# PRAVIN ELECTRICALS PVT. LTD v. GALAXY INFRA AND ENGINEERING PVT. LTD

- **Citation:** [2021] 1 S.C.R. 1162
- **Court:** Supreme Court of India
- **Decided:** 2021-03-08
- **Case number:** Civil Appeal No. 825 of 2021
- **Bench:** R. F. Nariman, B. R. Gavai, Hrishikesh Roy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/pravin-electricals-pvt-ltd-v-galaxy-infra-and-engineering-pvt-ltd-35425
- **Pages:** 37

## Headnote

Arbitration and Conciliation Act, 1996 - ss.8, 11(6), (6A),
(7) - Petition filed by respondent u/s.11(6) for appointment of a
Sole Arbitrator on the basis of an alleged Consultancy Agreement
- Appellant denied execution of the Agreement - High Court held
that there was an Arbitration Agreement between the parties and a
Sole Arbitrator was appointed to adjudicate the disputes between
the parties - On appeal, held: Certain emails and correspondence
do show that there was some dealing between the appellant and the
respondent qua a tender floated by South Bihar Power Distribution
Company Ltd. (SBPDCL) - However, that is not sufficient to
conclude that there was a concluded contract between the parties
containing an arbitration clause - A deeper consideration of
whether an arbitration agreement exists between the parties must
be left to an Arbitrator who is to examine the documentary evidence
produced before him in detail after witnesses are cross-examined
on the same - Impugned judgment in so far as it conclusively finds
that there is an Arbitration Agreement between the parties, set aside
- However, the ultimate order appointing a retired Judge the Sole
Arbitrator is upheld - Arbitrator to first determine the preliminary
issue as to whether an Arbitration Agreement exists between the
parties and decide the merits of the case only if such an agreement
exists - Arbitration and Conciliation (Amendment) Act, 2015.
Arbitration and Conciliation Act, 1996 - ss.8, 11, 11(6),
11(6A), 11(7), 37 - Law Commission Report - Arbitration and
Conciliation (Amendment) Act, 2015 - Orders appealable under
the Act - Held: By a process of judicial interpretation, Vidya Drolia
v. Durga Trading Corporation reported as (2021) 2 SCC 1 read the
"prima facie test" into s.11(6A) so as to bring the provisions of
ss.8(1) and 11(6) r/w 11(6A) on par - Considering that s.11(7) and
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s.37 were not amended, an anomaly arises - In light of what has
been decided in Vidya Drolia, the Parliament may need to have a relook at s.11(7) and s.37 so that orders made u/ss.8 and 11 are
brought on par qua appealability as well.
Words & Phrases - "existence" in s.11(6A) - Meaning of -
Discussed - Arbitration and Conciliation Act, 1996.
Partly allowing the appeal, the Court
HELD: 1. The 246th Law Commission Report not only
discussed the changes that are to be made bearing in mind the
difficulties that arose earlier, but also provided for amendments
that were to be made to Sections 8 and 11. Section 37 which is
the appeal provision, was also sought to be amended. When
Parliament enacted the 2015 amendment pursuant to the Law
Commission Report, it followed the Scheme of the Law
Commission's Report qua Section 8 and Section 37 by enacting
the words "..... unless it finds that prima facie no valid arbitration
agreement exists......" in Section 8(1) and the insertion of subclause (a) in Section 37(1) providing an appeal in an order made
under Section 8, which refuses to refer parties to arbitration.
However, so far as Section 11(6) and Section 11(6A) are
concerned, what was recommended by the Law Commission was
not incorporated. Section 11(6A) merely confines examination of
the Court to the existence of an arbitration agreement. Section
11(7) was retained, by which no appeal could be filed under an
order made under Section 11(6) read with Section 11(6A), whether
the Court's determination led to a finding that the arbitration
agreement existed or did not exist on the facts of a given case.
Concomitantly, no amendment was made to Section 37(1), as
recommended by the Law Commission. However, by a process
of judicial interpretation, Vidya Drolia has now read the "prima
facie test" into Section 11(6A) so as to bring the provisions of
Sections 8(1) and 11(6) r/w 11(6A) on par. Considering that Section
11(7) and Section 37 have not been amended, an anomaly thus
arises. Whereas in cases decided under Section 8, a refusal to
refer parties to arbitration is appealable under

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SUPREME COURT REPORTS
[2021] 1 S.C.R.
 [2021] 1 S.C.R. 1162
1162
PRAVIN ELECTRICALS PVT. LTD.
v.
GALAXY INFRA AND ENGINEERING PVT. LTD.
(Civil Appeal No. 825 of 2021)
MARCH 08, 2021
[R. F. NARIMAN, B. R. GAVAI AND
HRISHIKESH ROY, JJ.]
