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Sanghi Brothers (Indore) Pvt. Ltd. v. Muktinath Airlines Pvt. Ltd. and Another

Arbitration Petition · Neutral citation not assigned (Diary No. 32351 of 2014; non-reportable)Decided 15 Oct 2015
Diary No. 32351 of 2014; non-reportable
Justice Ranjan Gogoi

Background

The petitioner agreed in a memorandum of understanding dated 17 July 2013 to buy a Robinson R44 helicopter from Muktinath Airlines, paid an advance of Rs. 5 lakh, and was promised completion within two months. Completion did not happen. The airline argued that an earlier agreement with the seller's agent had lapsed, that the terms had been altered, and that the power of attorney behind the deal was forged. The petitioner invoked the arbitration clause and asked the Supreme Court to appoint an arbitrator.

Decision Breakdown

The Supreme Court allowed the petition and appointed Justice Mukul Mudgal (retired Chief Justice of the Punjab and Haryana High Court) as sole arbitrator, referring all disputes to him. The Court held that the airline's objections, namely that the earlier agreement had lapsed, that terms were altered, and that the power of attorney was forged, are questions the arbitrator must decide, relying on Section 16 of the Act, which lets the arbitral tribunal rule on its own jurisdiction. At the appointment stage a court does not decide these merits. The arbitrator was allowed to fix his own fees in consultation with the parties.

Lesson Learnt

When a contract contains an arbitration clause, a court asked to appoint an arbitrator will usually leave disputes over whether the contract is valid or was terminated for the arbitrator to decide. Parties should therefore check their arbitration clauses before litigating these questions in court.

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

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