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Tuesday, April 19, 2016

It is a settled principle of law that jurisdiction of Court under Section 11 of the Act is limited and confine to examine as to whether there is an arbitration agreement between the contracting parties and, if so, whether any dispute has arisen between them out of such agreement which may call for appointment of arbitrator to decide such disputes. Once it is held that disputes had arisen between the parties in relation to agreement which contained an arbitration clause for resolving such disputes, the Court should have made reference to the arbitrator leaving the parties to approach the arbitrator with their claim and counter- claim to enable the arbitrator to decide all such disputes on the basis of case set up by the parties before him. In this case, we find that the learned Single Judge did exceed his jurisdiction on this issue and hence interference to this extent is called for.



                                                              Non-Reportable
                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.4095 OF 2016
                    (ARISING OUT OF SLP(C) NO.10868/2016)
                          (@ SLP(C)…..CC 6652/2016)



      Rajesh Verma                                 Appellant(s)


                             VERSUS


      Ashwani Kumar Khanna                   Respondent(s)



                               J U D G M E N T


Abhay Manohar Sapre, J.
1)    Delay in filing special leave petition is condoned. Leave granted.
2)    This appeal is filed against the final judgment and order of the  High
Court of Delhi at New Delhi dated 03.12.2015 and 19.02.2016  in  Arbitration
Petition No. 434 of 2015 and I.A. No. 754 of 2016  in  Arbitration  Petition
No. 434 of 2015 respectively whereby the learned Single Judge  of  the  High
Court allowed Arbitration Petition No. 434 of 2015 and  dismissed  I.A.  No.
754 of 2016 in Arbitration Petition No. 434 of 2015 seeking  change  of  the
named arbitrator.
3)    In order to appreciate the short issue involved in the appeal,  it  is
necessary to state few relevant facts.
4)    The appellant is an owner/landlord of the shop  measuring  153.58  sq.
feet situated at 1729,  Gali No. 5,  Govind  Puri  Extension,  Kalkaji,  New
Delhi-110019 whereas the respondent was the appellant's tenant of  the  shop
in question at a monthly rent of Rs.175/-  since July 1977.
5)    On 31.10.2014, the  appellant  and  the  respondent  claimed  to  have
entered into an  agreement  whereby  it  was  inter  alia  agreed  that  the
appellant on respondent's vacating the shop  would  demolish  the  shop  and
construct the new one in its place on or before  31.03.2015  and  then  sell
the new shop to the respondent for a total consideration of  Rs.42,00,000/-.
The agreement further stipulated that the  respondent  has  paid  a  sum  of
Rs.32,00,000/-  by way of advance to the appellant in cash towards the  sale
consideration and balance amount of Rs.10,00,000/- was to  be  paid  by  the
respondent to the appellant at the time  of  execution  of  the  sale  deed.
Clause  14  of  the  agreement  contained  arbitration  clause  for   making
reference to the sole  arbitrator  in  the  event  of  any  dispute  arising
between the parties in relation to the agreement in question.
6)    The disputes arose between the parties in relation  to  implementation
of the terms of the agreement, which led  to  exchange  of  notices  between
them by making allegations and counter  allegations  by  both  against  each
other regarding committing of breaches of  the  agreement.  Eventually,  the
respondent  (tenant)  filed  an  arbitration  petition   being   Arbitration
Petition  No.  434  of  2015  under  Section  11  of  the  Arbitration   and
Conciliation Act, 1996 (hereinafter referred to as  “the  Act”)  before  the
Delhi High Court (Single Judge) out of  which  this  appeal  arises  praying
therein for appointment of sole arbitrator for resolving the disputes  which
had arisen between them. It was inter alia alleged that since Clause  14  of
the agreement provided for appointment of sole arbitrator for  deciding  the
disputes arising out of the agreement between the parties and when  disputes
have arisen between  them,  the  matter  should  be  referred  to  the  sole
arbitrator for his decision as provided in the  agreement.  The  arbitration
petition was contested by the appellant  (owner/landlord)  as  non-applicant
by denying the allegations made  in  the  petition.   However,  the  learned
Single Judge by order dated 03.12.2015 allowed the  petition  and  appointed
one Shri Ashok Chhabra, Advocate as sole arbitrator to decide the  disputes.
