Judicial Non-Interference Is Key To Domestic And International Arbitration: Delhi High Court

Judicial Non-Interference Is Key to Domestic and International Arbitration: Delhi High Court

Justice Subramonium Prasad of the Delhi High Court emphasized the principle of judicial non-interference in arbitral proceedings, stating it is fundamental to both domestic and international commercial arbitration. The court addressed a petition filed under Section 11(5) of the Arbitration and Conciliation Act, seeking the appointment of a sole arbitrator.

The case arose from an agreement executed on November 24, 2005, between Rajesh Kumar Gupta (the petitioner) and Rajender (the respondents) for the sale and purchase of a plot located in Delhi. A dispute emerged when the petitioner discovered in August 2020 that another party was occupying the plot without disclosing their identity. The petitioner alleged that the new occupant was assigned the plot after it was withdrawn from the respondents. Following this, the petitioner sent a legal notice on August 27, 2020, demanding compensation for the loss incurred but received no acknowledgment from the respondents. Consequently, the petitioner sought arbitration under Section 11(5) of the Act.

The petitioner argued that the dispute fell within the purview of the arbitration clause in the agreement, which provided for resolution through arbitration. The petitioner maintained that the primary relief sought was a refund of the consideration amount, not against a third party. In contrast, the respondents contended that the arbitration claim was time-barred, given that the agreement was executed in 2005 and the application was made in 2020. They also argued that the involvement of a third party in possession of the plot rendered the dispute non-arbitrable, citing the Supreme Court ruling in Vidya Drolia v. Durga Trading Corpn. (2021) and a judgment from the Delhi High Court in Pure Diets India Limited v. Lokmangal Agro Industries Ltd. (2023). They maintained that since they did not execute the agreement, the arbitration clause was not binding on them.

The High Court determined that there was a prima facie arbitration agreement in place and referred to the Supreme Court's ruling in SBI General Insurance Co. Ltd. v. Krish Spinning. The court noted its limited role at this stage was to ascertain the existence of the arbitration agreement, emphasizing that issues of limitation and non-arbitrability should be addressed by the arbitrator.

Justice Prasad stated, “It is well settled that the principle of judicial non-interference in arbitral proceedings is fundamental to both domestic as well as international commercial arbitration and that the Arbitration Act is a self-contained code.” He further asserted that judicial interference should be minimal and should not extend to substantive issues that can be adjudicated by the arbitrator.

The court concluded that any limitation issues could be resolved by the arbitrator based on the evidence presented. If the arbitrator found the claim to be non-maintainable or time- barred, they could impose costs on the claimant for raising a frivolous claim.

The court finally held that:

“In view of the above, this Court is inclined to appoint Mr. Shobhit Chaudhary as a sole arbitrator to adjudicate on the disputes between the parties. The arbitration would take place under the aegis of the Delhi International Arbitration Centre (DIAC) and would abide by its rules and regulations. The learned arbitrator shall be entitled to fees as per the Schedule of Fees maintained by the DIAC.”.

The Delhi High Court's ruling reaffirmed the existence of the arbitration agreement and highlighted that questions of limitation and non-arbitrability should be brought before the arbitrator rather than the court. The petition was ultimately allowed, paving the way for arbitration proceedings to resolve the dispute.