M/S Shivay Global, Through Its Partner Jaswant Kumar vs. Sita Devi

Facts

M/s Shivay Global (Petitioner) filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator to resolve disputes arising from a development agreement dated April 15, 2024, with Sita Devi and Vir Bahadur Choudhary (Respondents). The Petitioner contended that Article X of the agreement contained a valid arbitration clause. The Respondents opposed the application, arguing that they never received a signed copy of the agreement, that the arbitration clause was fatally defective and incomplete, lacking procedural details for appointment and fallback mechanisms, and that it was contradicted by another clause stating Ranchi Courts would have sole jurisdiction. They claimed the clause was non-operative and unenforceable.

Held

The Court held that a prima facie case had been made out for the appointment of an arbitrator. It found that Article X of the development agreement established the prima facie existence of an arbitration clause, which is the threshold requirement for proceedings under Section 11(6) of the Arbitration and Conciliation Act, 1996. The Court reasoned that the scope of Section 11(6) is limited to examining this prima facie existence, and once met, there is no basis to refuse the appointment. The Court further held that the appointment of an arbitrator does not preclude the Respondents from raising all permissible defenses, including those concerning the existence and validity of the arbitration clause, before the Arbitral Tribunal. The Court cited Supreme Court decisions in 'Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899 In Re' and 'SBI General Insurance Co. Ltd. versus Krish Spinning' to support its limited scope of review. The Court appointed Hon’ble Mr. Justice Tapen Sen, former Judge of the Jharkhand High Court, as the Arbitrator. All contentions and objections raised by the Respondents were left open for the Arbitrator's decision. The Arbitrator was directed to forward the statutory statement of disclosure within fifteen days, and arbitration costs were to be borne equally by the parties in the first instance.

Key Issues

1. Whether the arbitration clause in Article X of the Development Agreement dated April 15, 2024, prima facie exists and is valid for the appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996? 2. Whether the alleged defects and contradictions in the arbitration clause, including the lack of a signed agreement copy and the conflicting jurisdiction clause, preclude the appointment of an arbitrator at this stage? Petitioner's Arguments: The Petitioner argued that the scope of Section 11(6) proceedings is limited to examining the prima facie existence of an arbitration clause. They contended that the Respondents' defenses, raised in the counter-affidavit, went beyond this scope and were untenable. The Petitioner further submitted that the appointment of an arbitrator would not prevent the Respondents from raising all legal defenses, including the validity of the arbitration clause, before the arbitrator. They relied on the principle that the referral court's role is limited to ensuring a prima facie arbitration agreement exists. Respondents' Arguments: The Respondents reiterated their contentions that they never received a signed copy of the agreement, rendering the arbitration clause non-binding. They argued that the arbitration clause was inherently contradictory, incomplete, and non-operative, making it impossible to appoint an arbitrator based on it. They emphasized that the clause stating Ranchi Courts would have sole jurisdiction was inconsistent with arbitration.