𝐈𝐬 𝐚 𝐃𝐢𝐬𝐩𝐮𝐭𝐞 𝐏𝐞𝐫𝐭𝐚𝐢𝐧𝐢𝐧𝐠 𝐭𝐨 𝐭𝐡𝐞 𝐄𝐥𝐞𝐜𝐭𝐢𝐨𝐧 𝐨𝐟 𝐎𝐟𝐟𝐢𝐜𝐞 𝐁𝐞𝐚𝐫𝐞𝐫𝐬 𝐨𝐟 𝐚 𝐒𝐨𝐜𝐢𝐞𝐭𝐲 𝐀𝐫𝐛𝐢𝐭𝐫𝐚𝐛𝐥𝐞?

 Vidya Drolia's case referred to supra makes it clear that if the subject matter of the dispute affects third parties rights, it is not an arbitrable dispute. Hence, the dispute raised by the petitioner is not arbitrable as the said dispute falls within the public domain and can be adjudicated only by the public fora (Courts). The decision rendered by the Hon'ble Supreme Court in the Afcons Infrastructure Ltd. v. Cherian Varkey reported in (2010) 8 SCC 24 also makes it clear in paragraph 27(1) and (2) that disputes involving public interest or interest of numerous persons who are not parties before the Court and disputes relating to election of public offices are non arbitrable. The case on hand falls under the said category as the 2nd respondent Association is a public Association and election of office bearers to the said Association is only in public interest for development and growth of football in the State of Tamil Nadu. There may be numerous other interested persons who may have active interest in the affairs of the 1st and 2nd respondent Association as well as the election of its office bearers. The names of the interested persons cannot be specifically ascertained and further they are also not parties to the dispute raised by the petitioner.

40. The dispute raised by the petitioner has also now become a deadwood in view of the fact that the Arbitral Award passed against the 4th respondent on 18.11.2017 which is the basis of the dispute has been set aside by this Court on 26.02.2020 in O.P. No. 627 of 2018. Therefore, applying the principles laid down by the Supreme Court in Vidya Drolia's case and DLF's case, the dispute raised by the petitioner is non arbitrable.

 In the High Court of Madras

(Before Abdul Quddhose, J.)

Madras Sporting Youngsters Football Club Vs Tamil Nadu Football Association 

O.P. No. 563 of 2019 and O.A. No. 1210 of 2018

Decided on January 31, 2022,

Citation: 2022 SCC OnLine Mad 460

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Supreme Court lays down tests to determine the arbitrability of dispute if one party alleges fraud

 In a recent judgment reported as Rashid Raza (supra), this Court

referred to Sikri, J.’s judgment in Ayyasamy (supra) and then held:

“4. The principles of law laid down in this appeal make a

distinction between serious allegations of forgery/fabrication

in support of the plea of fraud as opposed to “simple

allegations”. Two working tests laid down in para 25 are: (1)

does this plea permeate the entire contract and above all,

the agreement of arbitration, rendering it void, or (2) whether

the allegations of fraud touch upon the internal affairs of the

parties inter se having no implication in the public domain.”

After these judgments, it is clear that “serious allegations of fraud” arise

only if either of the two tests laid down are satisfied, and not otherwise.

The first test is satisfied only when it can be said that the arbitration

clause or agreement itself cannot be said to exist in a clear case in

which the court finds that the party against whom breach is alleged

cannot be said to have entered into the agreement relating to arbitration

at all. The second test can be said to have been met in cases in which

allegations are made against the State or its instrumentalities of

arbitrary, fraudulent, or malafide conduct, thus necessitating the hearing

of the case by a writ court in which questions are raised which are not

predominantly questions arising from the contract itself or breach

thereof, but questions arising in the public law domain.

