M/S Mayavti Trading Pvt. Ltd. v. Pradyuat Deb Burman

Civil Appeal · 2019 INSC 1008Decided 5 Sept 2019
Civil Appeal No. 7023 of 2019
Justice Rohinton Fali Nariman · Justice R. Subhash Reddy · Justice Surya Kant

Background

A commercial dispute arose in which one party sought to invoke an arbitration clause to resolve its claims, while the other side resisted, raising preliminary objections. The matter reached the Supreme Court as an appeal against a High Court order on the arbitrator-appointment process, with the appellant's senior counsel also raising a related legal question about the correctness of a recent Supreme Court ruling, United India Insurance Company Ltd. vs. Antique Art Exports Pvt. Ltd., on how much a court may examine before appointing an arbitrator under Section 11.

Decision Breakdown

The Supreme Court declined to interfere with the High Court's impugned decision on the specific facts of the case, holding that this did not warrant exercising its extraordinary discretionary jurisdiction under Article 136 of the Constitution, and dismissed the appeal on that ground. However, in the course of the hearing, the Court went on to hold that the earlier decision in United India Insurance Company Ltd. had incorrectly read Section 11(6A) of the Arbitration Act (as introduced by the 2015 amendment) to allow courts to examine issues like "accord and satisfaction" at the arbitrator-appointment stage: the Court clarified that after the 2015 amendment, courts must confine themselves narrowly to examining only whether an arbitration agreement exists, leaving all other preliminary disputes (including whether a claim has already been settled) to the arbitrator. The Court accordingly overruled United India Insurance Company Ltd. as not laying down the correct law, even while dismissing the present appeal itself. It also granted a one-week extension of a status quo order to allow the appellant to pursue other remedies.

Lesson Learnt

When approaching a court to appoint an arbitrator under Section 11 of the Arbitration Act, the court's role is now meant to be narrow, limited to checking whether a valid arbitration agreement exists, rather than examining whether the dispute has already been resolved or settled; such questions are for the arbitrator to decide, which keeps the arbitration process faster and less prone to being bogged down in preliminary litigation.

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