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Mohammed Masroor Shaikh vs Bharat Bhushan Gupta & Ors.

Civil Appeal · 2022 INSC 138Decided 2 Feb 2022
Civil Appeal No. 874 of 2022
Indira Banerjee · Abhay S. Oka

Background

The appellant and the respondents were partners in three real-estate partnership firms. When one partner (respondent no. 1) retired from the firms under retirement deeds containing an arbitration clause, and later invoked arbitration over a dispute, the appellant did not respond. The Bombay High Court, acting on a Section 11 petition, appointed an arbitrator. The appellant challenged this appointment before the Supreme Court, claiming he was never properly served notice of the High Court proceedings (partly because he was hospitalised in mid-2021) and that the retirement deed's arbitration clause did not even cover disputes between a retiring and continuing partner.

Decision Breakdown

The Supreme Court dismissed the appeals. It found the appellant had in fact been served with an advocate's notice of the Section 11 petition back in 2019, well before his 2021 hospitalisation, so he had ample opportunity to contest it. It also noted the appellant's own advocate had appeared before the arbitrator and even supported another party's objections to arbitration, a fact the appellant had failed to disclose when filing the present appeals. Relying on its earlier ruling in Vidya Drolia v. Durga Trading Corporation, the Court held that at the Section 11 stage, courts should generally leave contested questions like whether a dispute is arbitrable or time-barred to the arbitrator to decide in the first instance, intervening only when it is manifestly clear on the face of it that there is no valid arbitration agreement. Since the High Court's order had expressly kept these issues open, and the appellant already had a pending challenge before the High Court under Section 34 of the Act, no interference was warranted.

Lesson Learnt

When a court is deciding merely whether to appoint an arbitrator, it need not resolve every dispute about the arbitration agreement's scope or limitation: those are ordinarily left for the arbitrator to decide first; also, litigants must disclose all material facts (like already having appeared before the arbitrator) when seeking relief from a court, or risk having that omission counted against them.

Official source (sci.gov.in)View Judgment (PDF)

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