2021 (3) TMI 382 - SC - Indian Laws

Seeking for appointment of a Sole Arbitrator for adjudication of disputes between the parties - Section 11(6) of the Arbitration and Conciliation Act, 1996 - HELD THAT - Since, the CFSL did not express an opinion either way, it became incumbent upon the learned Single Judge to determine as to whether the Agreement dated 7th July, 2014 could have been entered into given the surrounding circumstances of the case. As Shri Divan rightly points out, there are no negotiations which lead upto the 7th July, 2014 Agreement that are on record. Secondly, negotiations that take place take place only after 7th July, 2014 in which a draft agreement is deliberated upon between the same parties. It would stretch incredulity to state that on the same subject matter negotiations and a draft agreement would be spoken about after a final signed agreement has been agreed upon between the parties. Secondly, he rightly points out that the Agreement is notarized in Faridabad, Haryana, with no explanation worth the name when a contract is to be executed in Bihar by one of the parties whose registered office is in Bihar and the other party whose registered office is in Mumbai. Thirdly, the Notary who is said to have notarized the Agreement was not licensed to do so the same, his license having expired earlier, a fact that is accepted even by the Respondents. The allegation that the Consultancy Agreement of 7th July, 2014 had a signature that may not be that of Mr. M.G. Stephen was brushed aside stating that an arbitration agreement need not be signed by the parties. That is entirely besides the point. Mr. M.G. Stephen has sworn to an affidavit filed before the High Court that the signatures appearing on the 7th July, 2014 agreement are not his signatures, as a result of which the Appellant cannot be said to have entered into an agreement at all on 7th July, 2014 - The draft agreement sent by email was exchanged on 15th July, 2014 and not on 7th July, 2014. Secondly, the email in reply to the email of 15th July, 2014 shows that there was no concluded contract between the parties. Also, the pleading with which the parties went to Court was that there was a concluded contract between the parties on 7th July, 2014. There was no pleading worthy of the name that on 15th July, 2014, a draft agreement was exchanged between the parties, as a result of which a concluded contract emanated therefrom. The facts of this case remind one of Alice in Wonderland. In Chapter II of Lewis Caroll s classic, after little Alice had gone down the Rabbit hole, she exclaims Curiouser and curiouser and Lewis Caroll states (she was so much surprised, that for the moment she quite forgot how to speak good English) . This is a case which eminently cries for the truth to out between the parties through documentary evidence and cross-examination. Large pieces of the jigsaw puzzle that forms the documentary evidence between the parties in this case remained unfilled. The emails dated 22nd July, 2014 and 25th July, 2014 produced here for the first time as well as certain correspondence between SBPDCL and the Respondent do show that there is some dealing between the Appellant and the Respondent qua a tender floated by SBPDCL, but that is not sufficient to conclude that there is a concluded contract between the parties, which contains an arbitration clause. The impugned judgment of the Delhi High Court is set aside in so far as it conclusively finds that there is an Arbitration Agreement between the parties - appeal allowed.

Summary

Issues Involved:
1. Existence of a valid arbitration agreement.
2. Jurisdiction of the court to refer the matter to arbitration.
3. Prima facie review of the arbitration agreement.
4. Validity of the Consultancy Agreement dated 7th July, 2014.
5. The role of the CFSL report in determining the authenticity of the signatures.
6. The procedural aspects of appointing an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.

Issue-wise Detailed Analysis:

1. Existence of a valid arbitration agreement:
The primary issue was whether a valid arbitration agreement existed between the parties. The Respondent claimed that a Consultancy Agreement dated 7th July, 2014, which included an arbitration clause, was executed. The Appellant disputed this, arguing that the agreement was concocted and that no such agreement was ever finalized. The court examined the correspondence and documents exchanged between the parties, including emails and invoices, to determine if an arbitration agreement was indeed in place.

2. Jurisdiction of the court to refer the matter to arbitration:
The court's jurisdiction to refer the matter to arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996, was scrutinized. The court noted that its role was limited to examining the existence of an arbitration agreement and not delving into the merits of the case. The court highlighted the legislative intent behind the amendments to Sections 8 and 11, which aimed to minimize judicial intervention at the pre-arbitral stage and ensure that arbitration agreements are upheld.

3. Prima facie review of the arbitration agreement:
The court emphasized the need for a prima facie review to determine the existence of an arbitration agreement. This review is intended to weed out manifestly non-existent or invalid arbitration agreements. The court referred to the recent Three-Judge Bench judgment in Vidya Drolia v. Durga Trading Corporation, which clarified that the court should conduct a prima facie review to ascertain the existence of an arbitration agreement and leave detailed examination to the arbitrator.

4. Validity of the Consultancy Agreement dated 7th July, 2014:
The court examined the validity of the Consultancy Agreement dated 7th July, 2014. The Appellant argued that the agreement was fabricated, pointing out inconsistencies such as the notarization of the agreement in Faridabad, Haryana, despite the parties being based in Mumbai and Bihar, and the notary's license having expired. The court found that the negotiations and draft agreements exchanged after 7th July, 2014, cast doubt on the existence of a finalized agreement on that date.

5. The role of the CFSL report in determining the authenticity of the signatures:
The CFSL report dated 29th September, 2019, was inconclusive regarding the authenticity of the signatures on the Consultancy Agreement. The court noted that this inconclusiveness necessitated a deeper examination of the agreement's authenticity, which could only be achieved through a detailed inquiry involving cross-examination of witnesses and documentary evidence.

6. The procedural aspects of appointing an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996:
The court upheld the appointment of Justice G.S. Sistani, a retired Delhi High Court Judge, as the Sole Arbitrator. The arbitrator was tasked with first determining whether an arbitration agreement existed between the parties as a preliminary issue. Only if the arbitrator found that such an agreement existed would he proceed to decide the merits of the case. The court clarified that its observations were prima facie and should not influence the arbitrator's determination.

Conclusion:
The Supreme Court set aside the Delhi High Court's judgment to the extent that it conclusively found an arbitration agreement between the parties. However, it upheld the appointment of Justice G.S. Sistani as the Sole Arbitrator, directing him to first determine the existence of an arbitration agreement as a preliminary issue. The appeal was allowed in these terms, ensuring that the arbitrator would conduct a detailed examination of the evidence and witness testimonies to resolve the matter.