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22 Jun

Alternative Dispute resolution: An alternative to avoid lengthy court proceedings

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Alternative Dispute resolution: An alternative to avoid lengthy court proceedings

ABSTRACT

The Indian judiciary, which is one of the oldest in the world, faces a substantial backlog of cases that remain unresolved even with the fast track courts that have been established. ADR, or alternative dispute resolution, provides workable ways to lessen this load by using strategies including Lok Adalat, arbitration, mediation, negotiation, and conciliation. The article deals with each approach, which is subject to different rules, enables the settlement of disputes outside of formal court processes and offers advantages including speedier settlements, control over the process, and confidentiality. ADR does not, however, come without disadvantages, such as a potential lack of resolution and limited enforceability. Important legal frameworks in India facilitate ADR and improve its application. This article examines the importance, advantages, disadvantages, and many forms of alternative dispute resolution (ADR). It also highlights the government’s initiatives to establish India as a major global centre for arbitration and conflict settlement and provides case law examples of how ADR has changed in India. ADR offers equitable and effective outcomes; ultimately, the choice of ADR method depends on the particulars of the dispute and the preferences of the parties.

Key words: Alternative Dispute Resolution, Arbitration, Mediation, Conciliation, Lok Adalat.

INTRODUCTION

It is a well-known fact that the Indian judiciary is among the oldest in the world, but it is also getting less effective at handling cases that are still pending since Indian courts are overflowing with lengthy cases that have not been resolved. The problem is far from being resolved because there are still a large number of ongoing cases, despite the establishment of more than a thousand fast track courts that have already resolved millions of cases. All methods and procedures for resolving disputes that don’t involve the government are gathered under ADR. The most well-known alternative dispute resolution (ADR) techniques include transaction, negotiation, arbitration, conciliation, and mediation. Although they are subject to various regulations, all alternative dispute resolution (ADR) techniques share the ability to help parties resolve their disputes in a way that is acceptable outside of formal legal or court processes. In contrast to mediation and conciliation, where a third party serves to encourage an acceptable arrangement between the parties, negotiation does not involve a third party intervening to help the parties reach an agreement. The third party, which might be one or more arbitrators, will be crucial to the arbitration process since it will produce an arbitration award that the parties must abide by. In contrast, no legally-binding conclusion is imposed by the third party in conciliation or mediation. In practice, the parties combine the use of these many ADRs, so if they are all different, they shouldn’t be compared and faced. In their contracts, for example, the parties may state that, in the event of a dispute, they will first attempt an amicable settlement (conciliation or mediation) and will only turn to a judicial method of settlement, which may include arbitration or recourse to the State justice system, if that approach fails.

SIGNIFICANCE

ADR uses a variety of strategies to address the backlog of cases in Indian courts, which is a big concern in India. The Indian judiciary receives scientifically established approaches from the Alternative Dispute Resolution mechanism, which lessens the workload on the courts. ADR offers several ways to settle disputes, including as negotiation, mediation, conciliation, arbitration, and lok Adalat. In this context, negotiation refers to the parties’ self-counseling to settle their disagreement, nevertheless, In India, negotiation is not legally recognized. Articles 14 and 21, which address equality before the law and the right to life and personal liberty, respectively, are also the foundations of alternative dispute resolution (ADR). The preamble’s stated goals of social, economic, and political justice as well as upholding societal integrity are the driving forces of ADR.

REASONS FOR OPTING ADR

Through alternative dispute resolution (ADR), parties can agree to settle a dispute involving intellectual property that is protected in multiple jurisdictions in a single procedure, avoiding the cost and complexity of multi-jurisdictional litigation as well as the possibility of contradictory outcomes. Compared to court action, alternative dispute resolution (ADR) gives parties more influence over the resolution of their disagreement because it is a private process. The parties themselves may choose the best arbitrators for their dispute, in contrast to court proceedings. They can also decide on the venue, language, and applicable law for the proceedings. In court-based litigation, when familiarity with the relevant law and local processes can offer major strategic benefits, one party may benefit from a home court advantage. However, ADR can be neutral to the law, language, and institutional culture of the parties. The ADR process is confidential. As a result, the parties may decide to maintain the confidentiality of the proceedings and any conclusions. This frees them up to concentrate on the merits of the disagreement without worrying about how it will be received by the public. This may be especially crucial in cases involving trade secrets and commercial reputations. In contrast to court rulings, which are typically susceptible to challenge through one or more stages of litigation, arbitral awards are typically not appealable. In general, arbitral verdicts are recognized on par with domestic court judgements under the United Nations Convention for the Recognition and Enforcement of Foreign Arbitral verdicts of 1958, also referred to as the New York Convention, without merit review. This makes it much easier to enforce prizes internationally.

