LexM/S TODAY HOMES & INFRASTRUCTURE PVT. LTD. versus LUDHIANA IMPROVEMENT TRUST & ANR.
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[2013] 3 S.C.R. 589 M/S TODAY HOMES & INFRASTRUCTURE PVT. LTD. v. LUDHIANA IMPROVEMENT TRUST & ANR. (Civil Appeal No. 4596 of 2013 etc.} MAY 10, 2013. [ALTAMAS KABIR, CJI AND SURINDER SINGH NIJJAR, J.] ARBITRATION AND CONG/LIA TION ACT, 1996: ss. 11(1)(b) and (6) - Existence of arbitration agreement A B c even if main agreement is illegal and void - Held: An arbitration agreement could stand independent of the main agreement and did not necessarily become otiose, even if the main agreement, of which it is a part, is declared void -- By virtue of s. 16(1)(b), the arbitration clause continues to be D enforceable, notwithstanding a deflaration that the contract was null and void. s. 11 (6) - Application for appointment of arbitrator- Issues to be decided by Chief Justice or his designate - Explained - E Held: Designated Judge was not require'd to undertake a detailed scrutiny of merits and de-merits oi the case, almost as if he was deciding a suit - He was only required to decide preliminary issues such as jurisdiction to entertain the application, existence of a valid arbitration agreement, F whether a live claim existed or not, for the purpose of appointment of an arbitrator - By the impugned order, much more than what is contemplated uls 11 (6) was sought to be decided, without any evidence being adduced by the parties - Impugned order of designated Judge is set aside, and matter G remitted to be considered de novo in the light of the instant judgment and the decision of the Court. Disputes having arisen between the developers and 589 H 590 SUPREME COURT REPORTS [2013] 3 S.C.R. A Ludhiana Improvement Trust with respect to the agreement dated 24.5.2005, in an arbitration application u/s 11 (6) of the Arbitration and Conciliation Act, 1996, filed by the developers, the Chief Justice of the High Court by order dated 4.4.2008 appointed the arbitrator. The said s order was challenged before the Supreme Court contending that since the main agreement which contained the arbitration agreement, was itself void, the arbitration agreement could not survive independent of the main agreement, and the question was required to be c left to the arbitrator in terms of s.16 of the Act. Having regard of the 7-Judge Bench decision in SBP & Co. , the Supreme Court set aside the order of the Chief Justice of the High Court and remitted the matter for a fresh decision in keeping with the decision in SBP & Co. D The instant appeals arose out of the order of the designate of the Chief Justice of the High Court, dismissing the arbitration application and holding that the agreement dated 24.5.2005 was not legal and valid and, therefore, the disputes between the parties arising out of E the said agreement could not be referred to arbitrator. It · was contended that the designate Judge treated the matter as if he was deciding a suit, but without adducing evidence . . F Disposing of the appeals, the Court HELD: 1.1. The issue regarding the continued existence of the arbitration agreement, notwithstanding the main agreement itself being declared void, was considered by the 7-Judge Bench in SBP & Co. and it G was held that an arbitration agreement could stand independent of the main agreement and did not necessarily become otiose, even if the main agreement, of which it is a part, is declared void. Further, in Reva H SBP & Co. vs. Patel Engineering Ltd. and Another 2005 (4) Suppl. SCR. 688. TODAY HOMES & INFRASTRUCTURE PVf. LID. v. 591 LUDHIANA IMPROVEMENT TRUST Electric Car Company Private Limited, it has been held A that s.16(1)(a) of the 1996 Act presumes the existence of · a valid arbitration clause and mandates the same to be treated as an agreement independent of the other terms of the contract. By virtue of s. 16(1)(b), the arbitration clau~e continues to be enforceable, notwithstanding a B declaration that the contract was null and void. [para 13- 14] [598-C-E-H; 599-A-B] SBP & Co. Vs. Patel Engineering Ltd. and Another 2005 (4) Suppl. SCR 688 = (2005) 8 SCC 618; and Reva Electric Car Company Private Limited Vs. Green Mobil, 2011 (13) C SCR 359 = 2012 (2) sec 93 - relied on 1.2. In the instant case, the designated Judge misunderstood the scope of the order dated 14.10.2008, passed in the earlier proceedings and the provisions of o s.16 of the 1996 Act in going into a detailed examination regarding the merits of the case and the existence of an a
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