Scope of Power Of High Court Under Section 11 Is Extremely Limited, Court Can't Go Into Disputed Questions Of Facts: Telangana High Court

Section 11 of the Arbitration and Conciliation Act, 1996 deals with the appointment of arbitrators by the courts. It states the procedure for appointing arbitrators when parties fail to agree on the appointment or when certain circumstances require court intervention.

Brief Facts:

Syeda Sana Sumera (Applicant) approached the High Court under Sections 11(5) and (6) of the Arbitration and Conciliation Act, 1996 for the appointment of a sole arbitrator to resolve disputes. The Applicant argued that pursuant to a registered Agreement of Sale-cum-Irrevocable General Power of Attorney, Kamran Mirza and 3 Others (Respondents) agreed to convey 7935 Square Yards of land, part of a larger plot, yet to be fully developed. He contended that the Respondents breached their obligations under this agreement, issuing false notices and complicating matters. Furthermore, invoking Clause 8 of the agreement, the Applicant initiated arbitration proceedings and notified the Respondent who failed to appoint an arbitrator within the stipulated timeframe despite receiving due notice.

In response, Respondent No.1 argued that the subject agreement lacked legal validity due to alleged breaches by the Applicant, including defaulted post-dated cheques. It pointed to pending civil suits seeking cancellation of the agreement and third-party claims over the property. Respondent No.1 also acknowledged the arbitration clause but argued that due to the Applicant's failure to fulfil consideration obligations, the agreement stands void. Meanwhile, Respondent No. 2 argued for similar contentions regarding the agreement's alleged nullity due to non-payment issues and third-party claims.

Observations by the High Court:

The High Court emphasized the constrained scope of its powers under Section 11 of the Arbitration Act, which is primarily limited to ascertaining the existence of a prima facie arbitration agreement. Referring to the Supreme Court's decisions in Duro Felguera, S.A. v. Gangavaram Port Ltd. and Vidya Drolia v. Durga Trading Corporation, the High Court held that its role in appointing an arbitrator is not to delve into disputed factual issues, but rather to determine whether an arbitration agreement is in place, adhering strictly to legislative intent to minimize judicial intervention at this preliminary stage.

Referring to Clause 8 of the subject agreement between the parties, which outlined the mechanism for resolving disputes through arbitration, the High Court noted the absence of any disagreement concerning the arbitration clause itself. Therefore, the High Court held that there was no impediment to referring the ongoing disputes between the Applicant and the Respondents to arbitration.

The High Court appointed Justice A. Rajashekher Reddy, a Former Judge of the High Court, as the sole arbitrator.

Case Title: Smt. Syeda Sana Sumera And Ors Vs Kamran Mirza And Ors

Case Number: ARBITRATION APPLICATON No.207 OF 2022

Citation: 2024 LiveLaw (TS) 105

Advocate for the Petitioner: G.M. Mohiuddin

Advocate for the Respondent: G Rama Manjuna, V Venkata Rama Narsaiah and Ravikiran Singh.

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