Arbitration and Conciliation Act, 1996 - ss.8, 11(6), (6A),
(7) - Petition filed by respondent u/s.11(6) for appointment of a
Sole Arbitrator on the basis of an alleged Consultancy Agreement
- Appellant denied execution of the Agreement - High Court held
that there was an Arbitration Agreement between the parties and a
Sole Arbitrator was appointed to adjudicate the disputes between
the parties - On appeal, held: Certain emails and correspondence
do show that there was some dealing between the appellant and the
respondent qua a tender floated by South Bihar Power Distribution
Company Ltd. (SBPDCL) - However, that is not sufficient to
conclude that there was a concluded contract between the parties
containing an arbitration clause - A deeper consideration of
whether an arbitration agreement exists between the parties must
be left to an Arbitrator who is to examine the documentary evidence
produced before him in detail after witnesses are cross-examined
on the same - Impugned judgment in so far as it conclusively finds
that there is an Arbitration Agreement between the parties, set aside
- However, the ultimate order appointing a retired Judge the Sole
Arbitrator is upheld - Arbitrator to first determine the preliminary
issue as to whether an Arbitration Agreement exists between the
parties and decide the merits of the case only if such an agreement
exists - Arbitration and Conciliation (Amendment) Act, 2015.
Arbitration and Conciliation Act, 1996 - ss.8, 11, 11(6),
11(6A), 11(7), 37 - Law Commission Report - Arbitration and
Conciliation (Amendment) Act, 2015 - Orders appealable under
the Act - Held: By a process of judicial interpretation, Vidya Drolia
v. Durga Trading Corporation reported as (2021) 2 SCC 1 read the
"prima facie test" into s.11(6A) so as to bring the provisions of
ss.8(1) and 11(6) r/w 11(6A) on par - Considering that s.11(7) and
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s.37 were not amended, an anomaly arises - In light of what has
been decided in Vidya Drolia, the Parliament may need to have a relook at s.11(7) and s.37 so that orders made u/ss.8 and 11 are
brought on par qua appealability as well.
Words & Phrases - "existence" in s.11(6A) - Meaning of -
Discussed - Arbitration and Conciliation Act, 1996.
Partly allowing the appeal, the Court
HELD: 1. The 246th Law Commission Report not only
discussed the changes that are to be made bearing in mind the
difficulties that arose earlier, but also provided for amendments
that were to be made to Sections 8 and 11. Section 37 which is
the appeal provision, was also sought to be amended. When
Parliament enacted the 2015 amendment pursuant to the Law
Commission Report, it followed the Scheme of the Law
Commission's Report qua Section 8 and Section 37 by enacting
the words "..... unless it finds that prima facie no valid arbitration
agreement exists......" in Section 8(1) and the insertion of subclause (a) in Section 37(1) providing an appeal in an order made
under Section 8, which refuses to refer parties to arbitration.
However, so far as Section 11(6) and Section 11(6A) are
concerned, what was recommended by the Law Commission was
not incorporated. Section 11(6A) merely confines examination of
the Court to the existence of an arbitration agreement. Section
11(7) was retained, by which no appeal could be filed under an
order made under Section 11(6) read with Section 11(6A), whether
the Court's determination led to a finding that the arbitration
agreement existed or did not exist on the facts of a given case.
Concomitantly, no amendment was made to Section 37(1), as
recommended by the Law Commission. However, by a process
of judicial interpretation, Vidya Drolia has now read the "prima
facie test" into Section 11(6A) so as to bring the provisions of
Sections 8(1) and 11(6) r/w 11(6A) on par. Considering that Section
11(7) and Section 37 have not been amended, an anomaly thus
arises. Whereas in cases decided under Section 8, a refusal to
refer parties to arbitration is appealable under Section 37(1)(a),
a similar refusal to refer parties to arbitration under Section 11(6)
read with Sections 6(A) and 7 is not appealable. In the light of
what has been decided in Vidya Drolia, Parliament may need to
PRAVIN ELECTRICALS PVT. LTD. v. GALAXY INFRA AND
ENGINEERING PVT. LTD.
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have a re-look at Section 11(7) and Section 37 so that orders
made under Sections 8 and 11 are brought on par qua appealability
as well. [Paras 19-21][1191-G-H; 1194-G; 1195-D-H; 1196-A]
Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman
(2019) 8 SCC 714 : [2019] 12 SCR 123; Vidya Drolia
v. Durga Trading Corporation (2021) 2 SCC 1 - relied
on.
Vidya Drolia v. Durga Trading Corporation (2019) 20
SCC 406 - referred to.
246th Law Commission Report - referred to.
