India: Application Of Order II Rule 2 Cannot Be Considered By The Court Under Section 11 Of The Arbitration And Conciliation Act, 1996

Last Updated: 19 November 2018
Article by AMLEGALS  

IN THE HIGH COURT OF DELHI

Parsvnath Developers Limited & Anr. V. Rail Land Development Authority

[ARB. P. 724/2018 & IA 14999/2018 12841 of 2018]

dated: 31.10.2018

FACTS

The Petition was filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred as the "Act").

It was filed by Parsvnath Developers Limited (the Petitioner) for appointment of a nominee Arbitrator on behalf of the Rail Land Development Authority (the Respondent) for constitution of an Arbitral Tribunal.

In the present case, there was a dispute pertaining to a "Development Agreement" dated 31.05.2013, containing an Arbitration Agreement.

The Petitioner invoked arbitration and while appointing its arbitrator, made a request to the Respondent to appoint its own Arbitrator as well.

However, the Respondent declined to appoint an arbitrator on the ground that the dispute between the parties have already been addressed by the Arbitral Tribunal and stood concluded by the Arbitral Award dated 25.11.2017.

The Responded further objected that the Petitioner's claims were barred by the provisions of Order II Rule 2 of Civil Procedure Code, 1908 (CPC) and also by the principles of res judicata and estoppel.

On the other hand, the Petitioner contended that they have secured their right to claim whatever remained in the present claim through separate proceedings and that the Arbitral Tribunal did not render any findings upon Order II Rule 2 of CPC and based its decision on the pleadings submitted by the parties. 

ISSUES BEFORE HC

The High Court dealt with the issue as to whether the claims that were sought by the Petitioner were barred by Order II Rule 2 of CPC or on the ground of res judicata or estoppel.

OBSERVATION

The Court found an existence of a valid Arbitration Agreement between the parties and also that the Petitioner has resorted to Arbitration on more than one occasion.

The Court did not deny that the Petitioner reserved its rights to claim further claims in second arbitration proceedings which were concluded by the Arbitral Award on 25.11.2017.

The Court was also of the opinion that the issues raised were question of merit and should have been determined by the Arbitral Tribunal alone.

CONCLUDING VIEW

The Court concluded in an affirmation to the effect that an Arbitration Agreement can be invoked a number of times and does not cease to exist upon invocation for the first time and placed reliance upon Supreme Court's judgment in Dolphin Drilling Ltd. V. Oil and Natural Gas Corporation Ltd. (2010) 3 SCC 267 which held:

"8. The plea of the respondent is based on the words "all disputes" occurring in Para 28.3 of the agreement. Mr. Aggrawal submitted that those two words must be understood to mean "all disputes under the agreement" that might arise between the parties throughout the period of its subsistence. However, he had no answer as to what would happen to such disputes that might arise in the earlier period of the contract and get barred by limitation till the time comes to refer "all disputes" at the conclusion of the contract. The words "all disputes" in Clause 28.3 of the agreement can only mean "all disputes" that might be in existence when the arbitration clause is invoked and one of the parties to the agreement gives the arbitration notice to the other. In its present form Clause 28 of the agreement cannot be said to be a one-time measure and it cannot be held that once the arbitration clause is invoked the remedy of arbitration is no longer available in regard to other disputes that might arise in future."

Further, it relied upon another Supreme Court judgment of Indian Oil Corporation Ltd. v. SPS Engineering Ltd. (2011) 3 SCC 507 which held that:

"The limited scope of section 11 of the Act does not permit such examination of the maintainability or tenability of a claim either on facts or in law. It is for the arbitral tribunal to examine and decide whether the claim was barred by res judicata. There can be no threshold consideration and rejection of a claim on the ground of res judicata, while considering an application under section 11 of the Act."

REASON OF JURISPRUDENCE

The Court, while relying upon the ratio laid down in Indian Oil Corporation Ltd. vs. SPS Engineering Ltd. (supra) concluded that it is not empowered to look into the merit of any case under Section 11 of the Act. The Court held to the effect that:

"The legislature by amending the Act by way of the Arbitration and Conciliation (Amendment Act) 2015 and the insertion of Section 11(6A) of the Act has also restricted the scrutiny of the Court at the stage of adjudicating an application under Section 11 of the Act only to the existence of the Arbitration Agreement."

AMLEGALS REMARKS

The present case also makes reference to two factums as below:

One - A golden expression exists to the effect that "all disputes".

This expression unlocks all disputes. Hence, any or every dispute falling under the realm of "all disputes" can be arbitrated and merely because some dispute has been arbitrated, it does not waive off the right and/or crystallizes the right to invoke arbitration for left out disputes and claims thereafter.

Two - This case also clarifies the scope of jurisdiction of the Court and its limitation while deciding upon an application, under Section 11 of the Act, for appointment of an Arbitrator.

This content is purely an academic analysis under "Legal intelligence series".

© Copyright AMLEGALS.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Reade should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

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