Coercion In Disputes Must Be Examined By Arbitral Tribunal, Referral Court's Jurisdiction Limited By Section 11(6A): Delhi High Court

The Delhi High Court bench of Justice C. Hari Shankar has held that coercion, or its absence in a dispute is a complex question, purely of fact, which has necessarily to be examined by the arbitral tribunal. The bench held that with the introduction of sub-Section 6(A) in Section 11, the jurisdiction of the referral court is now circumscribed. Consequently, the High Court appointed Mr. P.V. Dinesh, Senior Advocate as arbitrator to resolve the disputes between parties. Section 11(6A) reads as follows: "The Supreme Court or, as the case may be, the High Court while considering any application under sub-section (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." Brief Facts: Nafees Ahmed (Petitioner) was awarded contracts for the construction of a World Class Skill Centre at Jahangirpuri, IIT, Delhi, and for the construction of an Additional M.P. Hall, Lab, Activity Room, and Upgradation and Face Lifting of Shahbad Daulatpur in Delhi. The contracts were awarded to Delhi Tourism And Transportation Development Corporation Ltd (Respondent). The Petitioner completed the work but claimed that certain bills remained unpaid. Clause 25 of the General Conditions of Contract required disputes to be settled by arbitration after following a detailed pre-arbitral protocol. The Petitioner argued that the references to the Superintending Engineer and the Chief Engineer in Clause 25 should be substituted with the Chief Project Manager and the Managing Director in the context of the respondent organization. Following the protocol outlined in Clause 25, the Petitioner made a representation to the Chief Project Manager regarding his claims. After receiving no response, the Petitioner appealed to the Managing Director and requested the formation of a Dispute Resolution Committee (DRC) if necessary. Subsequently, the Petitioner issued a notice under Section 21 of the Arbitration and Conciliation Act, 1996 to the Managing Director of the Respondent and sought to refer the disputes to arbitration. With no response from the Respondent, the Petitioner approached the High Court under Section 11(6) of the Arbitration Act for the appointment of the arbitrator. The Respondent contended that the Petitioner's allegations of coercion had to be examined by the court. Observations by the High Court: The High Court noted that after the introduction of sub-section 6(A) in Section 11 of the Arbitration Act the jurisdiction of the Referral Court has been significantly restricted. The High Court noted that the insertion of sub-section (6A) in Section 11 by the Arbitration & Conciliation (Amendment) Act, 2015, was meant to mitigate the effect of earlier judicial decisions such as in National Insurance Co. Ltd v. Boghara Polyfab Ltd, U.O.I. v. Master Construction Co., and New India Assurance Co. v. Genus Power Infrastructure Ltd. These decisions previously held that the referral Court, while exercising jurisdiction under Section 11(6), was also required to examine any allegation of fraud or coercion raised by either party. However, the Supreme Court in Duro Felguera S.A. v. Gangavaram Port Ltd and Mayawati Trading Pvt Ltd v. Pradyut Deb Burman clarified that this requirement no longer persisted following the insertion of sub-section (6A). The High Court noted that the matter of coercion, or its absence, is inherently complex and factual. This, according to the bench, requires examination by the arbitral tribunal. It noted that the Supreme Court, in Vidya Drolia v. Durga Trading Corporation, held that it is only in instances where serious fraud is alleged to have vitiated the execution of the arbitration agreement, and this can be determined without leading evidence, that the referral court could entertain such issues. Further, the High Court held that a plea of discharge by accord and satisfaction must be left to arbitration. It held that the court can only intervene at the referral stage if claims are evidently time-barred and dead or if no dispute exists. All other cases should be referred to the Arbitral Tribunal for decision on merits. The High Court noted that the GCC didn't state the venue of arbitration. However, since the parties are situated in Delhi and the work was carried out in Delhi, the High Court held that it had jurisdiction over the matter. Consequently, the disputes between the parties were referred to Mr. P.V. Dinesh, Senior Advocate, as the arbitrator. Case Title: Nafees Ahmed Vs Delhi Tourism And Transportation Development Corporation LtdCitation: 2024 LiveLaw (Del) 782 Case Number: ARB.P. 344/2024 Advocate for the Petitioner: Mr. Avinash Trivedi Advocate for the Respondent: Mr. Abhimanyu Garg Date of Judgment: 09.07.2024 Click Here To Read/Download Order or Judgment

Coercion In Disputes Must Be Examined By Arbitral Tribunal, Referral Court's Jurisdiction Limited By Section 11(6A): Delhi High Court

Rajesh Kumar

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