Skip to main content

Referral Court Has Duty To Conclusively Decide Issue Of ‘Existence & Validity Of Arbitration Agreement’

Cause Title : Magic Eye Developers Pvt. Ltd. Vs M/s. Green Edge Infrastructure Pvt. Ltd. & Ors., SLP (C) Nos. 18339-42/2021, Supreme Court Of India

Date of Judgment/Order :

Corum :  M.R. Shah & C. T. Ravikumar, J.

Citied: 

  1. Vidya Drolia and Ors. Vs. Durga Trading Corporation, (2021) 2 SCC 1
  2. N.N. Global Mercantile Private Limited Vs. Indo Unique Flame Ltd. and Ors., 2023 SCC Online SC 495
  3. NTPC Ltd. Vs. SPML Infra Ltd., 2023 SCC Online SC 389 (paragraphs 19, 25 and 28)
  4. Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. and Ors., (2013) 1 SCC 641
  5. Olympus Superstructures (P) Ltd. Vs. Meena Vijay Khetan, (1999) 5 SCC 651

Background

The issue was that when dispute arose between litigants, the appellant herein (original respondent) had argued that the final MOU did not contain any arbitral agreement while the respondent herein  (original applicant) the final MOU is interlinked with previous agreements which had arbitral clause.

The original applicant had approached the High Court under Section 11 of the Arbitration Act for appoint of arbitrators. Before the High Court the appellant herein specifically raised an objection with regard to the existence of an arbitration agreement/clause. The High Court deciding that the arbitrability of the dispute is an involved issue and can be addressed by the learned Arbitral Tribunal, referred the disputes for arbitration and appointed the arbitrator. Hence this appeal.

Judgment

The Supreme Court observed that the short question which is posed for the consideration of this Court is, the jurisdiction of the referral court at pre-referral stage when the issue with respect to the existence and validity of an arbitration agreement is raised.

Section 11 refers to the procedure for Appointment of arbitrators and the actions to be taken when parties and/or the arbitrators fail to agree with the procedure/appointments. At this stage the matter is said to be pre-referral.

As per the settled position of law, pre-referral jurisdiction of the court under Section 11(6) of the Arbitration Act is very narrow and inheres two inquiries. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant’s privity to the said agreement. The Secondary inquiry that may arise at the reference stage itself is with respect to the non-arbitrability of the dispute. Both are different and distinct. 

So far as the non-arbitrability of the dispute is concerned, the court at pre-referral stage and while examining the jurisdiction under Section 11(6) of the Act may even consider prima facie examining the arbitrability of claims. 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. 

However, so far as the dispute with respect to the existence and validity of an arbitration agreement is concerned and when the same is raised at pre-referral stage, the referral court has to decide the said issue conclusively and finally and should not leave the said issue to be determined by the arbitral tribunal. The reason is that the issue with respect to the existence and validity of an arbitration agreement goes to the root of the matter. Sans an agreement, there cannot be any reference to the arbitration. The intention behind the insertion of Section 11(6A) in the Act was to confine the Court, acting under Section 11, to examine and ascertain about the existence of an arbitration agreement.

Setting aside the order of the High Court, the SC observed that if the dispute/issue with respect to the existence and validity of an arbitration agreement is not conclusively and finally decided by the referral court while exercising the pre-referral jurisdiction under Section 11(6) and it is left to the arbitral tribunal, it will be contrary to Section 11(6A) of the Arbitration Act. It is the duty of the referral court to decide the said issue first conclusively to protect the parties from being forced to arbitrate when there does not exist any arbitration agreement and/or when there is no valid arbitration agreement at all.


Comments

Post a Comment

Most viewed this month

Partition proceedings are vitiated even if single co-sharer is not made party or is not served in accordance with law

Cause Title :  Bhagwant Singh vs  Financial Commissioner (Appeals) Punjab, Chandigarh,  CWP-2132-2018 (O&M), High Court Of Punjab & Haryana At Chandigarh Date of Judgment/Order : 31.08.2022 Corum : Hon’ble Mr. Justice Sudhir Mittal Background A large parcel of land was owned by the Nagar Panchayat. Thereafter, some of the co-sharers sold their shares to third parties including the petitioners herein. On 22.11.1995, respondents No.3 to 5 filed an application for partition of the land. The petitioners were not impleaded as parties.  On completion of proceedings, sanad was issued on 28.08.1996. Vide two separate sale deeds dated 28.05.2008 respondents No.3 and 5 sold some portion in favour of respondent No.6 and 7. These respondents sought implementation of the sanad resulting in issuance of warrants of possession dated 05.06.2008. Allegedly, it was then that the petitioners realized that joint land had been partitioned and that proceedings h...
Post a Comment
Read more

Power of Attorney holder can also file cheque bounce cases: Supreme Court

The Supreme Court has held that a criminal complaint in a cheque bounce case can be filed and pursued by a person who holds a power of attorney (PoA) on behalf of the complainant. A three-judge bench headed by Chief Justice P Sathasivam gave the "authoritative" pronouncement on the issue, referred to it by a division bench in view of conflicting judgements of some high courts and the apex court. "We are of the view that the power of attorney holder may be allowed to file, appear and depose for the purpose of issue of process for the offence punishable under Section 138 of the Negotiable Instruments Act (which deals with cheque bounce cases)," the bench, also comprising justices Ranjana Prakash Desai and Ranjan Gogoi, said. The bench, in its judgement, said, "...we clarify the position and answer the questions in the following manner: "Filing of complaint petition under Section 138 of Negotiable Instruments Act through PoA holder is perfectly legal...
1 comment
Read more

Christian who reconverts as Hindu SC will get quota benefits

Amid the controversy over “ghar wapsi”, the Supreme Court on Thursday ruled that a person who “reconverts” from Christianity to Hinduism shall be entitled to reservation benefits if his forefathers belonged to a Scheduled Caste and the community accepts him after “reconversion”. Citing articles by B R Ambedkar and James Massey, and reports by Mandal Commission and Chinappa Commission, the court said: “There has been detailed study to indicate the Scheduled Caste persons belonging to Hindu religion, who had embraced Christianity with some kind of hope or aspiration, have remained socially, educationally and economically backward.” The bench of Justices Dipak Misra and V Gopala Gowda held that a person shall not be deprived of reservation benefits if he decides to “reconvert” to Hinduism and adopts the caste that his forefathers originally belonged to just because he was born to Christian parents or has a Christian spouse. Expanding the scope of a previous Constitution benc...
1 comment
Read more