HC expounds Arbitrator must be free to decide on his/her own jurisdiction as well as the existence of the arbitration agreement despite Court’s reference

 

The Single Bench of the Delhi High Court in the case of Shristi Infrastructure Development Corporation Ltd vs Ircon International Ltd consisting of Justice Anup Jairam Bhambhani noted that despite reference being made by court, the arbitrator must be left free to decide on his/her own jurisdiction including the existence of the arbitration agreement, as permissible u/s 16 of the Arbitration & Conciliation Act which enshrines the kompetenz-kompetenz principle.

Facts

This petition was filed u/s 11 of the Arbitration & Conciliation Act 1996 (‘A&C Act’) through which the petitioner sought the appointment of an arbitrator to adjudicate upon the disputes stated to have arisen with the respondent from an Agreement between them. As per the record, the petitioner invoked arbitration via a notice, to which the respondent sent no reply. 

Contentions Made

Respondent: The Special Conditions of Contract (‘SCCs’) supersede the General Conditions of Contract (‘GCCs’) insofar as the arbitration clause was concerned. The provision in clause 31.0 of the SCCs which relates to settlement of disputes supersedes clause 72.0 of the GCCs which would imply supersession of clause 72.2, which (latter) provision was cited by the petitioner to comprise the arbitration agreement between the parties. So, there was no arbitration agreement between the parties. 

Observations of the Court

The Bench noted that while it is true that clause 1.0 of the SCCs gives an overriding effect to the SCCs over the GCCs, such effect was restricted only to the extent there is a conflict or inconsistency between the provisions of the SCCs and those of the GCCs.

It further noted that there is no provision in the SCCs that specifically override or supersede the arbitration agreement contained in clause 72.2 of the GCCs: 

There is also no evident conflict or inconsistency between the arbitration clause comprised in clause 72.2 of the GCCs and clause 31.0 or any other provision contained in the SCCs.”

It reiterated the conditions laid down by the Apex Court in Vidya Drolia & Ors. vs. Durga Trading Corporation wherein the scope of the Court to examine the prima facie validity of an arbitration agreement was laid down. Reliance was also placed on N.N. Global Mercantile (P) Ltd. vs. Indo Unique Flame Ltd. regarding the doctrine of kompetenz-kompetenz.

It finally noted the following:  

 

• Firstly, an arbitration agreement embedded in a contract is always considered a separate and severable clause, with a standing of its own; by reason of which, supersession of an arbitration agreement must not be lightly inferred.
• Secondly, in consonance with the overarching principle viz. ‘when in doubt, do refer’ whereby the extant, preponderant legal view is that if there is an arbitration agreement between the parties, which is sought to be negated by a party by citing other provisions of a contract, which requires interpretation of the contract, courts must lean towards referring the matter to arbitration.
• Thirdly, despite reference being made by court, the arbitrator must be left free to decide on his/her own jurisdiction including the existence of the arbitration agreement, as permissible u/s 16 of the A&C Act which enshrines the kompetenz-kompetenz principle

Judgment

The Bench allowed the petition, and while leaving it to the arbitrator to consider whether the provisions of the SCCs override and efface the arbitration agreement between the parties as contained in the GCCs, it was satisfied that there was a valid and subsisting arbitration agreement between the parties; that this court has territorial jurisdiction to entertain and decide the present petition; and also that the disputes that are stated to have arisen between the parties as set-out did not appear ex-facie to be non-arbitrable. Hon'ble Ms. Justice Indu Malhotra, former Judge of the Supreme Court was appointed as the learned Sole Arbitrator to adjudicate upon the disputes between the parties.

Case: Shristi Infrastructure Development Corporation Ltd vs Ircon International Ltd 

Citation: ARB.P. 797/2020 & I.A.12516/2020

Bench: Justice Anup Jairam Bhambhani

Decided on: 5^th August 2022 

Read Judgment ;

 

 

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