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HIGH COURT OF DELHI
SHRI TARUN CHANDER MALIK ..... Petitioner
Through: Mr. Amit Sethi and Mr. Arpit Goel, Advocates.
Through: Mr. Akshay Makhija, Sr. Advocate along
JUDGMENT
1. The present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (the „A&C Act‟) has been filed seeking appointment of a Sole Arbitrator to adjudicate the disputes between the parties.
2. Briefly stated, the facts are that the petitioner is the owner/landlord of the building bearing Municipal No. 68, Janpath, New Delhi 110001, which he had leased out to the respondent company for a period of 15 years w.e.f. 01.08.2008 vide Lease Deed dated 07.08.2008. The respondent is stated to have defaulted in payment of monthly rent which has led to accumulation of huge arrears. The Lease Deed is also stated to have expired by efflux of time on 31.07.2023. The petitioner has served legal notices upon the respondent seeking payment of arrears of rent and calling upon the respondent to handover the vacant possession of the leased premises, however, the respondent is neither paying the rent/occupation charges nor handing over the possession of the leased premises to the petitioner. Disputes having arisen between the parties, the petitioner vide letter dated 12.08.2023, invoked the arbitration clause contained in the Lease Deed and sought consent of the respondent for resolution of disputes by arbitration in accordance with the rules of Delhi International Arbitration Centre. Respondent is stated to have not replied to the said notice.
3. Consequently, the petitioner seeks appointment of a sole arbitrator, in terms of Clause 26(e) of the Lease Deed, which is reproduced below:
[2021] EWHC 872 (Ch) [2021] EWHC 2015 (TCC) decision of the Supreme Court in Vidya Drolia v. Durga Trading Corpn.,[8] and NTPC Ltd. v. SPML Infra Ltd.9, even if the existence of an arbitration clause is in doubt, reference can be made to arbitration, leaving the said issue to be decided by the arbitrator.
6. I have heard the parties and perused the record. I find no merit in the objections raised by the respondent. The reasons are enumerated hereunder.
7. In terms of the settled legal position, the scope of inquiry in a petition under Section 11 of the A&C is limited to examination of the existence of an arbitration agreement. Recently, in Interplay between Arbitration Agreements under the Arbitration & Conciliation Act, 1996 & the Indian Stamp Act, 1899, In re,10 a seven-Judges‟ Bench of the Supreme Court has held as under:
162. The legislature confined the scope of reference under Section 11(6A) to the examination of the existence of an arbitration agreement. The use of the term “examination” in itself connotes that the scope of the power is limited to a prima facie determination. Since the Arbitration Act is a self-contained code, the requirement of “existence” of an arbitration agreement draws effect from Section 7 of the Arbitration Act. In Duro Felguera (supra), this Court held that the referral courts only need to consider one aspect to determine the existence of an arbitration agreement - whether the underlying contract contains an arbitration agreement which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement. Therefore, the scope of examination under Section 11(6A) should be confined to the existence of an arbitration
2023 SCC OnLine SC 1666 agreement on the basis of Section 7. Similarly, the validity of an arbitration agreement, in view of Section 7, should be restricted to the requirement of formal validity such as the requirement that the agreement be in writing. This interpretation also gives true effect to the doctrine of competence-competence by leaving the issue of substantive existence and validity of an arbitration agreement to be decided by arbitral tribunal under Section 16. We accordingly clarify the position of law laid down in Vidya Drolia (supra) in the context of Section 8 and Section 11 of the Arbitration Act.
163. The burden of proving the existence of arbitration agreement generally lies on the party seeking to rely on such agreement. In jurisdictions such as India, which accept the doctrine of competence-competence, only prima facie proof of the existence of an arbitration agreement must be adduced before the referral court. The referral court is not the appropriate forum to conduct a minitrial by allowing the parties to adduce the evidence in regard to the existence or validity of an arbitration agreement. The determination of the existence and validity of an arbitration agreement on the basis of evidence ought to be left to the arbitral tribunal. This position of law can also be gauged from the plain language of the statute.”
8. In the present case, prima facie, an arbitration clause exists between the parties. The issue of interpretation of Clause 26(e) and/or substantive existence and validity of an arbitration agreement can be decided by an arbitral tribunal under Section 16 of the A&C Act.
9. On a prima facie conspectus, a bare perusal of Clause 26(e) reveals that it is in two parts; the first part confers exclusive jurisdiction on the courts at Delhi to adjudicate the disputes between the parties and the second part mandates reference of the disputes arising under the agreement to arbitration. This Court in Sunita Garg v. Scraft Product (P) Ltd.11, has held that if there is any contractual stipulation which undermines the scope of arbitration clause contained in any contract, the same will be accorded an 2023 SCC OnLine Del 1093: (2023) 297 DLT 717 interpretation which gives full effect to the arbitration agreement between the parties. Relevant extracts of the said decision are as under:
23. In A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386, Dr. D.Y. Chandrachud, J. in his separate opinion observed that: “53. The Arbitration and Conciliation Act, 1996, should in my view be interpreted so as to bring in line the principles underlying its interpretation in a manner that is consistent with prevailing approaches in the common law world. Jurisprudence in India must evolve towards strengthening the institutional efficacy of arbitration. Deference to a forum chosen by parties as a complete remedy for resolving all their claims is but part of that evolution. Minimising the intervention of courts is again a recognition of the same principle.”
