Delhi High Court Clarifies Limited Role Under Section 11(6) of Arbitration Act, Refers Dispute to Arbitral Tribunal

In a recent ruling, the Delhi High Court has clarified the scope of its jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996, emphasizing the limited role of the court in matters involving arbitration agreements. The decision, delivered by Justice C. Hari Shankar, was made in the case titled Dr. Rahul Bhayana v. Dr. Rohit Bhayana (Arb.P. 809/2024) on August 20, 2024.

Background and Brief Facts:

The petitioner, Dr. Rahul Bhayana, filed an arbitration petition under Section 11(6) of the Act, seeking to invoke Clause 55 of the Apartment Buyer Agreement and refer the dispute for arbitration. The agreement was executed between DLF Homes Developers Ltd (Respondent No. 2) as the party of the first part, and the petitioner along with Respondent No. 1 as the party of the second part.

Key Issues:

1. Existence of a Valid Arbitration Agreement:
   The primary issue before the court was whether there was a valid arbitration agreement between the parties, as asserted by the petitioner.
2. Jurisdiction Over Allegations of Fraud and Time-Barred Claims:
   Another critical issue was whether the allegations of fraud and the claims being time-barred should be decided by the court under Section 11(6) or left to the arbitral tribunal.

Arguments Presented:

• Contentions of the Petitioner:
  The petitioner contended that the dispute should be referred to arbitration due to the presence of an arbitration clause in the agreement. He argued that issues related to allegations of fraud and claims being time-barred fall under the purview of the arbitral tribunal, not the court, under Section 11(6).
• Contentions of the Respondent:
  The respondent, on the other hand, argued that the dispute was based on certain emails unrelated to the arbitration agreement between the parties. The respondent also contended that allegations of fraud, which may involve issues in rem, are not suitable for arbitration. The respondent referred to the case of SBI General Insurance Co Ltd v. Krish Spinning, 2024 SCC OnLine SC 1754, to assert that the court should examine these matters.

Court’s Observations:

The High Court, in its observations, underscored the limited scope of Section 11(6) of the Arbitration and Conciliation Act, 1996. It reiterated the Supreme Court’s position in the SBI General Insurance case, which held that the court’s role under Section 11(6) is confined to determining the existence of an arbitration agreement. The court observed:

“The Supreme Court has also held, in SBI General Insurance, that allegations of fraud and pleas that the claims of the petitioner are barred by time are also aspects which have to be left for consideration by the arbitral tribunal.”

The High Court further elaborated that matters related to arbitrability, allegations of fraud, and time-barred claims are not within the jurisdiction of the Section 11(6) court. It stressed that these are issues for the arbitral tribunal to decide:

“This Court has, in numerous cases, observed that, following SBI General Insurance, a Section 11(6) Court can only examine whether there exists an arbitration agreement between the parties. The arbitrability of the dispute that the petitioner seeks to raise, vis-à-vis the arbitration agreement, is not an aspect which a Section 11(6) court can examine.”

Decision:

The Delhi High Court allowed the arbitration petition, referring the dispute for arbitration and appointing an arbitrator to handle the matter. The court specifically left the issues of fraud and time-barred claims to be adjudicated by the arbitrator.

This decision reaffirms the principle of minimal judicial interference in arbitration matters, aligning with the legislative intent of the Arbitration and Conciliation Act, 1996, to promote efficient and effective dispute resolution through arbitration.

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