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2026 Supreme(Online)(P&H) 96742
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Lapita Banerji, J
SUNIL KUMAR – Appellant
Versus
MRS VEENA TANDON AND OTHERS – Respondent
ARB-139-2025 (O&M)
For the Appellants/Petitioners: Sumeet Jain
For the Respondents: Ajit Singh, Keshav Dogra, Tushar Wadhwa, Abhijeet, Ankush Thakur, Sonia Sharma
Under Section 11 of the Arbitration and Conciliation Act, 1996, the court's role is limited to a prima facie determination of the existence of a valid arbitration agreement; issues regarding contract validity or execution are for the arbitral tribunal to decide under the competence-competence principle.
Headnote:The matter involves an application under Section 11(5) of the Arbitration and Conciliation Act, 1996, concerning an Agreement to Sell dated September 06, 2021. The petitioner sought the appointment of an arbitrator under Clause 15 of the agreement after the respondents attempted to resile from the contract despite partial payment of consideration. The court found that a valid arbitration agreement existed between the parties. The primary issue was whether the court should refer the matter to arbitration when the respondents claimed the contract was void due to lack of free consent and the subject property was mortgaged. The court held that under the principle of 'competence-competence' and the guidelines established in Vidya Drolia, the court's role at the Section 11 stage is limited to a prima facie examination of the existence of a valid arbitration agreement, and issues regarding the merits of the contract are for the arbitrator to decide. Therefore, it allows the petition under Section 11(5) of the Arbitration and Conciliation Act, 1996 by appointing Mr. M.M Kumar, Chief Justice (Retd.).
LAPITA BANERJI, J.(ORAL)
Learned counsel appearing on behalf of the petitioner refers to Clause 15 of the Agreement to Sell dated September 06, 2021. The said agreement was signed between the petitioner and all the seven respondents. Clause 15 of the said agreement is reproduced hereinunder:-
“15. That in case of default on the part of First Party/Second Party then both the Parties herein shall resolve all disputes in connection with this agreement amicably by mutual negotiation failing which, the parties herein shall refer the dispute for arbitration in accordance with the Arbitration and Conciliation Act, 1996, with its statutory modifications, enactments or re-enactments thereto, before resorting to Litigation in which case the Court in Gurugram (Gurgaon) will have the Jurisdiction. The venue for arbitration shall be Gurugram (Gurgaon) and the cost of arbitration shall be shared equally by the Parties.”
It is submitted that the petitioner has paid some consideration to the respondents, but the respondents are now seeking to resile from the said agreement. Therefore, he prays for the dispute and differences to be resolved by way of arbitration proceedings pursuant to Clause 15 of the said agreement.
Notice of motion was issued on the respondents on March 04, 2025. Several adjournments were granted since the respondents did not file their replies. Thereafter, paper publication was also done. Vide an order dated March 25, 2026, the Coordinate Bench of this Court recalled the order dated February 03, 2026 directing that respondents Nos. 1, 2, 3, and 5 be proceeded against ex parte and allowed participation of the said respondents. Vide order dated July 03, 2026, this Court gave last opportunity to the respondents to file their replies.
Today, replies have been filed on behalf of the respondents.
Learned counsel appearing on behalf of the respondents submits that the parties did not seek to amicably resolve the disputes and differences between the parties as per Clause 15 of the said agreement. Furthermore, attention of the Court is drawn to paragraph 11 of the judgment of the Apex Court in Vidya Drolia and others Vs. Durga Trading Corporation reported in 2021(2) SCC 1 to submit that a concluded contract did not exist between the parties as there was no free consent. Unless there is consideration paid as per the Indian Contract Act, 1872 and the contract is entered into without coercion or undue influence, the contract will be void and unenforceable.
In the present case, the facts are distinguishable. The contract between the parties is regarding an agreement of sale in the present case and not a landlord-tenant dispute that was the subject matter of the case under reference. There is no allegation that the said contract was entered into between the parties as a result of force, undue influence or coercion on the part of the petitioner. Also a part of the consideration has been paid by the petitioner. Therefore, the decision in Vidya Drolia (supra) is not applicable to the facts of the present case.
He also relies on the said judgment to submit that the property in question i.e. the subject matter of dispute has already been mortgaged. The proceedings against the said property are pending before the learned Debts Recovery Tribunal, therefore, the agreement of sale could not be proceeded with. He refers to paragraph No.82 of the Vidya Drolia (supra) and the same is reproduced hereinafter:-
“82. An interesting and relevant exposition, when assertions claiming repudiation, rescission or ‘accord and satisfaction’ are made by a party opposing reference, is to found in Damodar Valley Corporation v. K.K. Kar , (1974) 1 SCC 141 which had referred to an earlier judgment of this Court in Union of India v. Kishorilal Gupta & Bros., AIR 1959 Supreme Court 1362 to observe:
“11. After a review of the relevant case law, Subba Rao, J., as he then was, speaking for the majority enunciated the following pr
