Delhi High Court: In a petition filed by the petitioner under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking the appointment of an Arbitrator for adjudicating the disputes that have arisen between the parties in relation to the “Non-Binding Term Sheet” executed between the parties, Navin Chawla, J., referred the parties to the arbitration and appointed Retired Chief Justice Dipak Misra as a Sole Arbitrator for adjudicating the disputes that have arisen between the parties in relation to the Term Sheet.
Counsel for the respondents submitted that the present petition is not maintainable inasmuch as the agreement being relied upon itself states that it is a “Non-Binding Term Sheet” and even though the agreement further states that the Dispute Resolution Clause in the said agreement would bind the parties, the same can be of no consequence inasmuch as the other terms of the agreement remain non-binding.
Placing reliance on Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1 and N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379, the Court noted that the Arbitration Agreement is a separate agreement distinct from the main contract, even though it may appear as one of the Clauses of the main agreement. In judging whether the parties can be referred to arbitration or not, the Court shall carry out only a prima facie study to determine if the Arbitration Agreement itself, and as a distinct to the main agreement, has been shown to be void or voidable.
The Court further noted that the scope of judicial review and jurisdiction of the Court under Section 11 of the Act is extremely restricted and limited. The Arbitral Tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The Court, by default, would refer the matter to arbitration when contentions relating to non-arbitrability are plainly arguable. The Court must act on the principle “when in doubt, do refer.”
The Court observed that though the title of the Term Sheet is “Non-Binding Term Sheet”, the Arbitration Agreement is specifically made binding on the parties. Whether the petitioner would succeed in such arbitration proceedings or not for want of alleged non-enforceability of the other covenants of the Term Sheets, is to be considered by the Arbitral Tribunal. However, the Term Sheet expressly states that notwithstanding its title, the Dispute Resolution Clause is binding on the parties.
The Court further clarified that whether the other covenants of the Term Sheet are enforceable or illegal/void in terms of the Regulations, also does not at least prima facie affect the Arbitration Agreement, which is a severable contract between the parties. Such alleged illegality, at least prima facie, does not tag with the arbitration agreement.
Thus, the Court held that it sees no impediment in appointing a Sole Arbitrator for adjudicating the disputes that have arisen between the parties in relation to the above-mentioned Term Sheet and appoint Retired Justice Dipak Misra as a Sole Arbitrator for adjudicating the disputes that have arisen between the parties in relation to the Term Sheet.
[Wellspun One Logistics Park Fund v. Mohit Verma, 2022 SCC OnLine Del 4492, decided on 19-12-2022]
Advocates who appeared in this case:
Mr. Jayant Mehta, Sr. Adv. with Ms. Sanya Sud, Mr. Sanjeev Sharma, Ms. Divya Joshi, Mr. Siddharth & Ms. Ananya Pratap Singh, Advocates for the Petitioner;
Mr. Arvind Nigam, Sr. Adv. with Mr. Sumit Kochhar, Ms. Laavanya Kaushik, Mr. Vineet Malhotra, Ms. Skhita, Mr. Mohit Paul, Mr. Vishal Gohri, Mr. Rajdeep Panda, Mr. Chitranshul Sinha, Ms. Sanjam Chawla & Ms. Akshita Upadhyay, Advocates for Respondent.
*Arunima Bose, Editorial Assistant has reported this brief.