Referral Court U/S 11 Of Arbitration Act Cannot Enter Into Merits Of Subject Matter Of Disputes: Rajasthan High Court

The Rajasthan High Court bench of Justice Sudesh Bansal has held that the court under section 11 of the Arbitration Act cannot enter into merits of subject matter of the disputes. It submitted that since the disputes/ differences have arisen between the parties, due to noncompliance of the collaboration agreement, which are arbitral in nature and an arbitration agreement incorporated in Clause 20 of the collaboration agreement, was also entered into between the parties to resolve/ settle such disputes through arbitration. The court after perusing the arbitration clause observed that “since the arbitration clause to settle the disputes/ differences between the parties through arbitration was also entered into as one of the terms and conditions of the agreements and words every kind of disputes/ differences is referred therein, same may not be allowed to be construed in such a narrow sense to construe the arbitration agreement, confines it to the dispute of construction work only.” The court noted that the respondents has made an attempt to confine this arbitration agreement only to that nature of disputes, which arise between the parties during the course of construction or post construction over the plots in question and no other disputes came within compass of this arbitration agreement It also added that If such a narrow sense is given to the arbitration agreement, same would also not be in consonance with the aim and object of the Arbitration Act. Further the intention of parties, prima facie reflects that the parties were agreeable to refer all kinds of disputes/ differences arisen out of the agreements of collaboration, to the Arbitrators to be appointed by mutual consent of both parties and the majority decision of the Arbitrators shall be biding on both parties It further observed that indeed there is no dispute between parties about existence and validity of the arbitration agreement, therefore, following the provision of Section 11 of the A&C Act, 1996, the disputes and differences deserve to be referred to the arbitration and arbitration tribunal is required to be constituted and since as per Section 16 of the A&C Act, 1996, the Arbitral Tribunal is competent to rule on its own jurisdiction.