Annual Arbitration Review 2018

NCC Limited v Indian Oil Corporation Limited

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Judgment: NCC Limited v Indian Oil Corporation Limited

 

Citation: 2019 SCC OnLine Del 6964

 

Court: Delhi High Court

 

Coram: Rajiv Shakder.

 

Date: February 8, 2019

 

Overview: In this case Delhi High Court looks the effect of insertion of Section 11(6A) by the Amendment Act, 2015 in context of scope of enquiry by court as to existence of an arbitration agreement at the pre-arbitral stage.

 

Issue:In view of insertion Section 11(6A), what is the scope of enquiry that a court can make about the existence of an arbitration agreement?

 

Factual Background:

NCC Limited (“Petitioner”) filed a petition under Section 11(6) read with Section 11(8)(b) of the Act.  The Petitioner sought direction for the appointment of a sole arbitrator in respect of disputes which have arisen between Indian Oil Corporation Ltd. (“Respondent”), and itself.

 

The Respondent resisted the petition, broadly, on the ground that the claims with respect to which reference to arbitration is sought by the Petitioner are, firstly, not “notified claims”; and secondly, under the terms of the contract obtaining between the parties, the jurisdiction to decide as to whether or not the claims are “notified claims” is vested solely with the Respondent’s General Manager.

 

 

 

Analysis:

The Delhi High Court observed that after the insertion of Subsection (6A) in section 11 of the Act, the scope of inquiry by the Court in a section 11 petition, once it is satisfied that it has jurisdiction in the matter, is confined to ascertaining whether or not a binding arbitration agreement exists qua the parties before it, which relates to the disputes at hand.

 

The scope for correlating the dispute at hand with the arbitration agreement is very narrow (sentence construction needs to be checked). Thus, except for an open and shut case, which throws up a circumstance indicative of the fact that a particular dispute does not fall within the four corners of the arbitration agreement obtaining between the parties, the matter would have to be resolved by an Arbitral Tribunal. In other words, if there is contestation on this score, the Court will allow the Arbitral Tribunal to reach a conclusion on way or another. This approach would be in keeping with the doctrine of ‘Kompetenz Kompetenz’, a doctrine which has statutory recognition u/s 16 of the Act.

 

On the facts of the case, the scope of examination as to whether or not the claims lodged are notified claims has narrowed down considerably in view of the language of Section 11(6A) of the Act. Once the court is persuaded that it has jurisdiction to entertain a section 11 petition, all that is required to examine is whether or not an arbitration agreement exists between the parties, which relates to the dispute at hand. The latter part of the exercise adverted to above, which involves correlating the dispute with the arbitration agreement obtaining between the parties, is an aspect which is implicitly embedded in sub-section (6A) of section 11 of the  Act, which requires the Court to confine its examination only to the existence of the arbitration agreement.

 

Conclusion:

Therefore, if on a bare perusal of the agreement, it is found that a particular dispute does not relate to the arbitration agreement then the Court may decline the relief sought by a party in a section 11 petition. However, if there is a contestation with regard to whether the dispute falls within the realm of the arbitration agreement then the best course would be to allow the arbitrator to form a view on the matter.

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