Bench: Uday Umesh Lalit, Hon'ble Ms Malhotra
The judgment was based on the doctrine of "KompetenzKompetenz," which states that the arbitral tribunal has the authority and competence to decide under its jurisdiction, including determining both jurisdictional questions and the nature or validity of the arbitration agreement. This doctrine is meant to limit judicial interference so that the arbitral procedure is not hindered at the outset, where one of the parties raises a preliminary objection.
However, the doctrine of kompetenzkompetenz is subject to an exemption, which is where the settlement deal is challenged as having been obtained by bribery or deceit. This exception will also occur in situations where the sides were in the middle of negotiating and had already signed a draft agreement as a prelude to implementing the final deal. The proposed agreement will merely be a proposal to arbitrate, not an unequivocal approval of the agreement's conditions.
The arbitral tribunal cannot claim authority over the cases if the arbitration arrangement is invalid or non-existent. If the arbitration arrangement is not in writing, or the issues are beyond the reach of the arbitration agreement, the appointment of an arbitrator can be denied.
whether the High Court was reasonable in dismissing an application for referral to arbitration brought under section 11 of the Arbitration and Conciliation Act, 1996 (“Act”) because it was prohibited by limitation.
The petitioner agreed to provide security to the respondent under an arrangement dated December 21, 2010.
Later, on May 29, 2013, the petitioner released a legal notice requesting payment of Rs. 1,43,69,309/- plus interest.
On March 9, 2016, the petitioner released another notice referencing Arbitration proceedings and requesting that the respondent appoint a Sole Arbitrator to resolve the parties' disputes.
Following that, on May 30, 2016, the petitioner sent another notice proposing the identity of the sole arbitrator.
The complainant then applied to the High Court for a sole arbitrator under Section 11 of the Act on September 20, 2016.
The supreme court noted that the 2015 Amendment Act altered the appointment procedure of an Arbitrator under Section 11:
The scope of jurisdiction under subsection (6A) of Section 11 was confined to examining the existence of the arbitration agreement at the preference stage. The Court is now only expected to investigate the presence of the arbitration arrangement due to the legal mandate specified in Article 11(6A) of the Act. Section 16, which enshrines the Kompetenz Kompetenz principle, leaves all such provisional or threshold questions determined by the arbitrator.
When considering the case of M/s Indan Farmers Fertilizers Cooperative Ltd. vs Bhadra Products, the Supreme Court held that the question of limitation is a jurisdictional issue that must be settled by the tribunal under Section 16 of the Act.
It is important to note that the Arbitration and Conciliation Act 1996 was amended again in 2019. Clause 6A in Section 11 was removed, thereby removing the limitation on the jurisdiction of courts under Section 11 and allowing courts to investigate the matter.
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