M/S CHINTELS INDIA LIMITED v. M/S BHAYANA BUILDERS PVT. LTD.

1. This is a petition under Section 11(6) of the Arbitration and Conciliation Act 1996[1] seeking reference of the disputes between the parties to arbitration.

2. The dispute arises in the context of a Contract dated 14 March 2011 executed between the petitioner and the respondent. The petitioner claims that the respondent is in breach of the contract.

3. A notice invoking arbitration was issued by the petitioner to the respondent on 6 January 2023. The respondent replied on 6 February “the 1996 Act”, hereinafter 2023.

4. As the parties have not been able to arrive at a consensus regarding the arbitration, the petitioner has filed the present petition before this Court under Section 11(6) of the 1996 Act.

5. Ms. Manmeet Kaur, learned Counsel for the respondent, emphatically contends that this dispute is not arbitrable, as it has already weathered one round of arbitration and the award passed based on that occasion was challenged and upheld by the court. As such, she submits that these claims would be barred by res judicata.

6. The law regarding the scope of jurisdiction vested in a court under Sections 11(5) and (6) has undergone a complete change with the recent decision in SBI General Insurance Co Ltd v Krish Spinning[2]. In para 114 of the decision, the Supreme Court clearly holds, following its earlier decisions in In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1966 and the Indian Stamp Act 18993, that “the scope of inquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else”. It is also observed that the law laid down in earlier decisions, including Vidya Drolia v Durga Trading Corporation[4] and NTPC Ltd v SPML Infra Ltd[5] can no longer be followed in view of the presently existing conspectus of arbitration law.

7. This Court has, in several decisions, followed SBI General Insurance.

8. The only other aspect which can be seen by a Section 11 Court, according to SBI General Insurance, is whether the Section 11 petition has been filed within three years of the notice issued under Section 21 of the 1996 Act. That requirement is satisfied in the present case.

9. Ms. Manmeet Kaur has placed reliance on a judgment of the High Court of Calcutta in Tantia Constructions Ltd v UOI[6], on the ground that, in the case of an earlier award dealing with the same issue, the High Court of Calcutta had refused to refer the dispute to arbitration, and the decision was upheld by the Supreme Court vide order dated 15 July 2022 in SLP (C) 10722/2022 (Tantia Constructions Ltd v UOI).

10. The decision in Tantia Constructions was rendered prior to the enunciation of law in SBI General Insurance which is by a bench of three Hon’ble Judges.

11. Given the position of law in SBI General Insurance, it is not possible for this Court to examine the aspect of res judicata, raised by Order dated 16 September 2021 in AP 353/2020 Ms. Manmeet Kaur.

12. However, it is clarified that the said aspect as well as all other questions of facts and law would be open to be urged before the learned Arbitral Tribunal.

13. The arbitration clause governing the Contract between the parties reads thus:

14. The petitioner, in its Section 21 notice dated 6 January 2023, has appointed Dr. Satish Chandra, a Hon’ble retired Judge of High Court of Allahabad as its arbitrator. The respondent was called upon to nominate its nominee arbitrator.