Reference To Arbitration Can Be Refused Only When Court Concludes, Without Even A Slightest Doubt, That The Claim Is Non-Arbitrable: Gujarat HC

The Gujarat High Court observed that the reference to the arbitration can be refused only when the court concludes that the claim is non-arbitrable without even a slightest doubt. 

The Court observed thus in a petition under Section 11 of the Arbitration and Conciliation Act, 1996 seeking for appointment of Arbitrator on refusal by a company in terms of the arbitration clause.

A Single Bench of Chief Justice Sunita Agarwal held, “It is held in NTPC Limited (supra) that on prima facie scrutiny of the facts, if the Court reaches at a clear conclusion that there is not even a vestige of doubt that the claim is non-arbitrable, it may refuse to refer the dispute to arbitration. However, on the other hand, even if there is a slightest doubt, the rule is to refer the dispute to arbitration. ...Taking note of the above position of law, on a prima facie scrutiny of the material brought before this Court, it cannot be concluded without any doubt that the dispute is non-arbitrable, or the claim of the petitioner had become stale for issuance of ‘No Claim Certificate’ on 25.11.2015. It is clear that the petitioner herein was agitating the dispute by issuance of notice of claim dated 01.10.2018."

The Bench noted that the arbitration application under Section 11(6) has been filed after dismissal of the Commercial Suit and refusal by the company to the notice under Section 21 of the Act, 1996.

Advocate JF Mehta appeared for the petitioner while Advocate Abhishek M Mehta appeared for the respondent.

In this case, the counsel for the respondent company i.e., Narmada Clean Tech Limited argued that all claims of the petitioner organisation i.e., Poll Cont Associates under an agreement were settled in 2015 with an issuance of ‘No Due Certificate’. The petitioner was left with no claim in respect of the work carried out under the contract and the contention was thus, that the claims raised were stale and as such non-arbitrable.

As per the respondent’s counsel, the arbitration clause in the original contract was no more in force and stood extinguished way back in 2015 when the petitioner had received the due amount and hence, no claim as such could be said to survive to appoint an Arbitrator. Some judgments were relied upon by the counsel in which it was held that the referral court can make a prima facie scrutiny as to the existence of the dispute, before referring the matter to Arbitrator.

The High Court after taking note of the above submissions said, “Having noted the chronology of events which has led to the filing of the instant arbitration application, this Court does not find any substance in the submission of the learned advocate for the respondent that the claim of the petitioner has become stale and the dispute is non-arbitrable. Reliance placed on the decisions of the Apex Court and of this Court noted hereinabove is misplaced as none of them would come to the rescue of the respondent.”

The Court added that it is not possible to refuse to refer the matter to the Arbitrator and therefore, it turned down the objections taken by the counsel for the respondent as to the maintainability of the petition.

Accordingly, the High Court allowed the petition and appointed one former Judge as the Sole Arbitrator to resolve the disputes between the parties.

Cause Title- Poll Cont Associates v. Narmada Clean Tech Ltd.

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