M/S Creative Projects And Contracts PVT. LTD vs. M/S Suncity Projects PVT LTD

Facts

The petitioner, M/s Creative Projects and Contracts Pvt. Ltd., filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator to adjudicate disputes with the respondent, M/s Suncity Projects Pvt Ltd. The parties had executed three work orders, but only Work Order No. 1 contained an arbitration clause. Disputes arose concerning all three work orders, leading to a Settlement Deed dated December 10, 2021. This deed settled various claims, including payments for Work Orders 1 and 2, a dispute regarding cement supply, and TDS on WCT. Subsequently, the respondent filed a civil suit seeking damages and injunction, which the petitioner challenged via an Order VII Rule 11 application. This application was dismissed, and the dismissal was stayed by the Punjab and Haryana High Court.

Held

The Court held that the Settlement Deed dated December 10, 2021, comprehensively settled all disputes between the parties, including those pertaining to Work Order No. 1. The Court found that the petitioner's claim of fraudulent inducement related to the settlement agreement itself, not the underlying Work Order No. 1. Therefore, the Court concluded that there were no pending disputes under Work Order No. 1 that could be referred to arbitration. The Court reasoned that the scope of Section 11(6) requires a prima facie examination to ensure that the claims are not time-barred or demonstrably non-arbitrable. Citing "Vidya Drolia v. Durga Trading Corpn.", the Court emphasized that while the scope is limited, it is not mechanical and aims to prevent parties from being forced into arbitration for non-arbitrable matters. The Court noted that the petitioner was at liberty to agitate any grievances concerning the settlement agreement in accordance with law. The findings were limited to the present petition and would not affect other disputes in different forums.

Key Issues

1. Whether the disputes arising from Work Order No. 1 are arbitrable, considering the Settlement Deed dated December 10, 2021, and the petitioner's claim of fraudulent inducement in its execution, as per Section 11(6) of the Arbitration and Conciliation Act, 1996. Petitioner's arguments: The petitioner contended that the referral court under Section 11 is only required to examine the existence of an arbitration clause and that the scope is limited to a prima facie determination, citing "Interplay between Arbitration Agreements under the Arbitration & Conciliation Act, 1996 & the Indian Stamp Act, 1899, In re". They argued that the Settlement Deed was fraudulently induced, implying the disputes under Work Order No. 1 were not effectively settled and remained arbitrable. Respondent's arguments: The respondent argued that the Settlement Deed comprehensively settled all disputes, including those under Work Order No. 1, and that payments were made pursuant to this settlement. They asserted that the petitioner's grievance regarding fraudulent inducement pertains to the settlement agreement itself, not the original Work Order No. 1, and that the petitioner is at liberty to pursue such claims separately. They relied on the principle that if there is no subsisting dispute, arbitration cannot be invoked.