SANJIV PRAKASH V. SEEMA KUKREJA AND ORS.
Sanjiv Prakash v. Seema Kukreja and Ors., 2021 SCC Online SC 282
- Whether an agreement which contains an arbitration clause has or has not been novated be decided in the exercise of a limited prima facie review as to whether an arbitration agreement exists between the parties.
- The existence of an arbitration agreement presupposes a valid agreement which the Court would enforce by relegating the parties to the arbitration.
- The existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law.
- The Appellant and his family members (Respondents) were shareholders in Asian Films Laboratories Private Limited, afterwards renamed ANI Media Private Limited (Company), which was established as a private limited company.
- The Appellant was approached by Thomson Reuters Corporation (Reuters) about a long-term equity investment and partnership with the Company with the stipulation that the Appellant would be actively involved in the operation of the Company.
- It was agreed in a Memorandum of Understanding (MOU), that in the event the Respondents wanted to sell their shares, the Appellant would have the first opportunity to buy them. The Arbitration Agreement, another arbitration clause, was included in the MOU.
- Invoking the MOU’s arbitration clause and claiming that the transfer of one of the respondents transferred their shares to another respondent violated his preemptive right to buy the transferred shares, the Appellant gave notice of arbitration to the respondents.
- The Appellant requested that the Respondents accept the arbiter he had chosen. The Respondents who were allegedly in violation of the MOU asserted that the SHA superseded the MOU and that the Arbitration Agreement, therefore, did not apply.
- A petition under Section 11 of the Act was filed before the High Court of Delhi by the Appellant for the appointment of an arbitrator. The Hon’ble High Court refused to appoint an arbitrator. The Hon’ble Apex Court was approached.
- It was held that for the Section 11 Court to decide any matter, the “existence of an arbitration agreement” is mandatory.
- Whether or not an arbitration agreement exists is a question to be determined by the Arbitral Tribunal.
- The Court said that the detailed arguments on whether an agreement that contains an arbitration clause has or has not been novated could not be decided in the exercise of a limited prima facie review as to whether an arbitration agreement exists between the parties.
- The Hon’ble SC set aside the judgment of the High Court and referred the parties to the arbitration of a sole arbitrator who was supposed to decide the dispute between the parties without referring to any observations made by the SC.