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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When a party can approach court even though there was arbitration clause in agreement?

The presence of an arbitration clause with regard to a dispute which is found to be non-arbitrable cannot deprive the plaintiffs of their right to approach the Civil Court. A somewhat similar question arose in M/s. National Seeds Co-operative Limited (supra). In the context of provisions of Seeds Act, 1966 as well as the Consumer Protection Act, 1986 it was held that the remedy of arbitration was not only the remedy available. It was an optional remedy and the aggrieved person could either seek reference to an arbitrator or file a complaint under the Consumer Protection Act, 1986. It was observed that if the aggrieved person opts for the remedy of arbitration then it could be said that he cannot subsequently file a complaint before the Consumer Forum. However, he could not be denied relief by invoking provisions of Section 8 of the Act of 1996. Similarly, in Sukanya Hoarding Pvt. Ltd. (supra), it was held that bifurcation of the cause of action or the subject matter of the suit has not been intended as bifurcation of a suit in two parts, one to be decided by the arbitral tribunal and the other to be decided by the Civil Court would delay the proceedings. If the prayers in the suit are perused, it can be seen that all the reliefs cannot be adjudicated by the arbitrator and it is only the Civil Court which would have jurisdiction to consider the grant of such relief.

12. It is thus found that the reliefs sought by the plaintiffs were in the nature of reliefs in rem and therefore, the disputes between the plaintiffs and the defendant were non-arbitrable. In the light of aforesaid law, the plaintiffs cannot be compelled to approach the Arbitrator nor can they be bound by Clause No. 19 of the byelaws. Moreover, as per the scheme of the Act of 1970 it does not appear to be intention of the legislature to require the parties to resolve the disputes through arbitration. There is also no statutory requirement for incorporation of an arbitration clause in the Deed of Declaration or Deed of Apartments as per the provisions of the Act of 1970. In the light of aforesaid, the decisions relied upon by the learned Counsel for the defendant do not support his contentions.

IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Writ Petition No. 863 of 2015

Decided On: 03.05.2018

 Sharad Vs  Hemantkumar

Hon'ble Judges/Coram:

A.S. Chandurkar, J.

Citation: 2018(5) MHLJ 191

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Concept of Arbitrability of Arbitration Agreements in India

“Arbitration is the grease that helps economies flow and brings us benefits around the world.”

—David W. Rivkin[1]

1.      Introduction

Arbitration is a dynamic dispute resolution technique. An arbitrator’s powers normally derive from the arbitration agreement. With increasing number of cross border transactions and international trade contracts, arbitrability of arbitration agreement holds a prominent place in resolution of international and domestic arbitrations.

2.      Effect given to an arbitration agreement by court

Traditionally the parties move to court when the dispute relating to an arbitration agreement arises. So the question that needs to be dealt with is how does a court give effect to an arbitration agreement? It can be dealt in parts.  

2.1  Where one party wants to institute arbitration and another one is uncooperative, court may pass order compelling arbitration.

2.2  Where litigation is initiated over a claim falling within the scope of arbitration agreement, court may dismiss the suit on grounds of lack of jurisdiction.

2.3  Depending on the law of the seat, the Court may even have powers to support the arbitral tribunal - witnesses, documents, opinions.[2]

However, question is when can parties approach court even in presence of an arbitration agreement? In other words, what makes a dispute non-arbitrable?

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To what extent disputes relating to intellectual property rights are arbitrable?

We now deal with the first aspect of the matter, i.e., as to whether IPR disputes are arbitrable. This takes us to the question as to whether it is in the realm of a right in rem and therefore, not arbitrable. In this context, a clear distinction has been made inter-alia in the line of authorities referred to supra between a right in rem and an action in personam. A judgment in personam refers to a judgment against a person as distinguishable from a judgment against a thing, right or status. A judgment in rem refers to a judgment against a thing, right or status or condition of property which operates directly on the property itself. To make this illustrative, it can be said that a patent license issue may be arbitrable, but validity of the underlying patent may not be arbitrable. This has been alluded to by the Hon'ble Supreme Court of India in Booz Allen supra and the learned Single Judge has also noted this aspect of the matter as is evident from a reading of the order which has been called in question before us.

