A Gopala Krishna, Died Per Lrs vs. M/S.Urban Asia Gachibowli

Facts

The applicant, A. Gopala Krishna (now represented by his legal heir, Adusumilli Jahnavi), filed an Arbitration Application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator to resolve disputes with the respondent, M/s. Urban Asia Gachibowli. The dispute arose from a lease deed dated December 30, 2017, for a property in Jubilee Hills, Hyderabad. The applicant claimed the respondent failed to pay rent and GST charges from September 2019, leading to the termination of the lease. The respondent disputed these claims. The applicant had previously filed an application under Section 9 of the Act, resulting in an order for the respondent to deposit rental arrears. The respondent also filed a suit seeking perpetual injunction, and an ex-parte order for status quo was granted. The applicant then invoked Clause 24 of the lease deed for arbitration.

Held

The Court held that the scope of power under Section 11 of the Arbitration and Conciliation Act, 1996, is limited to determining the prima facie existence of an arbitration agreement. The Court cannot delve into disputed questions of fact, which are to be decided by the arbitrator. The Court referred to the Supreme Court's decision in Vidya Drolia v. Durga Trading Corporations, which laid down tests for exercising power under Section 11. The Court found that disputes regarding rental dues and liability for taxes exist between the parties, and Clause 24 of the lease deed clearly provides for arbitration. Therefore, the Court deemed it appropriate to refer the matter to arbitration. Regarding the Memorandum of Compromise, the Court held that while a full and final compromise can be recorded, a partial compromise resolving only some disputes cannot be recorded by the Court under Section 11. However, liberty was granted to the parties to place the Memorandum of Compromise before the arbitral tribunal. The Court dismissed IA.Nos. 4 to 6 of 2022, which sought to recall previous orders, as the scope of Section 11 is limited and disputes are to be adjudicated by the arbitrator. The Arbitration Application was allowed, and an arbitrator was appointed.

Key Issues

1. Whether the Court has the power to appoint an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, when there are disputes regarding the existence and validity of the arbitration agreement or the arbitrability of the subject matter? (Section 11(6) of the Arbitration and Conciliation Act, 1996). The applicant argued that the scope of Section 11 is limited to prima facie existence of an arbitration agreement and that disputes of fact are for the arbitrator to decide. The respondent argued that the Court should not appoint an arbitrator if there is a strong case for non-existence of a valid arbitration agreement or if the subject matter is not arbitrable. 2. Whether the Memorandum of Compromise dated October 27, 2022, which records a partial settlement between the parties, can be recorded by the High Court under Section 11 of the Act, 1996? The applicant contended that the Memorandum of Compromise should be considered. The respondent argued that the Memorandum of Compromise reflects a partial settlement and that the Court should consider it. 3. Whether the High Court should recall its previous orders dated June 22, 2022, made in IA.No.1, IA.No.3, and IA.No.2 of 2022, to take on record the counter filed by the petitioner/respondent? The respondent argued that the previous orders were passed without considering their counter. The applicant argued that the IA's seeking recall were not maintainable.