The High Court of Calcutta, while allowing an application filed under Section 11 of the Arbitration and Conciliation Act, 1996, arises out of the disputes between the parties in connection with an Agreement for Settlement, held that in an application under Section 11 of the 1996 Act or the affidavits filed in connection therewith, the petitioner is not making its claim, but only prima facie seeks to satisfy the court that a dispute falling within the purview of the arbitration clause exists, that there is a valid arbitration clause and the dispute is otherwise arbitrable.
Brief Facts:
The petitioners/creditors sold iron-ore and fines to the respondent. Subsequently, an amount became due by way of the sale price. The parties decided to resolve the issues by adjusting the debts and agreed to a repayment schedule by the agreement in question for the realization of the dues of the petitioner. The petitioners claim that due to the closure of mining operations, iron ore could not be supplied by the petitioners in terms of the agreement. The petitioner requested the respondent to issue purchase orders as per the agreement and make payment of the balance amount by issuing post-dated cheques. The respondent refused to do so. The petitioner invoked the Arbitration Clause.
Contentions of the Petitioner:
The learned counsel appearing on behalf of the Petitioner submitted that in the agreement, in Clause 12, a force majeure provision was included, which, inter alia, stated that neither party would be liable for any breach of the agreement for reasons beyond the control and capacity of the creditor/petitioner. He argued that any dispute or difference between the parties arising out of or in relation to the agreement would be the subject matter of arbitration.
Contentions of the Respondent:
The learned counsel appearing on behalf of the Respondent submitted that the subject-matter of the dispute relates to the performance of the agreement and does not touch the validity of the same, such validity being undisputed. Hence, the dispute having not touched the validity, which furnishes the only scope of arbitration as per Clause 13 of the Agreement, the present application ought to be dismissed.
Observations of the court:
The court noted that if the phrases “arising out of” and “in relation to” are read in conjunction with “as to the validity”, it would be an absurdity to confine the scope of reference merely to the validity of the Agreement, which would have the necessary effect of entirely discarding the above two expressions which have been deliberately used by the parties in Clause 13.
The Court observed that in an application under Section 11 of the 1996 Act or the affidavits filed in connection therewith, the petitioner is not making its claim, but only prima facie seeks to satisfy the court that a dispute falling within the purview of the arbitration clause exists, that there is a valid arbitration clause and the dispute is otherwise arbitrable. Pleadings in a proceeding under Section 11 of the 1996 Act are intended only for the limited purpose of satisfying the court as to the existence of its essential ingredients and are not meant to be the actual statements of claim or defense of the parties.
The decision of the Court:
The Calcutta High Court, allowing the petition, held that the petitioners have made out a prima facie case sufficient for Section 11 of the 1996 Act.
Case Title: Mala Roy & Ors. v M/s. Jai Balaji Industries Limited
Coram: Hon’ble Justice Sabyasachi Bhattacharyya
Case No.: A.P. NO. 152 of 2021
Advocate for the Petitioner: Mr. Meghajit Mukerjee
Advocate for the Respondent: Mr. Abhrajit Mitra
Read Judgment @LatestLaws.com
Picture Source :
