Arbitration clause doesn't oust jurisdiction of consumer tribunals

I (2010) CPJ 602 (UP SCDRC) at para 4/5.

Arbitration and 397/398 Company Law Board

20th Century Finance Corporation Ltd v. Union of India, [2011] 161 Comp Cas 247 (Delhi)

"The grievance of the appellant was that the respondent had not adhered to the clauses of the sponsorship agreement. The right to get the memorandum and the articles of association amended had accrued to the appellant and the pre-requisite for the appellant was to fulfill all the obligations imposed on it by the sponsorship agreemnt as it was disputed by the respondents for the amendment of the mem/arts.... It flowed from the contractual obligations contained in the sponsorship agreement and had to be necessarily determined through means of arbitration as contained in the article 8(2) of the sponsorship agreement. "

CLB and Arbitration : Articles v. Agreement

Gautam Kapoor v. Limrose Engg, [2007] 137 Comp Cas 513 (CLB - New Delhi)
if the allegations could be examined without reference to the terms of the agreement containing the arbitration clause, then the parties need not be referred to arbitration even if the subject-matter is covered in the arbitration agreement.


Enercom GmBH [2009] 91 SCL 60 (CLB - New Delhi)
if the subject-matter brought before this Board is the subject matter of Arbitration Agreement, the Board is bound to refer the parties to arbitration.
Relied in [2010]  104 SCL 13


Also:
Escorts Finance Limited v GR Solvents and Allied Industries Ltd., [1999] 96 Comp Cas 323 
we are of the view that the present disputes being disputes arising out of or in connection with the sponsorship agreement which provides for arbitration clause have to be referred to arbitration.... 


relied upon in [2011] 161 comp cas 427 (clb) - where apart from breach of agreement no allegation of oppression and mismanagement was made.

economic duress and arbitrability

Sirajuddin Kasim v. Paramount Investment, (2010) 8 SCC 557 following Boghara Polyfab (2009) 1 SCC 267.

whether or not agreement was entered into under economic duress is arbitrable dispute.

Cases Suitable for ADR

Afcon Infra Limited v. Cherian Varkey Construction, http://www.indiankanoon.org/doc/1875345/ 2010 (8) SCC 24

18. The following categories of cases are normally considered to be not suitable for ADR process having regard to their nature : 

(i) Representative suits under Order 1 Rule 8 CPC which involve public interest or interest of numerous persons who are not parties before the court. (In fact, even a compromise in such a suit is a difficult process requiring notice to the persons interested in the suit, before its acceptance). 

(ii) Disputes relating to election to public offices (as contrasted from disputes between two groups trying to get control over the management of societies, clubs, association etc.).

(iii) Cases involving grant of authority by the court after enquiry, as for example, suits for grant of probate or letters of administration. (iv) Cases involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation, coercion etc.

(v) Cases requiring protection of courts, as for example, claims against minors, deities and mentally challenged and suits for declaration of title against government.

(vi) Cases involving prosecution for criminal offences.

19. All other suits and cases of civil nature in particular the following categories of cases (whether pending in civil courts or other special Tribunals/Forums) are normally suitable for ADR processes : 

(i) All cases relating to trade, commerce and contracts, including - disputes arising out of contracts (including all money claims); - disputes relating to specific performance;

- disputes between suppliers and customers;

- disputes between bankers and customers;

- disputes between developers/builders and customers; - disputes between landlords and tenants/licensor and licensees; - disputes between insurer and insured;

(ii) All cases arising from strained or soured relationships, including - disputes relating to matrimonial causes, maintenance, custody of children;

- disputes relating to partition/division among family members/co- parceners/co-owners; and

- disputes relating to partnership among partners.


 (iii) All cases where there is a need for continuation of the pre-existing relationship in spite of the disputes, including

- disputes between neighbours (relating to easementary rights, encroachments, nuisance etc.);

- disputes between employers and employees;

- disputes among members of societies/associations/Apartment owners Associations;

(iv) All cases relating to tortious liability including - claims for compensation in motor accidents/other accidents; and

 (v) All consumer disputes including

- disputes where a trader/supplier/manufacturer/service provider is keen to maintain his business/professional reputation and credibility or `product popularity.

