Can Arbitration Reference be declined if dispute in question does not correlate to arbitration agreement? SC replies

  

The Supreme Court Bench comprising Chief Justice of India N.V. Ramana and Justice Surya Kant in the case titled DLF Home Developers Limited v. Rajapura Homes Private Limited dated 22-09-2021 gives their views on whether Arbitration Reference can be declined if the dispute in question does not correlate to the arbitration agreement.

Facts of the Case:

The Petitioner DLF Home Developers Limited has filed two separate Arbitration Petitions under Section 11(6) r/w Section 11(12) of the Arbitration and Conciliation Act, 1996, praying for the appointment of a sole arbitrator for resolution of all disputes arising from the SCMA and RCMA.

Submissions of the Petitioner:

The Petitioner has submitted that the Begur Company and Respondent No.1 acted unreasonably in not accepting the notice of completion. The rejection of the notice certifying the completion of the Rajapura Homes Project and Southern Homes Project was allegedly done with the sole purpose of avoiding Respondent No.2’s obligation to pay “Fee” to the Petitioner. The petitioner further submitted that since the parties have not disputed the existence of the arbitration agreement or its core contractual ingredients contained in the SCMA and RCMA, the present dispute, should be referred to arbitration.

 Contentions of the Respondent:

 

The Respondent has contended that the instant disputes could only be arbitrated as per the dispute resolution mechanism specified in Clause 9 of the Rajapura SPA/Southern Homes SPA, namely, the Rules of SIAC with seat and venue of Arbitration at Singapore. Respondent further contended that if the seat of Arbitration were to be found outside India, i.e, Singapore, the instant Applications under Section 11(6) of 1996 Act are not maintainable.

Supreme Court’s Observation and Judgment:

After listening to both the parties, the Apex Court has held that “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.”

In the instant case, the Top Court rule:

“the Parties have neither denied that there is no ‘arbitrable dispute’ between them nor have they challenged the existence of the arbitration clause(s) in the Construction Management Service Agreements. Considering that the primary twin-test envisioned under Section 11(6) of the Act has been satisfied by the Petitioner-DHDL, hence, the instant application(s) are maintainable. The nature of disputes that have arisen between the parties, thus, can be adjudicated in the arbitral proceedings under Clause 11 of the RCMA and SCMA. If on appreciation of the facts and law, the arbitrator finds that the ‘real dispute’ between the parties stems from the Share Purchase Agreements dated 08.07.2016 and 25.01.2017, the arbitrator shall be free to wind up the proceedings with liberty to the Parties to seek redressal under the rules of SIAC.”

 It was further held:

“Since the Fee Agreement provides that the “Fee” can only be calculated after taking into consideration various financial components of both the Rajapura Homes Projects and the Southern Homes Project, it would be necessary for the sake of avoiding wastage of time and resources, and to avoid any conflicting awards, that the disputes under Arbitration Petition No.17 and Arbitration Petition No.16 are referred to a sole Arbitrator. Arbitration Petition No. 16 of 2020 and Arbitration Petition No.17 of 2020 are allowed. This Court appoints Mr. Justice (Retd.) R.V. Raveendran, Former Judge, Supreme Court of India as the sole arbitrator to resolve all disputes/differences between the parties.”

Read Judgement Here:

 

 

 

SOURCE ; .latestlaws.com/

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