Dharamvir khosla V. Asian Hotels (North) LTD.
24 June, 2020
Bench: HON’BLE MS. JUSTICE MUKTA GUPTA and others.
The Indian Polity is divided into three segments namely Legislature, Executive and Judiciary.
The Legislature and Executive go hand-in-hand but Judiciary is independent in itself. Indian Judicial System is one of the oldest judicial systems in the world. Indian Judiciary plays an important role in safeguarding the interests of people and providing a platform for speedy justice to them. The industrial revolution has led to rapid escalation in global trade and commerce. To correspond with the economic growth and avoid prolonged litigation, the parties resort to arbitration as the preferred dispute resolution mechanism. Not only in India but cohesive global growth strategies and economies have realized that arbitration happens to be a favourable way out for all. Cross border transactions and bilateral trade relations have fostered affiliations between countries thereby increasing legal intricacies. Needless to say, disputes have also become inevitable and there is a demand for methodology to expedite legal remedies. As per the Hindu Law, one of the earliest known treatise that mentions about arbitration is “Brhadaranayaka Upanishad”. It elaborates about the various types of arbitral bodies which consists of 3 primary bodies namely ‘Puga’ the local courts, ‘Srenis’ the people engaged in the same business or profession and the ‘Kulas’, who were members concerned with the social matters of a particular community and all these three bodies were cumulatively known as Panchayats. The members of the same were the Panchas, the then arbitrators, used to deal with the disputes under a system; we now refer to as Arbitration. It has been seen that the disputes which were referred to the Panchas and the courts have been duly recognised and have received credence to the awards passed by them.
Arbitration is an effective alternative dispute resolution. It is the forum in which parties by an agreement between them choose a forum other than the court of law to resolve their disputes. The reason behind the evolution of arbitration is to minimize the burden from the shoulders of the court of law and provide speedy remedy to the parties.
Third-party settlement of disputes is a part of ancient Indian ethos and culture. However, the settlement of disputes through the institution of the judiciary is a little over a century old and is a result of British rule in India. Despite the long history of the settlement of disputes by alternative means in our country, the first statutory recognition given to domestic arbitration was given by way of the Indian Arbitration Act, 1940.
The Arbitration & Conciliation Act, 1996 repeals the Arbitration Act, 1940; the Arbitration (Protocol and Convention) Act, 1937; and the Foreign Awards (Recognition and Enforcement) Act, 1961 and reformulates the law in one consolidated statue. It also seeks to amend and consolidate the law relating to domestic arbitration, international arbitration and the enforcement of foreign arbitral awards.
Facts of the case:
Dharamvir Khosla – Plaintiff
Asian Hotels (North- defendant
Plaintiff filed a suit along with an interim application for decree of declaration seeking license in favour of the Plaintiff in respect of space/shops/premises at Hyatt Hotel Regency as irrevocable, perpetual and the purported revocation of the license by the Defendant as illegal and void.
Further, the Plaintiff relying on various terms of the contract contended that the license was irrevocable license in perpetuity and therefore termination of license by defendant is illegal. The Plaintiff further contended that license agreement in their favour was in “nature of creating a right of ownership or in alternative less than ownership but more than a lease or to say was an irrevocable license and thus notice of revocation is non-est.” Defendant herein raised objection with regards to maintainability of suit under Section 8 Arbitration & Conciliation Act (without filing any application as required under such Act), in view of the clause relating to reference of disputes to arbitration in the license agreement.
Can an objection under section of the Act can be taken without filing an application
Under Section 8 of the Act, whether the court can decide the dispute is arbitrable or not or the parties are require to be relegated to the arbitrator for decision on the arbitrability of the dispute.
The pertinent issues which arose for consideration before the Single Bench were, first, whether an objection under Section 8 of the Arbitration Act can be taken without filing an application? Second, on an objection being taken, can the court decide that whether the dispute is arbitrable or not? Third, can claims which are relatable to special statute alone, cannot be referred to arbitration or even where there is a claim for a judgment in rem, the dispute cannot be referred to arbitration?
With respect to the first issue, the court, while placing reliance on the judgment rendered by the Delhi High Court in the case of Parasramka Holdings Private Limited v. Ambience Private Limited and another, CS (SO) No.125/2017, held that that party invoking the arbitration clause does not have to file a formal application seeking a specific prayer for reference of the dispute to arbitration as long as it raises an objection in the written statement that the present suit is not maintainable in view of the arbitration clause in the agreement.
The court, while deciding the second and third issues together, placed reliance upon the judgment of the Supreme Court in the case of Emaar MGF Land Limited v. Aftab Singh, (2019) 12 SCC 751 and held that, unlike an application under amended Section 11, which does not delve into the issue of arbitrability of dispute, an application under Section 8 of the Arbitration Act, requires the court to examine if the dispute is intended to covered by the arbitration clause. The Court also relied on Emaar MGF decision to read down the impact of amendments to Section 8.
The Delhi High Court also observed that, the law down in Booz Allen & Hamilton Inc. v. SBI Home Finance Limited and ors, (2011) 5 SCC 532 and Emaar MFG Land Limited (supra), though lays down certain categories of disputes which are inarbitrable in nature, the said categories cannot be held to be exhaustive and thus, would depend on the facts of each case that whether the remedy provided under the Arbitration Act for deciding such a dispute is barred by implication or otherwise.