The above enumeration of `suitable' and `unsuitable' categorization of cases is not intended to be exhaustive or rigid. They are illustrative, which can be subjected to just exceptions or additions by the court/Tribunal exercising its jurisdiction/discretion in referring a dispute/case to an ADR process. 

Contract and writ: arbitration

Principle:  Writ remedy may not be invoked when the case involves an essentially contractual disputes with the State, or involves questions of fact.  

State of U.P. v. Bridge & Roof (India) Limited, AIR 1996 SC 3515 "that the writ petition filed by the respondent for the issuance of a writ of Mandamus restraining the Government from deducting or withholding a particular sum, which according to the respondent is payable to it under the contract, was wholly misconceived and was not maintainable in law".  Followed by Vindhya Telelinks Limited v. MTNL, 95 (2002) DLT 865.

 The Bridge & Roof Case has been distinguished by the High Court at Guwahati in J. Deep  Chemicals and Fertilizers v. State of Tripura, 2007 (2) GLT 173.  The Guwahati High Court, while agreeing with the principle laid down in the Bridge & Roof Case, held that "the rightful claim or writ petitioner for payment of the remaining amount was not to be withheld by the State authorities. For that purpose the writ petition could have been entertained and there has been no necessity to refer the matter to the arbitrator as no such dispute for interpretation of contract or its terms or controversial facts was involved which could have been referred to the arbitrator".

Arbitration clause, further consent necessary.

Wellington Associates Ltd. v. Kirit Mehta, (2000) 4 SCC 272, the Supreme Court dealing with interpretation of an arbitration clause has held that an 'arbitration agreement' "… postulate an agreement which necessarily or rather mandatorily requires the appointment of an arbitrator/arbitrators. [It] does not cover a case where the parties agree that they "may " go to a suit or that they 'may' also go to arbitration".  

P. Gopal Das v. Kota Straw Board, AIR 1971 Raj 258, it was held by the Rajasthan High Court that the use of the word 'may' indicated that a fresh consent of both parties for arbitration was necessary, and may not constitute a binding arbitration clause. 

Jindal Exports Limited v. Fuerst Day Lawson Ltd, MANU/DE/3204/2009 decided on December 11, 2009, the Delhi High Court has held that "mere use of the word 'arbitration' or 'arbitrator' in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. For example, use of words such as "parties can, if they so desire, refer their disputes to arbitration" or "in the event of any dispute, the parties may also agree to refer the same to arbitration" or "if any disputes arise between the parties, they should consider settlement by arbitration" in a clause relating to settlement of disputes, indicate that the clause is not intended to be an arbitration agreement. Similarly, a clause which states that "if the parties so decide, the disputes shall be referred to arbitration" or "any disputes between parties, if they so agree, shall be referred to arbitration" is not an arbitration agreement. Any agreement or clause in an agreement requiring or contemplating a further consent or consensus before a reference to arbitration is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future." However, please note that each arbitration clause is unique and therefore, it is not necessary that the use of the word 'may' would necessarily be construed as a non-binding arbitration clause.  

oppression and mismanagement 397 / 398 and arbitration

Remedy circumscribed by 397/398 cannot be a subject of arbitration


OP Gupta v. Shiv General Finance Ltd, 1977 (47) Comp Cas 279 (Delhi)

Merely because there is an article in the articles of association of the company to the effect that any dispute between the company on the one hand and its members ofn the other will be referred to arbitration, the court will not stay a petition under Section 397/398.

The provisions of sections 397/398 and of sections 434 give exclusive jurisdiction to the court and the matters dealt with thereby cannot be referred to arbitration.

See also: 

 Smt. Sudershan Chopra v. CLB, 2004  (54?) Comp Cas 429 (P&H)