AUTHOR
Aravind prakash is currently pursuing B.COM LLB )Hons) form School of Legal studies, Cochin University of Science and Technology. He is a member of LJRF Ernakulam chapter and he is also a student member of Project Complete Lawyer.
INTRODUCTION
The Supreme Court gave its milestone judgement in DLF Homes Developers Ltd. v. Rajapura Homes Pvt. Ltd. and Anr.1 by widening the gamut of judicial inquiry in arbitration matters. The apex court, inter alia, has expressed, in detail, the numerous inferences on Arbitral proceedings when there is more than one Agreement being referred to, especially concerning the appointment of Arbitrator.
FACTS IN BRIEF
Resimmo PCC, a company incorporated in Mauritius, for acquiring ownership in Rajapura Homes Private Limited (RHPL) &BegurOmr Homes Pvt. Limited (BHPL), executed two separate Share Purchase Agreements (SPA) with DLF Home Developers Limited (Petitioner). To achieve the purpose, the parties needed to execute Construction Management Agreements (CMA 1&2) which mandate the petitioner to provide construction management services to RHPL & BHPL till completion of certain residential projects. The petitioner after completing the construction issued completion notices to both RHPL & BHPL but the same were rejected by them stating various reasons. To resolvethis, the petitioner invoked the arbitration clauses of CMA 1&2 which contemplate arbitration under the Arbitration and Conciliation Act, 1996 (the Act) with its venue and seat at New Delhi, and sought to appoint a sole arbitrator. But the respondents declined the request by contending that this dispute falls under the ambit of SPA which require the arbitration to be conductedat Singaporeas per the rules of the Singapore International Arbitration Centre. Aggrieved by the denial, the petitioner filed two arbitration petitions under section 11(6) of the Act before the Supreme Court seeking appointment of sole arbitrator as contemplated under CMA 1& 2.
LEGAL ISSUE INVOLVED:
The moot issues considered by the Supreme Court are;
- Whether the arbitrability of the dispute in these two petitions falls within the Arbitration Clause(s) of CMA 1 & 2?
- Whether there is a need for a consolidated and composite tribunal to resolve the disputes arising from CMA 1 & 2?
DECISION
The Petitioner submitted inter alia that this Court while dealing with anapplication under Section 11(6) of the Act has a narrow scope ofexamination, confined only to trace out whether there exists an‘arbitrable dispute’ and a ‘written contract’ providing ‘arbitration’ asthe Dispute Resolution Mechanism. It was further contended that as the existence of the arbitration clauses in CMA 1 & 2 is admitted by the respondents, the matter is to be dealt with under the arbitration clauses therein.
Discussing the first issue, the Court relied on Superstructure Case[1]and held that to find the nature of arbitral proceedings, two sets of agreements must be read in harmony so a conclusion can be drawn as to which of the clauses would be applicable. The Supreme Court observed that a judicial intervention under Section 11(6-A) of the Act is not to take over the jurisdiction of the Arbitral Tribunal but to streamline the arbitration proceedings. In the present dispute, the arbitration clauses of CMA 1 & 2 are substantially different when compared with the dispute resolution clauses of the SPA even though the former is a condition precedent for effectuating the latter. From a bare reading of these two sets of agreements, it is clear that their subject matter and field of operation is unique and unmistakable. Since the present disputes pertain to construction-related obligations, they cannot be construed as a dispute which is connected with or in relation to the object of SPA. Thus, the subject disputes could be only adjudicated through Arbitral clauses under the CMA 1 & 2.
Dealing with the second issue, the court held that, as a rule,both CMA 1 & 2 though related and connected, shall be treated as two separate agreements which stand on their own feet. For this reason, it would be unfitting to consolidate the arbitral proceedings stemming out of CMA1 & 2. But an exception applies to the above mentioned rule, i.e., if the dispute relates to the similar calculation of financial components in the agreements, it would be wise not to set up two distinct arbitration tribunals to settle the same. Thus, the apex court given discretion to the sole arbitrator to consolidate and adjudicate the dispute under a single composite award if he thinks it is necessary to do so and also to choose the appropriate modus operandi to conduct two separate arbitral proceedings.
ANALYSIS
The comprehensiveness of judicial inquiry under Section 11 of the Act is debatable and lacked clarity. Interestingly, in the DuroFelguera case[2], the Supreme Court widened the scope of this section and held that the Courts should also look into the disputes between the contracting parties which can be brought under the arbitration provided by the agreement. Also, in VidyaDrolia case[3], the apex court included a yardstick to check the validity of an arbitration agreement, i.e. arbitrability of the dispute. Now, with this decision, the apex court has provided a broader interpretation by increasing the powers of the courts referring matters to arbitration.
CONCLUSION
The Supreme Court has solved the complexity in the arbitral proceedings if there are more than one agreement involved. The apex court also clarified that the courts are not supposed to act mechanically while inspecting the existence of an arbitration agreement; rather the courts shall apply their judicial minds to the arbitrability or non-arbitrability of core issues. This judgment will become a precedent that expands the gamut of judicial inquiry in arbitration proceedings under section 11 of the Act.
Reference
1.(1999) 5 SCC 651
2. (2017) 9 SCC 729
3. (2021) 2 SCC 1
EDITOR
Praveena.C is a member of LJRF palakkad Chapter and is the editor of lawexams.co.in and ljrf voice. she had completed her graduation BBA LLB from Government law College, Thrissur and her Masters specialized in Administrative law from the same college.