DRAWBACKS OF ADR

There is not always a resolution through the alternate resolution procedure.
This implies that even after spending time and resources attempting to settle the disagreement outside of court, the parties may still need to go through with a trial by jury and litigation in order to pursue arbitration and other kinds of conflict resolution. An appeal is not possible against a neutral arbitration’s ruling, with a few notable exceptions like fraud. Conversely, a court’s rulings are typically appealable for a number of reasons. ADR awards cannot be enforced as if they were court judgements because there is no equivalent to section 66 of the Arbitration Act 1996, which states that an award made by the tribunal in accordance with an arbitration agreement may be enforced in the same manner as a judgement or order of the court to the same effect. The awards are not as readily enforceable, though. The majority of conflicts resolved through arbitrations involve money. They are unable to give injunctions because they are unable to impose instructions requiring one party to do something or refrain from doing something. Due to the lack of a disclosure requirement in arbitration that exists in litigation, there is a chance that parties will settle a dispute without fully understanding the circumstances, which could result in an incorrect conclusion. However, the majority of businessmen held the opinion that reaching a resolution quickly is preferable to squandering time and resources on a disagreement in order to reach the right conclusion. When a client requires an injunction, when there is no issue to be resolved, or when the client needs a legal decision made, alternative dispute resolution is not appropriate.

MODES OF ADR

Arbitration

The arbitration process cannot proceed if there is not a valid arbitration agreement in effect prior to a dispute developing. Parties submit their disagreement to one or more arbitrators in this way of resolving disputes. Parties must abide by the arbitrator’s ruling, which is referred to as the “Award.” The goal of arbitration is to resolve disputes fairly and quickly, out of court, without incurring further costs or delays. Any party to a contract that has an arbitration clause may invoke it on their own behalf or through an authorised agent, in which case the dispute will be submitted to arbitration under the terms of the arbitration agreement. An arbitration clause in this context refers to a clause that specifies the procedures, language, number of arbitrators, and seat or authorised location of the arbitration.

According to Section 8 of the Arbitration and Conciliation Act of 1996, a party may petition the court to have the matter referred to an arbitration tribunal in accordance with the agreement if the other party disregards the arbitral agreement and takes the suit to civil court rather than arbitration, but not after the first statement has been submitted. The dispute will be referred to arbitration if the courts are satisfied with the application, which must contain a certified copy of the arbitration agreement.

Mediation

Through the alternative dispute resolution process of mediation, two or more disputants might work with a third, impartial person to help them reach a resolution. A third party serves as a mediator in this simple and straightforward party-centered negotiation process, employing effective communication and negotiating strategies to help parties settle their differences amicably. The parties have complete control over this process. The mediator’s role is limited to assisting the parties in resolving their disagreement. The mediator does not impose his opinions or decide what constitutes a just settlement.

Conciliation

Although less formal in nature, conciliation is nonetheless a type of arbitration. It is the process of helping the parties to a disagreement reach a peaceful conclusion through the use of a conciliator who meets with each party separately to resolve the conflict. Conciliators meet separately in order to improve communication, reduce tension between the parties, and interpret the situation in order to facilitate a negotiated conclusion. Prior consent is not required, and it cannot be imposed onto a party that does not choose to participate in conciliation. That is how it differs from arbitration.

Negotiation

It is the most regularly employed alternate method of resolving disputes. A non-binding process whereby the parties start talks with each other without the help of a third party in an effort to reach a mutually agreeable settlement. Businesses, non-profits, government agencies, court cases, international relations, and private affairs like marriage, divorce, parenthood, and daily living all involve negotiation.

