the existence of an arbitration agreement. It should not interfere with the arbitral process but allow the tribunal to rule on its jurisdiction, including issues involving non-signatories. This approach aligns with the principle of minimum judicial interference and the competence-competence doctrine.Conclusion:The court allowed the petition and appointed Shri Justice Mohit S. Shah as the sole arbitrator. It clarified that all rights and contentions of the parties are open for adjudication by the arbitrator. Pending applications, if any, were disposed of.