Arbitration Reference Can Be Declined If Dispute In Question Does Not Correlate To Arbitration Agreement: Supreme Court

The Supreme Court observed that prayer for reference to Arbitration under Section 11 of the Arbitration and Conciliation Act can be declined if the dispute in question does not correlate to the arbitration agreement.

The bench of Chief Justice of India NV Ramana and Justice Surya Kant observed that it is not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen Arbitrator.

The bench observed thus while considering the petition filed by DLF Home Developers Limited under Section 11(6) read with Section 11(12) of the Arbitration and Conciliation Act, for appointment of sole arbitrator to adjudicate the differences between itself and other parties.

referred to earlier judgments including Vidya Drolia and Others v. Durga Trading Corporation, and observed:

19. To say it differently, this Court or a High Court, as the case may be, are not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen Arbitrator. On the contrary, the Court(s) are obliged to apply their mind to the core preliminary issues, albeit, within the framework of Section 11(6-A) of the Act. Such a review, as already clarified by this Court, is not intended to usurp the jurisdiction of the Arbitral Tribunal but is aimed at streamlining the process of arbitration. Therefore, even when an arbitration agreement exists, it would not prevent the Court to decline a prayer for reference if the dispute in question does not correlate to the said agreement.

In this case, the court noted that the Parties have neither denied that there is no 'arbitrable dispute' between them nor have they challenged the existence of the arbitration clause(s) in the Construction Management Service Agreements. The nature of disputes that have arisen between the parties, thus, can be adjudicated in the arbitral proceedings, the court said.

The court therefore appointed Justice (Retd.) R.V. Raveendran, Former Judge, Supreme Court of India as the sole arbitrator to resolve all disputes/differences between the parties.

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