15. At this stage, it is necessary to deal with the broad statement of

the law in Afcons (supra) and Booz Allen (supra). When Afcons

(supra) refers in paragraph 27(iv) to “cases involving serious and specific allegations of fraud, fabrication of documents,  forgery, impersonation, coercion, etc.”, this must now be understood in the sense laid down in

Ayyasamy (supra) and Rashid Raza (supra). When it comes to

paragraph 27(vi) in Afcons (supra), and paragraph 36(i) in Booz Allen (supra), namely, cases involving prosecution for criminal offences, it is also important to remember that the same set of facts may have civil as well as criminal consequences.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5145 OF 2016

AVITEL POST STUDIOZ LIMITED Vs  HSBC PI HOLDINGS (MAURITIUS) LIMITED 

Dated:August 19, 2020.

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Whether the dispute between licensor and licensee will be arbitrable even if the defendant has not filed application U/S 8 of Arbitration Act?

Objection of learned counsel for the plaintiffs that since no application under Section 8 of the Act has been filed by the defendant, hence the plea for rejection of the plaint cannot be accepted, deserves to be rejected in view of the decision of this Court dated 15th January, 2018 in CS (SO) No. 125/2017 Parasramka Holdings Pvt. Ltd. vs. Ambience Pvt. Ltd. and another, wherein this Court held that party invoking the arbitration clause does not have to file a formal application seeking a specific prayer for reference of the dispute to arbitration as long as it raises an objection in the written statement that the present suit is not maintainable in view of the arbitration clause in the agreement.

33. Keeping in view the aforesaid judgments as well as the judgment in Eastern Medikt (supra) and judgments of the learned Single Judge and Division Bench of this Court in Sharad P. Jagtiani (supra), this Court is of the view that the party invoking the arbitration clause does not have to file a formal application seeking a specific prayer for reference of the dispute to arbitration as long as it raises an objection in the written statement that the present suit is not maintainable in view of the arbitration clause in the agreement.

57. In the present case the defendant on the first day of the appearance itself even before filing of the written statement has raised the objection under Section 8 of the Arbitration and Conciliation Act and hence this objection cannot be summarily rejected on the ground that no application has been filed by the defendant under Section 8 of the Act.

In view of the discussion above, prima facie the plaintiffs have a right in their favour and interest in land which is more than that of a lessee or at least that of an irrevocable licensee. In MANU/SC/0359/1999 : (1999) 5 SCC 651 Olympus Superstructures vs. Meena Vijay, Supreme Court held that the relief of specific performance of an agreement can be awarded by an arbitrator. Thus if the arbitrator can direct creation of an interest in a property, the arbitrator can also award declaration of the interest of the parties in the property. Further, as held in Booz Allen in paragraph 46, an agreement to sell or an agreement to mortgage does not involved any transfer of right in rem but creates a personal obligation and, therefore, the claim for specific performance will be arbitrable contrary to a mortgage which is a transfer of a right in rem. Moreover, as noted in Vidya Drolia, there is nothing in the Transfer of Property Act or the Specific Relief Act which forbids the rights of the parties being decided by arbitration. The rights of the plaintiffs herein at best governed by the Transfer of Property Act or the Specific Relief Act, or that of an irrevocable licensee under the Easements Act can still be decided in arbitration. Consequently the present suits are not maintainable and the parties may avail the remedy of arbitration.

IN THE HIGH COURT OF DELHI

CS (COMM) 184/2020, 

Decided On: 21.07.2020

 Dharamvir Khosla  Vs. Asian Hotels (North) Ltd.

Hon'ble Judges/Coram:

Mukta Gupta, J.

Citation: MANU/DE/1394/2020

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What will be the effect on Arbitrability of dispute if the proceeding is pending before Competition Commission of India?