Lok Adalat

The Lok Adalat, often known as the “People’s Court,” is chaired by a member of the legal profession, social activists, or a serving or retired judge. In order to exercise this authority, the National Legal Service Authority (NALSA) and other Legal Services Institutions regularly hold Lok Adalats. Lok Adalat may be consulted over any matter that is still pending in a regular court or any disagreement that hasn’t been presented before a court of law. The process is quick since there are no court costs and certain procedures are followed. The court money that was initially paid in the court when the petition was filed is also returned to the parties in the event that a matter that is pending in court or referred to the Lok Adalat is settled afterwards.

PIVOTAL CASE LAWS

Case name- Renusagar Power Co Ltd vs. General Electric

According to the Supreme Court, the goal of this Act was to expedite and advance international trade by establishing an arbitration process for the prompt resolution of trade-related disputes. It was declared that unless the parties specifically granted him such authority, an arbitrator generally lacked the capacity to clothe himself with the authority to decide the matter within his own jurisdiction. The Court further decided that the court, not the arbitrator, should make the decision regarding the contract’s validity under Section 33. The entire process would lack jurisdiction if there had been no arbitration clause in place when the arbitrators began their duties.

Case name- Bhatia International Vs Bulk Trading

The Supreme Court of India adopted Section 9 to support arbitrations seated outside of India after interpreting Part I of the Act to extend to arbitrations held outside of India. The aforementioned Act makes no mention of its provisions not applying to international commercial arbitrations held in nations that have not ratified conventions. The Act’s Part II is exclusively applicable to arbitrations conducted in nations that have signed conventions. The court decided that Part I’s rules would automatically apply in any case where the arbitration took place in India. Nonetheless, unless the Parties have expressly or implicitly rejected all or any of Part I’s provisions, the requirements of Part I shall apply in cases of international commercial arbitrations conducted outside of India. In that instance, the Parties’ selected laws or regulations would take precedence. Any part of Part I that is expressly prohibited will not be applicable. The aggrieved parties in foreign arbitrations are now able to get interim remedy in India.

CONCLUSION

The establishment of arbitration rules, which have undergone substantial evolution over time, is where ADR techniques got their start. Over time, more alternative dispute resolution (ADR) techniques made their way to the Indian Parliament, which was astute enough to incorporate these novel approaches to conflict resolution. For example, the Micro, Small and Medium Enterprises Development Act of 2006 and the Commercial Courts Act of 2015 make sure that these processes are used case-by-case in particular industries. In order to position India as a leading worldwide hub for arbitration and other kinds of conflict resolution, the Indian government is currently undertaking further measures to establish alternative dispute resolution (ADR) procedures. Effective substitutes for traditional litigation are Alternative Dispute Resolution (ADR) techniques such arbitration, neutral review, mediation, and settlement conferences. They provide parties the ability to settle conflicts quickly, amicably, and possibly at a considerable financial savings. Selecting the best ADR strategy will eventually support equitable and successful conflict resolution and depend on the particulars of the dispute as well as the preferences of the parties.

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Written by- Shreyasi Ghatak

18 Jun

Promoting an Inclusive Arbitration Landscape in India: A Path to Just Outcomes

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Promoting an Inclusive Arbitration Landscape in India: A Path to Just Outcomes