2.1 There are no negotiations which lead upto the 7th July,
2014 Agreement (the alleged Consultancy Agreement) that are
on record. Negotiations that take place take place only after 7th
July, 2014 in which a draft agreement is deliberated upon between
the same parties. It would stretch incredulity to state that on the
same subject matter negotiations and a draft agreement would
be spoken about after a final signed agreement has been agreed
upon between the parties. The Notary who is said to have
notarized the Agreement was not licensed to do so the same, his
license having expired earlier, a fact that is accepted even by the
Respondents. Even otherwise, some of the Single Judge's
conclusions are plainly incorrect and against the record. An
invoice was raised on M/s Process Construction and Technical
Services Pvt. Ltd. (Process), Process making payment on 29th
September, 2014 and not the Appellant. Equally, the finding that
a draft Consultancy Agreement was sent on 15th July, 2014
containing an arbitration clause, parties being ad idem regarding
submission of the disputes to arbitration is also plainly incorrect
in view of the fact that on the same day, an email was sent back in
which various terms were disputed, there being no concluded
contract between the parties. Also, the finding that Process was
a sub-contractor of the Respondent, is contrary to the pleadings
between the parties which had ranged from Process being a joint
venture partner of the Appellant to Process having common
Directors with the Appellant, and to Process thereafter being
described as the lead partner. Sub-contractor-ship is not pleaded
at all by the Respondent, the aforesaid arising only from written
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submissions made before the Single Judge. The allegation that
the Consultancy Agreement of 7th July, 2014 had a signature
that may not be that of Mr. MGS was brushed aside stating that
an arbitration agreement need not be signed by the parties. That
is entirely besides the point. Mr. MGS sworn to an affidavit filed
before the High Court that the signatures appearing on the 7th
July, 2014 agreement are not his signatures, as a result of which
the Appellant cannot be said to have entered into an agreement
at all on 7th July, 2014. Again, the Single Judge's finding that
there exists an arbitration agreement between the parties as
contained in the "draft agreement" exchanged by email dated
7th July, 2014, is incorrect for two reasons. The draft agreement
sent by email was exchanged on 15th July, 2014 and not on 7th
July, 2014. Secondly, the email in reply to the email of 15th July,
2014 shows that there was no concluded contract between the
parties. Also, the pleading with which the parties went to Court
was that there was a concluded contract between the parties on
7th July, 2014. There was no pleading that on 15th July, 2014, a
draft agreement was exchanged between the parties, as a result
of which a concluded contract emanated therefrom.
[Paras 23-26][1196-D-G; 1197-A-G]
2.2 The emails dated 22nd July, 2014 and 25th July, 2014
produced here for the first time as well as certain correspondence
between SBPDCL and the Respondent do show that there is some
dealing between the Appellant and the Respondent qua a tender
floated by SBPDCL, but that is not sufficient to conclude that
there is a concluded contract between the parties, which contains
an arbitration clause. Given the inconclusive nature of the finding
by CFSL together with the signing of the agreement in Haryana
by parties whose registered offices are at Bombay and Bihar qua
works to be executed in Bihar; given the fact that the Notary
who signed the agreement was not authorised to do so and various
other conundrums that arise on the facts of this case, it is unsafe
to conclude, one way or the other, that an arbitration agreement
exists between the parties. The prima facie review spoken of in
Vidya Dhrolia can lead to only one conclusion on the facts of this
case - that a deeper consideration of whether an arbitration
agreement exists between the parties must be left to an Arbitrator
PRAVIN ELECTRICALS PVT. LTD. v. GALAXY INFRA AND
ENGINEERING PVT. LTD.
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who is to examine the documentary evidence produced before
him in detail after witnesses are cross-examined on the same.
For all these reasons, the impugned judgment of the Delhi High
Court is set aside in so far as it conclusively finds that there is an
Arbitration Agreement between the parties. However, the
ultimate order appointing a retired Delhi High Court Judge as a
Sole Arbitrator is upheld. The Judge will first determine as a
preliminary issue as to whether an Arbitration Agreement exists
between the parties, and go on to decide the merits of the
case only if it is first found that such an agreement exists.
[Para 27][1198-B-F]
Case Law Reference
[2019] 12 SCR 123
relied on
Para 11
(2021) 2 SCC 1
relied on
Para 12
(2019) 20 SCC 406
referred to
Para 12
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 825
of 2021.
From the Judgment and Order dated 12.05.2020 of the High Court
of Delhi at New Delhi in Arbitration Petition No. 674 of 2018.
Shyam Divan, Sr. Adv., Saswat Pattnaik, Govind Manoharan,
Hasan Murtaza, Advs. for the Appellant.
Dhruv Mehta Sr. Adv., Ms. Minakshi Jyoti, Dharamveer Singh,
Keith Varghese, Surya Hari Kamuju, Ms. Divya Roy, Advs. for the
respondent.
The Judgment of the Court was delivered by
R. F. NARIMAN, J.
1. Leave granted.
2. This appeal arises out of a petition filed under Section 11(6) of
the Arbitration and Conciliation Act, 1996, for appointment of a Sole
Arbitrator for adjudication of disputes between the parties. The
Respondent, Galaxy Infra and Engineering Pvt. Ltd., is a company
incorporated under the provisions of the Companies Act, 1956, having
its registered office at Village Arra Gadh, Post Office Dharhara, Dist.
Vaishali, P.S. Hajipur, Bihar and is in the business of providing consultancy
services. The Appellant, Pravin Electricals Pvt. Ltd., operates in key
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industrial and commercial retail sectors and provides services for
electrical supplies etc.
