The Delhi High Court, in the case of Amrish Gupta v. Gurchait Singh Cheema 2022 SCC OnLine Del 1116, held that the Arbitral Tribunal has the jurisdiction to arbitrate on all disputes referred to in the Arbitration Agreement, and a party to an Arbitration Agreement cannot challenge the jurisdiction of the Arbitral Tribunal after submitting to the jurisdiction of the Tribunal.
FACTS
An Agreement to Sell was purportedly entered between Mr. Amrish Gupta (hereinafter referred to as “Petitioner”) and late Mr. Gurchait Singh Cheema (hereinafter referred to as “Respondent”) in presence of the representative of the Respondent, Mr. Surinder Wadhwa (hereinafter referred to as “Representative”) on 07.08.2014.
The consideration amount of Rs. 11 Crores agreed under the Agreement was transferred to the Petitioner by the Respondent in August 2016. The Representative on 24.01.2017 asked the Petitioner to execute the Conveyance Deed in favour of the Respondent for transfer of the property, in response to which the Petitioner denied the sale of property on 07.02.2017.
Simultaneously, the Petitioner lodged a complaint before the Joint Commissioner of Police (South), Delhi against the Respondent on 10.04.2017, alleging forgery and fabrication of documents by the Respondent.
In the meanwhile, the Respondent issued a notice for invocation of Arbitration on 14.03.2017 pursuant to the Arbitration Clause envisaged in the Agreement. On 12.10.2017, the Arbitrator was appointed and the proceedings commenced. On 06.01.2018, the Respondent expired and was represented by his legal heirs.
The main issue before the Arbitral Tribunal was regarding the validity of the Agreement, as the Petitioner alleged that the Agreement was forged and fabricated. The Arbitral Tribunal passed an Award in favour of the Respondent. The Petitioner aggrieved by the award, challenged the Arbitral Award before the Delhi High Court (“hereinafter referred to as “High Court”).
ISSUES BEFORE THE HIGH COURT
- Whether the Arbitral Tribunal had the jurisdiction to adjudicate the dispute?
- Whether the dispute is arbitrable on the ground that the Arbitration Agreement contained in the Agreement to Sell allegedly bears forged signatures of the Petitioner?
- Whether the Arbitral Tribunal erred in directing specific performance of the Agreement to Sell, despite the findings of the Tribunal that the Agreement to Sell contained clauses which are untrue?
CONTENTIONS OF THE PARTIES
The Petitioner admitted the receipt of Rs. 11 Crores, but stated the amount was not received as a consideration for the Agreement to Sell, but as a loan, and the fund was utilized to extend the loan to the Representative at an interest rate of 6% per annum.
The Petitioner contended that the Arbitral Tribunal had no jurisdiction to conclude the dispute as a serious question of fraud and forgery was involved, and hence, the matter was non-arbitrable. Moreover, the Petitioner submitted that the FIR against the Respondent’s alleged fraud and forgery was filed, and a chargesheet regarding the same was also prepared.
The Petitioner pleaded the High Court to relook into the matters decided by the Arbitral Tribunal, as the Award passed by the Arbitral Tribunal is patently illegal.
The Petitioner argued that the Agreement to Sell was antedated, and in the Respondent’s complaint filed before the Economic Offences Wing and in his Legal Notice issued to the Petitioner, there was no mention of any person witnessing the execution of the Agreement to Sell.
The Petitioner submitted that according to the terms of the Agreement to Sell, the Petitioner had to execute the Conveyance Deed within a period of one year and to get the property converted into ‘freehold’. The Respondent did not send any communications or reminders to the Petitioner for the same till almost three years of the execution of the Agreement to Sell.
Furthermore, as the value of the property was evaluated to be Rs. 55 Crores, the Petitioner contended that it would be erroneous to think that the Petitioner would agree to sell the same for a consideration of Rs. 11 Crores.
