2010 Supreme(SC) 1095

2010 (8) Supreme 129
SUPREME COURT OF INDIA
T.S. Thakur,J.
Alva Aluminium Ltd. Bangkok — Applicant
versus
Gabriel India Limited — Respondent
Arbitration Petition No.2 of 2010
Decided on : 16-11-2010

IMPORTANT POINT
A heavy duty lies upon the party who seeks to avoid a contract on the ground of mis-representation, fraud or coercion to prove any such allegation.

Headnote:Arbitration and Conciliation Act,1996- Sections 11(5) , 11(9)-Petition for appointment of arbitrator by petitioner –Respondent contested said petition on plea that no valid arbitration agreement existed between parties so as to call for the appointment of an arbitrator in terms thereof- Issue in consideration whether Court in a petition under Sections 11(5) and 11(9) of Act, 1996 was required to determine the existence of an arbitration agreement between parties? –Held that once existence of arbitration agreement itself is questioned by any party to the proceeding initiated under Section 11 of Act, the same will have to be decided by Chief Justice/designate as the case may be- That is because existence of an arbitration agreement is a jurisdictional fact which will have to be addressed while making an order on a petition under Section 11 of the Act- The position may be different where arbitration proceedings are initiated before a nominated arbitral Tribunal but the opposite party appears to dispute the existence of the arbitration agreement- In any such situation Arbitral Tribunal can itself decide issue in exercise of its powers under Section 16(1) of the Act -So also the parties may without approaching Chief Justice refer the matters in dispute to nominated Tribunal including the question whether there exists an arbitration agreement.- In any such case also Arbitral Tribunal can determine the existence of arbitration agreement- Suffice it to say that power available to Arbitral Tribunal under Section 16 of the Act does not imply that the issue can be or ought to be left to be determined by Arbitral Tribunal even in cases where one of the parties has filed a petition under Section 11 of the Act and the other party opposes the making of a reference on the ground that there exists no arbitration agreement between them- Question whether or not an arbitration agreement exists between the parties will have to be answered for it is only if the answer to that question is in affirmative that Chief Justice or his designate can pass an order of reference of the disputes for adjudication (Paras 17, 18)

        Arbitration and Conciliation Act,1996- Sections 11(5) , 11(9)-Petition for appointment of arbitrator by petitioner –Respondent contested said petition on plea that no valid arbitration agreement existed between parties so as to call for the appointment of an arbitrator in terms thereof-Issue in consideration whether any such arbitration agreement had indeed been executed between parties in the instant case to call for appointment of an arbitrator for adjudication of disputes and differences that had arisen between them?- The defence set up by respondent was that information and correspondence provided by respondent was only suggestive of “some sort of negotiation” between parties held unsustainable-The documents, information and correspondence when taken in their totality especially in light of the signed contract document that stipulated mutual rights and obligations of the parties not showed that parties were simply negotiating a contract- The information provided, the correspondence exchanged and documents executed on the contrary were clearly suggestive of the parties having finalized and signed a contract- No material to establish that signatures appended by D to contract document in token of its acceptance, was vitiated by any misrepresentation or such other considerations that could have the effect of vitiating contract- In absence of details and particulars of what, according to respondent, constituted inducement, mis-guidance or mis-direction ,held difficult to see how a fluent use of such expressions could help respondent in avoiding a contract that had come into existence between parties- A heavy duty lies upon party who seeks to avoid a contract on the ground of mis-representation, fraud or coercion to prove any such allegation- Nothing of sort had been done in the instant case by the respondent-Totality of circumstances, showed that a legally valid contract had indeed come into existence between the parties which contained an arbitration clause for adjudication of disputes that might arise between them-Petition allowed (Paras 20 to 23)

       Facts of the Case :

        Two Issues that arose for consideration in present case was (1) Whether this Court is in a petition under Sections 11(5) and 11(9) of the Arbitration and Conciliation Act, 1996 required to determine the existence of an arbitration agreement between the parties? and (2) Whether any such agreement has indeed been executed between the parties in the present case to call for the appointment of an arbitrator for adjudication of the disputes and differences that have arisen between them?

       Findings of the Court :

        Once existence of arbitration agreement itself is questioned by any party to the proceeding initiated under Section 11 of Act, the same will have to be decided by Chief Justice/designate as the case may be. That is because existence of an arbitration agreement is a jurisdictional fact which will have to be addressed while making an order on a petition under Section 11 of the Act. The position may be different where arbitration proceedings are initiated before a nominated arbitral Tribunal but the opposite party appears to dispute the existence of the arbitration agreement. In any such situation Arbitral Tribunal can itself decide issue in exercise of its powers under Section 16(1) of the Act .So also the parties may without approaching Chief Justice refer the matters in dispute to nominated Tribunal including the question whether there exists an arbitration agreement. In any such case also Arbitral Tribunal can determine the existence of arbitration agreement. Suffice it to say that power available to Arbitral Tribunal under Section 16 of the Act does not imply that the issue can be or ought to be left to be determined by Arbitral Tribunal even in cases where one of the parties has filed a petition under Section 11 of the Act and the other party opposes the making of a reference on the ground that there exists no arbitration agreement between them.Question whether or not an arbitration agreement exists between the parties will have to be answered for it is only if the answer to that question is in affirmative that Chief Justice or his designate can pass an order of reference of the disputes for adjudication.

        There was no material to establish that signatures appended by D to contract document in token of its acceptance, was vitiated by any misrepresentation or such other considerations that could have the effect of vitiating contract. In absence of details and particulars of what, according to respondent, constituted inducement, mis-guidance or mis-direction ,held difficult to see how a fluent use of such expressions could help respondent in avoiding a contract that had come into existence between parties. A heavy duty lies upon party who seeks to avoid a contract on the ground of mis-representation, fraud or coercion to prove any such allegation. Nothing of sort had been done in the instant case by the respondent. Totality of circumstances, showed that a legally valid contract had indeed come into existence between the parties which contained an arbitration clause for adjudication of disputes that might arise between them. Petition was allowed.

       Result : Petition allowed