3. On 26th May, 2014, an online tender was invited by Chief
Engineer, South Bihar Power Distribution Company Ltd. (hereinafter
referred to as "SBPDCL") for appointment of implementing agencies
for execution of a Scheme, on turnkey basis, for strengthening,
improvement and augmentation of distribution systems capacities of 20
towns in Bihar. The Appellant submitted its technical and financial bid
and was declared the L1 bidder and was awarded the work on 22nd
September, 2014. It is the case of the Respondent that it had made
substantial efforts under a Consultancy Agreement dated 7th July, 2014,
to facilitate the Appellant in getting the aforesaid contract for which it
was entitled to commission. It is then alleged that the Appellant sent an
email dated 15th July, 2014 to the Respondent with a draft agreement
attached for comments and confirmation. On the same day, the
Respondent sent its reply stating that certain terms were not acceptable.
In emails that have surfaced for the first time in this Court dated 22nd
July, 2014 and 25th July, 2014, the Respondent argued that, in point of
fact, all differences between the parties were ironed out and a Final
Consultancy Agreement was agreed upon through correspondence
between the parties.
4. The Respondent alleged that it had raised an invoice on 27th
September, 2014, for payment of Rs.28.09 lakhs as an advance for
consultancy charges including service tax. It is important to note that the
said invoice was addressed to one M/s Process Construction and
Technical Services Pvt. Ltd. (hereinafter referred to as "Process") and
makes reference to an agreement entered into between the Respondent
and Process. Also, on 24th April, 2016, the Respondent alleged that it
raised yet another invoice on the Appellant. This invoice was also
addressed to Process and makes reference to an agreement between
the Respondent and Process. Ledger accounts that were produced in
the normal course of business by the Respondent reflects transactions
with Process and not the Appellant. Finally, vide an email dated 30th
June, 2017, the Respondent attached the final invoice to the Appellant
claiming an amount of Rs.5.54 crores under the alleged Consultancy
Agreement dated 7th July, 2014. This was followed up by a demandcum-legal notice dated 9th March, 2018, seeking payment of
Rs.5,54,14,318/- from the Appellant as being due under the alleged
PRAVIN ELECTRICALS PVT. LTD. v. GALAXY INFRA AND
ENGINEERING PVT. LTD. [R. F. NARIMAN, J.]
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Consultancy Agreement dated 7th July, 2014. Vide its reply dated 22nd
March, 2018, the Appellant recorded its surprise on receiving such demand
notice and flatly denied that any agreement dated 7th July, 2014, was
ever entered into between the parties. The Appellant further requested
the Respondent to provide a copy of the alleged Agreement dated 7th
July, 2014 and payment details referred to in the legal notice.
5. On 26th April, 2018, the Respondent invoked Article 14 of the
alleged Consultancy Agreement dated 7th July, 2014, in which they
nominated one Kameshwar Choudhary as Sole Arbitrator to adjudicate
differences between the parties. On 3rd May, 2018, the Appellant denied
execution of the Agreement dated 7th July, 2014 and, therefore, stated
that the matter could not be referred to arbitration. We are informed that
on 14th May, 2018, the Respondent's Advocates finally supplied a copy
of the alleged Agreement dated 7th July, 2014 to the Appellant.
6. On 7th September, 2018, the Respondent then filed a petition
under Section 11(6) of the 1996 Act for appointment of a Sole Arbitrator
on the basis of the alleged Agreement dated 7th July, 2014. The Delhi
High Court vide an order dated 28th November, 2018, directed the
Respondent to produce the original of the Consultancy Agreement dated
7th July, 2014. The Appellant was then directed to produce Mr. M.G.
Stephen, Managing Director of the Appellant, before the Registrar
(Judicial) on 7th December, 2018, so that he can carry with him documents
which bear his original signature at the contemporaneous time. The
Registrar (Judicial) was also directed to obtain specimen signatures of
Mr. M.G. Stephen. The original of the Agreement together with the
aforesaid signatures of Mr. M.G. Stephen was then to be sent to the
CFSL for obtaining a report. The report was then received and by an
order dated 20th September, 2019, the High Court directed that copies of
the report be given to the learned counsel for the parties. Finally, on 30th
September, 2019, the learned counsel for the Appellant submitted that
he had instructions to contest the matter after which the impugned
judgment dated 12th May, 2020 was passed.
