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2024 (9) TMI 1299 - SC - Indian LawsSeeking appointment of a Sole Arbitrator to adjudicate the disputes between the Petitioners - Section 11(6) read with Section 11(9) of the Arbitration and Conciliation Act, 1996 - whether the SRG Group, being a non-signatory to the FAA, should also be referred to arbitration along with the AMP and JRS Groups? - HELD THAT - The issues in the first category have to be mandatorily decided by the Chief Justice or his designate under Section 11 of the Act, 1996. This included the question whether there is an arbitration agreement and whether the party that has applied under Section 11 is also a party to such an agreement. The crucial question that arose for consideration by this Court in Duro Felguera S.A. v. Gangavaram Port Limited 2017 (10) TMI 1304 - SUPREME COURT was the effect of the change introduced by the 2015 Amendment to the Act, 1996 which inserted Section 11(6A). The Court held that all that needs to be looked into is whether the agreement contained a Clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement i.e., the existence of the arbitration agreement, nothing more, nothing less. A two Judge-Bench of this Court in Garware Wall Ropes Ltd. v. Coastal Marine Constructions Engineering Ltd. 2019 (4) TMI 716 - SUPREME COURT considered the effect of Section 11(6A) which confined the jurisdiction of the Court to examine the existence of an arbitration agreement on an arbitration agreement contained in an unstamped document or contract. The Court was of the opinion that its enquiry as to whether a compulsorily stampable document, which contains the arbitration clause, is duly stamped or not, is only an enquiry into whether such an arbitration agreement exists in law and this does not in any manner amount to deciding preliminary question(s) that arise between the parties. The recent Constitution Bench decision of this Court in Cox and Kings Limited v. SAP India Private Limited and Another 2023 (12) TMI 427 - SUPREME COURT (LB) , specifically dealt with the question of impleading a non-signatory as a party in the arbitration proceedings and the corresponding scope of enquiry at the referral stage. It was held therein that Section 16 is an inclusive provision which comprehends all preliminary issues touching upon the jurisdiction of the arbitral tribunal and the issue of determining parties to an arbitration agreement goes to the very root of the jurisdictional competence of the arbitral tribunal. This Court took the view that the referral court is required to prima facie rule on the existence of the arbitration agreement and whether the non-signatory party is a veritable party to the arbitration agreement. However, recognising the complexity of such a determination, the arbitral tribunal was considered the proper forum since it can decide whether the non-signatory is a party to the arbitration agreement on the basis of factual evidence and application of legal doctrine. The fact that a non-signatory did not put pen to paper may be an indicator of its intention to not assume any rights, responsibilities or obligations under the arbitration agreement. However, the courts and tribunals should not adopt a conservative approach to exclude all persons or entities who intended to be bound by the underlying contract containing the arbitration agreement through their conduct and their relationship with the signatory parties. The mutual intent of the parties, relationship of a non-signatory with a signatory, commonality of the subject matter, composite nature of the transactions and performance of the contract are all factors that signify the intention of the non-signatory to be bound by the arbitration agreement. Considering the complexity involved in the determination of the question whether the SRG Group is a veritable party to the arbitration agreement or not, it would be appropriate for the arbitral tribunal to take a call on the question after taking into consideration the evidence that may be adduced by the parties before it and the application of the legal doctrine as elaborated in the decision in Cox and Kings 2023 (12) TMI 427 - SUPREME COURT (LB) . Mr. Akil Kureshi (Former Chief Justice, High Court of Rajasthan) is appointed to act as the sole arbitrator. The fees of the arbitrator including other modalities shall be fixed in consultation with the parties - petition allowed.
Issues Involved:
1. Scope of jurisdiction of the referral court under Section 11(6) of the Arbitration and Conciliation Act, 1996. 2. Whether the SRG Group, being a non-signatory to the FAA, can be referred to arbitration. Issue-wise Detailed Analysis: i. Scope of jurisdiction of the referral court under Section 11(6) of the Act, 1996: The court examined the evolution of the scope of jurisdiction of the referral courts under Section 11 of the Arbitration and Conciliation Act, 1996, particularly post the 2015 Amendment. The amendment introduced Section 11(6A), which confined the court's examination to the "existence of an arbitration agreement." This legislative change aimed to minimize judicial intervention at the stage of appointing an arbitrator. The court referred to several landmark judgments, including SBP & Co. v. Patel Engg. Ltd., which initially expanded the court's power under Section 11 to decide preliminary issues, and National Insurance Company Limited v. Boghara Polyfab Private Ltd., which categorized preliminary issues into three groups. However, the 2015 Amendment, through Section 11(6A), overruled these decisions by restricting the court's role to determining the existence of an arbitration agreement. The court emphasized that the referral court must conduct a prima facie examination of the existence of an arbitration agreement, without delving into detailed factual disputes, as reiterated in Duro Felguera S.A. v. Gangavaram Port Limited and Vidya Drolia and Ors. v. Durga Trading Corporation. The court also highlighted that the arbitral tribunal has the primary jurisdiction to decide on its own jurisdiction, including issues of the existence and validity of the arbitration agreement, as stated in In Re: Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899. ii. Whether on a prima facie view, the SRG Group being a non-signatory to the FAA, can be referred to arbitration: The court examined whether the SRG Group, a non-signatory to the FAA, could be considered a veritable party to the arbitration agreement. It referred to the decision in Cox and Kings Limited v. SAP India Private Limited and Another, which clarified that non-signatories could be bound by an arbitration agreement if there is a defined legal relationship and mutual intent to be bound by the terms of the agreement. The court noted that the FAA included clauses involving the SRG Group, such as Clauses 2.1.4 and 2.1.6, which required the SRG Group's participation in transactions related to Millenium and Deegee. The court observed that the SRG Group's involvement in the negotiation, performance, and termination of the underlying contract could indicate their intention to be bound by the arbitration agreement. The court identified several contested questions of fact that needed resolution, such as whether the SRG Group was represented during negotiations, whether their silence on certain communications implied consent, and their role in the valuation and due diligence processes. The court concluded that these issues required a detailed examination by the arbitral tribunal, as the referral court's jurisdiction under Section 11(6) was limited to a prima facie determination. Conclusion: The court allowed the petition, appointing Mr. Akil Kureshi (Former Chief Justice, High Court of Rajasthan) as the sole arbitrator. It emphasized that all rights and contentions of the parties were left open for adjudication by the arbitrator, and the tribunal would decide on the veritable party status of the SRG Group based on evidence and legal doctrines.
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