M/s Today Homes & Infrastructure Pvt. Ltd vs. Ludhiana Improvement Trust &Anr, Civil Appeal No. 4596 of 2013 [Arising out of SLP(C) No. 7334 of 2010],
Decided on 10th May, 2013
An
application under section 11(6) of Arbitration and Conciliation Act 1996 was filed
in the High Court of Punjab & Haryana. The designate Judge came to a
finding that the main agreement (which contained the arbitration clause) was
not legal and valid and, therefore, the disputes between the parties arising
out of the said agreement could not be referred to an arbitrator and dismissed
the application.
The
Hon’ble Supreme Court held:
“The learned Judge was
only required to decide such preliminary issues such as jurisdiction to
entertain the application, the existence of a valid arbitration agreement,
whether a live claim existed or not, for the purpose of appointment of an
arbitrator. By the impugned order, much more than what is contemplated under
Section 11(6) of the 1996 Act was sought to be decided, without any evidence
being adduced by the parties. The issue regarding the continued existence of
the arbitration agreement, notwithstanding the main agreement itself being
declared void, was considered by the 7-Judge Bench in SBP & Co. Patel
Engineering Ltd. and Another [(2005) 8 SCC 618] and it was held that an
arbitration agreement could stand independent of the main agreement and did not
necessarily become otiose, even if the main agreement, of which it is a part,
is declared void”. [Para 13]
“It may be profitable to
remind ourselves of the observations made by the 7-Judge Bench in SBP & Co.
(supra), regarding what the Chief Justice is really required to decide on an
application being made to him under Section 11(6) of the 1996 Act. In paragraph
39 of the judgment, it has been stated that obviously the Chief Justice has
to first decide his own jurisdiction and whether the party concerned has
approached the right High Court. He also has to decide whether there is an
arbitration agreement and as to whether the person who has made the request
before him, is a party to such agreement. Their Lordships further indicated
that it was necessary to mention that the learned arbitrator could also
decide the question as to whether the claim was a dead one or a long-barred
claim that was sought to be resurrected. Summing up its views, in paragraph
47 of the judgment, the 7-Judge Bench, while holding that the power
exercised by the Chief Justice of the High Court or the Chief Justice of India
under Section 11(6) of the 1996 Act is not an administrative power but a
judicial one, also held that the Chief Justice or the designated Judge would
have the right to decide the preliminary aspects, as indicated hereinbefore.”
[Para 16]
The
Court also noted following case laws:
Reva Electric Car Company Private Limited Vs. Green Mobil
[(2012) 2 SCC 93], wherein the provisions of Section 16(1) in the backdrop of
the doctrine of kompetenz kompetenz were considered and it was inter alia held
that:
“under Section 16(1), the legislature makes it clear that
while considering any objection with regard to the existence or validity of the
arbitration agreement, the arbitration clause, which formed part of the
contract, had to be treated as an agreement independent of the other terms of
the contract. Reference was made in the said judgment to the provisions of
Section 16(1)(b) of the 1996 Act, which provides that even if the arbitral
tribunal concludes that the contract is null and void, it should not result, as
a matter of law, in an automatic invalidation of the arbitration clause. It was
also held that Section 16(1)(a) of the 1996 Act presumes the existence of a
valid arbitration clause and mandates the same to be treated as an agreement
independent of the other terms of the contract. By virtue of Section 16(1)(b)
of the 1996 Act, the arbitration clause continues to be enforceable,
notwithstanding a declaration that the contract was null and void’.
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