Case Note & Summary
The Supreme Court considered appeals against a common judgment of the Delhi High Court which had referred disputes to arbitration and appointed a sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. The appellant, Magic Eye Developers Pvt. Ltd., was the opponent in the arbitration petitions filed by the respondent, M/s. Green Edge Infrastructure Pvt. Ltd. & Ors. The dispute revolved around MOU-2, which did not contain an arbitration clause. The respondent contended that other agreements (SHA-1, SHA-2, and MOU-1) were interlinked with MOU-2 and contained an arbitration clause (clause 27.3 in SHA-1). The High Court, relying on Vidya Drolia v. Durga Trading Corporation, held that the arbitrability of the dispute was an issue to be decided by the arbitrator and referred the matter. The Supreme Court held that under Section 11(6A), the court's jurisdiction is limited to examining the existence of an arbitration agreement. Since MOU-2 lacked an arbitration clause and there was no evidence that the parties intended to incorporate the arbitration clause from other agreements, the High Court erred in referring the disputes. The Court set aside the impugned order and dismissed the arbitration petitions.
Headnote
A) Arbitration Law - Pre-referral Jurisdiction - Section 11(6A) of the Arbitration and Conciliation Act, 1996 - Existence of Arbitration Agreement - The court, while appointing an arbitrator under Section 11(6), must confine itself to examining the existence of an arbitration agreement. It cannot refer disputes to arbitration if the specific agreement in question does not contain an arbitration clause, even if other related agreements contain such a clause, unless the parties have agreed to incorporate the arbitration clause from those agreements. (Paras 2-5)
B) Arbitration Law - Interlinked Agreements - Section 7 of the Arbitration and Conciliation Act, 1996 - Arbitration Agreement in Related Documents - For an arbitration clause in one agreement to apply to disputes arising under another agreement, there must be a clear intention of the parties to incorporate the arbitration clause. Mere interconnection or interlinking of agreements is insufficient to infer an arbitration agreement. (Paras 3-5)
Issue of Consideration
Whether the High Court, while exercising jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996, could refer disputes to arbitration when the specific agreement (MOU-2) containing the dispute did not contain an arbitration clause, and whether the court could consider other agreements (SHA-1, SHA-2, MOU-1) as interlinked to find an arbitration agreement.
Final Decision
The Supreme Court allowed the appeals, set aside the impugned common judgment and order of the High Court, and dismissed the arbitration petitions filed by the respondent.
Law Points
- Section 11(6A) of the Arbitration and Conciliation Act
- 1996
- pre-referral jurisdiction
- existence of arbitration agreement
- interlinked agreements
- arbitrability
Case Details
Civil Appeal Nos. of 2023 (@SLP (C) Nos. 18339-42/2021)
Magic Eye Developers Pvt. Ltd.
M/s. Green Edge Infrastructure Pvt. Ltd. & Ors. Etc.
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Nature of Litigation
Appeals against High Court order referring disputes to arbitration and appointing sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Remedy Sought
The appellant sought to set aside the High Court's order referring disputes to arbitration, arguing that the relevant agreement (MOU-2) did not contain an arbitration clause.
Filing Reason
The appellant challenged the High Court's decision to refer disputes to arbitration despite the absence of an arbitration clause in MOU-2.
Previous Decisions
The High Court had referred the disputes to arbitration and appointed a sole arbitrator, relying on Vidya Drolia v. Durga Trading Corporation.
Issues
Whether the High Court could refer disputes to arbitration under Section 11(6) when the specific agreement (MOU-2) did not contain an arbitration clause.
Whether the court could consider other agreements (SHA-1, SHA-2, MOU-1) as interlinked to infer an arbitration agreement.
Submissions/Arguments
Appellant argued that the dispute revolves around MOU-2, which does not contain an arbitration clause, and therefore no arbitration agreement exists.
Respondent argued that SHA-1, SHA-2, and MOU-1 are interlinked with MOU-2 and contain an arbitration clause (clause 27.3 of SHA-1), so all agreements should be read together.
Ratio Decidendi
Under Section 11(6A) of the Arbitration and Conciliation Act, 1996, the court's jurisdiction is confined to examining the existence of an arbitration agreement. The court cannot refer disputes to arbitration if the specific agreement in question does not contain an arbitration clause, and mere interlinking of agreements is insufficient to infer an arbitration agreement without clear intention of the parties to incorporate the clause.
Judgment Excerpts
The issue involved in the present appeals is as such in a very narrow compass, namely, pre-referral jurisdiction of the Court under Section 11(6) of the Arbitration and Conciliation Amendment Act, 2015.
Before the High Court the appellant herein specifically raised an objection with regard to the existence of an arbitration agreement/clause.
By the impugned common judgment and order and relying upon the decision of this Court in the case of Vidya Drolia and Ors. Vs. Durga Trading Corporation, (2021) 2 SCC 1 and by observing that the arbitrability of the dispute raised, viz-a-viz the arbitration clause 27.3 of SHA-1, is an involved issue and the said issue can be addressed by the learned arbitrator, the High Court has referred the disputes for arbitration and has appointed the sole arbitrator.
Procedural History
The respondent filed arbitration petitions under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the Delhi High Court. The High Court, by a common judgment, referred the disputes to arbitration and appointed a sole arbitrator. The appellant, being aggrieved, filed the present appeals before the Supreme Court.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 11(6), Section 11(6A), Section 7
