Case Note & Summary
The appeal arose from the dismissal of an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 by the Madras High Court. The appellants, VGP Marine Kingdom Pvt Ltd and another, sought appointment of an arbitrator to resolve disputes arising out of a Share Subscription and Shareholders Agreement dated 27.04.2016 with the respondent, Kay Ellen Arnold. The High Court refused on two grounds: first, that arbitral proceedings were already pending and an award had been passed regarding related agreements; second, that the respondent had initiated proceedings before the NCLT for oppression and mismanagement as a minority shareholder. The Supreme Court allowed the appeal, holding that the High Court erred. The Court noted that the arbitration clause in the 2016 agreement was clear and that the appellant was not a party to the earlier arbitral proceedings. Relying on Vidya Drolia v. Durga Trading Corporation, the Court held that unless the dispute is ex facie non-arbitrable, the court should not delve into arbitrability at the Section 11 stage; such issues should be left to the arbitrator. The pendency of NCLT proceedings was also not a valid ground to refuse appointment. The Court set aside the High Court's order, appointed former Madras High Court Judge Justice K. Ravichandrabaabu as the sole arbitrator, and left the issue of arbitrability to the arbitrator.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - Existence of Arbitration Agreement - The Court held that where an arbitration agreement exists, the court at the stage of Section 11 should not refuse appointment unless the dispute is ex facie non-arbitrable; issues of arbitrability requiring deeper consideration should be left to the arbitrator. (Paras 5-5.3) B) Arbitration Law - Effect of Pending NCLT Proceedings - Section 11(6) of the Arbitration and Conciliation Act, 1996 - The pendency of proceedings before the National Company Law Tribunal (NCLT) for oppression and mismanagement does not bar the appointment of an arbitrator under a separate shareholders' agreement; the arbitrator can consider the entire aspect. (Paras 5.4) C) Arbitration Law - Interlinked Agreements - Section 11(6) of the Arbitration and Conciliation Act, 1996 - The question whether the shareholders' agreement is interlinked with other agreements and whether the dispute is covered by a prior arbitral award is a matter of arbitrability to be decided by the arbitrator, not by the court at the Section 11 stage. (Paras 5.3)
Issue of Consideration
Whether the High Court was justified in refusing to appoint an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 on the grounds of pending arbitral proceedings and NCLT proceedings.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's order, and appointed Justice K. Ravichandrabaabu, Former Judge, Madras High Court, as the sole arbitrator to resolve the dispute arising out of the Share Subscription and Shareholders Agreement dated 27.04.2016. The issue of arbitrability is left to the arbitrator.
Law Points
- Arbitration agreement exists
- Court at Section 11 stage should not delve into arbitrability if not ex facie non-arbitrable
- Pendency of NCLT proceedings not a bar to arbitration
- Interlinked agreements issue left to arbitrator