Background

The discourse surrounding arbitration has shifted its focus to the necessity of inclusion and representation due to the growing sensitivity of judicial systems globally to guaranteeing diversity. Geographical, cultural, racial, ethnic, and socioeconomic diversity should all be taken into consideration, even if the discussion of the need for diversity often begins with gender diversity. Given that India is a country with a great deal of regional, cultural, linguistic, and other diversity, it is imperative to have a varied pool of arbitrators to handle cases involving litigants from various areas. The examination of the arbitration environment in India reveals some recurring themes that are frequently cited as the main reasons for the dearth of diversity. The two most prominent features are the appointment process’s lack of openness and historical underrepresentation. Similar to arbitration, the pipeline problem is frequently mentioned as a significant contributing factor to the underrepresentation of women in leadership roles. In its most basic form, the term “pipeline” refers to the sequence of training, encounters, affiliations, and employment roles that culminate in the appointment of an arbitrator. Since the hurdles to entrance exist not only for career advancement but also from the recruitment stage, they may be much more detrimental to ethnic diversity. There are few opportunities for other arbitrators as a result of parties’ desire to nominate or select experienced arbitrators with stellar records. The CJI has referred to the current state of affairs as the “diversity paradox” because there are now fewer than 10% of Indian women arbitrators on foreign panels. The situation regarding the nomination of female arbitrators is only somewhat improved on a global scale. Different viewpoints from various cultures, backgrounds, and legal systems contribute to a more thorough knowledge of the issues at hand. Additionally, the possibility of cognitive biases affecting decision-making is reduced by a diverse arbitral tribunal.

Matter of concern

Need of diversity in arbitral tribunal for ensuring inclusivity and fairness in the decision-making process.

Present scenario

Chief Justice of India (CJI) DY Chandrachud has been a notable advocate for inclusion in arbitration in India. Emphasis has been given on the importance of not just diversifying the pool of potential arbitrators based on gender but also increasing the frequency with which experienced lawyers are appointed to the role of arbitrator. Recently, Vice-President of India Jagdeep Dhankhar echoed this appeal for more diversity, commenting on the CJI’s statements during the 6th ICC India Arbitration Day in New Delhi.

Conclusion

The goal of inclusion is to create an environment in which people from all backgrounds and cultures are welcomed, treated fairly, and accepted in their culture. Professional, cultural, and gender diversity are all incorporated into the purview of an inclusive legal system. Diversity is more than just symbolic gestures; in order to create an inclusive arbitration environment, stakeholders must become more aware of the need to eliminate prejudices and take deliberate, proactive measures to eliminate blind spots.

Written By- Shreyasi Ghatak

17 Jun

“Revolutionizing Arbitration”: IIAC Launches Groundbreaking Regulations for Micro and Small Enterprises

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Background –

On June 7, 2024, the India International Arbitration Centre (IIAC) introduced the India International Arbitration Centre (Conduct of Micro and Small Enterprises Arbitration) Regulations 2024. Recognizing the importance of micro and small enterprises in the Indian economy, these regulations aim to enhance the efficiency and speed of dispute resolution within this crucial sector.

Update –

The IIAC has acknowledged the necessity of promoting quicker and more effective dispute resolution mechanisms for micro and small enterprises. These newly established regulations are part of IIAC’s ongoing efforts to facilitate arbitration in this significant economic segment. According to a press release, the regulations underscore the importance of swift and efficient dispute resolution processes.

Key features –

Fee Structure – There are no filing fees for claims or counterclaims, and the arbitrator’s fees are set at a rate lower than that specified in the Fourth Schedule of the Arbitration and Conciliation Act, 1996. Additionally, the administration fees charged to parties are kept to a minimum.
Fast Track Procedure – The default method for all arbitrations is a fast track procedure based on the pleadings, documents, and submissions provided by the parties. Oral hearings are held only if all parties request them or if the Arbitral Tribunal deems them necessary for clarifying issues. The arbitral award is to be issued within six months from the date the Registrar informs the parties about the constitution of the Arbitral Tribunal. Parties can request that the fast-track procedure not be followed, subject to the Arbitral Tribunal’s approval.
Appointment of Arbitrator – A Sole Arbitrator is appointed by the IIAC Chairperson, advised by the Advisory Panel. The selection process ensures that the arbitrator is independent, impartial, and capable of conducting the arbitration efficiently and promptly.
Legal Aid – Micro and small enterprises experiencing financial difficulties can apply for legal aid by submitting supporting documents to IIAC. Approved applications may result in a waiver of up to 50% of the IIAC’s administration fee. Additionally, a counsel may be provided at no cost, subject to the Arbitral Tribunal’s decision on arbitration costs.
Use of Artificial Intelligence – IIAC plans to implement Artificial Intelligence software developed by Digital India Bhashini Division, an Independent Business Division within the Digital India Corporation under the Ministry of Electronics and Information Technology. This technology aims to simplify and enhance the transparency of the arbitration process across India, irrespective of the parties’ regional or linguistic differences. Features include real-time translation of documents and speech in various languages listed in the Eighth Schedule of the Indian Constitution to English/Hindi, marking the first use of such technology in dispute resolution in India.
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23 May

