The Supreme Court has reiterated that a suit for injunction and declaration challenging the jurisdiction of arbitrator is not maintainable.
The bench comprising Justice Abhay Manohar Sapre and Justice R. Subhash Reddy observed that any objection with respect to existence or validity of the arbitration agreement can be raised only by way of an application under Section 16 of the Arbitration and Conciliation Act.
In this case [National Aluminium Company Limited vs. Subhash Infra Engineers Pvt. Ltd.], the company appointed an arbitrator who initiated proceedings by issuing notice to both the parties. On receiving the notice, the other party filed a civil suit seeking relief of declaration that the appointment of the arbitrator is null and void. Application seeking interim injunction was dismissed by the Trial Judge, but was allowed by the District Court. The High Court affirmed the order of District Court.
In appeal, the company, placing reliance on the judgment in Kvaerner Cementation India Limited V. Bajranglal Agarwal, contended that even if the other party disputes the jurisdiction of the arbitrator, it is open for it to move an application before the arbitrator under Section 16 of the Act, but at the same time, the suit filed for declaration and injunction is not maintainable.
Agreeing with this contention, the bench observed:
In the Judgment of this Court, in the case of Kvaerner Cementation India Limited V. Bajranglal Agarwal and Another1, this Court has examined the similar issue and held that any objection with respect to existence or validity of the arbitration agreement, can be raised only by way of an application under Section 16 of the Act and Civil Court cannot have jurisdiction to go into such question. Having regard to aforesaid judgment of this Court and various communications between the parties, we are in agreement with the submission made by the learned senior counsel for the appellant that, if the first respondent wants to raise an objection with regard to existence or validity of the arbitration agreement, it is open for the first respondent to move an application before the arbitrator, but with such plea, he cannot maintain a suit for declaration and injunction.
The court, however, noted that the company had appointed its own Chairman-cum-Managing Director as an arbitrator. Having regard to the Fifth Schedule, he cannot be continued as an arbitrator, to adjudicate the lis between the parties, the bench said.
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