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IN THE HIGH COURT OF DELHI AT NEW DELHI
Prathiba M.Singh, J.
Surender Kumar Singhal & Ors - Appellant
Versus
Arun Kumar Bhalotia & Ors - Respondent
C.M. (M) No. 1272 of 2019; CM Appls No. 38560 of 2019, 38561 of 2019, 41024 of 2019
Decided On : 25-03-2021
ARBITRATION - JURISDICTION - SECTION 16 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - SCOPE AND EXTENT OF INTERFERENCE - WHETHER ARBITRAL TRIBUNALS ARE TRIBUNALS OVER WHICH WRIT JURISDICTION CAN BE EXERCISED - WHETHER THE ARBITRAL TRIBUNAL HAS THE OPTION OF KEEPING OPEN THE ISSUE OF JURISDICTION TO BE DECIDED AFTER RECORDING EVIDENCE AND AFTER HEARING FINAL ARGUMENTS - WHETHER THE ARBITRAL TRIBUNAL CAN POSTPONE THE DECISION IN THE PLEA - WHETHER THE ARBITRAL TRIBUNAL IS MANDATED TO DECIDE THE PLEA - WHETHER THE ARBITRAL TRIBUNAL CAN DECIDE THE OBJECTION WITH A SENSE OF URGENCY - WHETHER THE ARBITRAL TRIBUNAL CAN FRAME A PRELIMINARY ISSUE AND DECIDE THE SAME AS SOON AS POSSIBLE - WHETHER THE ARBITRAL TRIBUNAL CAN DIRECT LIMITED EVIDENCE TO BE LED ON THE ISSUE AND ADJUDICATE THE SAME - WHETHER THE ARBITRAL TRIBUNAL CAN ADJUDICATE THE OBJECTIONS UNDER SECTION 16 OF THE ACT AS SOON AS POSSIBLE, AS A PRELIMINARY GROUND.
Fact of the Case:
The Petitioners, who were not parties to the arbitration agreement, were arrayed as Respondents in the arbitration proceedings and raised an objection that the Tribunal does not have any jurisdiction to adjudicate the claims against them. The Petitioners contended that they are bonafide purchasers of one of the properties and have valid title to the same and that the arbitration clause does not bind them. The Arbitrator held that the objection as to jurisdiction would be decided along with the final award. An application for recall of the order was filed, which was rejected. The Petitioners then filed a petition under Article 227 of the Constitution of India, challenging the orders of the Arbitrator.
Finding of the Court:
The Court held that arbitral tribunals are tribunals over which writ jurisdiction can be exercised by High Courts and that the scope of interference is limited in nature. The Court further held that Section 16 of the Arbitration and Conciliation Act, 1996 mandates the Arbitral Tribunal to decide the plea of jurisdiction raised by a party and that the Tribunal cannot postpone the decision in the plea. The Court also held that the Arbitral Tribunal can decide the objection with a sense of urgency and can frame a preliminary issue and decide the same as soon as possible. The Court further held that the Arbitral Tribunal can direct limited evidence to be led on the issue and adjudicate the same.
Issues: 1. Whether arbitral tribunals are tribunals over which writ jurisdiction can be exercised by High Courts and what is the scope of interference? 2. What is the law governing applications under Section 16 of the Arbitration & Conciliation Act, 1996 and manner of consideration by arbitral tribunals? 3. Whether on the facts of the present case, interference is warranted challenging the orders passed by the arbitral tribunal?
Ratio Decidendi: 1. Arbitral tribunals are tribunals over which writ jurisdiction can be exercised by High Courts. However, the scope of interference is limited in nature. 2. Section 16 of the Arbitration and Conciliation Act, 1996 mandates the Arbitral Tribunal to decide the plea of jurisdiction raised by a party and that the Tribunal cannot postpone the decision in the plea. The Arbitral Tribunal can decide the objection with a sense of urgency and can frame a preliminary issue and decide the same as soon as possible. The Arbitral Tribunal can also direct limited evidence to be led on the issue and adjudicate the same. 3. On the facts of the present case, interference is not warranted challenging the orders passed by the arbitral tribunal.
Final Decision: The Court dismissed the petition filed by the Petitioners.
JUDGMENT
Prathiba M. Singh, J. - This judgment has been pronounced through video conferencing.