7. Vide the impugned judgment, the learned Single Judge of the
Delhi High Court referred to the alleged Consultancy Agreement dated
7th July, 2014 and the correspondence between the parties, including the
correspondence between SBPDCL and the Respondent herein. After
going through the aforesaid, the learned Single Judge then held:
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"39. Learned counsel for the petitioner has drawn the attention of
the Court to various emails which indicate that a Consultancy
Agreement was executed between the parties on 07.07.2014. In
the said agreement, the parties agreed on the percentage of fee
that the petitioner would get in case the respondent succeeded in
getting the tender from SBPDCL. On 15.07.2014 the respondent
had sent an email with a soft copy of the agreement suggesting a
certain percentage of the consultancy fee. Subsequent emails are
also placed on record which show that payment terms were being
discussed between the parties. Email dated 30.06.2017 is also on
record by which a final invoice was sent by the petitioner clearly
making a reference to the Agreement dated 07.07.2014. None of
these documents have been denied by the respondent. Learned
counsel for the petitioner has also pointed out that the respondent
even made payments in accordance with the terms of the
Agreement. As per the payment terms, Rs.25 Lakhs was payable
on receipt of LOI by the respondent from SBPDCL. Admittedly
on 22.09.2014, LOI was awarded to the respondent and on the
petitioner raising an invoice for Rs.25 Lakhs on 27.09.2014,
respondent actually made payment on 29.09.2014. Counsel for
the petitioner has also shown the email dated 27.09.2014 whereby
the respondent had asked the petitioner to raise the invoice on its
letterhead. These documents in my view clearly indicate that the
parties had entered into an Agreement pursuant to which the
parties had acted. The petitioner had assisted the respondent in
the award of the LOI and the respondent had initially made
payments in terms of the said agreement dated 07.07.2014.
Learned counsel for the Petitioner is also right in submitting that
on 15.07.2014, the respondent had itself sent an email containing
a Draft Consultancy Agreement which contained Article 14, which
was the Arbitration Clause. The parties were thus ad idem
regarding submission of disputes to Arbitration.
40. The fact that there was an Agreement between the parties is
also fortified by the fact that the information sent by the
Department to the respondent regarding award of the Contract to
the respondent was also sent to the petitioner vide email dated
22.09.2014. Draft letter of acceptance sent by the Department to
the petitioner through email dated 25.09.2014 was sent by the
petitioner to the respondent on the same day, by an email.
PRAVIN ELECTRICALS PVT. LTD. v. GALAXY INFRA AND
ENGINEERING PVT. LTD. [R. F. NARIMAN, J.]
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41. Learned counsel for the respondent in my view is not correct
in its contention that since a draft agreement was emailed by the
respondent, there was no executed agreement dated 07.07.2014.
From the email dated 15.07.2014, it is apparent that the respondent
had executed an Agreement prior to 15.07.2014. Petitioner had
categorically stated in the email dated 15.07.2014 that the payment
terms in the draft agreement were different and there is no
document on record filed by the respondent evidencing denial of
the contents of this email.
42. In so far as the argument that the invoices were raised on
PCTSPL and not on the petitioner is concerned, petitioner is
correct in its submission that PCTSPL was only a sub-contractor
of the respondent. Petitioner had not raised the invoice on its own
will. Counsel for the petitioner has pointed out the email dated
24.09.2019 sent by PCTSPL to the respondent i.e. Mr. Manoj
Panikar to Mr. Stephen whereby PCTSPL had emailed the draft
invoice to the respondent and sought confirmation whether it could
be sent to the petitioner and finally, the revised draft invoice was
sent to the petitioner on 27.09.2019 by PCTSPL.
43. The contention of the respondent that it was PCTSPL which
had made payments to the petitioner and this was on account of
their own inter se business relationships has no merit. The invoice
placed on record clearly shows that this was with respect to the
contract awarded to the respondent by the Department with which
admittedly PCTSPL had no direct relationship. This itself is
indicative of the fact that dehors the addressee of the invoices,
the same were with respect to the contract given by the department
to the respondent and for which the petitioner was a consultant.
44. In so far as the contention of the respondent that the
Consultancy Agreement dated 07.07.2014 did not have the
signatures of Mr. M.G. Stephen and therefore, cannot be accepted
as an agreement between the parties, is without merit. As
mentioned in the earlier part of the judgment, it is not mandatory
for an Arbitration Agreement that it must be signed by the parties.
The Supreme Court in case of Caravel Shipping Services Pvt.
Ltd. vs. M/s. Premier Sea Foods (2019) 11 SCC 461, has clearly
held as under:
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"8. In addition, we may indicate that the law in this behalf, in
Jugal Kishore Rameshwardas v. Goolbai Hormusji, AIR 1955
SC 812, is that an arbitration agreement needs to be in writing
though it need not be signed. The fact that the arbitration agreement
shall be in writing is continued in the 1996 Act in Section 7(3)
thereof. Section 7(4) only further adds that an arbitration agreement
would be found in the circumstances mentioned in the three subclauses that make up Section 7(4). This does not mean that in all
cases an arbitration agreement needs to be signed. The only prerequisite is that it be in writing, as has been pointed out in Section
7(3)."
45. In my view, the documents placed on record by the petitioner
clearly evidence that there exists an Arbitration Agreement
between the parties as contained in the draft agreement exchanged
by email dated 07.07.2014. The present case squarely falls within
the ambit of Section 7(4)(b) of the Act. The inevitable result is
that the parties must be referred to Arbitration for adjudication of
their disputes."
Accordingly, Justice G.S. Sistani, a former Judge of the Delhi High
Court was appointed as the Sole Arbitrator to adjudicate the dispute
between the parties.
