Delhi High Court
M/S Surpal Cycles Pvt. Ltd. & Anr vs M/S Chetanya Buildcon Pvt. Ltd. & Ors on 21 May, 2025
Author: Jasmeet Singh
Bench: Jasmeet Singh
$~11
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 21.05.2025
+ ARB.P. 2036/2024 & CRL.M.A. 3869/2025
M/S SURPAL CYCLES PVT. LTD. & ANR. .....Petitioner
Through: Mr. Saurabh D. Karan Singh, Ms.
Vasudha Saini, Advs.
versus
M/S CHETANYA BUILDCON PVT. LTD. & ORS. .....Respondent
Through: Mr. Shreyans Singhvi, Ms. Akanksha
Agrawal, Ms. Taniya Singh, Advs.
Mr. Prosenjeet Banerjee, Mr. Sarad
K. Sunny, Mr. Keshav M., Mr.
Sarthak, Ms. Archika, Advs. for R-2
CORAM:
HON'BLE MR. JUSTICE JASMEET SINGH
: JASMEET SINGH, J (Oral)
1. This is a petition filed under Section 11(4) read with Section 11(6) of
the Arbitration and Conciliation Act, 1996 seeking appointment of an
arbitrator to adjudicate the disputes between the parties, arising out of the
registered Agreement to Sell dated 03.09.2019.
2. At the outset, Mr. Singh, learned counsel for the petitioner makes an
oral request to delete respondent Nos 7 and 8. Hence, respondent nos. 7 and
8 are deleted from the array of parties.
3. Briefly stating the facts are that the respondent Nos. 2 to 5 being the
owners of a plot of land measuring 964 square yards, located at No. 22,
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
Block-W, Greater Kailash-II, New Delhi-110048 (hereinafter referred to as
"Plot"), with the intention of redeveloping and reconstructing a residential
building on the Plot, entered into a Collaboration Agreement with
Respondent No. 1. Respondent No. 1 in lieu of carrying out the
redevelopment / reconstruction was to become entitled to sell certain areas
in the redeveloped residential building.
4. Pursuantly, the petitioners agreed to purchase the Entire Second Floor
of the building consisting of five bedrooms with attached bathrooms, one
drawing - cum - dining room, one kitchen, front and rear balconies with
exclusive lift, lift lobby, portion of the stilt area alongwith 22.5% undivided,
indivisible and impartible ownership rights in the plot (hereinafter referred
to as "subject property"). In this regard, the petitioners entered into the
Agreement to Sell dated 03.09.2019 with respondent nos. 1 - 5 (whereby
respondent nos. 2- 5 were represented by respondent no. 6). As per the said
agreement, the subject property was supposed to be delivered to the
petitioners by the respondent nos. 1-5 on or before 03.01.2021.
5. The arbitration clause is contained as clause 31 of the Agreement to
Sell dated 03.09.2019 and the same reads as under:
"31. That any disputes and differences arising between the
parties, pertaining to and arising out of the present
Agreement, shall be referred to the sole arbitrator, to be
mutually appointed by the parties, whose decision shall be
final and binding upon the parties. The provisions of
Arbitration and Conciliation Act, 1996, shall be applicable to
such proceedings. The place of arbitration shall be at New
Delhi."
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
6. Since the respondent(s) failed to deliver the subject property, the
petitioners invoked arbitration vide legal notice dated 17.07.2024 and
thereafter, filed the present petition.
7. All the respondent(s) have been served and respondent Nos. 1 and 2
to 5 are represented. The reply has also been filed.
8. Mr. Banerjee, learned counsel appearing on behalf of Respondent No.
2, submits that the disputes between the parties are not arbitrable. In support
of this contention, he relies on Clause 28 read with Clause 33 of the
Arbitration Agreement dated 03.09.2019, which reads as under:
"28. That in case any of the parties hereto infringes any of the
terms and conditions of this Agreement to Sell, then the other
party shall be entitled to get this transaction enforced through
the Court of law by Specific Performance of the Contract, at
the cost and expenses of the defaulting party.
33. That this transaction has taken place at New Delhi and as
such Delhi Courts shall have exclusive jurisdiction to entertain
any dispute arising out or in any way touching or concerning
this deed."
9. He further submits that in view of the above clauses, the parties had
expressly agreed that the terms and conditions of the Agreement to Sell
dated 03.09.2019 would be enforceable only through a court of law by way
of a suit for specific performance. Moreover, in the present case, the
petitioner is seeking execution of the sale deed for his portion, which is
covered squarely by the above clauses and as per the above clauses, the
petitioner should have filed a suit for specific performance.
