Supreme Court of India
M/S. EMAAR INDIA LTD.versusTARUN AGGARWAL PROJECTS LLP & ANR.
- Citation
- 2022 INSC 1049
- Decided
- 30 September 2022
- Disposal
- Appeal(s) allowed
- Bench
- M R SHAH
Holding
A court must first determine, on a prima facie basis, whether a dispute is non‑arbitrable under an express ‘excepted’ clause before appointing arbitrators, and failure to do so invalidates the appointment.
Summary
M/s Emaar India Ltd entered into a Collaboration Agreement and a 2011 Addendum with Tarun Aggarwal Projects LLP. A dispute arose concerning performance under clauses 3, 6 and 9 of the Addendum, and the parties invoked Clause 36, which permits specific performance in a court, while Clause 37 provides for arbitration of other matters. The Delhi High Court, ignoring the claim that the dispute fell within Clause 36, appointed arbitrators under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996. Emaar appealed, arguing that the High Court should have first examined whether the dispute was non‑arbitrable under the express ‘excepted’ clause. The Supreme Court held that when an agreement expressly excludes certain disputes from arbitration, the court must conduct a prima facie inquiry at the reference stage to determine arbitrability; failure to do so renders the appointment of arbitrators invalid. Consequently, the appeal was allowed, the High Court’s order was set aside, and the matter was remitted for a fresh inquiry under Section 11.
Issues considered
- Whether the dispute falls within Clause 36 of the Addendum Agreement and is therefore non‑arbitrable.
- Whether the High Court was required to conduct a preliminary inquiry into arbitrability before appointing arbitrators under Section 11(5) & (6) of the Arbitration and Conciliation Act, 1996.
- Whether a court can appoint arbitrators when the arbitration agreement expressly excludes certain disputes.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 11(5), s. 11(6), s. 34(2)(a), s. 34(2)(b), s. 8
Subjects
ArbitrationArbitrabilitySection 11Non‑arbitrable clauseContract interpretationAddendum agreementCourt appointment of arbitratorsPreliminary inquiryArbitration Act 1996
Judgment
[2022] 13 S.C.R. 933 933
M/S. EMAAR INDIA LTD. A
v.
TARUN AGGARWAL PROJECTS LLP & ANR.
(Civil Appeal No. 6774 of 2022)
SEPTEMBER 30, 2022 B
[M. R. SHAH AND KRISHNA MURARI, JJ.]
Arbitration and Conciliation Act, 1996 – s.11(6) – Appointment
of arbitrator – Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the High Court allowing the
C
application u/ss. 11(5) & (6) and appointing the arbitrators with
respect to the dispute between the parties, the original applicant-
respondent has preferred the instant appeal – Held: When a specific
plea was taken that the dispute falls within Clause 36 of the
Addendum agreement and not under Clause 37 and therefore, the
dispute is not arbitrable, the High Court was at least required to D
hold a primary inquiry and prima facie come to conclusion on
whether the dispute falls under Clause 36 or not and whether the
dispute is arbitrable or not – High Court has not appreciated and
considered the fact that in case of dispute as mentioned in Clauses
3, 6 and 9 for enforcement of the Agreement, the dispute is not
E
arbitrable at all – Impugned judgment and order passed by the
High Court appointing the arbitrators in terms of Clause 37 of the
Addendum Agreement is hereby quashed and set aside – Matter is
remitted to the High Court to decide the application u/s 11(5) and
(6) afresh and to pass appropriate order after holding preliminary
inquiry/review on whether the dispute is arbitrable or not and/or F
whether the dispute falls within Clause 36 of the Addendum
Agreement or not.