5(q) We are aware that after Booz Allen and Ayyasamy supra, there is one more judgment of the Supreme Court, which dealt with the question as to whether there can be an arbitration clause in a trust deed and as to whether a dispute pertaining to a trust or as amongst trustees of a public trust is arbitrable and the same was answered in the negative. This judgment is Vimal Kishor Shah Vs. Jayesh Dinesh Shah [(2016) 8 SCC 788] decided on 17.8.2016.

5(r) While Booz Allen dealt with disputes relating to rights in rem qua arbitration / arbitrability, Ayyasamy dealt with fraud qua arbitration / arbitrability. The third judgment dealt with a dispute touching upon a trust qua arbitration /arbitrability. Though the last of the three judgments, i.e., Vimal Kishor Shah was not cited before us, the same stand noticed by us.

5(s) Pivotal submission of Lifestyle on this aspect of the matter is that the aforesaid judgment of the Hon'ble Supreme Court of India has not considered or excluded IPR disputes from the scope of arbitrability. For absolute clarity on this aspect of the matter, learned counsel for Lifestyle referred to paragraph 14 of Ayyasamy case and said that the list of disputes which may not be arbitrable as adumbrated therein is not the ratio or conclusion of the Hon'ble Supreme Court of India, but a mere extract from a book titled 'The Law and Practice of Arbitration and Conciliation'. A perusal of paragraph 14 affirms this position and very fairly, learned Senior Counsel for QDS does not dispute this.

5(t) We also notice that the learned Single Judge has dealt with the rival submissions on this aspect of the matter and summarized the findings returned by the Court. Learned Single Judge has held that there is no quarrel with the proposition that the grant of registration of a copyright or design under the relevant statutes can be achieved through / only by statutory authorities constituted under the respective statutes. Learned Single Judge has gone on to hold in the present case that both parties are in reality claiming a better right of usage vis-a-vis the other and that this would clearly bring the facts of the present case within the realm of a right in personam rather than a right in rem. On this aspect of the matter, we have no difficulty in sustaining the finding returned and opinion of the learned Single Judge. At the risk of repetition, while a patent right may be arbitrable, the very validity of the underlying patent is not arbitrable. This has been articulated in Mustill and Boyd in their '2001 Companion Volume to the 2nd Edn. of Commercial Arbitration' . This has also been extracted by the Hon'ble Supreme Court of India in Booz Allen's case and the learned Single Judge has noticed this. Therefore, to this extent, there is no difficulty in agreeing with the learned Single Judge and holding that the disputes in the instant case as between Lifestyle and QDS are arbitrable.
Madras High Court

Lifestyle Equities Cv vs Qdseatoman Designs Pvt. Ltd on 13 October, 2017

CORAM : Ms.INDIRA BANERJEE, CHIEF JUSTICE

MR.JUSTICE M.SUNDAR

O.S.A.Nos.216 and 249 of 2017
and
C.M.P.No.14932 of 2017
O.S.A.No.216 of 2017 :

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Whether dispute against non parties to arbitration agreement can be referred to arbitration?

As per the Deed of Partnership dated 1.4.2010, the applicants and the non-applicant Nos. 1 and 2 agreed to refer any dispute amongst the partners with regard to interpretation of the said deed or any other matter connected with the business of partnership to the sole arbitrator. In this context, if the plaint is perused, it can be seen that it is the case of the plaintiffs that defendant Nos. 2 to 6 by acting inappropriately had deleted the names of the plaintiffs from the revenue record pertaining to the suit property and had thereafter with the aid of defendant No. 10, had sold the suit properties to defendant Nos. 7 to 9. The relief sought was cancellation of these sale deeds executed in favour of defendant Nos. 7 to 9 dated 16.3.2016. Defendants No. 7 to 10 are not partners of the partnership firm nor are they signatories to any agreement by which any dispute amongst them could be referred for arbitration. The relief sought with regard to the cancellation of sale deeds executed in favour of defendant Nos. 7 to 9 who were strangers to the Deed of Partnership was thus non-arbitrable.

9. For the purposes of applicability of Section 8 of the said Act, it is well-settled that such agreement containing the arbitration clause should be between parties to the dispute and that such agreement should relate to or be applicable to the dispute - Yogi Agrawal (supra). Similarly, the words "a matter" appearing in Section 8 of the said Act would mean the entire subject-matter of the suit which should be the subject of arbitration. The suit cannot be bifurcated into two parts so as to refer some part to the arbitrator for adjudication and the other part to be decided by the civil court" - Sukanya Holdings (P) Ltd. (supra).

