The Delhi High Court opined that determining a dispute regarding the existence of a settlement agreement, being a disputed question of fact, falls under the scope of an arbitrator and not the court.
The High Court of Delhi also relied upon the precedent of SBI Insurance Co Ltd v. Krish Spinning, reiterating the conditions required for the appointment of an arbitrator under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996.
Brief Facts
The Petitioner filed a petition under section 11(5) of the Arbitration and Conciliation Act, 1996 (Hereinafter, “Act”) against Respondents. The dispute between them germinated from a Partnership Deed dated February 25, 2017, which expressly included the arbitration clause for dispute resolution. However, even after existence of this arbitration agreement, both the parties could not agree on arbitration, leaving the Petitioner with the recourse to approach the Delhi High Court for appointment of the Arbitrator.
Issues
- What are the conditions for referring the disputes to arbitration under Section 11(5) of the Act and Whether those conditions have been satisfied in the present case.
- Whether the issue relating to existence of settlement agreement should be determined by the court itself or be left to the jurisdiction of the arbitrator.
Contentions of Petitioner
The Petitioner argued that there exists a valid arbitration clause in the Partnership Deed and that even after several efforts to resolve the dispute mutually after withdrawal of previous arbitration petitions, the dispute still remained unresolved. Regarding the above, the petitioner contended that he had previously withdrawn his arbitration petitions in good faith due to possibility of a potential settlement and the court while noting his contentions stated that “He, however, submits that this was because his client had been assured by the respondents that the disputes would be settled, but submits that no formal settlement agreement was ever drawn up, as the parties were not able to arrive at a negotiated settlement”. Thus, the petitioner postulated that since there has not been any final settlement between the parties, ergo, the petition under section 11(5) must be allowed and the arbitrator be appointed to resolve the ongoing disputes.
Contentions of Respondent
The respondent urged that there was a mutual settlement arrived between the parties which was also recorded by the high court in it’s previous order and thus, there was no reason for allowing the present petition for arbitration as no dispute survives.
Observation of the Court
Delhi High court opined that despite objections by Respondents about the alleged settlement agreement, the fact that there exists an arbitration agreement requires the court to refer the dispute to arbitration. Regarding the above, the bench while relying upon the dictum laid in SBI General Insurance Co Ltd v. Krish Spinning 2024 SCC OnLine SC 1754 held that “According to the said decision, the Court exercising jurisdiction under Section 11(5) or Section 11(6) of the 1996 Act has only to satisfy itself that there exists an arbitration agreement between the parties and that the petition under Section 11(5)/Section 11(6) has been moved within three years of service of Section 21 notice. Both these conditions stand satisfy in the present case.”
Furthermore, with respect to the issue that what are the conditions for appointment of an arbitrator under Section 11 and the issue whether the dispute stands settled or not, should be determined by the court or be left within the scope of jurisdiction of arbitrator, the bench observed that “… If that is so, then the issue of whether the dispute stands settled becomes a disputed question of fact, which cannot be decided by the Court in Section 11(5)/Section 11(6) of the 1996 Act. The question is, therefore, left open to be decided by the arbitrator in the arbitral proceedings.”
Decision
In conclusion, the Delhi High Court allowed the Petition, without imposing any costs, and appointed the arbitrator to resolve the disputes between the parties.
Case Title: Raj Kumari Taneja v. Rajinder Kumar & Anr.
Citation: Arb.P. 862/2023
Court: Delhi High Court
Coram: Justice C. Hari Shankar
Date: August 21, 2024
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