 In so far as the judgment of Supreme Court in case of

Competition Commission of India v/s. Bharti Airtel Ltd. (supra) relied

upon by the learned senior counsel for the petitioner is concerned, the

said judgment is clearly distinguishable in the facts of this case. The

petitioner in this case had already raised an issue of arbitrability even

in the correspondence at the stage of the respondent invoking

arbitration agreement. It is not the case of the petitioner that the learned

arbitrator has decided the issues which would exclusively fall within

the domain of the CCI in the impugned award.{Para 363}

364. In my view, Mr. Samdani, learned senior counsel for the

respondent is right in his submission that the monetary claim made by

the respondent does not fall within the jurisdiction of the CCI under

Section 61 of the Competition Act. The learned arbitrator has rightly exercised its jurisdiction to entertain the monetary claims made by the respondent and has not exceeded his jurisdiction. The learned arbitrator has only directed the petitioner to pay the contractual dues of the respondent arising out of the sale of seeds.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

IN ITS COMMERCIAL DIVISION

COMMERCIAL ARBITRATION PETITION NO. 737 OF 2019

Nuziveedu Seeds Ltd. Vs  Mahyco Monsanto Biotech (India) Pvt.

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Whether dispute involving simple allegation of fraud are arbitrable?

 In view of our aforesaid discussions, we are of

the opinion that mere allegation of fraud simplicitor

may not be a ground to nullify the effect of

arbitration agreement between the parties. It is only

in those cases where the Court, while dealing with

Section 8 of the Act, finds that there are very

serious allegations of fraud which make a virtual

case of criminal offence or where allegations of

fraud are so complicated that it becomes absolutely

essential that such complex issues can be decided

only by civil court on the appreciation of the

voluminous evidence that needs to be produced, the

Court can sidetrack the agreement by dismissing

application under Section 8 and proceed with the suit

on merits. It can be so done also in those cases

where there are serious allegations of

forgery/fabrication of documents in support of the

plea of fraud or where fraud is alleged against the

arbitration provision itself or is of such a nature

that permeates the entire contract, including the

agreement to arbitrate, meaning thereby in those

cases where fraud goes to the validity of the

contract itself of the entire contract which contains

the arbitration clause or the validity of the

arbitration clause itself. Reverse position thereof

would be that where there are simple allegations of

fraud touching upon the internal affairs of the party

inter se and it has no implication in the public

domain, the arbitration clause need not be avoided

and the parties can be relegated to arbitration.

While dealing with such an issue in an application

under Section 8 of the Act, the focus of the Court

has to be on the question as to whether jurisdiction

of the Court has been ousted instead of focusing on

the issue as to whether the Court has jurisdiction or

not. It has to be kept in mind that insofar as the

statutory scheme of the Act is concerned, it does not

specifically exclude any category of cases as nonarbitrable.

Such categories of non-arbitrable

subjects are carved out by the Courts, keeping in

mind the principle of common law that certain

disputes which are of public nature, etc. are not

capable of adjudication and settlement by arbitration

and for resolution of such disputes, Courts, i.e.

public fora, are better suited than a private forum

of arbitration. Therefore, the inquiry of the Court,

while dealing with an application under Section 8 of

the Act, should be on the aforesaid aspect, viz.

whether the nature of dispute is such that it cannot

be referred to arbitration, even if there is an

arbitration agreement between the parties. When the

case of fraud is set up by one of the parties and on

that basis that party wants to wriggle out of that

arbitration agreement, a strict and meticulous

inquiry into the allegations of fraud is needed and

only when the Court is satisfied that the allegations

are of serious and complicated nature that it would

be more appropriate for the Court to deal with the

subject matter rather than relegating the parties to

arbitration, then alone such an application under

Section 8 should be rejected.

The principles of law laid down in this appeal make a

distinction between serious allegations of

forgery/fabrication in support of the plea of fraud as

opposed to “simple allegations”. Two working tests laid

down in paragraph 25 are : (1) does this plea permeate the

entire contract and above all, the agreement of arbitration,

rendering it void, or (2) whether the allegations of fraud

touch upon the internal affairs of the parties inter se

having no implication in the public domain.