Finally, the Petitioner stated that there were regular financial dealings between the parties and the amount of Rs. 11 Crores thus received by the Petitioner was pertaining to transactions involving the advancement of loans, and there existed no reason for the Arbitral Tribunal to discredit the same.
DECISION AND FINDINGS
The High Court observed that merely due to the Petitioner not raising any objections before the Arbitral Tribunal regarding its jurisdiction under Section 16 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”), no inference can be drawn that the jurisdiction cannot be questioned.
The Court noted that in the cases where a challenge is made to an Agreement on the ground of fraud, it is clear that the challenge is to the main Agreement and not merely to the Arbitration Agreement. Hence, the Arbitral Tribunal possessed the jurisdiction to adjudicate upon the fraud, as the Agreement to Sell was challenged and not only the Arbitration Agreement.
The High Court held that the Act does not exclude any dispute as non-arbitrable. There are certain matters which are intrinsically non-arbitrable, as either they are matters in rem or have a separate mechanism for adjudication. As the dispute did not fall into either of these categories, the High Court observed that the present matter is arbitrable in nature.
The High Court noted that the Petitioner did not challenge the jurisdiction of the Arbitral Tribunal in view of the forged signatures under Section 16 of the Act at the beginning of the Arbitral Proceedings. Moreover, as the Petitioner participated in the appointment of Arbitrator, the challenge is to the Agreement to Sell and not specifically to the Arbitration Agreement.
The High Court observed that scope of relook in the Award passed by the Arbitral Tribunal is very limited, and hence, validity of the Agreement to Sell must be decided as per Section 34(2) and Section 34(2A) of the Act.
The High Court considered the evidences regarding the signature and concurred with the finding of the Arbitral Tribunal that there was little doubt that the signature was of the Petitioner.
The High Court held that the argument of the Petitioner that the transaction was regarding the loan amount and not of sale purchase, was patently erroneous and did not hold any merit. The High Court further observed that even if it was a loan, the Petitioner had not deducted tax at source, and hence, it could not be considered to be a loan.
Ultimately, the High Court upheld the Award of specific performance passed by the Arbitral Tribunal, as the Tribunal had satisfactorily established the transaction recorded in the Agreement to Sell. The High Court noted that the Petitioner was a chronic litigant and assumed a modus operandi to avoid transactions. Hence, the High Court dismissed the petition and upheld the Arbitral Award.
AMLEGALS REMARKS
An Arbitration Agreement, even if contained as a clause of the main Agreement, exists as a separate Agreement. Thus, any contention on jurisdiction of the Arbitral Tribunal and the dispute being non-arbitrable can be raised only when it pertains to Arbitration Agreement itself, and not the entire Agreement.
In the instant case, the mere presence of an FIR with regards to the main Agreement did not immediately disqualify the Arbitration Agreement and the procedure laid down for settlement of disputes thereof.
Additionally, the conduct of the parties is indicative of their intention to proceed with the Arbitration Agreement. The Petitioner herein had waived their right to challenge the Arbitration Agreement when they decided to proceed with the procedure for appointment of Arbitrator and participated in the proceedings thereafter.
More so, the Petitioner did not resist the reference to Arbitration at any point of proceedings, and for this reason they lost their opportunity to question its jurisdiction before the High Court. Thus, it is trite law that if the parties submit to the jurisdiction of the Tribunal and also seek relief from the same Tribunal, it is unfair on their part to later claim that they did not agree to the Tribunal’s jurisdiction.
The decision of the High Court is a step forward in the right direction to discourage litigants from unnecessarily dragging arbitrable disputes before the Court of law by filing extraneous FIRs, and to ensure that such disputes are referred to the Tribunal itself at the first instance.
-Team AMLEGALS, assisted by Ms. Priyanshi Jain (Intern)
For any queries or feedback, please feel free to get in touch with rohit.lalwani@amlegals.com or riddhi.dutta@amlegals.com.
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