8. Shri Shyam Divan, learned Senior Advocate, appearing on behalf
of the Appellant, has argued that the alleged Consultancy Agreement
dated 7th July, 2014 is a concocted document. This is clear from the
CFSL report dated 29th September, 2019, on which he relied very heavily.
This being the case, since the alleged Consultancy Agreement itself had
no existence, there was no arbitration agreement between the parties,
as a result of which the High Court judgment fell to the ground. He also
argued that this is the only case of its kind in which a formal signed
agreement is alleged to have been entered into between the parties,
after which negotiations take place and a draft agreement is referred to.
The very fact that negotiations have taken place after such alleged
agreement shows that such alleged agreement does not in fact exist. He
also went on to argue that the agreement is notarized at Faridabad,
Haryana, when the parties are from Mumbai and Bihar respectively. He
has also produced documents to show that the so-called Notary's license
had expired way before notarization allegedly took place on 7th July,
2014. He argued that once the case that is pleaded between the parties
PRAVIN ELECTRICALS PVT. LTD. v. GALAXY INFRA AND
ENGINEERING PVT. LTD. [R. F. NARIMAN, J.]
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is found to be incorrect, the Respondent cannot now be allowed to rely
upon documents produced here for the first time to show that even apart
from the pleaded case namely, the Consultancy Agreement dated 7th
July, 2014, yet, an agreement is made out in correspondence between
the parties after the said date. He attacked the Delhi High Court judgment
arguing that the findings that were made qua invoices being raised and
payments being made are wholly incorrect in that such invoices were
raised and payments were made only by Process under a separate
agreement entered into between the Respondent and Process. He also
stated that if the pleadings of this case are perused, Process has been
described by the Respondent as a Joint Venture partner with the Appellant
in one place, then described as a private company who has common
directors with the Appellant; and then finally described as a Sub-Contractor
only in the written submissions filed before Delhi High Court, which last
appellation has been accepted by the High Court completely wrongly.
Even in the Counter Affidavit filed before this Court, yet another plea is
taken that Process is the lead partner of the Appellant. For all these
reasons, the learned Senior Advocate submits that the judgment under
appeal ought to be set aside.
9. Shri Dhruv Mehta, learned Senior Advocate appearing on behalf
of the Respondent, has taken us through all the correspondence again in
order to show that even if the Consultancy Agreement dated 7th July,
2014 is not relied upon, yet, an arbitration clause exists in that the draft
agreement that was exchanged between the parties culminated in a final
agreement on 25th July, 2014. In any case, if the correspondence between
SBPDCL and the Respondent is to be seen with CCs being marked to
the Appellant, it is clear that the Respondent acted as a go-between and
successfully obtained the bid for the Appellant having earned its
commission thereon. He argued that the judgment under appeal does
not require interference in that the CFSL report was also inconclusive
and that the correspondence referred to by the learned Single Judge of
the High Court would clearly show that the dramatis personae in this
case interacted with each other and that, but for the efforts of his client,
Pravin Electricals Pvt. Ltd. would never have got the bid. He relied
upon a number of judgments of this Court to buttress his submissions.
10. Having heard learned counsel for both the parties, it is important
to first set out the relevant provisions of the Arbitration and Conciliation
Act, 1996:
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8. Power to refer parties to arbitration where there is an
arbitration agreement. -
(1) A judicial authority, before which an action is brought in a
matter which is the subject of an arbitration agreement shall, if a
party to the arbitration agreement or any person claiming through
or under him, so applies not later than the date of submitting his
first statement on the substance of the dispute, then,
notwithstanding any judgment, decree or order of the Supreme
Court or any Court, refer the parties to arbitration unless it finds
that prima facie no valid arbitration agreement exists.
11. Appointment of arbitrators. -
xxxx
(6) Where, under an appointment procedure agreed upon by the
parties, -
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach
an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function
entrusted to him or it under that procedure,
a party may request the Supreme Court or, as the case may be,
the High Court or any person or institution designated by such
Court to take the necessary measure, unless the agreement on
the appointment procedure provides other means for securing the
appointment.
(6A) The Supreme Court or, as the case may be, the High Court,
while considering any application under sub-section (4) or subsection (5) or sub-section (6), shall, notwithstanding any judgment,
decree or order of any Court, confine to the examination of the
existence of an arbitration agreement.
xxxx
(7) A decision on a matter entrusted by sub-section (4) or subsection (5) or sub-section (6) to 3 the Supreme Court or, as the
case may be, the High Court or the person or institution designated
by such Court is final and no appeal including Letters Patent Appeal
shall lie against such decision.
PRAVIN ELECTRICALS PVT. LTD. v. GALAXY INFRA AND
ENGINEERING PVT. LTD. [R. F. NARIMAN, J.]
