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2022 Supreme(SC) 990

M. R. SHAH, KRISHNA MURARI
Emaar India Ltd. – Appellant
Versus
Tarun Aggarwal Projects LLP – Respondent


Advocates appeared:
For the Appellant(s) : Mr. Dhanesh Relan, Adv. Mr. Arindam Dey, Adv. Mr. Gautam Narayan, AOR Ms. Asmita Singh, Adv.
For the Respondent(s): Mr. Siddharth Mittal, AOR Mr. Prabhat Kumar, Adv. Mr. Kshitiz Chauhan, Adv. Ms. Shilpa G. Mittal, Adv.

Judgement Key Points

Certainly. Based on the provided legal document, here are the key points:

  1. The core issue pertains to the appointment of an arbitrator and whether the dispute is arbitrable under the terms of the agreement, specifically focusing on the jurisdiction of the arbitral tribunal (!) .

  2. The agreement contains specific clauses—Clause 36 and Clause 37—that delineate the dispute resolution process. Clause 36 allows for the dispute to be enforced through a court of law in certain circumstances, particularly for disputes related to specific clauses (Clauses 3, 6, and 9). Clause 37 specifies that other disputes should be settled through arbitration (!) (!) .

  3. When a dispute arises that falls under Clause 36, it is not arbitrable and must be addressed through appropriate court proceedings. Conversely, disputes falling outside of Clause 36 are subject to arbitration (!) .

  4. The court's role at the initial stage of arbitration proceedings, particularly under Section 11 of the Arbitration and Conciliation Act, is limited. It is primarily responsible for determining whether the dispute is arbitrable and whether the dispute falls within the scope of the arbitration agreement. This involves a preliminary inquiry into the nature of the dispute and the relevant contractual clauses (!) (!) .

  5. The court must scrutinize whether the dispute is capable of being arbitrated and whether it falls within the scope of the arbitration agreement, especially considering any ‘excepted matters’ explicitly excluded from arbitration by the agreement or law (!) (!) .

  6. The decision on arbitrability is a jurisdictional issue and may be decided by the court or, in certain circumstances, by the arbitral tribunal itself. The court's review should be limited to manifest and clear cases where the dispute is clearly non-arbitrable or where the arbitration agreement is invalid (!) .

  7. The court emphasized the importance of holding a preliminary inquiry when there is a specific plea that the dispute falls under an exception (such as Clause 36). Without such inquiry, appointment of arbitrators may be premature and legally unsustainable (!) .

  8. The court's authority to appoint arbitrators without first examining whether the dispute is arbitrable is limited. If it is found that the dispute falls within an exception or is non-arbitrable, the appointment is invalid. The matter should be remanded for a proper preliminary review (!) (!) .

  9. The judgment underscores that the primary responsibility for determining non-arbitrability lies with the court at the initial stage, and this determination should be made after a proper review of the contractual clauses and the nature of the dispute (!) (!) .

  10. Ultimately, if the court fails to conduct this preliminary inquiry, its order appointing arbitrators can be set aside, and the matter should be reconsidered after such an inquiry. This ensures that arbitration is not enforced in cases where disputes are non-arbitrable by law or contract (!) .

These points collectively highlight the importance of a preliminary judicial review to determine whether a dispute is arbitrable, especially when specific contractual clauses exclude certain disputes from arbitration.


JUDGMENT :

M.R. Shah, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 24.12.2021 passed by the High Court of Delhi at New Delhi in Arbitration Petition No. 637 of 2021, by which, the High Court in exercise of powers under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Arbitration Act) has appointed arbitrators to resolve the dispute between the parties, the original respondent – M/s EMMAR India Limited has preferred the present appeal.

2. That the original petitioners – respondents herein entered into a Collaboration Agreement dated 07.05.2009 for development of a residential colony in Sector 62 and 65, Gurugram. That thereafter, a further Addendum Agreement dated 19.04.2011 was executed between the parties. The dispute arose between the parties and it was the case on behalf of the original applicants – respondents herein that the appellant herein did not comply with the obligations under the Addendum Agreement dated 19.04.2011. The respondents – original applicants/petitioners issued a legal notice dated 20.11.2019 raising demand for physical possession of 5 plots measuring 2160 sq. yds. and claiming a s


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