Vidya Drolia and Ors. v. Durga Trading Corporation
(2021) 2 SCC 1 : [2021] 6 JT 460; Indian Oil
Corporation Limited v. NCC Limited 2022 SC OnLine G
SC 896 (Civil Appeal No. 341 of 2022, decided on
20.07.2022); Oriental Insurance Co Ltd. v. Narbheram
Power and Steel (P) Ltd., (2018) 6 SCC 534 : [2018] 4
SCR 826; Rajasthan State Industrial Development and
Investment Corporation v. Diamond and Gem
H
933
934 SUPREME COURT REPORTS [2022] 13 S.C.R.
A Development Corporation Ltd. (2013) 5 SCC 470:
[2013] 4 SCR 331; Harsha Construction v. Union of
India and Ors. (2014) 9 SCC 246: [2014] 7 SCR 668;
Booz Allen & Hamiltan Inc. v. SBI Home Finance Ltd.
(2011) 5 SCC 532 : [2011] 7 SCR 310; Garware Wall
Ropes Ltd. v. Coastal Marine Constructions &
B
Engg.;(2019) 9 SCC 209 : [2019] 5 SCR 579; United
India Insurance Co. Ltd. v. Hyundai Engg. &
Construction Co. Ltd. (2018) 17 SCC 607 : [2018] 12
SCR 1085 – relied on.
Uttarakhand Purv Sainik Kalyan Nigam Limited v.
C Northern Coal Field Limited (2020) 2 SCC 455 –
referred to.
Case Law Reference
(2020) 2 SCC 455 referred to Para 3.1
D [2018] 4 SCR 826 relied on Para 6.2
[2013] 4 SCR 331 relied on Para 6.3
[2011] 7 SCR 310 relied on Para 6.5
[2019] 5 SCR 579 relied on Para 6.7
E [2018] 12 SCR 1085 relied on Para 6.7
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6774
of 2022.
From the Judgment and Order dated 24.12.2021 of the High Court
F of Delhi at New Delhi in Arb. P. No.637 of 2021.
Dhanesh Relan, Ms. Bhavna Kohli, Arindam Dey, Ms. Saubhagya
Sundriyal, Gautam Narayan, Advs. for the Appellant.
Siddharth Bhatnagar, Sr. Adv., Siddharth Mittal, Nadeem Afroz,
Pracheta Kar, Aditya Sidhra, Prabhat Kumar, Tapan M., Kshitiz Chauhan,
G Advs. for the Respondents.
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment
H and order dated 24.12.2021 passed by the High Court of Delhi at New
M/S. EMAAR INDIA LTD. v. TARUN AGGARWAL PROJECTS 935
LLP & ANR. [M. R. SHAH, J.]
Delhi in Arbitration Petition No. 637 of 2021, by which, the High Court A
in exercise of powers under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the Arbitration Act)
has appointed arbitrators to resolve the dispute between the parties, the
original respondent – M/s EMMAR India Limited has preferred the
present appeal.
B
2. That the original petitioners –respondents herein entered into a
Collaboration Agreement dated 07.05.2009 for development of a
residential colony in Sector 62 and 65, Gurugram. That thereafter, a
further Addendum Agreement dated 19.04.2011 was executed between
the parties. The dispute arose between the parties and it was the case
on behalf of the original applicants – respondents herein that the appellant C
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 D
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 E
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 F
Clause 37 which incorporates arbitration clause.
2.2 Despite having noted that the Clause 36 of the Addendum
Agreement stipulates that in the event of any dispute with regard to
Clauses 3, 6 and 9, other party shall have a right to get the agreement
specifically enforced through appropriate court of law, the High Court G
has appointed the arbitrators in terms of Clause 37 of the Addendum
Agreement by observing that conjoint reading of Clauses36 and 37 makes
it clear that a party does have a right to seek enforcement of agreement
before the Court of law but it does not bar settlement of disputes through
Arbitration and Conciliation Act, 1996. By observing so, the High Court H
936 SUPREME COURT REPORTS [2022] 13 S.C.R.
A has allowed the application under Section 11(5) & (6) and has appointed
the arbitrators, who shall appoint the third arbitrator in terms of Clause
37.
2.3 Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the High Court allowing the application under Section
B 11(5) & (6) of the Arbitration Act and appointing the arbitrators with
respect to the dispute between the parties, the original opponent –
respondent has preferred the present appeal.