It is against this order of the learned  Single  Judge,  the  owner/landlord
has filed this special leave to appeal.
7)    Heard Mr. Praveen Chaturvedi, learned counsel for  the  appellant  and
Mr. Vivek Sharma, learned counsel for the respondent.
8)    Mr. Praveen Chaturvedi,  learned counsel for the appellant, urged  two
points in support of his submission. In the first place, he urged  that  the
learned Single Judge while allowing the petition exceeded  his  jurisdiction
under Section 11 of the Act because he virtually  proceeded  to  decide  the
main disputes itself by recording findings on such issues in Paras 9 and  10
of the impugned order. It was his submission that the findings  recorded  in
Paras 9 and 10 and all such observations made in the impugned  order,  which
touched the merits of the  controversy,  should,  therefore,  be  set  aside
leaving the arbitrator to decide all such disputes in  accordance  with  law
in arbitration proceedings on its merits depending upon the stand  taken  by
the parties before the arbitrator.
9)    His second  submission  was  that  the  learned  Single  Judge  having
allowed the petition should have sought party’s consent for  nominating  the
arbitrator and in any case, according to learned counsel, any retired  judge
would have been more preferable for appointment to act as an  arbitrator  in
place of any lawyer.
10)   Learned counsel for the respondent, however,  supported  the  impugned
order and urged that no interference is called for in the impugned order.
11)   Having heard the learned counsel for the parties  and  on  perusal  of
the record of the case, we find some  force  in  the  submissions  urged  by
learned counsel for the appellant.
12)   We have perused the impugned order and find that in Paras  9  and  10,
the learned Single Judge has elaborately discussed the issues  touching  the
merits of the controversy relating  to  the  agreement.  In  our  considered
opinion, a discussion much less with such elaboration on factual issues  was
wholly uncalled for and should not  have  been  made.  Indeed,  it  was  not
necessary for the learned Single Judge  to  have  recorded  any  finding  on
merits while making reference to the arbitrator  under  Section  11  of  the
Act.
13)   It is a settled principle of law  that  jurisdiction  of  Court  under
Section 11 of the Act is limited and confine to examine as to whether  there
is an arbitration agreement between the  contracting  parties  and,  if  so,
whether any dispute has arisen between them out of such agreement which  may
call for appointment of arbitrator to decide such disputes.
14)   Once it is held that  disputes  had  arisen  between  the  parties  in
relation to agreement which contained an arbitration  clause  for  resolving
such disputes, the Court  should  have  made  reference  to  the  arbitrator
leaving the parties to approach the arbitrator with their claim and counter-
claim to enable the arbitrator to decide all such disputes on the  basis  of
case set up by the parties before him.  In  this  case,  we  find  that  the
learned Single Judge did exceed his jurisdiction on  this  issue  and  hence
interference to this extent is called for.
15)   We, accordingly,  observe  that  the  arbitrator  while  deciding  the
disputes between the parties in arbitration proceedings would  not,  in  any
manner, be influenced by any  finding,  observations  made  by  the  learned
Single Judge in the impugned order and nor would make any reference  of  the
findings while deciding the case.
16)   Now so far as the appointment of sole arbitrator made by  the  learned
Single Judge is concerned, in view  of  the  reservation  expressed  by  the
appellant regarding the choice of an advocate arbitrator by the High  Court,
we feel that it is just and proper that a retired Judge should be  appointed
in his place as an arbitrator to resolve the disputes.
17)   We, accordingly, appoint Shri Justice M.L. Mehta (Rtd.)  as  the  sole
arbitrator to decide the disputes, which have arisen between the parties  in
relation to the agreement in question. The arbitrator would  be  at  liberty
to settle the terms for deciding the dispute such as fees and expenses etc.
18)    Needless  to  say,   the   arbitration   proceedings   be   completed
expeditiously.
19)   In the light of foregoing  discussion,  the  appeal  succeeds  and  is
allowed in part. Impugned order is modified to the extent  indicated  above.



.……...................................J.
                                     [J. CHELAMESWAR]


                     ………..................................J.
                                      [ABHAY MANOHAR SAPRE]
      New Delhi,
      April 19, 2016.
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