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Arbitral Tribunal ought to decide the objection under Section 16 of the Act as a preliminary ground : High Court of Delhi

Section 16 of the Arbitration Act states that issues of jurisdiction ought to be raised before the Arbitrator at the earliest and such objection has to be decided as a preliminary ground. If the Tribunal thinks fit that the objections under Section 16 of the Act cannot be decided at the inception and further enquiry is required the Tribunal could consider framing a preliminary issue and deciding the same as soon as possible. This was held in SURENDER KUMAR SINGHAL & Ors V. ARUN KUMAR BHALOTIA & ORS [CM (M) 1272/2019] in the High Court of Delhi by single bench consisting of JUSTICE PRATHIBA M. SINGH.

Facts of the case are that a property dispute exists between the petitioners and respondents which was referred to arbitrator on account of application from one of the respondents. The Petitioners have filed an application under Section 16 of the Act and raised an objection to jurisdiction of Tribunal on grounds of being bonafide purchasers of one of the properties. Arbitrator held  that the objection as to jurisdiction would be decided along with the final award.

The The court while interpreting the law governing applications under Section 16 of the Arbitration & Conciliation Act, 1996 referred to the  principle of kompetenze-kompetenze. The High Court relied on the precedent laid down by the judgment of Supreme Court in McDermott International Inc. (supra), where in it was held that, “ It was required to be raised during arbitration proceedings or soon after initiation thereof. The jurisdictional question is required to be determined as a preliminary ground. A decision taken thereupon by the arbitrator would be the subject-matter of challenge under Section 34 of the Act. In the event the arbitrator opined that he had no jurisdiction in relation thereto an appeal there against was provided for under Section 37 of the Act.”

The court also referred to the judgement of Raj International v. Tripura Jute Mills Ltd where in it was observed that,“Without giving decision on the question of jurisdiction, the arbitrator has no right to proceed for making an arbitral award. He may accept or reject the plea as raised before him, but he cannot be abstained from giving any decision on such question of jurisdiction.”

Considering the precedents and the facts of the case court held that, the Tribunal ought to decide the objection with a sense of urgency. It is required to ensure that parties to whom the arbitral proceedings may not even be applicable are not entangled and also to maintain the efficiency of the system. If the application under Section 16 cannot, in the opinion of the ld. Arbitrator, be decided at this stage and would require completion of pleadings and admission and denial the same is also allowed, but it would have to be adjudicated first, prior to the passing of the final award.

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