Courts power confined to examine arbitration agreement existence only after amendments to the Arbitration and Conciliation Act 1996-Delhi High Court

Courts power confined to examine arbitration agreement existence only after amendments to the Arbitration and Conciliation Act 1996-Delhi High Court. 

ABCAUS Case Law Citation:
1039 (2016) (10) HC

Important Case Law Referred:
Radhakrishnan v. M/s. Maestro Engineers & Ors. (2009) (13) SCALE 403

Brief Facts of the Case:
A Memorandum of Understanding (MoU) was entered into between the Petitioner and the Respondent in terms of which the Petitioner agreed to grant the Respondent a franchisee of its Animation College at Bangalore.

In terms of the clause no. 8 of the MoU, it was agreed that any dispute and difference between them arising from the Agreement would be referred to a sole Arbitrator. These facts were not denied.

Contentions of the Respondent:
It was alleged by the respondent that the Petitioner had played a fraud on the Respondent by making a misrepresentation and, therefore, it was the Respondent which had to claim damages from the Petitioner as a result of such misrepresentation regarding the Petitioner being the sole and exclusive owner of the marks in question.

Placing reliance on N. Radhakrishnan case, the respondent contended that where allegations of fraud are made by one party against the other, the appropriate forum is the Court and in the dispute should not be referred to arbitration.

Observations made the Supreme Court:
The High Court observed that the decision in N. Radhakrishnan case was delivered at a time when the amendments to the Arbitration and Conciliation Act, 1996 with effect from 23rd October, 2015 had not been made. In terms of the said amendments, sub-Section 6A in Section 11 of the Act reads as under:

“(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under subsection (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement.”

Thus the High Court opined that in the present petition, the examination, therefore, had to be confined to the question whether there exists an arbitration agreement between the parties. It remained a fact that the Respondent did not deny that it had entered into the aforementioned MoU containing an arbitration clause.

Therefore, the Court, cannot at this stage examine whether the Respondent had a justified claim against the Petitioner as a result of the Respondent contending that the misrepresentation made by the Petitioner led to the execution of the Agreement. That obviously is a question that will be examined in the arbitration proceeding

Remedy Given:
The High Court appointed a sole Arbitrator to adjudicate the disputes between the parties including their claims and counter-claims.