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11. Sections 8 and 11 were amended pursuant to a detailed Law
Commission Report being the 246th Law Commission Report on
Arbitration. The history of the law prior to 2015 is set out in the aforesaid
Report and the changes made therein are reflected by this Court in its
judgment in Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman,
(2019) 8 SCC 714 as under:
"9. The 246th Law Commission Report dealt with some of these
judgments and felt that at the stage of a Section 11(6) application,
only "existence" of an arbitration agreement ought to be looked
at and not other preliminary issues. In a recent judgment of this
Court, namely, Garware Wall Ropes Ltd. v. Coastal Marine
Constructions & Engg. Ltd., (2019) 9 SCC 209, this Court
adverted to the said Law Commission Report and held:
"8. The case law under Section 11(6) of the Arbitration Act, as it
stood prior to the Amendment Act, 2015, has had a chequered
history.
9. In Konkan Railway Corpn. Ltd. v. Mehul Construction Co.,
(2000) 7 SCC 201 (Konkan Railway 1), it was held that the powers
of the Chief Justice under Section 11(6) of the 1996 Act are
administrative in nature, and that the Chief Justice or his designate
does not act as a judicial authority while appointing an arbitrator.
The same view was reiterated in Konkan Railway Corpn. Ltd.
v. Rani Construction (P) Ltd., (2002) 2 SCC 388 (Konkan
Railway 2).
10. However, in SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC
618, a seven-Judge Bench overruled this view and held that the
power to appoint an arbitrator under Section 11 is judicial and not
administrative. The conclusions of the seven-Judge Bench were
summarised in para 47 of the aforesaid judgment. We are concerned
directly with sub-paras (i), (iv) and (xii), which read as follows:
(SCC pp. 663-64)
'(i) The power exercised by the Chief Justice of the High Court
or the Chief Justice of India under Section 11(6) of the Act is
not an administrative power. It is a judicial power.
***
(iv) The Chief Justice or the designated Judge will have the
right to decide the preliminary aspects as indicated in the earlier
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part of this judgment. These will be his own jurisdiction to
entertain the request, the existence of a valid arbitration
agreement, the existence or otherwise of a live claim, the
existence of the condition for the exercise of his power and on
the qualifications of the arbitrator or arbitrators. The Chief
Justice or the designated Judge would be entitled to seek the
opinion of an institution in the matter of nominating an arbitrator
qualified in terms of Section 11(8) of the Act if the need arises
but the order appointing the arbitrator could only be that of the
Chief Justice or the designated Judge.
***
(xii) The decision in Konkan Railway Corpn. Ltd. v. Rani
Construction (P) Ltd., (2002) 2 SCC 388 is overruled.'
11. This position was further clarified in National Insurance Co.
Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 as follows:
(SCC p. 283, para 22)
'22. Where the intervention of the court is sought for
appointment of an Arbitral Tribunal under Section 11, the duty
of the Chief Justice or his designate is defined in SBP & Co.
(supra)This Court identified and segregated the preliminary
issues that may arise for consideration in an application under
Section 11 of the Act into three categories, that is, (i) issues
which the Chief Justice or his designate is bound to decide; (ii)
issues which he can also decide, that is, issues which he may
choose to decide; and (iii) issues which should be left to the
Arbitral Tribunal to decide.
22.1. The issues (first category) which the Chief Justice/his
designate will have to decide are:
(a)
Whether the party making the application has
approached the appropriate High Court.
(b)
Whether there is an arbitration agreement and whether
the party who has applied under Section 11 of the Act,
is a party to such an agreement.
22.2. The issues (second category) which the Chief Justice/his
designate may choose to decide (or leave them to the decision of
the Arbitral Tribunal) are:
PRAVIN ELECTRICALS PVT. LTD. v. GALAXY INFRA AND
ENGINEERING PVT. LTD. [R. F. NARIMAN, J.]
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(a)
Whether the claim is a dead (long-barred) claim or a
live claim.
(b)
Whether the parties have concluded the contract/
transaction by recording satisfaction of their mutual
rights and obligation or by receiving the final payment
without objection.
22.3. The issues (third category) which the Chief Justice/his
designate should leave exclusively to the Arbitral Tribunal are:
(i)
Whether a claim made falls within the arbitration
clause (as for example, a matter which is reserved
for final decision of a departmental authority and
excepted or excluded from arbitration).
(ii)
Merits or any claim involved in the arbitration.'
12. As a result of these judgments, the door was wide open for
the Chief Justice or his designate to decide a large number of
preliminary aspects which could otherwise have been left to be
decided by the arbitrator under Section 16 of the 1996 Act. As a
result, the Law Commission of India, by its Report No. 246
submitted in August 2014, suggested that various sweeping
changes be made in the 1996 Act. Insofar as SBP & Co. (supra)
and Boghara Polyfab (supra) are concerned, the Law
Commission examined the matter and recommended the addition
of a new sub-section, namely, sub-section (6-A) in Section 11. In
so doing, the Law Commission recommendations which are
relevant and which led to the introduction of Section 11(6-A) are
as follows:
'28. The Act recognises situations where the intervention of
the Court is envisaged at the pre-arbitral stage i.e. prior to the
constitution of the Arbitral Tribunal, which includes Sections 8,
9, 11 in the case of Part I arbitrations and Section 45 in the
case of Part II arbitrations. Sections 8, 45 and also Section 11
relating to "reference to arbitration" and "appointment of the
Tribunal", directly affect the constitution of the Tribunal and
functioning of the arbitral proceedings. Therefore, their
operation has a direct and significant impact on the "conduct"
of arbitrations. Section 9, being solely for the purpose of securing
interim relief, although having the potential to affect the rights
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of parties, does not affect the "conduct" of the arbitration in
the same way as these other provisions. It is in this context the
Commission has examined and deliberated the working of these
provisions and proposed certain amendments.
