Rule 20 of the Delhi International Arbitration Centre (Arbitration Proceedings) Rules, 2018 cannot be equated with Section 16 of the Arbitration and Conciliation Act, 1996: Delhi High Court
The Delhi High Court has passed a judgement on 08-02-2021 in the case of Jeph Bev Pvt. Ltd & Ors. Vs Delhi International Arbitration Centre & Ors. W.P.(C) 1478/2021. Justice Pratibha M. Singh dismissed the petition.
FACTS OF THE CASE
This petition has been filed challenging the communication dated 16th February, 2020, issued by the Coordinator/Additional Coordinator Delhi International Arbitration Center, Delhi High Court (hereinafter, “DIAC) and the reasons received by email dated 19th January, 2021 by the Petitioner. Vide Communication dated 16th February 2020, the DIAC informed the Petitioner as under:
“After due consideration of the submissions made by both the parties in the hearing conducted through VC and written arguments filed along with case laws by both the parties, the said application/objections have been dismissed by the Hon’ble Chairperson.”
The brief background to this petition is that the Petitioner and Respondent No. 3 entered into an Agreement dated 17th January 2017. The Agreement contained an Arbitration clause ‘U’, to refer disputes arising out of the Agreement to the Delhi International Arbitration Center at the High Court of Delhi, as per the Delhi International Arbitration Centre (Arbitration Proceedings) Rules, 2018 (hereinafter referred as “2018 Rules”). The relevant clause is extracted herein as under:
“U. Governing Law and Jurisdiction:
any dispute or differences arising between the parties shall be resolved amicably at the first instance. Unresolved disputes, controversies, contests, disputes, if any shall be submitted to arbitration. Any dispute, controversy, etc. shall be referred to Delhi International Arbitration Centre (Formerly Delhi High Court Arbitration Centre), at High Court of Delhi, New Delhi and arbitration shall be conducted as per rules of the Delhi International Arbitration Centre. In the event Delhi International Arbitration Centre, ceases to exist then arbitration shall be conducted in accordance with the provisions of the Arbitration of the Arbitration and Conciliation Act 1996 along with the Rules there under and any amendments thereto. The arbitration shall be conducted in English. The decision/award of the arbitrator shall be final/conclusive and binding on the Parties. The seat of the arbitration shall be at New Delhi. This Agreement and the relationship between the parties hereto shall be governed by and interpreted in accordance with the laws of India. The courts at Delhi alone shall have sole and exclusive jurisdiction over any dispute arising out of or relating to this Agreement.”
In September 2018, the Petitioner is stated to have withdrawn from the said Agreement, due to inter se disputes between the parties. Post this, the Respondent No. 3, Barista Coffee Company Limited (hereinafter referred as “BCCL”), invoked the Arbitration clause by way of a statement of claim filed before the DIAC, dated 4th September, 2019 and initiated Arbitration proceedings for adjudication of the disputes of the parties.
Upon invocation of the arbitration clause, the Respondents in the Arbitration Proceedings, i.e. the Petitioner No. 1 before this Court, filed an application under Rule 20 of the 2018 Rules, challenging the request for arbitration filed by the Claimant. Their stand in the application under Rule 20 of the 2018 rules was that they have approached the Micro & Small Enterprises Facilitation Council (hereinafter referred as “MSEFC”) under the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred as the MSMED Act), and thus, the arbitration ought not to be proceeded with before the DIAC. It was further argued by the Respondents/Petitioner No. 1 before the DIAC that the invocation of Arbitration is premature as there is bar on the jurisdiction of DIAC under Section 18(1), Section 18(4) and Section 24 of the MSMED Act.
JUDGMENT
In the light of the discussion done in this case, under Rule 20.1, it is clear that the question as to whether the arbitration clause in the Agreement can be invoked is merely determined in a prima facie manner by the DIAC. The objection of jurisdiction, if raised before the Tribunal, would have to be adjudicated by the Arbitral Tribunal, once constituted, without being affected or influenced by the decision under Rule 20. The said Rule 20 of the 2018 Rules of the DIAC cannot be equated with Section 16 of the Arbitration and Conciliation Act, 1996.
Therefore, this court is of the opinion that there is no infirmity in the decision and the communications issued by DIAC to the Petitioners.
Accordingly, the present petition is dismissed. The DIAC may proceed further and constitute the Tribunal in accordance with the 2018 Rules. It is made clear that any objection to jurisdiction of the Arbitral Tribunal, which the Petitioners may raise before the Arbitration Tribunal, under Section 16 of the Arbitration and Conciliation Act, 1996, is open for being adjudicated in accordance with law by the concerned Tribunal.
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JUDGMENT REVIEWED BY ABHINAV CHATURVEDI