An arbitral tribunal ought to decide the objection u/s 16 of the Act as a preliminary issue: Delhi High Court
The Delhi High Court has passed a judgment on 25-03-2021 in the case of Surender Kumar Singhal & Ors v. Arun Kumar Bhalotia & Ors CM(M) 1272/2019. Justice Pratibha M. Singh disposed of the petition.
FACTS OF THE CASE
Disputes arose between two branches of one family – One led by Sh. Arun Kumar Bhalotia – Respondent No.1 and his family members consisting of his wife – Smt. Sunita Bhalotia- Respondent No.2 and two sons, namely, Sh. Anant Bhalotia and Sh. Ayush Bhalotia, (Respondents No. 3 and 4 respectively) and The second branch led by his brother – Sh. Gopal Kumar Bhalotia (Respondent No.5) and his family consisting of his wife – Smt. Sunita Bhalotia (Respondent No.6) and two children, namely, Smt. Smriti Bhalotia (Respondent No.7) and Sh. Anshul Bhalotia (Respondent No.8).
Vide order dated 9th January, 2018, the ld. Single Judge of this Court, referred the disputes to Arbitration by a sole Arbitrator. Pursuant to the above reference, claim petition was filed before the Arbitrator and counter claim was raised by the Respondent No. 5 (Shri Gopal Kumar Bhalotia).In the arbitral proceedings, the Petitioners herein (namely, Shri Surender Kumar Singhal, Shri Ramkishan Aggarwal, Shri Rajesh Kumar, Shri Kishore Kumar Aggarwal, Smt. Chetna Bansal and Shri Lovelesh Aggarwal) were arrayed as Respondents No. 5 to 10 and vide order dated 11th April, 2019, notice was issued to the said Respondents for appearing before the Arbitrator. On 16th April, 2019, notice was served in the arbitration proceedings to the Petitioners.
The Petitioners herein then filed an application under Section 16 of the Act and raised an objection that the Tribunal does not have any jurisdiction to adjudicate the claims against the Petitioners. One of the grounds raised in the application was that the Petitioners are bonafide purchasers of one of the properties and have valid title to the same and that the arbitration clause does not bind them. It was stated in the application that the Petitioners were neither party to the suit in the High Court nor a party to the arbitration agreement and since they are completely third parties, they cannot be compelled to participate in the arbitration proceedings. Thus, a prayer was made to dismiss the arbitration proceedings qua the Petitioners on the ground that the Arbitral Tribunal has no jurisdiction to entertain any claims against the Petitioners. In the said application the ld. Arbitrator held vide order dated 8 th July 2019 that the objection as to jurisdiction would be decided along with the final award.
It is argued on behalf of the Petitioners that if the issue of jurisdiction is not decided at the initial stage, parties like the Petitioners would be saddled with arbitral proceedings for several years and incur huge costs and this is contrary to the spirit of section 16(5) of the Arbitration and Conciliation Act, 1996 itself.
On the other hand, ld. counsel for the Respondents, Ms. Smita Maan, submits that the orders of an Arbitral Tribunal are not amenable to writ jurisdiction. Under section 16, the only outcomes that are contemplated under the Act are where the objection as to maintainability is upheld by the Tribunal and whereby the Tribunal rejects the plea and continues with the arbitral proceedings.
Applying the settled legal position to the facts of the present case, the approach of the ld. Arbitrator cannot be set out as either perverse or patently lacking in jurisdiction. The fact situation does not present an `exceptional rarity’ requiring exercise of jurisdiction. The order of reference dated 9thJanuary, 2018, as held by the arbitrator is quite wide in nature by use of the expression “Disputes which may arise in any manner with respect to or connected with the family settlement/ partition dated 15 th July, 2019”
Considering this expression used in the order of reference, ld. Arbitrator was of the opinion that a final decision on the application of the Petitioners under Section 16 cannot be taken, without further evidence in the matter. The property which the Petitioners have purchased as per the Arbitrator is clearly subject matter of the arbitral proceedings and thus the ld. Arbitrator, after evidence being recorded may be required to mould relief in the same manner. Thus, the tests for interference under Article 226/227 being extremely strict, this Court does not deem it appropriate to interfere under Article 227.
Having said that, the Ld. Arbitrator’s observation that the said objection shall be decided `while passing the award’ may also not be fully in line with the legal position as held in Mcdermott International Inc(supra). Thus, the question of jurisdiction raised by the Petitioners would have to be adjudicated first, prior to the passing of the final award.
The present petition is disposed of.
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JUDGMENT REVIEWED BY ABHINAV CHATURVEDI