Delhi High Court Sets Aside Arbitrator’s Rs. 20 Lakh Award for Loss of Profit Due to Lack of Evidence

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CASE TITLE – M/S DIVYAM REAL ESTATE PVT LTD v. M/S M2K ENTERTAINMENT PVT LTD

CASE NUMBER – O.M.P. (COMM) 162/2020 & I.A. 14331/2012, I.A. 10655/2022

DATED ON – 22.05.2024

QUORUM – Justice Anup Jairam Bhambhani

FACTS OF THE CASE

Disputes had arisen between the parties from a Memorandum of Understanding dated 20.02.2006 (“MoU‟), under which the petitioner was to construct a mall in the name and style of “R-3 Mall‟ in Ahmedabad, Gujarat (“Mall‟) in which the respondent was to be provided space for running a multiplex on a lease basis. The bone of contention between the parties was, that the respondent alleged that the petitioner had committed a breach of the terms of the MoU by entering into a contract with a third party on 09.03.2006, thereby terminating the respondent’s contract. The respondent claimed that the termination was invalid and illegal, which compelled them to file a claim in arbitration. By way of the Arbitral Award, the petitioner has been directed to pay to the respondent the sum of Rs. 24,54,458.33 along with interest at the rate of 12% per annum. The said sum comprises two primary components: (i) the sum of Rs. 4,54,458.33 towards expenses held to have been incurred by the respondent towards advertisement and exhibition charges etc. as detailed in the award; and (ii) the sum of Rs.20,00,000.00 towards „loss of profit‟ suffered by the respondent, as also detailed in the award.

ISSUES

Whether the Learned Arbitrator was justified in issuing an award of Rs. 20,00,000.00 by way of loss of profit?

CONTENTIONS BY THE PETITIONER

The Learned Counsel appearing for the petitioner submitted that in the petition they have raised two principal contentions impugning the Arbitral Award. The first is that the MoU signed between the parties was merely an “agreement to agree‟ and was therefore not a concluded or enforceable contract, and second, that the award of Rs. 20,00,000.00 in favour of the respondent by way of loss of profit, is untenable since it was based entirely on conjectures and surmises. The petitioner’s main contention is that the learned Arbitrator has awarded loss of profit to the respondent based on no evidence tendered on record, and the Arbitral Award is in fact self-contradictory in its reasoning

CONTENTIONS BY THE RESPONDENT

The Learned counsel for the respondent has argued that the learned Arbitrator has returned a finding that the petitioner was guilty of breach of the MoU, thereby also dismissing the petitioner‟s counterclaims. It was argued that by way of the present petition, the petitioner is therefore asking the court to re-appreciate evidence adduced before the learned Arbitrator, which is impermissible under section 34 of the A&C Act. It was submitted that the award is neither contrary to law nor against the public policy of India. He had drawn the attention of the Hon’ble High Court to an affidavit dated 01.02.2010 tendered by Mr. Sunil Gupta, Deputy Manager of the respondent by way of evidence in the arbitral proceedings, in which, it was argued, the witness has furnished details of the expenses incurred by the respondent towards performing its obligations under the MoU. It was pointed out that the said witness has deposed that the respondent spent a sum of Rs. 20,08,343.00 towards payment made to various parties for performing its part under the MoU. The Learned Counsel also stated that in addition to such expenses, the respondent has also suffered loss of goodwill and loss of profit, resulting from termination of the MoU by the petitioner.

