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2022 (10) TMI 89
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....icants - respondents herein that the appellant herein did not comply with the obligations under the Addendum Agreement dated 19.04.2011. The respondents - original applicants/petitioners issued a legal notice dated 20.11.2019 raising demand for physical possession of 5 plots measuring 2160 sq. yds. and claiming a sum of Rs. 10 crores for the losses/damages suffered by them. As according to the original petitioners - respondents herein the dispute between the parties were arbitrable, the original petitioners appointed a former judge of the High Court as their arbitrator. The appellant herein denied appointment of the arbitrator. Therefore, the respondents herein approached the High Court for appointment of the arbitrators in terms of Clause 37 of the Addendum Agreement by submitting an application under Section 11(5) & (6) of the Arbitration Act seeking appointment of arbitrators by the Court. 2.1 The said arbitration petition was opposed by the appellant herein by raising various grounds including one of the grounds that the dispute falls under Clause 36 of the Addendum Agreement and not under Clause 37 which incorporates arbitration clause. 2.2 Despite having noted that the ....
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....Clause 36 the High Court appointed the arbitrators. 3.1 Learned counsel appearing on behalf of the appellant submitted that as observed and held by this Court in the case of Uttarakhand Purv Sainik Kalyan Nigam Limited Vs. Northern Coal Field Limited; (2020) 2 SCC 455, the appointment of an arbitrator may be refused if the arbitration agreement is not in writing, or the dispute is beyond the arbitration agreement. 3.2 Learned counsel appearing on behalf of the appellant has further submitted that as observed and held by this Court in the case of Vidya Drolia and Ors. Vs. Durga Trading Corporation; (2021) 2 SCC 1, the Court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is nonexistent, invalid or the disputes are nonarbitrable, though the nature and facet of nonarbitrability would, to some extent, determine the level and nature of judicial scrutiny. It is further submitted that in the said decision it is also observed that such restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably "nonarbitrable" and to cut off the deadwood. 3.3 Learned co....
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....e dispute is arbitrable or not? 6.1 While considering the aforesaid question/issue, the relevant provisions of the Agreement, namely, Clauses 36 and 37, are required to be referred to, which are as under: " Dispute Resolution & Jurisdiction 36. In case of any conflict or difference arising between the parties or in case the either party refused or neglects to perform its part of the obligations under this Addendum Collaboration Agreement, interalia as mentioned in Clauses 3, 6 & 9 hereinabove, then the other party shall have every right to get this agreement specifically enforced through the appropriate court of law. 37. Save & except clause 36 hereinabove mentioned, all or any dispute arising out of or touching upon or in relation to the terms of this Agreement including the interpretation and validity thereof, and the respective rights and obligations of the parties, shall be settled through under the provisions of Arbitration & Conciliation Act, 1996 wherein both the parties shall be entitled to appoint one Arbitrator each and the Arbitrators so appoint shall appoint a third Arbitrator or rank of Retired Judge of any High Court. The arbitration proc....
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....interpreted giving the actual meaning to the words contained in the contract and it is not permissible for the Court to make a new contract, however reasonable, if the parties have not made it themselves. It is further observed that the terms of the contract have to be construed strictly without altering the nature of a contract as it may affect the interest of either of the parties adversely (Para 23). 6.4 In the case of Harsha Construction Vs. Union of India and Ors.; (2014) 9 SCC 246, it is observed and held by this Court in paragraphs 18 and 19 as under: 11 "18. Arbitration arises from a contract and unless there is a specific written contract, a contract with regard to arbitration cannot be presumed. Section 7(3) of the Act clearly specifies that the contract with regard to arbitration must be in writing. Thus, so far as the disputes which have been referred to in Clause 39 of the contract are concerned, it was not open to the Arbitrator to arbitrate upon the said disputes as there was a specific clause whereby the said disputes had been "excepted". Moreover, when the law specifically makes a provision with regard to formation of a contract in a particular manner, ....
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....he Arbitral Tribunal, or whether they do not arise out of the statement of claim and the counterclaim filed before the Arbitral Tribunal. A dispute, even if it is capable of being decided by arbitration and falling within the scope of an arbitration agreement, will not be "arbitrable" if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such a joint list of disputes, does not form part of the disputes raised in the pleadings before the Arbitral Tribunal." 6.6 After referring to and considering in detail the earlier decisions on the point, more particularly, with respect to nonarbitrability and the 'excepted matters', it is ultimately concluded in para 76 as under: "76. In view of the above discussion, we would like to propound a fourfold test for determining when the subject matter of a dispute in an arbitration agreement is not arbitrable: 76.1.(1) When cause of action and subjectmatter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem. 76.2.(2) When cause of action and subjectmatter of the dispute affects thirdparty rights; have ....
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.... itself and may not be left unanswered, to be examined and decided by the Arbitral Tribunal. Thereafter, in para 153, it is observed and held that the expression, "existence of arbitration agreement" in Section 11 of the Arbitration Act, would include aspect of validity of an arbitration agreement, albeit the Court at the reference stage would apply the prima facie test. It is further observed that in cases of debatable and disputable facts and, good reasonably arguable case etc., the Court would force the parties to abide by the arbitration Agreement as the Arbitral Tribunal has the primary jurisdiction and authority to decide the disputes including the question of jurisdiction and nonarbitrability. Ultimately in para 154, the proposition of law is crystallized as under: "154. Discussion under the heading 'Who decides Arbitrability?' can be crystallized as under: 154.1. Ratio of the decision in Patel Engineering Ltd. on the scope of judicial review by the court while deciding an application under Sections 8 or 11 of the Arbitration Act, post the amendments by Act 3 of 2016 (with retrospective effect from 23102015) and even post the amendments vide Act 33 of 2019 ....
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.... the matter is demonstrably "nonarbitrable and to cut off the deadwood." It is further observed that the prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straightforward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage. 7. Applying the law laid down by this Court in the aforesaid decisions and considering Clauses 36 and 37 of the Agreement and when a specific plea was taken that the dispute falls within Clause 36 and not under Clause 37 and therefore, the dispute is not arbitrable, the High Court was at least required to hold a primary inquiry/review and prima facie come to conclusion on whether the dispute falls under Clause 36 or not and whether the dispute is arbitrable or not. Without holding such primary inquiry and despite having observed that a party does have a right to seek enforcement of agreement before the Court of law as per Clause 36, thereafter, has appointed the arbitrators by solely observing that the same does not bar settlement of disputes through Arbitration and Conciliation Act, 1996. However, the High Court has not appreciated and consi....