Prima Facie No Arbitration Agreement Between Parties, Delhi High Court Dismisses Section 11(5) A&C Petition

“The Scheme of A&C Act, 1996 makes it clear that Sections 8 and 11 are similar in character, regarding reference to arbitration, and have the same reach and extent in terms of court intervention. If the party has prima facie proven the existence of an arbitration agreement, the Court is required by Sections 8 and 11 to send the issue to arbitration or appoint an arbitrator.”

Brief Facts:

The Petitioner approached the Delhi High Court (“High Court”) and filed an application under Section 11 (5) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), seeking appointment of a Sole Arbitrator to resolve disputes between the parties. The Petitioner, a professional aviation consulting company, entered into an agreement with the Respondent. The Petitioner specialized in the sale and purchase of business aircraft/helicopters and managing the associated processes. The Respondent expressed interest in acquiring a midsize aircraft, such as Bombardier Challenger 650/605, and engaged the Petitioner as a consultant for managing the aircraft induction project under the NSOP category.

Petitioner facilitated the acquisition of a Bombardier Learjet 45XR aircraft, and a letter of intent was signed between the Respondent and Luxembourg Air Ambulance S.A. The Petitioner raised an invoice for Rs.48,67,500/- in the name of VSR Ventures Private Limited, based on the understanding reflected in WhatsApp chats filed on record.

The Respondents strongly denied the petition. It argued that the agreement was between the Petitioner and the Respondents, with no mention of VSR Ventures Private Limited. It argued that the liability for payment against the invoice raised upon VSR Ventures Private Limited cannot be imposed on the Respondents. Furthermore, the Respondents presented another letter of intent filed by the Petitioner, this time between VSR Ventures Private Limited and Luxemburg Air Ambulance SA, regarding the same aircraft mentioned in the dispute.

Observations by the High Court:

The High Court held that it has limited scope of jurisdiction under Section 11(6) of the Arbitration Act. It held that the court's duty is confined to determining whether there is a prima facie existence of an arbitration agreement between the parties and whether the dispute is arbitrable. Sections 8 and 11 of the Arbitration Act state that the court should assess whether there is prima facie finding that an agreement containing an arbitration clause exists.

The High Court noted that Section 8(1), as amended in 2015, mandates the referral of parties to arbitration by a judicial authority unless there is prima facie finding that no valid arbitration agreement exists.

Highlighting the similarity in character between Sections 8 and 11, the High court emphasized that if party prima facie establishes the existence of an arbitration agreement, the court is obligated by both sections to refer the matter to arbitration or appoint an arbitrator.

Examining the documents on record, the High Court held that there was no prima facie evidence of an agreement between the Petitioner and VSR Ventures Private Limited. Moreover, there was no documentation establishing a connection between the Respondent and VSR Ventures Private Limited.

In light of the absence of an agreement containing the arbitration clause and the lack of an arbitrable dispute between the Petitioner and the Respondent, the High Court held that the matter cannot be referred to arbitration. Consequently, the High Court dismissed the petition.

Case Title: Aerosource India Pvt Ltd. Vs Geetanjali Aviation Pvt Ltd.

Citation: 2024 LiveLaw (Del) 296

Case Number: ARB.P. 1144/2023, I.A. 21723/2023.

Advocate for the Petitioner: Mr.Sukrit R.Kapoor and Mr.Aviral Tripathi.

Advocate for the Respondent: Mr.Jayashree Shukla Dasgupta.

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