10. In support, he relies upon the judgment passed by the Hon‟ble
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
Supreme Court in Emaar India Limited vs. Tarun Aggarwal Projects LLP
and Anr. (2023) 13 SCC 661 and more particularly para-Nos. 12,13 and 19
which reads as under:
"12. While considering the aforesaid question/issue, the
relevant provisions of the agreement, namely, Clauses 36 and
37, are required to be referred to, which are as under:
"Dispute Resolution & Jurisdiction
36. In case of any conflict or difference arising
between the parties or in case either party refused or
neglects to perform its part of the obligations under
this addendum collaboration agreement, inter alia as
mentioned in Clauses 3, 6 and 9 hereinabove, then the
other party shall have every right to get this agreement
specifically enforced through the appropriate court of
law.
37. Save & except Clause 36 hereinabove mentioned,
all or any dispute arising out of or touching upon or in
relation to the terms of this agreement including the
interpretation and validity thereof, and the respective
rights and obligations of the parties, shall be settled
through under the provisions of the Arbitration and
Conciliation Act, 1996 wherein both the parties shall
be entitled to appoint one arbitrator each and the
arbitrators so appointed shall appoint a third
arbitrator of rank of retired Judge of any High Court.
The arbitration proceedings shall be governed by the
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
provisions of the Arbitration and Conciliation Act,
1996 or any statutory amendments/modification
thereto for the time being in force. The arbitration
proceedings shall be held at Delhi."
13. On a bare reading of Clause 36 of the agreement, it clearly
stipulates that in the event of any dispute as mentioned in
Clauses 3, 6 and 9, other party shall have a right to get the
agreement specifically enforced through the appropriate court
of law. As per Clause 37, save and except Clause 36, all or
any dispute arising out of or touching upon or in relation to
the terms of the addendum agreement ... shall be settled
through under the provisions of the Arbitration and
Conciliation Act, 1996. Thus, with respect to any dispute as
mentioned in Clauses 3, 6 and 9, such disputes are not
arbitrable at all. It cannot be disputed that both the parties are
governed by the Addendum Agreement dated 19-4-2011.
.......
19. On the question, who decides on non-arbitrability of the
dispute, after referring to and considering the earlier decisions
on the point, more particularly, the decisions in Garware Wall
Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.
[Garware Wall Ropes Ltd. v. Coastal Marine Constructions &
Engg. Ltd., (2019) 9 SCC 209: (2019) 4 SCC (Civ) 324],
United India Insurance Co. Ltd. v. Hyundai Engg. &
Construction Co. Ltd. [United India Insurance Co. Ltd. v.
Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC 607 :
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
(2019) 2 SCC (Civ) 530] and Narbheram Power & Steel
[Oriental Insurance Co. Ltd. v. Narbheram Power & Steel (P)
Ltd., (2018) 6 SCC 534 : (2018) 3 SCC (Civ) 484] , it is
observed and held in Vidya Drolia case [Vidya Drolia v.
Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ)
549] that the question of non-arbitrability relating to the
inquiry, whether the dispute was governed by the arbitration
clause, can be examined by the courts at the reference stage
itself and may not be left unanswered, to be examined and
decided by the Arbitral Tribunal. Thereafter, in para 153, it is
observed and held that the expression, "existence of
arbitration agreement" in Section 11 of the Arbitration Act,
would include aspect of validity of an arbitration agreement,
albeit the Court at the reference stage would apply the prima
facie test. It is further observed that in cases of debatable and
disputable facts and, good reasonably arguable case, etc. the
Court would force the parties to abide by the arbitration
agreement as the Arbitral Tribunal has the primary
jurisdiction and authority to decide the disputes including the
question of jurisdiction and non-arbitrability."
11. I have heard the learned counsels for both the parties.
12. It is a well settled position of law that the referral Courts under
Section 11 of the Arbitration and Conciliation Act, 1996 is only required to
see whether there is a valid arbitration agreement or not and further, make a
prima-facie enquiry regarding the claims raised by the petitioner. In this
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
regard, reliance is placed on the judgment passed by the Hon‟ble Supreme
Court in SBI General Insurance Co. Ltd. V. Krish Spinning, 2024 SCC
OnLine SC 1754. The operative portion reads as under: (Para nos.
