Appellants: Hindustan Petroleum Corpn. Ltd.
Respondent: Pinkcity Midway Petroleums
(2003) 6 SCC 503, Decided On: 23.07.2003, Hon'ble Judges: - N. Santosh Hegde, B.P. Singh
The question that would arise: what would be the role of the civil court when an argument is raised that such an arbitration clause does not apply to the facts of the case in hand?
Facts: Dealership agreement between parties for the sale and distribution of petroleum products of the appellant. Clause 20 of agreement incorporating terms and conditions, Clause 30 providing for the appellant's right to stop/suspend supplies and Clause 40 incorporating provision for arbitration. Officers of appellant finding short delivery of MS and HSD in dispensing units of the respondent. Show cause notice issued to the respondent. Not satisfied with its reply, sales and supply of petroleum products to respondent suspended--Respondent filing civil suit and obtaining stay. Appellant filing application under Section 8/5 in Court for referring the dispute to arbitration in terms of Clause 40 of agreement. Trial court rejecting application and High Court affirming rejection. Whether justified?
Held: Learned counsel for the appellant contends that it is an issue that ought to be raised before the arbitrator who is capable to settle upon the equivalent and the civil court should not embark upon a request with respect to the applicability of the arbitration clause to the facts of the case. While learned counsel appearing for the respondent contends that since the applicability of the arbitration clause to the facts of the case goes to the very root of the jurisdiction of the reference to arbitration, this question should be decided by the civil court before alluding the issue to arbitration even in cases where there is admittedly an arbitration clause. The answer to this contention, in our opinion, is found in Section 16 of the Act itself. It has enabled the Arbitral Tribunal to rule on its jurisdiction including a rule on any objection concerning the existence or validity of the arbitration agreement.
The Court in Konkan Rly. regarding the power of the arbitrator under Section 16 has laid down thus: It may likewise be that in a given case the Chief Justice or designate may have nominated an arbitrator although the period of thirty days had not expired. If so, the Arbitral Tribunal would have been inappropriately established and be without jurisdiction. It should be open to the aggrieved party which provides the Arbitral Tribunal to rule on its jurisdiction.
It is provided in section 16 of the Act. It states the Arbitral Tribunal may rule on its jurisdiction. That the Arbitral Tribunal may rule ‘on any objections with respect to the existence or validity of the arbitration agreement’ which provides that the Arbitral Tribunal's control under Section 16 is not confined to the width of its jurisdiction, as submitted by learned counsel for the appellants, but goes to the very root of its jurisdiction.
Therefore, in our opinion, in this case, the courts below ought not to have proceeded to examine the applicability of the arbitration clause to the facts of the case in hand but ought to have left that issue to be determined by the Arbitral Tribunal as contemplated in clause 40 of the Dealership Agreement and as required under Sections 8 and 16 of the Act. The appeal was dismissed.