Application under Order II Rule 2 Code of Civil Procedure cannot be considered by court u/s 11 Arbitration & Conciliation Act, 1996

The Delhi High Court recently held that courts cannot consider the question of viability of a claim as under Order II Rule 2 of the Code of Civil Procedure, while hearing a petition under Section 11 of the Arbitration and Conciliation Act, 1996.

The said decision was held in the matter of Parsvanath Developers Limited and Anr. Vs. Rail Land Development Authority (Arb. P. No. 724/2018), decided on 02.11.2018.

Challenge

The court was hearing a petition filed under Section 11, seeking appointment of a nominee Arbitrator on behalf of the respondent, Rail Land Development Authority (RLDA), for constitution of an Arbitral Tribunal for adjudication of disputes between RLDA and the petitioner, Parsvnath Developers Ltd.

RLDA had refused to appoint a nominee Arbitrator, asserting that the arbitral proceedings between them stood concluded during earlier arbitration proceedings in November last year. It had further contended that the claims now sought to be raised by the petitioner would be barred by provisions of Order II Rule 2 of the CPC as well as principles of estoppel and res judicata.

The petitioner, on the other hand, drew the court’s attention to the Statement of Claim filed during the earlier arbitration proceedings, wherein it had expressly reserved its rights to claim the present claim by way of separate arbitration proceedings.

Held

Ruling in favour of the petitioner, the court reiterated that an arbitration agreement can be invoked a number of times and does not cease to exist only with its invocation the first time.

The court further pointed out that after the amendment of the Act in 2015, Section 11(6A) restricts the scrutiny of the court at the stage of adjudicating an application under Section 11 of the Act only to the existence of the arbitration agreement. It, therefore, found no impediment in appointing a nominee Arbitrator for RLDA to adjudicate the disputes that are sought to be raised by the petitioners.

The Delhi High Court relied on the judgment in the case of Indian Oil Corporation Ltd. vs. SPS Engineering Ltd., wherein the Supreme Court had held, “The limited scope of section 11 of the Act does not permit such examination of the maintainability or tenability of a claim either on facts or in law. It is for the arbitral tribunal to examine and decide whether the claim was barred by res judicata. There can be no threshold consideration and rejection of a claim on the ground of res judicata, while considering an application under section 11 of the Act.”