3. Shri Dhanesh Relan, learned counsel appearing on behalf of
the appellant has vehemently submitted that while allowing the application
C under Section 11(5) & (6) and appointing the arbitrators, the High Court
has not at all considered that according to the appellant the dispute falls
within Clause 36 of the Agreement and not under Clause 37. It is submitted
that as per Clause 36 in case of any conflict or difference arising between
the parties or in case the either party refuses or neglects to perform its
part of the obligations under Addendum Collaboration Agreement, inter-
D alia, as mentioned in Clauses 3, 6 and 9, then the other party shall have
every right to get the agreement specifically enforced through the
appropriate court of law. It is submitted that as per Clause 37, save and
except Clause 36 or any dispute arising out of or touching upon or in
relation to the terms of the addendum agreement…… shall be settled
E through under the provisions of the Arbitration and Conciliation Act, 1996.
It is submitted that therefore any dispute with regard to the Clauses 3, 6,
9 shall have to be resolved through the appropriate court of law and
such dispute is not arbitrable at all. It is submitted that despite the High
Court has noted Clauses 36 & 37, without deciding whether the dispute
falls within Clause 36 the High Court appointed the arbitrators.
F
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
G 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
H
M/S. EMAAR INDIA LTD. v. TARUN AGGARWAL PROJECTS 937
LLP & ANR. [M. R. SHAH, J.]
manifestly and ex facie certain that the arbitration agreement is non- A
existent, invalid or the disputes are non-arbitrable, though the nature and
facet of non-arbitrability 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
B
demonstrably “non-arbitrable” and to cut off the deadwood.
3.3 Learned counsel appearing on behalf of the appellant has also
relied upon the recent decision of this Court in the case of Indian Oil
Corporation Limited Vs. NCC Limited; 2022 SCC OnLine SC
896 (Civil Appeal No. 341 of 2022, decided on 20.07.2022), in
which after considering the decision of this Court in the case of Vidya C
Drolia (supra), this Court after taking into consideration other decisions
has observed and held that at the stage of Section 11 of the Arbitration
Act, a preliminary inquiry is permissible if the dispute is raised with respect
to the arbitrability.
3.4 Relying upon the above decisions, it is vehemently submitted D
by learned counsel appearing on behalf of the appellant that in the facts
and circumstances of the case, the High Court has virtually ignored
Clause 36 of the Agreement. It is submitted that the High Court was
required to hold a preliminary inquiry on whether considering Clause 36
of the Agreement, the dispute between the parties falls within Clause 36 E
or not. It is submitted that if in preliminary inquiry it is found that the
dispute falls within Clause 36 in that case such a dispute is not arbitrable
at all. It is, therefore, prayed to allow the present appeal and quash and
set aside the judgment and order passed by the High Court.
4. While opposing the present appeal Shri Siddharth Bhatnagar, F
learned Senior Advocate appearing on behalf of the respondents has
vehemently submitted that even as observed and held by this Court in
the case of Vidya Drolia (supra) whether the dispute is arbitrable or
not, it should be best left to the arbitrator in an application under Section
16 of the Arbitration Act and it is for the arbitrator to decide the
arbitrability of the dispute. G
4.1 It is submitted that on conjoint reading of Clauses 36 and 37 of
the Agreement and the intention of the parties to resolve the dispute
through arbitration under the Arbitration Act, no error has been committed
by the High Court in appointing the arbitrators.
H
938 SUPREME COURT REPORTS [2022] 13 S.C.R.
A 5. We have heard learned counsel appearing on behalf of the
respective parties at length.
6. The short question which is posed for consideration of this
Court is whether in the facts and circumstances of the case, the High
Court is justified in appointing the arbitrators in an application under
B Section 11(5) and (6) of the Arbitration Act without holding any
preliminary inquiry or inquiry on whether the 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: -
C “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,
inter-alia as mentioned in Clauses 3, 6 & 9 hereinabove, then the
D 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,
E 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
F arbitration proceedings shall be governed by the provisions of
Arbitration and Conciliation Act, 1996 or any statutory amendments/
modification thereto for the time being in force. The arbitration
proceedings shall be held at Delhi.”