107,108,110,114, 128 and 133)
"107. The parties have been conferred with the power to
decide and agree on the procedure to be adopted for
appointing arbitrators. In cases where the agreed upon
procedure fails, the courts have been vested with the power to
appoint arbitrators upon the request of a party, to resolve the
deadlock between the parties in appointing the arbitrators.
108. Section 11 of the Act, 1996 is provided to give effect to
the mutual intention of the parties to settle their disputes by
arbitration in situations where the parties fail to appoint an
arbitrator(s). The parameters of judicial review laid down for
Section 8 differ from those prescribed for Section 11. The view
taken in SBP & Co. (supra) and affirmed in Vidya Drolia
(supra) that Sections 8 and 11 respectively of the Act, 1996 are
complementary in nature was legislatively overruled by the
introduction of Section 11(6-A) in 2015. Thus, although both
these provisions intend to compel parties to abide by their
mutual intention to arbitrate, yet the scope of powers
conferred upon the courts under both the sections are
different.
......
110. The scope of examination under Section 11(6-A) is
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
confined to the existence of an arbitration agreement on the
basis of Section 7. The examination of validity of the
arbitration agreement is also limited to the requirement of
formal validity such as the requirement that the agreement
should be in writing.
.......
128. On the first issue, it was observed by us that the
Limitation Act, 1963 is applicable to the applications filed
under Section 11(6) of the Act, 1996. Further, we also held
that it is the duty of the referral court to examine that the
application under Section 11(6) of the Act, 1996 is not barred
by period of limitation as prescribed under Article 137 of the
Limitation Act, 1963, i.e., 3 years from the date when the right
to apply accrues in favour of the applicant. To determine as to
when the right to apply would accrue, we had observed in
paragraph 56 of the said decision that "the limitation period
for filing a petition under Section 11(6) of the Act, 1996 can
only commence once a valid notice invoking arbitration has
been sent by the applicant to the other party, and there has
been a failure or refusal on part of that other party in
complying with the requirements mentioned in such notice."
........
133. Thus, we clarify that while determining the issue of
limitation in exercise of the powers under Section 11(6) of the
Act, 1996, the referral court should limit its enquiry to
examining whether Section 11(6) application has been filed
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
within the period of limitation of three years or not. The date
of commencement of limitation period for this purpose shall
have to be construed as per the decision in Arif Azim (supra).
As a natural corollary, it is further clarified that the referral
courts, at the stage of deciding an application for appointment
of arbitrator, must not conduct an intricate evidentiary enquiry
into the question whether the claims raised by the applicant
are time barred and should leave that question for
determination by the arbitrator. Such an approach gives true
meaning to the legislative intention underlying Section 11(6-A)
of the Act, and also to the view taken in In Re: Interplay
(supra)."
13. A perusal of the aforesaid paragraphs indicates that, the referral Court
under Section 11 of the Arbitration and Conciliation Act, is required to
examine the existence of an arbitration agreement and nothing more. The
prima-facie examination should be restricted only to the issue where the
claims are within the period of limitation and are not dead wood.
14. The issue(s) raised by the respondent No. 2 would squarely fall within
the Kompetenz-Komepetenz doctrine of the arbitrator. The principle of
Kompetenz-Kompetenz signifies that the arbitrator is empowered, in the first
instance, to determine and rule upon its own jurisdiction, including any
objections concerning the existence, validity, or scope of the arbitration
agreement.
15. To my mind, the arbitrator is better placed to adjudicate the issues and
claims raised by the parties, as the arbitrator has the benefit of going through
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
all the relevant evidence and pleadings in much more detail than the referral
court. The doctrine of Kompetenz-Kompetenz mandates that the arbitrator be
given the first opportunity to rule on its own jurisdiction, thereby requiring
minimal judicial interference.
16. The Hon‟ble Supreme Court in Emaar India (supra), while following
the law laid down by the Hon‟ble Supreme Court in Vidya Drolia vs Durga
Trading Corporation (2021) 2 SCC 1 held that the courts under section 11
of the Arbitration and Conciliation Act, 1996 need to only prima facie
inquire about the arbitrability of the claims. The said issue has been dealt by
the Hon‟ble Supreme Court in SBI General (supra). The operative portion
reads as under:
"113. Referring to the Statement of Objects and Reasons of the
Arbitration and Conciliation (Amendment) Act, 2015, it was
observed in In Re : Interplay (supra) that the High Court and
the Supreme Court at the stage of appointment of arbitrator
shall examine the existence of a prima facie arbitration
agreement and not any other issues. The relevant observations
are extracted hereinbelow:
"209. The above extract indicates that the Supreme
Court or High Court at the stage of the appointment of
an arbitrator shall "examine the existence of a prima
facie arbitration agreement and not other issues".
