Supreme Court

Meenakshi Solar Power Pvt. Ltd. vs. Abhyudaya Green Economic Zones Pvt. Ltd. and Ors.

MANU/SC/1535/2022

23.11.2022

Arbitration

Court can interfere at the referral stage only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute

In present matter, disputes arose between the Appellant and the Respondents and the Appellant filed an application before the Commercial Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking to restrain the Respondents from alienating their shares in the Company. The Commercial Court granted an ad ¬interim injunction restraining the Respondents from alienating their shares vide order.

The Appellant sent a letter invoking the arbitration clause as a means of dispute resolution in terms of Clause 10 of the Share Purchase Agreement and called upon respondent Nos. 1 to 3 to settle the disputes through arbitration. The Appellant appointed one Dr. P.V. Amarnadha Prasad, Engineer and Techno Legal Consultant, Hyderabad as its arbitrator and vide such letter requested Respondent Nos. 1 to 3 to appoint their nominee arbitrator and to constitute an Arbitral Tribunal of three members to adjudicate upon the dispute between the parties. On receiving no response to the aforesaid notice, the aggrieved Appellant herein filed an application under Section 11(6) of the Act of 1996 which came to be dismissed vide impugned judgment and order passed by the High Court. Aggrieved by the dismissal of the application, the Appellant has approached this Court by way of the present appeal.

The plea taken by the Respondent is that owing to novation of share purchase agreement, the arbitration clause no longer existed so as to resolve the dispute between the parties through arbitration. On the other hand, the plea of the Appellant is that there was no such novation of the share purchase agreement and the arbitration clause was very much available and hence, the High Court ought to have referred the matter to arbitration.

The Court at the referral stage can interfere only, when it is manifest that the claims are ex facie time-¬barred and dead, or there is no subsisting dispute. In the context of issue of limitation period, it should be referred to the Arbitral Tribunal for decision on merits. Similar would be the position in case of disputed “no¬ claim certificate” or defence on the plea of novation and “accord and satisfaction”.

High Court was not right in dismissing the petition under Section 11(6) of the Act of 1996 filed by the Appellant herein by giving a finding on novation of the Share Purchase Agreement between the parties as the said aspect would have a bearing on the merits of the controversy between the parties. Therefore, it must be left to the Arbitrator to decide on the said issue also. Hence, the impugned judgment and order passed by the High Court has to be set¬ aside.

The impugned judgment and order passed by the High Court is quashed and set aside. All contentions of both sides are left open to be raised by the respective parties before the Arbitral Tribunal in accordance with law. Appeal allowed.

Tags : Reference dispute Arbitration

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