Courts Cannot Recast The Terms Of Arbitration Agreement, Reiterates Delhi HC [Read Judgment]

The Delhi High Court has reiterated that court cannot recast the terms of an arbitration agreement entered into between parties and should rather make efforts to ensure that the parties adhere to the choice of the Arbitrator or to the mechanism for constituting the Arbitral Tribunal as envisaged by the Arbitration Agreement.

Justice Sanjeev Narula observed, "The Court while exercising its power under Section 11 of the Arbitration and Conciliation Act, 1996 cannot recast the terms of the Contract and direct the parties to go for a composite arbitration contrary to the procedure prescribed under the arbitration clause provided in distinct arbitration agreements".

The bench said so while dismissing the petition moved by Libra Automotives Private Limited praying for appointment of a Sole Arbitrator for adjudication of the disputes that had arisen between itself and the Respondents (BMW India Private Limited and BMW India Financial Services Private Limited) in relation with the Agreements.

The Petitioner was appointed as a dealer of the BMW Group Products in terms of various agreements executed between it and the respondents including the dealership and financing agreement besides other deeds. The arbitration clauses in all the agreements were separate and distinct.

Both the parties held each other responsible for breach of the Agreement and raised monetary claims.

Libra Automotives invoked the arbitration clause under the Agreements, vide letter dated 24th January 2019 and 28th January 2019 and requested the Respondents to either agree to appointment of a common Arbitrator to decide all the disputes in a tripartite arbitration or approach the Delhi International Arbitration Centre for the appointment of a sole Arbitrator. The respondents did not convey their response following which the petitioner came before the high court by way of instant plea.

The court, however, held the petition to be "wholly misconceived and untenable in law" as it held, "The overlapping of the issues does not mean that the arbitration proceedings under the two respective contracts cannot commence and continue independently."

Relying on the Supreme Court's judgment in cases such as Indian Oil Corporation Ltd. v. Raja Transport Pvt. Ltd, Union of India v. Singh Builders Syndicate and others, Justice Narula said, "the supreme court has expressed its opinion that where an application under Section 11(6) of the Act is filed, the procedure for appointment of an arbitrator prescribed in the agreement, be given effect to and the Court ought not to appoint an independent arbitrator without resorting to the inbuilt mechanism as agreed between the parties".

"Parties were conscious of the terms of the agreement and they willingly and consciously agreed for the arbitral procedure envisaged under the agreement without any reservation. Petitioner is now suggesting that the agreed choice of forum should be ignored and that part of the Agreements should be severed and further Respondent should tow it's line and agree to the Arbitral Tribunal contrary to what has been provided in the Contracts. This cannot be permitted and thus the relief claimed in the present petition for appointment of a common arbitrator cannot be granted," held Justice Narula.

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