Delhi High Court refers to Supreme Court's principle 'when in doubt, do refer'

Delhi High Court refers to Supreme Court's principle 'when in doubt, do refer'

The Single Bench of Justice Anup Jairam Bhambhani held that an arbitration agreement embedded in a contract is always considered a separate and severable clause, and that the supersession of the arbitration clause must not be inferred lightly.

The Delhi High Court, in view of the principal enunciated by the Supreme Court, 'when in doubt, do refer', held that if there is an arbitration agreement between the parties which is sought to be negated by a party by citing other provisions of a contract, which requires interpretation of the contract, the Court must look towards referring the matter to arbitration.

The facts of the case are that the petitioner Shristi Infrastructure Development Corporation Ltd. entered into an agreement with the respondent Ircon International Limited. However, upon certain disputes, the petitioner invoked the arbitration clause iand filed a petition before the Delhi High Court seeking appointment of an arbitrator.

The respondent Ircon International submitted before the High Court that the parties had signed the Special Conditions of Contract (SCCs), and that as per the relevant clause contained in the SCCs, if any of the conditions contained in the SCCs conflict with or are inconsistent with any of the General Conditions of Contract (GCCs), the special conditions shall prevail.

The Court observed that though the Special Conditions of Contract (SCCs) gave an overriding effect to the Special Conditions of Contract over the General Conditions of Contract (GCCs), such an effect was only restricted to the extent there was a conflict or inconsistency between the two provisions. The Court added that there was no evident conflict or inconsistency between the arbitration clause comprised in the General Conditions of Contract and any other provision contained in the Special Conditions of Contract.

The Court ruled that the question whether the dispute settlement clause contained in the SCCs overrides only the relevant clause contained in the GCCs, or also the specific arbitration agreement contained in the GCCs, requires a detailed interpretation of the provisions of the contract, which cannot be decided by the Court in the proceedings initiated under Section 11 of the A&C Act.

The High Court observed that the Apex Court in Intercontinental Hotels Group (India) Pvt. Ltd. & Anr. Versus Waterline Hotels Pvt. Ltd. (2022) had relied upon the supplementary opinion rendered by the Chief Justice of India N.V. Ramana in Vidya Drolia & Ors. Versus Durga Trading Corporation (2020), to the effect that- if the validity of the arbitration agreement cannot be determined on a prima facie basis, the Court should refer a matter to arbitration, i.e., 'when in doubt, do refer'.

Hence, the Supreme Court in Intercontinental Hotels Group (2022) had ruled that the Courts have a very limited jurisdiction under Section 11(6) of the A&C Act and that the watch word for the Courts is- 'when in doubt, do refer'. The Apex Court had held that when dealing with issues relating to the existence of the arbitration agreement, the Courts are only required to take a 'prima facie' view and that the issues of arbitrability and validity are required to be adjudicated upon by the arbitrators. The Supreme Court had ruled that the only exception to this rule was when the dispute involved was a deadwood.

Ruling that the arbitration agreement embedded in a contract is always considered a separate and severable clause, the supersession of which must not be lightly inferred, the High Court held that in consonance with the overarching principle of 'when in doubt, do refer', if there is an arbitration agreement between the parties, which is sought to be negated by a party by citing other provisions of a contract, which requires interpretation of the contract, the Courts must lean towards referring the matter to arbitration.

Thus Sole Arbitrator was appointed and the parties were referred to arbitration.