10. In the light of aforesaid law, on considering the plaint as a whole along with clause 15 of the Deed of Partnership dated 1.4.2010, I do not find that the trial Court committed any error when it rejected the application moved by the defendant Nos. 1 to 6 under Section 8 of the said Act. Considering the reliefs sought in the plaint, the ratio of the decisions in the case of Hindustan Petroleum Corpn. Ltd. and Ravi Prakash Goel (supra) cannot be made applicable to the case in hand. Though in Agri Gold Exims Ltd. (supra), it has been held that the expression "any dispute" in Section 8 of the said Act are of wide amplitude, it cannot be construed in such a matter so as to cover a dispute even against non-parties to the arbitration agreement. 
IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Civil Revision Application No. 99 of 2016

Decided On: 16.02.2017

Ramdeobaba Padmavati Developers & Builders and Ors.
Vs.
 Ganesh Vitthaldas Chandak and Ors.

Hon'ble Judges/Coram:
A.S. Chandurkar, J.
Citation: 2017(5) MHLJ 357 Bom

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Whether arbitrator can decide non-arbitrable issues?

 The question before this Court is whether the Arbitrator could have decided the issues which were not arbitrable.

20. Arbitration arises from a contract and unless there is a specific written contract, a contract with regard to arbitration cannot be presumed. Section 7(3) of the Act clearly specifies that the contract with regard to arbitration must be in writing. Thus, so far as the disputes which have been referred to in Clause 39 of the contract are concerned, it was not open to the Arbitrator to arbitrate upon the said disputes as there was a specific clause whereby the said disputes had been "excepted". Moreover, when the law specifically makes a provision with regard to formation of a contract in a particular manner, there cannot be any presumption with regard to a contract if the contract is not entered into by the mode prescribed under the Act.

21. If a non-arbitrable dispute is referred to an Arbitrator and even if an issue is framed by the Arbitrator in relation to such a dispute, in our opinion, there cannot be a presumption or a conclusion to the effect that the parties had agreed to refer the issue to the Arbitrator. In the instant case, the Respondent authorities had raised an objection relating to the arbitrability of the aforestated issue before the Arbitrator and yet the Arbitrator had rendered his decision on the said "excepted" dispute. In our opinion, the Arbitrator could not have decided the said "excepted" dispute.

22. We, therefore, hold that it was not open to the Arbitrator to decide the issues which were not arbitrable and the award, so far as it relates to disputes regarding non-arbitrable disputes is concerned, is bad in law and is hereby quashed.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 534 of 2007

Decided On: 05.09.2014

 Harsha Constructions Vs.  Union of India (UOI)

Hon'ble Judges/Coram:

Anil R. Dave and Vikramajit Sen, JJ.

Citation;(2014) 9 SCC 246.

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When parties can approach court even in presence of arbitration agreement?

Arbitration is increasing method of dispute resolution. With increasing number of cross border transactions and international trade contracts, arbitrability of arbitration agreements now holds a prominent place in resolution of international and domestic arbitrations.

In India, traditionally the parties move to court when the the dispute relating to an arbitration agreement arises

The Golden Rule is that if the dispute is covered by an Arbitration agreement, the said dispute should be resolved by Arbitration. However, there are following exceptions to this Rule. 
 1. If a party institute an action in the Court in respect of a dispute, which is covered by an arbitration agreement, the Court may continue with the said action if the other party doesn't object to the Court's jurisdiction.
2. If there is an immediate urgency, the Court may hear the case. (Textile v Hydro Industries)
3. If the dispute is in respect of Oppression and Mismanagement under the Company law, the Court may hear the action.
4. The Court may hear disputes in respect of unjust enrichment and compensation for improvements.
5. The Court may also hear disputes which are not covered under the Agreement and the Arbitration Clause.
6. The Court may hear disputes if non parties to arbitration agreement are involved.
7. The Court should hear dispute if dispute arising out of arbitration agreement in criminal in nature.
8. The Court should hear if dispute is relating to status such as divorce, judicial separation, restitution of conjugal rights, child custody etc.
9. The Court should hear dispute if it is relating to competition law, insolvency, winding up, bribery, corruption
10. The Court should hear dispute if it is relating to   guardianship matters.
11. The Court should hear dispute if it is relating to testamentary matters.
12. The Court should hear dispute if it is disputes relating to trust.

Points 1-5 have been contributed by Mr. Yasith Hirimburegama, Lawyer based in Sri Lanka. 

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