On a bare reading of Clause 36 of the Agreement, it clearly
stipulates that in the event of any dispute as mentioned in Clauses 3, 6
G
and 9, other party shall have a right to get the Agreement specifically
enforced through the appropriate court of law. As per Clause 37, save
and except Clause 36, all or any dispute arising out of or touching upon
or in relation to the terms of the addendum agreement……. shall be
settled through under the provisions of Arbitration and Conciliation Act,
H 1996. Thus, with respect to any dispute as mentioned in Clauses 3, 6 &
M/S. EMAAR INDIA LTD. v. TARUN AGGARWAL PROJECTS 939
LLP & ANR. [M. R. SHAH, J.]
9, such disputes are not arbitrable at all. It cannot be disputed that both A
the parties are governed by the Addendum Agreement dated 19.04.2011.
6.2 In the case of Oriental Insurance Co Ltd. Vs. Narbheram
Power and Steel (P) Ltd., (2018) 6 SCC 534, it is observed and held
by this Court that the parties are bound by the Clauses enumerated in
the policy and the Court does not transplant any equity to the same by B
rewriting a clause. It is further observed and held that an arbitration
clause is required to be strictly construed. Any expression in the clause
must unequivocally express the intent of arbitration. It can also lay the
postulate in which situations the arbitration clause cannot be given effect
to. It is further observed that if a clause stipulates that under certain
circumstances there can be no arbitration and they are demonstrably C
clear then the controversy pertaining to appointment of Arbitrator has to
be put to rest (Paras 10-23).
6.3 In the case of Rajasthan State Industrial Development
and Investment Corporation Vs. Diamond and Gem Development
Corporation Ltd.; (2013) 5 SCC 470, it is observed and held by this D
Court that a party cannot claim anything more than what is covered by
the terms of the contract, for the reason that the contract is a transaction
between two parties and has been entered into with open eyes and by
understanding the nature of contract. It is further observed that thus the
contract being a creature of an agreement between two or more parties E
has to be interpreted giving literal meanings unless there is some ambiguity
therein. The contract is to be 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 F
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: -
G
“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 H
940 SUPREME COURT REPORTS [2022] 13 S.C.R.
A 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, there cannot be any presumption with regard
to a contract if the contract is not entered into by the mode
prescribed under the Act.
B
19. If a non-arbitrable dispute is referred to an Arbitrator and
even if an issue is framed by the Arbitrator in relation to such a
dispute, in our opinion, there cannot be a presumption or a
conclusion to the effect that the parties had agreed to refer the
issue to the Arbitrator. In the instant case, the respondent
C authorities had raised an objection relating to the arbitrability of
the aforestated issue before the Arbitrator and yet the Arbitrator
had rendered his decision on the said “excepted” dispute. In our
opinion, the Arbitrator could not have decided the said “excepted”
dispute. We, therefore, hold that it was not open to the Arbitrator
D to decide the issues which were not arbitrable and the award, so
far as it relates to disputes regarding non-arbitrable disputes is
concerned, is bad in law and is hereby quashed.”
6.5 In the recent decision in the case of Vidya Drolia (supra),
which, as such, is post-insertion of Section 11(6-A) of the Arbitration
E Act, it is observed and held that the issue of non-arbitrability of a dispute
is basic for arbitration as it relates to the very jurisdiction of the Arbitral
Tribunal. An Arbitral Tribunal may lack jurisdiction for several reasons
and non-arbitrability has multiple meanings. After referring to another
decision of this Court in the case of Booz Allen & Hamiltan
Inc. Vs. SBI Home Finance Ltd. [(2011) 5 SCC 532 (Para 34)], it
F is observed and held that there are facets of non-arbitrability, namely
“(i) Whether the disputes are capable of adjudication and
settlement by arbitration? That is, whether the disputes, having
regard to their nature, could be resolved by a private forum chosen
by the parties (the Arbitral Tribunal) or whether they would
G exclusively fall within the domain of public fora (courts).
