HIGH COURT CANNOT DECIDE ON ARBITRABILITY OF A DISPUTE: DELHI HIGH COURT
Category: Arbitration
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BACKGROUND
Hon’ble Justice C Hari Shankar, sitting at the Delhi High Court, had made the observation that, since it has a limited jurisdiction under §11(6) of the Arbitration and Conciliation Act, 1996, it cannot particularly decide on the arbitrability of the dispute. Furthermore, owing to the dispute between PayU and the New India Assurance Company, it was observed by the Hon’ble Justice that, since the issue on jurisdiction was raised by the New India Assurance Company, and in accordance to §11(6), the High Court cannot delve into such issues, as it has a limited scope of powers under the Arbitration and Conciliation Act, 1996.Â
KEY ASPECTSÂ
In this case, PayU and the New India Assurance Company had a dispute between themselves, after the insurance company had decided to reimburse the insurance claim raised by PayU. Such claim was made after PayU had its security breach, due to which it suffered losses owing to certain fraudulent transactions. It had obtained two insurance policies, of â‚ą20 Crores and the Rs. â‚ą6.5 crores. But, after suffering huge amount of losses due to the fraudulent transactions, PayU lodged a claim for about Rs. 8 Crores with the New India Assurance Company, which was subsequently rejected.
Herein, recently, Justice C Hari Shankar observed when dealing with the case of an online payment gateway services company, PayU, that sought for an arbitration and thus, the appointment of an arbitrator for the same, so as to settle the dispute with the New India Assurance Company. However, it was opposed by the New India Assurance Company on grounds of jurisdiction, as to whether the dispute can be referred to Arbitration at all.Â
Responding to the same, it was noted by the court as follows:Â
Firstly, it was stated that, the Delhi High Court cannot delve into such issues as it is within the limited scope of powers given to them under §11(6) of the Arbitration and Conciliation Act, 1996.Â
Secondly, in order to explain the same, a Supreme Court Ruling, namely, SBI General Insurance Co Ltd v Krish Spinning was taken into consideration, wherein, it was explained that, "any question of arbitrability or non-arbitrability of the dispute has to be relegated to the arbitral tribunal”. Further, it was stated by the Delhi High Court that, the decision in the aforementioned case has resulted in a paradigm shift of scope of examination by §11, resulting in examining the aspect of non-examination of arbitrability of the dispute.Â
Thirdly, it was also noted that, in the SBI Case, the Supreme Court left no scope of doubt on this arbitrability issue, by observing that, the scope of enquiry at the stage of appointing an arbitrator is limited to scrutiny of the prima facie existence of the arbitration agreement, and not anything else.Â
CONCLUSION
Therefore, owing to the considerations and observations as made above, the High Court refused to give any of its findings on the arbitrability of the dispute, thus leaving the same to the arbitral tribunal to decide. It allowed the Parties to appoint two members of a three member arbitral tribunal, so that the nominated two-members can add a third member of the arbitration panel. The Order was concluded by the Justice stating that “All questions of facts and law including the arbitrability of the dispute and the issue of repudiation that has been raised before this Court shall remain open to be agitated before the learned Arbitral Tribunal”.
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WRITTEN BY: THANUJA ARAVINDAN
GUIDED BY: ADVOCATE ANIK
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