Rajesh Verma Vs Ashwani Kumar Khanna

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Non-Reportable

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4095 OF 2016 (ARISING OUT OF SLP(C) NO.10868/2016)

(@ SLP(C)…..CC 6652/2016)

Rajesh Verma Appellant(s)

VERSUS

Ashwani Kumar Khanna Respondent(s)

J U D G M E N T

Abhay Manohar Sapre, J.

1) Delay in filing special leave petition is condoned.

Leave granted.

2) This appeal is filed against the final judgment

and order of the High Court of Delhi at New Delhi

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dated 03.12.2015 and 19.02.2016 in Arbitration

Petition No. 434 of 2015 and I.A. No. 754 of 2016 in

Arbitration Petition No. 434 of 2015 respectively

whereby the learned Single Judge of the High Court

allowed Arbitration Petition No. 434 of 2015 and

dismissed I.A. No. 754 of 2016 in Arbitration Petition

No. 434 of 2015 seeking change of the named

arbitrator.

3) In order to appreciate the short issue involved in

the appeal, it is necessary to state few relevant facts.

4) The appellant is an owner/landlord of the shop

measuring 153.58 sq. feet situated at 1729, Gali No.

5, Govind Puri Extension, Kalkaji, New Delhi-110019

whereas the respondent was the appellant's tenant of

the shop in question at a monthly rent of Rs.175/-

since July 1977.

5) On 31.10.2014, the appellant and the respondent

claimed to have entered into an agreement whereby it

was inter alia agreed that the appellant on

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respondent's vacating the shop would demolish the

shop and construct the new one in its place on or

before 31.03.2015 and then sell the new shop to the

respondent for a total consideration of Rs.42,00,000/-.

The agreement further stipulated that the respondent

has paid a sum of Rs.32,00,000/- by way of advance

to the appellant in cash towards the sale consideration

and balance amount of Rs.10,00,000/- was to be paid

by the respondent to the appellant at the time of

execution of the sale deed. Clause 14 of the agreement

contained arbitration clause for making reference to

the sole arbitrator in the event of any dispute arising

between the parties in relation to the agreement in

question.

6) The disputes arose between the parties in

relation to implementation of the terms of the

agreement, which led to exchange of notices between

them by making allegations and counter allegations by

both against each other regarding committing of

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breaches of the agreement. Eventually, the respondent

(tenant) filed an arbitration petition being Arbitration

Petition No. 434 of 2015 under Section 11 of the

Arbitration and Conciliation Act, 1996 (hereinafter

referred to as “the Act”) before the Delhi High Court

(Single Judge) out of which this appeal arises praying

therein for appointment of sole arbitrator for resolving

the disputes which had arisen between them. It was

inter alia alleged that since Clause 14 of the agreement

provided for appointment of sole arbitrator for deciding

the disputes arising out of the agreement between the

parties and when disputes have arisen between them,

the matter should be referred to the sole arbitrator for

his decision as provided in the agreement. The

arbitration petition was contested by the appellant

(owner/landlord) as non-applicant by denying the

allegations made in the petition. However, the learned

Single Judge by order dated 03.12.2015 allowed the

petition and appointed one Shri Ashok Chhabra,

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Advocate as sole arbitrator to decide the disputes. It is

against this order of the learned Single Judge, the

owner/landlord has filed this special leave to appeal.

7) Heard Mr. Praveen Chaturvedi, learned counsel

for the appellant and Mr. Vivek Sharma, learned

counsel for the respondent.

8) Mr. Praveen Chaturvedi, learned counsel for the

appellant, urged two points in support of his

submission. In the first place, he urged that the

learned Single Judge while allowing the petition

exceeded his jurisdiction under Section 11 of the Act

because he virtually proceeded to decide the main

disputes itself by recording findings on such issues in

Paras 9 and 10 of the impugned order. It was his

submission that the findings recorded in Paras 9 and

10 and all such observations made in the impugned

order, which touched the merits of the controversy,

should, therefore, be set aside leaving the arbitrator to

decide all such disputes in accordance with law in

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arbitration proceedings on its merits depending upon

the stand taken by the parties before the arbitrator.

9) His second submission was that the learned

Single Judge having allowed the petition should have

sought party’s consent for nominating the arbitrator

and in any case, according to learned counsel, any

retired judge would have been more preferable for

appointment to act as an arbitrator in place of any

lawyer.

10) Learned counsel for the respondent, however,

supported the impugned order and urged that no

interference is called for in the impugned order.

11) Having heard the learned counsel for the parties

and on perusal of the record of the case, we find some

force in the submissions urged by learned counsel for

the appellant.

12) We have perused the impugned order and find

that in Paras 9 and 10, the learned Single Judge has

elaborately discussed the issues touching the merits of

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the controversy relating to the agreement. In our

considered opinion, a discussion much less with such

elaboration on factual issues was wholly uncalled for

and should not have been made. Indeed, it was not

necessary for the learned Single Judge to have

recorded any finding on merits while making reference

to the arbitrator under Section 11 of the Act.

13) It is a settled principle of law that jurisdiction of

Court under Section 11 of the Act is limited and

confine to examine as to whether there is an

arbitration agreement between the contracting parties

and, if so, whether any dispute has arisen between

them out of such agreement which may call for

appointment of arbitrator to decide such disputes.

14) Once it is held that disputes had arisen between

the parties in relation to agreement which contained

an arbitration clause for resolving such disputes, the

Court should have made reference to the arbitrator

leaving the parties to approach the arbitrator with

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their claim and counter-claim to enable the arbitrator

to decide all such disputes on the basis of case set up

by the parties before him. In this case, we find that the

learned Single Judge did exceed his jurisdiction on

this issue and hence interference to this extent is

called for.

15) We, accordingly, observe that the arbitrator while

deciding the disputes between the parties in

arbitration proceedings would not, in any manner, be

influenced by any finding, observations made by the

learned Single Judge in the impugned order and nor

would make any reference of the findings while

deciding the case.

16) Now so far as the appointment of sole arbitrator

made by the learned Single Judge is concerned, in

view of the reservation expressed by the appellant

regarding the choice of an advocate arbitrator by the

High Court, we feel that it is just and proper that a

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retired Judge should be appointed in his place as an

arbitrator to resolve the disputes.

17) We, accordingly, appoint Shri Justice M.L. Mehta

(Rtd.) as the sole arbitrator to decide the disputes,

which have arisen between the parties in relation to

the agreement in question. The arbitrator would be at

liberty to settle the terms for deciding the dispute such

as fees and expenses etc.

18) Needless to say, the arbitration proceedings be

completed expeditiously.

19) In the light of foregoing discussion, the appeal

succeeds and is allowed in part. Impugned order is

modified to the extent indicated above.

.……...................................J. [J. CHELAMESWAR]

………..................................J. [ABHAY MANOHAR SAPRE]

New Delhi, April 19, 2016.

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