(ii) Whether the disputes are covered by the arbitration
agreement? That is, whether the disputes are enumerated or
described in the arbitration agreement as matters to be decided
by arbitration or whether the disputes fall under the “excepted
H matters” excluded from the purview of the arbitration agreement.
M/S. EMAAR INDIA LTD. v. TARUN AGGARWAL PROJECTS 941
LLP & ANR. [M. R. SHAH, J.]
(iii) Whether the parties have referred the disputes to A
arbitration? That is, whether the disputes fall under the scope of
the submission to the 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
B
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 non-arbitrability and the C
‘excepted matters’, it is ultimately concluded in para 76 as under:
“76. In view of the above discussion, we would like to
propound a four-fold test for determining when the subject matter
of a dispute in an arbitration agreement is not arbitrable:
D
76.1.(1) When cause of action and subject-matter 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 subject-matter of the
dispute affects third-party rights; have erga omnes effect; require
E
centralized adjudication, and mutual adjudication would not be
appropriate and enforceable;
76.3.(3) When cause of action and subject-matter of the
dispute relates to inalienable sovereign and public interest functions
of the State and hence mutual adjudication would be
F
unenforceable;
76.4 (4) When the subject-matter of the dispute is expressly
or by necessary implication non-arbitrable as per mandatory
statute(s).
76.5 These tests are not watertight compartments; they G
dovetail and overlap, albeit when applied holistically and
pragmatically will help and assist in determining and ascertaining
with great degree of certainty when as per law in India, a dispute
or subject matter is non-arbitrable. Only when the answer is
affirmative that the subject matter of the dispute would be non-
arbitrable. H
942 SUPREME COURT REPORTS [2022] 13 S.C.R.
A 76.6 However, the aforesaid principles have to be applied
with care and caution as observed in Olympus Superstructures
(P) Ltd. Vs. Meena Vijay Khetan and Ors.; (1999) 5 SCC
651: (SCC p. 669, para 35)
“35. …Reference is made there to certain disputes like
B criminal offences of a public nature, disputes arising out of illegal
agreements and disputes relating to status, such as divorce, which
cannot be referred to arbitration. It has, however, been held that
if in respect of facts relating to a criminal matter, say, physical
injury, if there is a right to damages for personal injury, then such
C a dispute can be referred to arbitration (Keir v. Leeman). Similarly,
it has been held that a husband and a wife may refer to arbitration
the terms on which they shall separate, because they can make a
valid agreement between themselves on that matter
(Soilleux v. Herbst, Wilson v. Wilson and Cahill v. Cahill).”
D 6.7 On the question, who decides on non-arbitrability of the dispute,
after referring to and considering the earlier decisions on the point, more
particularly, the decisions in the cases of Garware Wall Ropes
Ltd. Vs. Coastal Marine Constructions & Engg.; (2019) 9 SCC
209; United India Insurance Co. Ltd. Vs. Hyundai Engg. &
Construction Co. Ltd.; (2018) 17 SCC 607, and Narbheram Power
E & Steel (P) Ltd. (supra), it is observed and held that the question of
non-arbitrability relating to the inquiry, whether the dispute was governed
by the arbitration clause, can be examined by the Courts at the reference
stage 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
F 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
G
has the primary jurisdiction and authority to decide the disputes including
the question of jurisdiction and non-arbitrability. 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:
H
M/S. EMAAR INDIA LTD. v. TARUN AGGARWAL PROJECTS 943
LLP & ANR. [M. R. SHAH, J.]
154.1. Ratio of the decision in Patel Engineering Ltd. on A
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 23-
10-2015) and even post the amendments vide Act 33 of 2019
(with effect from 9-8-2019), is no longer applicable.
