Delhi High Court - Orders
Chem Academy Pvt Ltd vs Anoop Lamba on 23 February, 2023
Author: Yashwant Varma
Bench: Yashwant Varma
$~2 & 3
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 267/2022
CHEM ACADEMY PVT LTD ..... Petitioner
Through: Mr. Surya Kant Vyas and Ms.
Anjali Tiwari, Advs.
versus
ANOOP LAMBA ..... Respondent
Through: Mr. Lakshay Joshi, Adv.
3
+ ARB.P. 275/2022
CHEM ACADEMY PVT LTD ..... Petitioner
Through: Mr. Surya Kant Vyas and Ms.
Anjali Tiwari, Advs.
versus
SUMIT MEHTA ..... Respondent
Through: Mr. Lakshay Joshi, Adv.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
ORDER
% 23.02.2023
1. The instant petitions have been preferred for the constitution of an Arbitral Tribunal in light of the disputes which have arisen between parties.
2. From the objections which have been filed in these proceedings, the Court notes that the Respondents principally assert that the issues which arise would clearly not be arbitrable since they would include matters relating to alleged infringement of copyright and a claim of defamation. In view of the aforesaid and since, according to the Respondents, those issues are clearly non arbitrable, the prayer for constitution of the Arbitral Tribunal is liable to be rejected.
3. The Court notes that while dealing with an identical question, a learned Judge of the Court in Chem Academy Pvt. Ltd. vs. Praveen Malik [Arb. P. 656/2022] had made the following pertinent Signature Not Verified Digitally Signed By:NEHA Signing Date:01.03.2023 18:06:33 observations:-
"11. A three-judge bench of the Supreme Court has in Vidya Drolia and Others vs. Durga Trading Corporation, crystallized the scope of inquiry in applications under Section 11 of the Act. With regard to questions of arbitrability, the Court has held as follows:-
"154. Discussion under the heading "Who Decides Arbitrability?" can be crystallised as under: 154.1. Ratio of the decision in Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] on the scope of judicial review by the court while deciding an application under Sections 8 or 11 of the Arbitration Act, post the amendments by Act 3 of 2016 (with retrospective effect from 23-10-2015) and even post the amendments vide Act 33 of 2019 (with effect from 9-8-2019), is no longer applicable. 154.2. Scope of judicial review and jurisdiction of the court under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.
154.3. The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence- competence, is that the Arbitral Tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred power of "second look" on aspects of non- arbitrability post the award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act.
154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is an-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably "non-arbitrable" and to cut off the deadwood. The court by default would refer the matter when contentions relating to non-arbitrability are plainly arguable: when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested: when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the Arbitral Tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism."Signature Not Verified Digitally Signed By:NEHA Signing Date:01.03.2023 18:06:33
The same view has been taken in DLF Home Developers Limited. In a concurring opinion, N.V. Ramana, J. formulated the principles thus:-
"244. Before we part, the conclusions reached, with respect to Question 1, are:
244.1. Sections 8 and 11 of the Act have the same ambit with respect to judicial interference.
244.2. Usually, subject-matter arbitrability cannot be decided at the stage of Section 8 or 11 of the Act, unless it is a clear case of deadwood.
244.3. The court, under Sections 8 and 11, has to refer a matter to arbitration or to appoint an arbitrator, as the case may be, unless a party has established prima facie (summary findings) case of non-existenfe of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding.
244.4. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above i.e. "when in doubt, do refer".
244.5. The scope of the court to examine the prima facie validity of an arbitration agreement includes only:
244.5.1. Whether the arbitration agreement was in writing? or 244.5.2. Whether the arbitration agreement was contained in exchange of letters, telecommunication, etc.?
244.5.3. Whether the core contractual ingredients qua the arbitration agreement were fulfilled? 244.5.4. On rare occasions, whether the subject- matter of dispute is arbitrable?"
The aforesaid principles have been reiterated in two decisions rendered earlier this year - Mohammed Masroor Shaikh vs. Bharat Bhushan Gupta and Others and Indian Oil Corporation Limited vs. NCC Limited.
12. The judgment in Booz Allen and Hamilton Inc., cited by Mr. Joshi, also clearly holds that in an application under Section 11 of the Act, questions of arbitrability or appropriateness of adjudication by a private forum should rarely be gone into once the existence of the in arbitration agreement is established. To this extent the judgment is, in fact, against the respondent herein. The discussion in the said judgment, albeit in context of Section 8 of the Act, also does not deal specifically with the question raised by Mr. Joshi Signature Not Verified Digitally Signed By:NEHA Signing Date:01.03.2023 18:06:33 regarding arbitrability of a claim arising out of an allegation of defamation.
13. The order of the Madras High Court in Srividya Krishna is also not applicable. Leaving aside the question of whether a claim in defamation can at all be arbitrable in any circumstances, I find that the principal claim in the present case arises out of an allegation of breach of contract, and not in the tortious realm of defamation. Mr. Tiwari has drawn my attention to the specific clauses of the contract which deal with tenure, the lock-in period, as well as the non-compete and non- solicitation clauses. It is of course open to the respondent to resist the claims on all grounds, including those relating to the validity of these contractual stipulations. However, that does not per se render the claims non-arbitrable. Indeed, it indicates the existence of the disputes which requires reference to arbitration in terms of the mechanisms specified in the contract itself.
14. As held in the aforesaid judgments, these questions are best left to the arbitrator to decide except in a situation where on a reading of the facts of the case, the Court comes to the view that the claim is ex-facie non-arbitrable. In such circumstances, the Supreme Court has held that the Court would be entitled to decline appointment of an arbitrator in an effort to "cut the deadwood". I am unable to accede to Mr. Joshi's submission that the present case falls within this narrow category of cases where the claim is ex-facie non-arbitrable or that the appointment of the arbitrator ought to be declined on the grounds mentioned in the aforesaid judgments of the Supreme Court."
4. Following the aforesaid principles, and since all objections would be open to be addressed by the Respondents before the Arbitral Tribunal including with respect to non-arbitrability, the Court disposes of the present petitions by appointing Mr. Justice Kailash Gambhir [Official Address: C-49, (Basement) Panchsheel Enclave, New Delhi- 110017] [Mobile No. 09871300033] [email:
[email protected]] to act as the sole arbitrator. All contentions of respective parties on merits are kept open.
5. The parties are directed to appear before the learned arbitrator, as and when notified. This is subject to the learned arbitrator making the necessary disclosure under Section 12(1) of the Arbitration and Conciliation Signature Not Verified Act, 1996 [the Act] and not being ineligible under Digitally Signed By:NEHA Signing Date:01.03.2023 18:06:33 Section 12(5) of the Act.
6. The fees of the arbitrator shall be decided according to the Fourth Schedule of the Act.
7. The petitions shall stand disposed of.
YASHWANT VARMA, J FEBRUARY 23, 2023 SU Signature Not Verified Digitally Signed By:NEHA Signing Date:01.03.2023 18:06:33