29. The Supreme Court has had occasion to deliberate upon
the scope and nature of permissible pre-arbitral judicial
intervention, especially in the context of Section 11 of the Act.
Unfortunately, however, the question before the Supreme Court
was framed in terms of whether such a power is a "judicial"
or an "administrative" power - which obfuscates the real
issue underlying such nomenclature/description as to
- the scope of such powers - i.e. the scope of arguments
which a court (Chief Justice) will consider while deciding
whether to appoint an arbitrator or not - i.e. whether the
arbitration agreement exists, whether it is null and void, whether
it is voidable, etc.; and which of these it should leave for decision
of the Arbitral Tribunal.
- the nature of such intervention - i.e. would the court (Chief
Justice) consider the issues upon a detailed trial and whether
the same would be decided finally or be left for determination
of the Arbitral Tribunal.
30. After a series of cases culminating in the decision in SBP
& Co. v. Patel Engg. Ltd. (supra), the Supreme Court held
that the power to appoint an arbitrator under Section 11 is a
"judicial" power. The underlying issues in this judgment, relating
to the scope of intervention, were subsequently clarified by
Raveendran, J. in National Insurance Co. Ltd. v. Boghara
Polyfab (P) Ltd. (supra), where the Supreme Court laid down
as follows: (SCC p. 283, para 22)
'22.1. The issues (first category) which Chief Justice/his
designate will have to decide are:
(a) Whether the party making the application has
approached the appropriate High Court?
(b) Whether there is an arbitration agreement and whether
the party who has applied under Section 11 of the Act, is a
party to such an agreement?
PRAVIN ELECTRICALS PVT. LTD. v. GALAXY INFRA AND
ENGINEERING PVT. LTD. [R. F. NARIMAN, J.]
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22.2. The issues (second category) which the Chief Justice/
his designate may choose to decide are:
(a) Whether the claim is a dead (long barred) claim or a
live claim?
(b) Whether the parties have concluded the contract/
transaction by recording satisfaction of their mutual rights
and obligation or by receiving the final payment without
objection?
22.3. The issues (third category) which the Chief Justice/
his designate should leave exclusively to the Arbitral Tribunal
are:
(a) Whether a claim made falls within the arbitration clause
(as for example, a matter which is reserved for final decision
of a departmental authority and excepted or excluded from
arbitration)?
(b) Merits of any claim involved in the arbitration."
31. The Commission is of the view that, in this context, the same
test regarding scope and nature of judicial intervention, as
applicable in the context of Section 11, should also apply to Sections
8 and 45 of the Act - since the scope and nature of judicial
intervention should not change upon whether a party (intending to
defeat the arbitration agreement) refuses to appoint an arbitrator
in terms of the arbitration agreement, or moves a proceeding before
a judicial authority in the face of such an arbitration agreement.
32. In relation to the nature of intervention, the exposition of the
law is to be found in the decision of the Supreme Court in ShinEtsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC
234, (in the context of Section 45 of the Act), where the Supreme
Court has ruled in favour of looking at the issues/controversy only
prima facie.
33. It is in this context, the Commission has recommended
amendments to Sections 8 and 11 of the Arbitration and Conciliation
Act, 1996. The scope of the judicial intervention is only restricted
to situations where the court/judicial authority finds that the
arbitration agreement does not exist or is null and void. Insofar as
the nature of intervention is concerned, it is recommended that in
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the event the court/judicial authority is prima facie satisfied against
the argument challenging the arbitration agreement, it shall appoint
the arbitrator and/or refer the parties to arbitration, as the case
may be. The amendment envisages that the judicial authority shall
not refer the parties to arbitration only if it finds that there does
not exist an arbitration agreement or that it is null and void. If the
judicial authority is of the opinion that prima facie the arbitration
agreement exists, then it shall refer the dispute to arbitration, and
leave the existence of the arbitration agreement to be finally
determined by the Arbitral Tribunal. However, if the judicial
authority concludes that the agreement does not exist, then the
conclusion will be final and not prima facie. The amendment also
envisages that there shall be a conclusive determination as to
whether the arbitration agreement is null and void. In the event
that the judicial authority refers the dispute to arbitration and/or
appoints an arbitrator, under Sections 8 and 11 respectively, such
a decision will be final and non-appealable.