B
154.2. Scope of judicial review and jurisdiction of the court
under Section 8 and 11 of the Arbitration Act is identical but
extremely limited and restricted.
154.3. The general rule and principle, in view of the legislative
mandate clear from Act 3 of 2016 and Act 33 of 2019, and the C
principle of severability and competence-competence, is that the
arbitral tribunal is the preferred first authority to determine and
decide all questions of non-arbitrability. The court has been
conferred power of “second look” on aspects of non-arbitrability
post the award in terms of sub-clauses (i), (ii) or (iv) of Section
D
34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration
Act.
154.3. Rarely as a demurrer the court may interfere at the
Section 8 or 11 stage when it is manifestly and ex facie certain
that the arbitration agreement is non-existent, invalid or the disputes
E
are non-arbitrable, though the nature and facet of non-arbitrability
would, to some extent, determine the level and nature of judicial
scrutiny. The restricted and limited review is to check and protect
parties from being forced to arbitrate when the matter is
demonstrably “non-arbitrable” and to cut off the deadwood. The
court by default would refer the matter when contentions relating F
to non-arbitrability are plainly arguable; when consideration in
summary proceedings would be insufficient and inconclusive; when
facts are contested; when the party opposing arbitration adopts
delaying tactics or impairs conduct of arbitration proceedings. This
is not the stage for the court to enter into a mini trial or elaborate
G
review so as to usurp the jurisdiction of the arbitral tribunal but to
affirm and uphold integrity and efficacy of arbitration as an
alternative dispute resolution mechanism.”
6.8 In the case of Vidya Drolia (supra), it is specifically observed
and held by this Court that rarely as a demurrer, the Court may interfere
H
944 SUPREME COURT REPORTS [2022] 13 S.C.R.
A at Section 8 or 11 stage when it is manifestly and ex facie certain that
“the arbitration agreement is non-existent, invalid or the disputes
are non-arbitrable”, though the nature and facet of non-arbitrability
would, to some extent, determine the level and nature of judicial scrutiny.
It is further observed that the restricted and limited review is to check
and protect parties from being forced to arbitrate when the matter is
B
demonstrably “non-arbitrable 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.
C
7. Applying the law laid down by this Court in the aforesaid
decisions and considering Clauses36 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
D 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
E
and Conciliation Act, 1996.However, the High Court has not appreciated
and considered the fact that in case of dispute as mentioned in Clauses
3, 6 and 9 for enforcement of the Agreement, the dispute is not arbitrable
at all. In that view of the matter, the impugned judgment and order passed
by the High Court appointing the arbitrators is unsustainable and the
F same deserves to be quashed and set aside. However, at the same time,
as the High Court has not held any preliminary inquiry on whether the
dispute is arbitrable or not and/or whether the dispute falls under Clause
36 or not, we deem it proper to remit the matter to the High Court to hold
a preliminary inquiry on the aforesaid in light of the observations made
G by this Court in the case of Vidya Drolia (supra) and in the case of
Indian Oil Corporation Limited (supra) and the observations made
hereinabove and thereafter, pass an appropriate order.
8. In view of the above and for the reasons stated above the
present appeal succeeds. The impugned judgment and order passed by
the High Court appointing the arbitrators in terms of Clause 37 of the
H
M/S. EMAAR INDIA LTD. v. TARUN AGGARWAL PROJECTS 945
LLP & ANR. [M. R. SHAH, J.]
Addendum Agreement dated 19.04.2011 is hereby quashed and set aside. A
The matter is remitted to the High Court to decide the application under
Section 11(5) and (6) of the Arbitration Act afresh and to pass an
appropriate order after holding a preliminary inquiry/review on whether
the dispute is arbitrable or not and/or whether the dispute falls within
Clause 36 of the Addendum Agreement or not. The present appeal is
B
accordingly allowed. No costs.
Devika Gujral Appeal allowed.
(Assisted by : Deepak Panwar, LCRA)
C
D
E
F
G
H
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