VIDYA DROLIA AND OTHERS versus DURGA TRADING CORPORATION

Citation: [2020] 11 S.C.R. 1001 · Decided: 14-12-2020 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Reference answered

Cited by 22 judgment(s) · cites 31 · see the full citation network in Lexace

Judgment (excerpt)

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VIDYA DROLIA AND OTHERS
v.
DURGA TRADING CORPORATION
(Civil Appeal No. 2402 of 2019 etc.)
DECEMBER 14, 2020
[N.V. RAMANA, SANJIV KHANNA AND
KRISHNA MURARI, JJ.]
Arbitration and Conciliation Act, 1996:
ss. 8 and 11 – Jurisdiction under – Judicial review – Scope
and ambit of – Held: Per Sanjiv Khanna, J.  – Scope of judicial
review and jurisdiction of the Court u/s. 8 and 11 is identical, but
extremely limited and restricted – The court may interfere at the
stage of jurisdiction u/ss. 8 and 11, when it is manifestly and ex
facie certain that the arbitration agreement is non-existent, invalid
or the disputes are non-arbitrable – The court can not interfere
and refer the matter for arbitration when contentions relating to
non-arbitrability are plainly arguable; when consideration in
summary proceedings would be insufficient and inconclusive; when
facts are contested; and when the party opposing arbitration adopts
delaying tactics or impairs conduct of arbitration proceedings –
This is not the stage for the court to enter into a mini trial or elaborate
review so as to usurp the jurisdiction of the arbitral tribunal – At
this stage the court is required to affirm and uphold integrity and
efficacy of arbitration as an alternative dispute resolution mechanism
– Per Ramana, J. – Sections 8 and 11 have the same ambit i.e.
limited judicial interference at reference stage – Usually subject
matter arbitrability cannot be decided at the stage of ss. 8 and 11,
unless it’s a clear case of deadwood – Unless a party has established
a prima facie case of non-existence of valid arbitration agreement,
the court has to refer the matter for arbitration or to appoint an
arbitrator as the case may be i.e. ‘when in doubt, do refer’ – The
scope of the court to examine the prima facie validity of an arbitration
agreement includes only (i) whether arbitration agreement was in
writing; (ii) whether such agreement was contained in exchange of
letters, telecommunication etc. (iii) whether the core contractual
   [2020] 11 S.C.R. 1001
1001
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SUPREME COURT REPORTS
[2020] 11 S.C.R.
ingredients qua arbitration agreement were fulfilled; and (iv) on
rare occasions, whether the subject-matter of dispute is arbitrable.
Arbitration:
Landlord-tenant dispute – Governed by Transfer of Property
Act – Arbitrability of – Held: In order to determine whether the
subject-matter of a dispute in an arbitration agreement is not
arbitrable, the four-fold test is when cause of action and subject
matter of dispute (i) relates to action in rem that do not pertain to
subordinate rights in personam that arise from rights in rem; (ii)
affects third party rights, have erga omnes effect, require centralized
adjudication and mutual adjudication would not be appropriate
and enforceable; (iii) relates to inalienable sovereign and public
interest functions of the State and hence mutual adjudication would
be unenforceable;(iv) expressly or by necessary implication non-
arbitrable as per mandatory statutes – However, these tests are not
watertight compartments – Landlord-tenant disputes governed by
Transfer of Property Act are arbitrable as per the tests
aforementioned – However, such disputes, if covered by rent control
legislation giving exclusive jurisdiction to specific court or forum,
would not arbitrable – Transfer of Property Act, 1882.
Deeds and Documents:
Arbitration agreement – Interpretation of – Held: The approach
as to interpretation of arbitration agreement would depend upon
various factors such as language, parties, nature of relationship,
factual background in which the agreement was entered, etc. – In
case of pure commercial disputes, more appropriate principle of
interpretation would be the one of liberal construction as there is
presumption in favour of one-stop adjudication.
Doctrines/Principles:
Principle of ‘separation’ and  ‘competence-competence’ –
Applicability of – Discussed.
Doctrine of ‘election’ – Applicability of.
‘Second look’ principle – Applicability of.
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Judgment:
Judgment in rem and judgment in personam – Distinction
between – Discussed.
Words and Phrases:
‘Agreement’ – Meaning of.
‘Arbitration agreement’ – Meaning of.
‘Legal  relationship’ – Meaning of.
‘Arbitration agreement in writing’ – Meaning of.
‘Existence’ – Meaning of.
‘Examination’ – Meaning of.
‘Existence of an arbitration agreement’ – Meaning of.
‘Arbitrability’ – Meaning of.
‘Prima facie’ – Meaning of.
Answering the referred qu

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