COURT ANALYSIS AND JUDGEMENT

The Hon’ble High Court of Delhi, after looking through the evidence before them and the Arbitrator’s reasoning for issuing the award was of the opinion that on the limited challenge pressed on behalf of the petitioner, viz. a challenge only to the award of Rs. 20 lacs to the respondent towards loss of profit, the discussion and reasoning contained in the Arbitral Award was sparse and cryptic. They noticed that the learned Arbitrator first makes a passing observation that the respondent had incurred loss of profit, which he says has been calculated for the period from 20.06.2006 to 20.12.2008 based on the estimated loss of and then proceeds to observe that calculating loss of profit must involve a certain amount of conjecture and that there cannot be straight-jacket formula for that purpose. However, the learned Arbitrator thereafter proceeds to observe “it is speculative if any profit would be made or not. However, it cannot be ignored that it is the respondent who had committed the breach.” Therefore, the Hon’ble High Court noticed that the learned Arbitrator was of the view that even the foundational fact as to whether the respondent would have made a profit at all was in doubt. IIt the opinion of the Hon’ble High Court, that there is a clear discordance, whereby on the one hand, the learned Arbitrator holds that whether or not the respondent would have made any profit is itself a matter of speculation, but on the other hand, he proceeds to award loss of profit of Rs. 20 lacs, drawing that figure literally from thin air. Hence, they stated that, the learned Arbitrator did not proceed even on the basis of the evidence on record, that was available inter alia by way of the evidence tendered before him. The Hon’ble High Court then held that it was persuaded to allow the present petition, holding that the award of Rs. 20 lacs to the respondent towards loss of profit was based on no evidence on record, and in fact, the learned Arbitrator has failed to even decide whether the respondent had incurred, or would have incurred, any loss of profit at all, and stated that the Arbitral Award dated 07.03.2012 is to be set aside.

Judgement Reviewed by – Gnaneswarran Beemarao

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21 May

Delhi HC declines settlement agreement stating lack of intent to avoid Arbitration; Sends dispute to Arbitration.

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CASE TITLE – M/S DHAWAN BOX SHEET CONTAINERS PVT. LTD v. M/S SHREYANSH HEALTHCARE PVT. LTD.

CASE NUMBER – ARB.P. 1196/2023

DATED ON – 20.05.2024

QUORUM – Justice Dinesh Kumar Sharma

FACTS OF THE CASE

The petitioner is engaged in the business of manufacturing corrugated boxes and cartons. The respondent placed various orders upon the petitioner for the supply of corrugated boxes. The petitioner having been supplied the same issued various invoices from time to time. The petitioner’s plea is that there was outstanding due of Rs. 36,40,006/- for which the petitioner issued a legal demand notice dated 01.06.2023. The petitioner has filed the present petition stating therein that there is an outstanding of Rs. 36,40,006/-. The petitioner also stated that the respondent issued an email dated 22.05.2023 and requested the petitioner to settle the matter at the lesser rate on the coercive ground that the management and control of the company would soon be taken over by the Insolvency Resolution Professional as appointed by the Hon’ble National Company Law Tribunal. The petitioner also claimed to have sent legal demand notice dated 01.06.2023. The petitioner stated that the respondent had informed that the insolvency proceedings had been initiated against him by M/s Synergy Group and further shared a screenshot of the filing details. Therefore, to bring a quietus to the matter, the petitioner accepted the offer of the respondent vide consent letter dated 12.06.2023. However, later on it was revealed that no insolvency petition had been filed. The respondent submitted that the petitioner had been supplying bad quality of the goods and the respondent was forced to return the good to the tune of Rs. 10,23,117/-. It has been submitted that thereafter the parties entered into a settlement agreement dated 12.06.2023 thereby deciding the terms of the payments to be to the petitioner after mutual discussion between the parties.

ISSUES

Whether the letter dated 12.06.2023 can be taken as a novation of agreement or settlement of dispute between the parties?

Whether the arbitration clause in the invoices is still enforceable given the settlement agreement?

LEGAL PROVISIONS

Section 8 of the Arbitration and Conciliation Act, 1996, prescribes the power of a judicial authority to refer parties to arbitration.

Section 11 of the Arbitration and Conciliation Act, 1996, prescribes the appointment of arbitrators in an arbitration proceeding.

