8 August 2022


High Court of Delhi

Surender Kumar Singhal & Ors vs Arun Kumar Bhalotia & Ors




The party raising the jurisdictional objection under Section 16 of Arbitration Act has to raise it with alacrity

The Petitioners filed an application under Section 16 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) and raised an objection that, the Tribunal does not have any jurisdiction to adjudicate the claims against the Petitioners. One of the grounds raised in the application was that, the Petitioners are bonafide purchasers of one of the properties and have valid title to the same and that the arbitration clause does not bind them. It was stated in the application that, the Petitioners were neither party to the suit in the High Court nor a party to the arbitration agreement and since, they are completely third parties, they cannot be compelled to participate in the arbitration proceedings. Thus, a prayer was made to dismiss the arbitration proceedings qua the Petitioners on the ground that, the Arbitral Tribunal has no jurisdiction to entertain any claims against the Petitioners.

A jurisdictional objection by its very nature would be one which has to be raised at the inception itself. The statute contemplates that, the party raising the objection has to raise it with alacrity and hence, by an overall reading of Section 16 and especially Section 16(5) of the Arbitration Act, there is no doubt that, the Tribunal also ought to decide the objection with a sense of urgency. Such dispensation would be favoured especially, in order to ensure that parties to whom the arbitral proceedings may not even be applicable are not entangled to long drawn arbitral proceedings with substantial costs being incurred. Moreover, in order to maintain the efficiency of the arbitral system, it is necessary that only those parties to whom the arbitral Clause is applicable contractually are obliged to arbitrate.

The Arbitrator has fully applied his mind and given reasons as to why the application of Petitioners (Respondent No.5 to 10 in the arbitration) under Section 16 of the Arbitration Act is not to be adjudicated at this stage. The Arbitrator observes that, the property in question which was purchased by the Petitioners was subject matter of the reference which was made by the learned Single Judge of this Court on 9th January, 2018. Arbitrator further observes that, the Petitioners may be genuine purchasers of the property, however, the sale consideration qua the said property was to be decided between the parties. Thus, notice was issued to the Petitioners so that their rights are not jeopardized in any manner. An application to recall notice of arbitration under Section 16 of the Arbitration Act cannot, therefore, in the opinion of the Arbitrator, be decided at this stage and would rightly have to await completion of pleadings and admission and denial.

According to the Arbitrator, the matters are complicated and would require evidence and the Petitioners arguments cannot be adjudicated in isolation since the claimants have asked for declaration of the sale deed in favour of the Petitioners as null and void. The property which the Petitioners have purchased is squarely in dispute in the arbitration and, therefore, the Arbitrator was of the view that, the appropriate stage will only be the final stage and the application of the Petitioners was kept on file.

The approach of the Arbitrator cannot be set out as either perverse or patently lacking in jurisdiction. The fact situation does not present an ‘exceptional rarity' requiring exercise of jurisdiction. The question of jurisdiction raised by the Petitioners would have to be adjudicated first, prior to the passing of the final award. The present petition is disposed of.

Tags : Dispute Jurisdiction Adjudication

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