SANJIV PRAKASH versus SEEMA KUKREJA AND ORS.

Citation: [2021] 4 S.C.R. 44 · Decided: 06-04-2021 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Disposed off

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 4 S.C.R.
   [2021] 4 S.C.R. 44
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SANJIV PRAKASH
v.
SEEMA KUKREJA AND ORS.
(Civil Appeal No. 975 of 2021)
APRIL 06, 2021
[R.F. NARIMAN, B.R. GAVAI AND HRISHIKESH ROY, JJ. ]
Arbitration and Conciliation Act, 1996: s. 11 – Power of court
u/s. 11 – Scope of – Novation of contract – Plea of – On facts,
father formed a private company from his personal funds and
distributed the shares among his family members without any
consideration – Foreign company approached the father for long-
term equity investment and collaboration – Pursuant thereto, family
members-appellant and respondents entered into Memorandum of
Understanding(MoU), wherein disputes arising in connection
thereto were to be referred to an arbitrator – Thereafter, a
Shareholders’ Agreement (SHA) and Share Purchase Agreement (SPA)
entered into between the family members and the foreign Company,
and both SHA and SPA contained an arbitration clause – Dispute
between the parties over transfer of shareholding – Notice by
appellant-son, invoking arbitration clause contained in the MoU
against the respondents – However, reply by the respondents that
the MoU ceased to exist on and from the date of the SHA, which
superseded and novated the same – Petition u/s. 11 by the appellant
– Dismissed by the Single Judge, holding that an arbitration clause
of the MoU having perished the MoU owing to novation, invocation
of arbitration under the MoU not justified – On appeal, held:
Whether the MoU has been novated by the SHA requires a detailed
consideration of the clauses of the two Agreements, together with
the surrounding circumstances in which these Agreements were
entered into, and a full consideration of the law on the subject – It
cannot be done, given the limited jurisdiction of a court u/s. 11 –
Detailed arguments whether an agreement which contains an
arbitration clause has or has not been novated cannot possibly be
decided in exercise of a limited prima facie review as to whether an
arbitration agreement exists between the parties – Section 11 – court
would refer the matter when contentions relating to non-arbitrability
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are plainly arguable, or when facts are contested – Instant case
does not fall within the category of cases which oust arbitration
altogether – More so, the Court at this stage is not empowered to
determine by way of a mini-trial, the validity of the arbitration
agreement – It would usurp the jurisdiction of the arbitral tribunal
– Thus, the judgment of the High Court set aside – Matter referred
to the sole arbitrator to decide the dispute between the parties –
Contract Act, 1872 – s. 62.
Allowing Civil Appeal No. 975 of 2021 and disposing of Civil
Appeal No. 976 of 2021, the Court
HELD: 1.1 By virtue of the Arbitration and Conciliation
(Amendment) Act, 2015 by which Section 11(6A) was introduced,
the earlier position as to the scope of the powers of a court under
Section 11, while appointing an arbitrator, are now narrowed to
viewing whether an arbitration agreement exists between parties.
[Para 6][65-B-C]
1.2 It is obvious that whether the Memorandum of
Understanding has been novated by the Shareholder’s Agreement
dated 12.04.1996 requires a detailed consideration of the clauses
of the two Agreements, together with the surrounding
circumstances in which these Agreements were entered into, and
a full consideration of the law on the subject. None of this can be
done given the limited jurisdiction of a court under Section 11 of
the Arbitration and Conciliation Act, 1996. [Para 9][79-B-C]
1.3 Detailed arguments on whether an agreement which
contains an arbitration clause has or has not been novated cannot
possibly be decided in exercise of a limited prima facie review as
to whether an arbitration agreement exists between the parties.
Also, this case does not fall within the category of cases which
ousts arbitration altogether, such as matters which are in rem
proceedings or cases which, without doubt, concern minors,
lunatics or other persons incompetent to contract. There is
nothing vexatious or frivolous in the plea taken by the Appellant.
On the contrary, a Section 11 court would refer the matter when
contentions relating to non-arbitrability are plainly arguable, or
when facts are contested. The court cannot, at this stage, enter
SANJIV PRAKASH v. SEEMA KUKREJA AND ORS.
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SUPREME COURT REPORTS
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into a mini trial or elaborate review of the facts and law w

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