Judged by these two tests, it is clear that this is a

case which falls on the side of “simple allegations” as

there is no allegation of fraud which would vitiate the

partnership deed as a whole or, in particular, the

arbitration clause concerned in the said deed. Secondly,

all the allegations made which have been relied upon by the

learned counsel appearing on behalf of the respondent,

pertain to the affairs of the partnership and siphoning of

funds therefrom and not to any matter in the public domain.

This being the case, we are of the view that the

disputes raised between the parties are arbitrable and,

hence, a Section 11 application under the Arbitration Act

would be maintainable.

‘REPORTABLE’

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7005 OF 2019

RASHID RAZA Vs  SADAF AKHTAR 

R. F. NARIMAN, J.

Dated:September 04, 2019.

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Whether disputes arising out of Transfer of property Act can be referred to arbitration?

It may be noticed that none of the provisions of the Transfer of Property Act have been noticed by this judgment. In fact, none of the aforesaid provisions would indicate that disputes under the said Act are triable only by the civil court and not by arbitration, as has been held in this paragraph. It is clear that the Transfer of Property Act is silent on arbitrability, and does not negate arbitrability.

22. In a similar situation, this Court, in Olympus Superstructures Pvt. Ltd. v. Meena Vijay Khetan and Ors. MANU/SC/0359/1999 : (1999) 5 SCC 651, held that when it came to the grant of specific performance, there is no prohibition in the Specific Relief Act that issues relating to specific performance cannot be referred to arbitration, unlike the English statute [see paragraph 34].

23. Equally, merely because a discretion had to be exercised by the court on whether or not to grant specific performance, would not militate against specific performance being granted [see paragraph 44, in particular, of Booz Allen (supra)]. It is clear, therefore, that the judgment in Himangni Enterprises (supra) will require a relook by a Bench of three Hon'ble Judges of this Court.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 2402 of 2019 

Decided On: 28.02.2019

Vidya Drolia  Vs.  Durga Trading Corporation

Hon'ble Judges/Coram:

Rohinton Fali Nariman and Vineet Saran, JJ.

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Whether it is permissible to raise issue of arbitrability of dispute at subsequent stage before court?

This Court, in Mcdermott International Inc. v. Burn Standard Co. Ltd. and Ors. MANU/SC/8177/2006 : (2006) 11 SCC 181, has held that the party questioning the jurisdiction of the Arbitrator has an obligation to raise the said question before the Arbitrator. It has been held as under:

51. After the 1996 Act came into force, Under Section 16 of the Act the party questioning the jurisdiction of the arbitrator has an obligation to raise the said question before the arbitrator. Such a question of jurisdiction could be raised if it is beyond the scope of his authority. It was required to be raised during arbitration proceedings or soon after initiation thereof. The jurisdictional question is required to be determined as a preliminary ground. A decision taken thereupon by the arbitrator would be the subject-matter of challenge Under Section 34 of the Act. In the event the arbitrator opined that he had no jurisdiction in relation thereto an appeal thereagainst was provided for Under Section 37 of the Act.

13. It is also necessary to observe that intervention of the court is envisaged only in few circumstances like fraud or bias by the Arbitrators, violation of natural justice. The court cannot correct the errors of the Arbitrators. That is evident from para 52 of the judgment in Mcdermott International Inc (supra), which is as under:

52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.

14. Therefore, the Division Bench was not justified while considering the arbitrability of the disputes for the first time, particularly, when the Respondent has not urged the issue relating to 'No Claims Certificate' before the Chief Justice, Arbitral Tribunal or before the learned Single Judge.

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 15545-15546 of 2017 (Arising out of SLP (C) Nos. 39038-39039 of 2012)

Decided On: 03.10.2017

Chittaranjan Maity Vs. Union of India (UOI)

Hon'ble Judges/Coram:

Jasti Chelameswar and S. Abdul Nazeer, JJ.

Citation:AIR 2017 SC 4588

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