The Supreme Court opined that when the issue of arbitrability requires deep consideration, the same should be adjudicated upon by the Arbitrator.
The Court further expounded that the case is pending before the NCLT is not a ground to dismiss the application under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Arbitration Act”), especially when both the proceedings deal with different issues altogether.
Brief Facts:
The present Appeal has been preferred against the judgement passed by the Madras High Court vide which the application under Section 11 of the Arbitration Act was dismissed.
The High Court of Madras dismissed the said application because firstly, the matter was already referred to the Tribunal at the time of the filing of this application and secondly, that the proceedings were pending before the NCLT for adjudication over various acts constituting oppression and mismanagement of a minority shareholder.
Contentions of the Appellant:
It was contended that the matter referred to the Tribunal for arbitration was different from the subject of the present case. The Appellant was not even a party to the arbitration proceedings. It was also argued that proceedings pending before NCLT cannot be a ground to not refer the parties to Arbitration.
Contentions of the Respondent:
It was contended that the three agreements are interlinked and therefore, the present proceedings are not maintainable.
Observations of the Court:
The Court observed that the issue of arbitrability of the dispute should have been decided by the Arbitrator himself; hence, the High Court must have allowed the application under Section 11(6) of the Arbitration Act.
The Bench noted that unless the dispute is prima facie not arbitrable, the Arbitrator will decide the issue of arbitrability. The pendency of proceedings before NCLT is not a ground to dismiss the application, the same should have been adjudicated by the Arbitrator.
Decision of the Court:
Given the abovementioned reasons, the Apex Court set aside the judgement passed by the High Court of Madras and allowed the application of the Appellants under Section 11(6) of the Arbitration Act.
Case Title: VGP Marine Kingdom Pvt. Ltd. & Anr. V. Kay Ellen Arnold
Citation: 2022 Latest Caselaw 872 SC
Coram: Hon’ble Mr. Justice M.R. Shah, Hon’ble Mr. Justice Krishna Murari
Case No.: Civil Appeal No. 6679 of 2022
Advocates for Appellants: Adv. Aditya Verma
Advocates for Respondent: Adv. Yogesh Kannar
Read Judgement @LatestLaws.com
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