These other issues not only pertain to the validity of the
arbitration agreement, but also include any other
issues which are a consequence of unnecessary judicial
interference in the arbitration proceedings.
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
Accordingly, the "other issues" also include
examination and impounding of an unstamped
instrument by the referral court at the Section 8 or
Section 11 stage. The process of examination,
impounding, and dealing with an unstamped
instrument under the Stamp Act is not a timebound
process, and therefore does not align with the stated
goal of the Arbitration Act to ensure expeditious and
time-bound appointment of arbitrators. [...]"
(Emphasis supplied)
114. In view of the observations made by this Court in In Re
: Interplay (supra), it is clear that the scope of enquiry at the
stage of appointment of arbitrator is limited to the scrutiny of
prima facie existence of the arbitration agreement, and
nothing else. For this reason, we find it difficult to hold that
the observations made in Vidya Drolia (supra) and adopted
in NTPC v. SPML (supra) that the jurisdiction of the referral
court when dealing with the issue of "accord and
satisfaction" under Section 11 extends to weeding out ex-
facie non-arbitrable and frivolous disputes would continue to
apply despite the subsequent decision in In Re : Interplay
(supra).
.....
117.... Mere appointment of the arbitral tribunal doesn't in
any way mean that the referral court is diluting the sanctity of
"accord and satisfaction" or is allowing the claimant to walk
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
back on its contractual undertaking. On the contrary, it
ensures that the principal of arbitral autonomy is upheld and
the legislative intent of minimum judicial interference in
arbitral proceedings is given full effect. Once the arbitral
tribunal is constituted, it is always open for the defendant to
raise the issue of "accord and satisfaction" before it, and only
after such an objection is rejected by the arbitral tribunal, that
the claims raised by the claimant can be adjudicated.
118.Tests like the "eye of the needle" and "ex-facie
meritless", although try to minimise the extent of judicial
interference, yet they require the referral court to examine
contested facts and appreciate prima facie evidence (however
limited the scope of enquiry may be) and thus are not in
conformity with the principles of modern arbitration which
place arbitral autonomy and judicial non-interference on the
highest pedestal.
(emphasis supplied)
17. On a prima facie inquiry, it is clear that there is a valid and subsisting
arbitration agreement. The clause 31 of the Agreement to Sell dated
03.09.2019 mandates the disputes and differences between the parties be
referred to an arbitrator.
18. As regards respondent no. 9 is concerned, I am of the view that
respondent no. 9 is a veritable party to the Agreement to Sell. It is sister
concern of respondent no..1 and had availed loans from the petitioners and
the Agreement to Sell dated 03.09.2019 was entered into to convey the
subject property to the petitioners so that the loan taken by the respondent
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
No. 9 could be set - off. Further, the respondent no. 9 is also a signatory to
the Agreement to Sell dated 03.09.2019.
19. For the said reasons, the petition is allowed and the following
directions are issued: -
i) Mr. Justice G.S. Sistani, (Retd.) (Mob. No. 9871300034) is
appointed as a Sole Arbitrator to adjudicate the disputes
between the parties.
ii) The arbitration will be held under the aegis and rules of the
Delhi International Arbitration Centre, Delhi High Court, Sher
Shah Road, New Delhi (hereinafter, referred to as the
„DIAC‟).
iii) The remuneration of the learned Arbitrator shall be in terms of
DIAC (Administrative Cost and Arbitrators‟ Fees) Rules,
2018.
iv) The learned Arbitrator is requested to furnish a declaration in
terms of Section 12 of the Act prior to entering into the
reference.
v) It is made clear that all the rights and contentions of the
parties, including as to the arbitrability of any of the claim, any
other preliminary objection, as well as claims/counter-claims
and merits of the dispute of either of the parties, including the
claims regarding the maintainability are left open for
adjudication by the learned arbitrator.
vi) The parties shall approach the learned Arbitrator within two
weeks from today.
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
20. The present petition is disposed of in the aforesaid terms.
JASMEET SINGH, J
MAY 21, 2025/sp
(Corrected and released on 29.05.2025)
Click here to check corrigendum, if any
By:DEEPANSHU MALASI
Signing Date:30.05.2025
19:58:36