24. In Govind Rubber Ltd. v. Louids Dreyfus Commodities Asia (P) Ltd., (2015) 13 SCC 477, it has been held as under:— “17. We are also of the opinion that a commercial document having an arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than invalidate it. On the principle of construction of a commercial agreement, Scrutton on Charter Parties (17th Edn., Sweet & Maxwell, London, 1964) explained that a commercial agreement has to be construed, according to the sense and meaning as collected in the first place from the terms used and understood in the plain, ordinary and popular sense (see Article 6 at p. 16). The learned author also said that the agreement has to be interpreted “in order to effectuate the immediate intention of the parties”. Similarly, Russell on Arbitration (21st Edn.) opined, relying on Astro VencedorCompaniaNaviera S.A. v. Mabanaft GmbH [((1970) 2 Lloyd's Rep 267], that the court should, if the circumstances allow, lean in favour of giving effect to the arbitration clause to which the parties have agreed. The learned author has also referred to another judgment in Paul Smith Ltd. v. H and S International Holdings Inc. [(1991) 2 Lloyd's Rep 127] in order to emphasise that in construing an arbitration agreement the court should seek to “give effect to the intentions of the parties”.
25. The same approach to interpretation of arbitration agreements has been followed across jurisdictions. For instance, the United States Supreme Court in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 US 614 (1985), 626 (U.S. S.Ct. 1985), has affirmed as under:— “… The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.”
26. Similarly, in the United Kingdom, in Premium Nafta Products Ltd. v. Fili Shipping Company Ltd., [2007] UKHL 40 (House of Lords), it was held as under:— “The proposition that any jurisdiction or arbitration clause in an international commercial contract should be liberally construed promotes legal certainty. It serves to underline the golden rule that if the parties wish to face issues as to the validity of their contract decided by one tribunal and issues as to its meaning or performance decided by another, they must say so expressively. Otherwise, they will be taken to have agreed on a single tribunal for the resolution of all such disputes.”
27. With regard to the view taken in some older authorities to the effect that the arbitration clauses must be interpreted restrictively, it is stated by Gary B. Born in International Arbitration: Law and Practice, Third Edition as under: “The “restrictive” presumption is generally explained on the grounds that arbitration is a derogation from otherwise available access to civil justice and the “natural judge” of the contract, and that such derogations must be construed narrowly. Thus, in an older decision, a French appellate court declared that “[t]he arbitration agreement must be strictly interpreted as it departs from the norm - and in particular from the usual rules as to the jurisdiction of the courts.” „This restrictive interpretative presumption is archaic and out of step with the ordinary intentions of commercial parties; it is generally not applied in contemporary decisions.”
10. The intention of the parties to refer disputes “arising from the present agreement [lease deed] … to Arbitration as per the provisions of Arbitration and Conciliation Act 1996” is manifestly clear from Clause 26(e). On a harmonious reading, the first part of Clause 26(e) only confers supervisory jurisdiction of arbitration on the courts at Delhi. Clause 26(e) cannot be construed in any other way so as to defeat the very purpose of the arbitration clause or to render it otiose. Therefore, the conflict, if any, between the first and second part of Clause 26(e) has to be resolved in favour of arbitration.
11. The approach of the courts in other jurisdiction is also similar and courts have endeavoured to give effect to an arbitration stipulation rather than to adopt an interpretation which permits the parties to avoid the same. Recently, in Melford Capital Partners (supra), the High Court of England and Wales has harmoniously construed an exclusive jurisdiction clause with a later arbitration clause as under:
80. In my judgment the parties can be taken to have agreed to a separable arbitration agreement and I will give effect to it. As necessary, I will give effect to cl.27.[2] inasmuch as the English court retains a supervisory jurisdiction over any arbitration. I thus do not find that the agreement to arbitrate is inoperative as contended by Mr Grant QC”.
12. The decisions of the Supreme Court in Sahebzada Mohammad (supra) and Radha Sundar Dutta (supra), which say if two clauses in a deed cannot be reconciled then the earlier provision in the deed prevails over the later, are clearly not applicable to the facts of the present case. In the present case, the first part and second part of Clause 26(e) are certainly capable of being harmoniously read. Further, judgement of this court in Sunil Kumar Chandra (supra), relied upon by the respondent, itself notices the judgment of a Constitution Bench of the Supreme Court in Ramkishorelal v. Kamal Narayan12, wherein it has been held as under:
13. In view of the aforesaid, there is no impediment in appointing an independent sole arbitrator to adjudicate the dispute between the parties.
14. Accordingly, Mr. Pulin Kumar, Advocate, (Mobile No.9810797445) is appointed as the sole arbitrator to adjudicate the disputes between the parties.
15. The respondent shall be entitled to raise preliminary objections as regards arbitrability/jurisdiction of the claims which shall be decided by the arbitrator, in accordance with law.
16. The learned Sole Arbitrator may proceed with the arbitration proceedings subject to furnishing to the parties requisite disclosures as required under Section 12 of the A&C Act.
17. The learned Sole Arbitrator shall be entitled to fee in accordance with Fourth Schedule of the A&C Act; or as may otherwise be agreed to between the parties and the learned Sole Arbitrator.
18. Parties shall share the arbitrator‟s fee and arbitral costs, equally.
19. All rights and contentions of the parties in relation to the claims/counter-claims are kept open, to be decided by the learned Arbitrator on their merits, in accordance with law.
20. Needless to say, nothing in this order shall be construed as an expression of this court on the merits of the case.
21. The present petition stands disposed of in the above terms.
SACHIN DATTA, J MARCH 04, 2024