CONTENTIONS BY THE PETITIONER

The Learned counsel for the petitioner submitted that the respondent coerced the petitioner into settling the matter by accepting part consideration and agreeing to receive the balance consideration proportionately on recovery of dues against whom the respondent has stated to have initiated recovery proceedings. Learned counsel for the petitioner also stated that the respondent falsely informed the petitioner that proceedings under IBC had been initiated against him which was found to be false. The petitioner in these circumstances accepted the offer of the respondent vide consent letter dated 12.06.2023. The Learned counsel for the petitioner submitted that there is an arbitration clause in the invoices within the jurisdiction of the Delhi Courts. He also submitted that it is a settled proposition that an arbitration clause on the invoices can be taken into account for appointing an Arbitrator. It had further been stated that the plea taken by the respondent that the arbitration clause as contained in the invoices of the petitioner stood novated under the settlement as recorded in the document dated 12.06.2023 is liable to be rejected. It had been submitted that the document dated 12.06.2023 cannot obviate the arbitration clause in the invoice. The Learned counsel further submitted that it is a settled proposition that if an original contract remains in existence, for disputes in connection with issues of repudiation, frustration, breach, etc., the Arbitration Clause therein continues to operate for these purposes.

CONTENTIONS BY THE RESPONDENT

The Learned counsel for the respondent submitted that the petitioner had been supplying bad quality of the goods and the respondent was forced to return the goods to the tune of Rs. 10,23,117/-. It had been submitted that thereafter the parties entered into a settlement agreement dated 12.06.2023 thereby deciding the terms of the payments to be to the petitioner after mutual discussion between the parties. He also submitted that the petitioner upon realizing the defects and quality issues in the goods sold by the Petitioner to the Respondent of its own volition agreed to settle the accounts amicably after discussions and deliberations with the Respondent. The Learned counsel for the respondent submitted that after the settlement as recorded in the letter dated 12.06.2023, there was no live lis between the parties and therefore in the absence of any dispute, the matter cannot be referred to the arbitration. He further submitted that once the parties to any arbitration agreement enter into a settlement thereby discharging the original agreement, the jurisdiction under Section 11 of the Arbitration and Conciliation Act cannot be invoked. After placing reliance on multiple precedents, The Learned Counsel came up with the arguments that a) an arbitration clause contained in an agreement which is void ab initio cannot be enforced as the contract itself never legally came into existence. b) A validly executed contract can also be extinguished by a subsequent agreement between the parties. c) If the original contract remains in existence, for the purposes of disputes in connection with issues of repudiation, frustration, breach, etc., the arbitration clause contained therein continues to operate for those purposes. d)Where the new contract constitutes a wholesale novation of the original contract, the arbitration clause would also stand extinguished by virtue of the new agreement. The Learned counsel argued that though the scope of judicial intervention at the stage of exercising jurisdiction under Sections 8 and 11 of the Arbitration and Conciliation Act is limited, yet, the matter can be referred only if there is a dispute between the parties. He further submitted that the petitioner having settled the dispute with the respondent, the matter cannot be referred to the learned Arbitrator.

COURT ANALYSIS AND JUDGEMENT

The Hon’ble High Court of Delhi was of the firm view that by no stretch of imagination the letter dated 12.06.2023 can be taken as the novation of an agreement or the settlement of the dispute between the parties as the document does not reveal at all that vide this document the dispute between the parties have been settled and there is no Live Lis between the parties. They further stated that while deciding such issues, the court has only to look at the prima facie view and the intention of the parties. In order to deny the arbitration, if the same is the preferred mode of resolution of dispute, there has to be clear intent of the parties, and stated that they do not consider that there is clear intent of the parties as reflected in the document dated 12.06.2023. The Hon’ble High Court disposed of the petition, with a few directions, stating that the disputes between the parties under the said agreement were now referred to the arbitral tribunal, and had also appointed an Arbitrator. It was also made clear that all the rights and contentions of the parties, including as to the arbitrability of any of the claim, any other preliminary objection, as well as claims on merits of the dispute of either of the parties, are left open for adjudication by the learned arbitrator.

Judgement Reviewed by – Gnaneswarran Beemarao

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