Brief Background
2. Disputes arose between two branches of one family -
One led by Sh. Arun Kumar Bhalotia - Respondent No.1 and his family members consisting of his wife - Smt. Sunita Bhalotia- Respondent No.2 and two sons, namely, Sh. Anant Bhalotia and Sh. Ayush Bhalotia, (Respondents No. 3 and 4 respectively) and
The second branch led by his brother - Sh. Gopal Kumar Bhalotia (Respondent No.5) and his family consisting of his wife - Smt. Sunita Bhalotia (Respondent No.6) and two children, namely, Smt. Smriti Bhalotia (Respondent No.7) and Sh. Anshul Bhalotia (Respondent No.8).
3. Cs(Os) 384/2017 titled Sh. Arun Kumar Bhalotia & Anr Vs. Sh. Gopal Kumar Bhalotia was filed before this Court, in which an application was moved by Respondent No. 5 (Sh. Gopal Kumar Bhalotia) under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act').
4. Vide order dated 9th January, 2018, the ld. Single Judge of this Court, referred the disputes to Arbitration by a sole Arbitrator. The relevant portion of the said order reads as under:
"1. After hearing the counsels for the parties, this suit is disposed of by referring the disputes in the present suit as also disputes which may arise in any manner with respect to or connected with the family settlement/partition dated 15.7.2009, to the Arbitration of Shri B. B. Chaudhary, District & Sessions Judge (Retired) Mobile No.9910384611.
2. Counsels for the parties also agree that irrespective of the wording of the arbitration clause in the family settlement/partition dated15.7.2009, the Arbitrator hereby appointed to determine the disputes between the parties connected to or with respect to the family settlement/partition dated 15.7.2009 will proceed in accordance with the procedure and other aspects as specified under the Arbitration &Conciliation Act, 1996. It is further clarified that parties will be entitled to file their claims and counter claims before the Arbitrator and which will not be restricted to the pleadings as raised in the present suit and claims and counter-claims to be filed can encompass all reliefs and claims which arise pursuant to the family settlement/partition deed dated 15.7.2009. "
5. Pursuant to the above reference, claim petition was filed before the Arbitrator and counter claim was raised by the Respondent No. 5 (Shri Gopal Kumar Bhalotia).In the arbitral proceedings, the Petitioners herein (namely, Shri Surender Kumar Singhal, Shri Ramkishan Aggarwal, Shri Rajesh Kumar, Shri Kishore Kumar Aggarwal, Smt. Chetna Bansal and Shri Lovelesh Aggarwal) were arrayed as Respondents No. 5 to 10 and vide order dated 11th April, 2019, notice was issued to the said Respondents for appearing before the Arbitrator. On 16th April, 2019, notice was served in the arbitration proceedings to the Petitioners.
6. The Petitioners herein then filed an application under Section 16 of the Act and raised an objection that the Tribunal does not have any jurisdiction to adjudicate the claims against the Petitioners. One of the grounds raised in the application was that the Petitioners are bonafide purchasers of one of the properties and have valid title to the same and that the arbitration clause does not bind them. It was stated in the application that the Petitioners were neither party to the suit in the High Court nor a party to the arbitration agreement and since they are completely third parties, they cannot be compelled to participate in the arbitration proceedings. Thus, a prayer was made to dismiss the arbitration proceedings qua the Petitioners on the ground that the Arbitral Tribunal has no jurisdiction to entertain any claims against the Petitioners. In the said application the ld. Arbitrator held vide order dated 8th July 2019 that the objection as to jurisdiction would be decided along with the final award. An application for recall of the order was filed, which was rejected on
The Arbitral Tribunal has the power to rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose, a....
Section 12 sets out grounds of challenge to person appointed as arbitrator and duty of an arbitrator appointed, to disclose any disqualification he may have.
Judicial interference under Article 227 is limited in arbitration matters, especially when a comprehensive mechanism exists under the Arbitration and Conciliation Act for addressing non-arbitrability....
It must be noted that Section 16 of Arbitration Act, necessarily mandates that issue of jurisdiction must be dealt first by tribunal, before court examines same under Section 34.
Point of law: Drill of Section 16 of the Arbitration and Conciliation Act, 1996 is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 applicat....
Point of law : Drill of Section 16 of the Arbitration and Conciliation Act, 1996 is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 applica....
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