INTRODUCTION
Today, I will discuss the case of DLF Home
Developers Limited v. Rajapura Homes Private Limited & Another,
2021 SCC OnLine SC 781, wherein the Hon’ble Supreme Court discussed Section 11
of the Arbitration & Conciliation Act, 1996 (in short, “Arbitration Act”),
that deals with appointment of arbitrators. The facts of the case are not
necessary for the purposes of this show and hence, the same are not being discussed
here.
SECTION 11 OF THE ARBITRATION ACT
But before adverting any further, let us understand
the basics of Section 11 of the Arbitration Act. Section 11 (1) provides that a
person of any nationality may be appointed as an arbitrator. S. 11 (2) provides
that the parties are free to agree on a procedure for appointing the arbitrator.
S. 11 (6) provides that where the parties to fail to reach an agreement relating
to appointment of arbitrator or fails to appoint the same and if the agreement
does not provide for any means for securing the appointment, then the parties
may approach the Supreme Court or the High Court, as the case may be, for such
appointment. Under S. 11 (6A), the Court must confine its examination to the
existence of an arbitration agreement and designate an appropriate arbitrator. In
order to understand S. 11 of the Arbitration Act in a better manner, let us go
through the pertinent observations by the Supreme Court.
OBSERVATIONS BY THE COURT
Firstly, the Court observed that “the
jurisdiction of this Court under Section 11 is primarily to find out whether
there exists a written agreement between the parties for resolution of disputes
through arbitration and whether the aggrieved party has made out a prima facie
arbitrable case. The limited jurisdiction, however, does not denude this Court
of its judicial function to look beyond the bare existence of an arbitration
clause to cut the deadwood.”
Secondly, it was noted that the Court, “with
a view to prevent wastage of public and private resources, may conduct ‘prima
facie review’ at the stage of reference to weed out any frivolous or vexatious
claims.”
Thirdly, the Court opined that the stage of
appointment of arbitrator “is not the stage for the court to enter into a
mini trial or elaborate review so as to usurp the jurisdiction of the Arbitral
Tribunal but” the real purpose is “to affirm and uphold integrity
and efficacy of arbitration as an alternative dispute resolution mechanism.”
Fourthly, the Court clarified that under S. 11,
the Court “has to refer a matter to arbitration or to appoint an
arbitrator, as the case may be, unless a party has established a prima facie
(summary findings) case of nonexistence of valid arbitration agreement, by
summarily portraying a strong case that he is entitled to such a finding.”
Fifthly, the Court discussed the three guiding
principles with respect to the scope of the Court to examine the prima facie
validity of an arbitration agreement: -
1. Whether the arbitration agreement was in
writing?
2. Whether the arbitration agreement constitutes
as a valid and legal contract?
3. Whether the subject-matter of the dispute is
arbitrable?
Sixthly, it was observed that the Courts “are
not expected to act mechanically merely to deliver a purported dispute raised
by an applicant at the doors of the chosen Arbitrator. On the contrary, the
Court(s) are obliged to apply their mind to the core preliminary issues,
albeit, within the framework of Section 11(6-A) of the Act. Such a review…. is
not intended to usurp the jurisdiction of the Arbitral Tribunal but is aimed at
streamlining the process of arbitration. Therefore, even when an arbitration
agreement exists, it would not prevent the Court to decline a prayer for
reference if the dispute in question does not correlate to the said agreement.”
And lastly, the Court noted that in cases where
there are two valid arbitration clauses in a dispute, the Court is expected to
harmonize such arbitration clauses and find a way forward.
Those were the observations by the Court. So, what
are my concluding remarks?
CONCLUDING REMARKS
In conclusion, it could be said that in order to
attract applicability of S. 11 of the Arbitration Act: -
a. The Arbitration Agreement must be in writing.
b. The Arbitration Agreement must be a valid and a
legal contract.
c. The subject-matter of the dispute must be
arbitrable and not frivolous or vexatious.
d. The dispute raised must relate to the agreement
between the parties; and
e. In case of existence of two valid arbitration
clauses, the Court must harmonize such clauses to uphold the integrity and
efficacy of arbitration as an alternate dispute resolution mechanism.
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