Article

In a recent case of M/s. Emaar India Ltd. v. Tarun Aggarwal Projects LLP & Anr [CIVIL APPEAL NO.  6774 OF 2022], once again question that emerged  for the consideration of Hon’ble Supreme Court was whether the High Court was justified  in allowing  the   application   under  Section   11(5)   &  (6)  of the Arbitration and Conciliation Act, 1996 for appointing the arbitrators without considering the aspect of arbitrability of dispute as per the relevant clauses under the Agreement.  As per the Agreement executed between the parties, if any conflict or difference arose between the parties or in case either party refuses or neglects to perform its part of the obligations under Agreement,  then such issues were not arbitrable but the other party had right to get the agreement specifically enforced through the appropriate court of law. Therefore, the question whether the dispute is arbitrable or not, was to be considered by the Court or by the arbitral tribunal in the light of the very terms of the said agreement.

The Court while analysing the issue went into underling the relevance of contract and observed that the reliefs to the parties shall not travel beyond the terms of the contract executed between the parties. It is because a contract is a transaction between two parties and has been entered into with open eyes and by understanding the nature of contract and that such contract has to   be interpreted giving literal meanings unless there is some ambiguity therein. The Court further referred to the judgment in Harsha  Construction  Vs.  Union  of  India and Ors.  (2014) 9 SCC 246 and observed that a contract with regard to arbitration has to be an expressed one. It must be in writing as per the legislation. In Harsha  Construction case it was clearly held that it was not open to the Arbitrator to arbitrate upon the disputes which had   been expressly  “excepted” and thus non-arbitrable. An award, therefore, so far as it related to disputes   regarding   non¬arbitrable   disputes  was bad in law  and liable to be quashed.

The Court further referred to the judgment in Vidya Drolia and Ors. Vs. Durga Trading Corporation (2021) 2 SCC 1 to elaborate on the aspect of arbitrability and its determination at the stage of application under section 11(6) of the Arbitration and Conciliation Act, 1996. The Court observed that the issue of non-arbitrability of a dispute is basic for arbitration as it relates to the very jurisdiction of the Arbitral Tribunal. As per Vidya Drolia and a catena of judgments decided earlier, the question of arbitrability, specially relating   to   the   inquiry whether   the   dispute   was   governed   by   the   arbitration clause, can be examined by the Courts at the reference stage itself. Further, Court can examine the validity   of   an arbitration   agreement, the authority which is covered by the expression, “existence of arbitration agreement” in Section 11 of the Arbitration   Act. Court shall not refer the matter for arbitration and as a demurrer interfere under section 8 and 11 when  it is manifestly and ex facie certain   that   the   arbitration   agreement   is   non-¬existent, invalid or the disputes are non-arbitrable and also when the matter is demonstrably “non-arbitrable   and   to   cut   off   the deadwood.”  The judicial scrutiny may however vary with the nature and   facet   of   non-arbitrability. If, however, the contentions relating to non–arbitrability are plainly arguable, the court by default shall refer the matter for arbitration. Applying the law laid down by this Court in the aforesaid decisions, the Court in the present matter held that the dispute is not arbitrable since the claims have been excepted by the clear term in the Agreement.