Case: Alva Aluminium Ltd. Bangkok Vs. Gabriel India Limited

Arbitral Tribunal can determine the existence of the arbitration agreement. Suffice it to say that the power available to the Arbitral Tribunal under Section 16 of the Act does not imply that the issue can be or ought to be left to be determined by the Arbitral Tribunal even in cases where one of the parties has filed a petition under Section 11 of the Act and the other party opposes the making of a reference on the ground that there exists no arbitration agreement between them. It is quite evident that the question whether or not an arbitration agreement exists between the parties will have to be answered for it is only if the answer to that question is in the affirmative that the Chief Justice or his designate can pass an order of reference of the disputes for adjudication. Question No. (1) is answered accordingly.Regarding Question No. 219. That there is a written contract document between the parties, is not in dispute. That an arbitration clause is found in the said contract is also not in dispute. That Shri Sandeep K. Dabir had negotiated the contract on behalf of the respondent is also a fact that is not disputed. That correspondence between the parties was exchanged before the signing of the document and the said correspondence was not only with Shri Dabir but with Shri Sengupta, who according to the respondent, was the competent authority to sign the document is also not in dispute. All that the respondent in the above backdrop argues is that Shri Sandeep K. Dabir was not competent to sign the contract and that Shri Dabir had been misdirected/enticed/misdirected to initial the contract which is according to the respondent, void in terms of the Contract Act, 1872. Reply sent by the respondent to the notices served upon it summarises the twin objections to the contract set up by the petitioner in the following words: “4. The documents, information and correspondence provided by our client clearly suggest that what was going on between M/s. Kliss Trading Pvt. Ltd. the representatives of your client and certain officials of our client was only some sort of negotiation in respect of the purchase of 150 MTAC2B aluminium ingots. At no point of time our client had entered into any contract with you for the purchase of the above said material.8. Our client further states that since your client had misguided/ enticed/ misdirected Mr. Dabir to initial the said contract the same is also void under the provision of the Indian Contract Act, 1872.” 20. The question, therefore, is whether the contract set up by the petitioners can be held non est for the two reasons indicated in paragraphs 4 and 8 extracted above. The defence set up by the respondent that the information and correspondence provided by the respondent was only suggestive of “some sort of negotiation” between the parties has not impressed me. The documents, information and correspondence when taken in their totality especially in the light of the signed contract document that stipulates the mutual rights and obligations of the parties do not show that the parties were simply negotiating a contract. The information provided, the correspondence exchanged and the documents executed are on the contrary clearly suggestive of the parties having finalized and signed a contract.21. So also the assertion of the respondent that the petitioner had mis-directed, enticed or mis-guided Shri Dabri who was admittedly negotiating the contract on its behalf, had no authority to do so need be noticed only to be rejected. There are no particulars leave alone any material to establish that the signatures appended by Shri Dabir to the contract document in token of its acceptance, was vitiated by any misrepresentation or such other considerations that could have the effect of vitiating the contract. In the absence of details and particulars of what, according to the respondent, constituted inducement, mis-guidance or mis-direction referred to in paragraph 8, it is difficult to see how a fluent use of such expressions can help the respondent in avoiding a contract that had come into existence between the parties. A heavy duty lies upon the party who seeks to avoid a contract on the ground of mis-representation, fraud or coercion to prove any such allegation. Nothing of the sort has been done in the instant case by the respondent. So much so the respondent has not even placed on record any charter of duties and powers of Shri Dabir and Shri Sengupta nor has it chosen to place on record any material to suggest that any action was indeed taken against Shri Dabir for the alleged transgression of the limits of his authority and if so the nature of the disciplinary action taken against him. All this information and material was within the special knowledge of the respondent. Non-furnishing of such information must, therefore, give rise to an adverse interference against it. The petitioner company had in any event no reason to believe or even suspect that Shri Dabir with whom it was dealing did not have the authority to sign the contract which was finalized between the two companies acting through their representatives. That is so especially when even according to the respondent, Shri Dabir had been authorized to negotiate the terms on behalf of the respondent. If Shri Dabir was competent to negotiate the terms of the contract, the petitioner cannot be said to have induced or defrauded him into signing of the contract, which was forwarded to the respondent and which was returned duly signed by Shri Dabir. The petitioner was in this backdrop justified in proceeding on the basis that the contract was duly negotiated and signed on behalf of the respondent company.22. In the totality of the above circumstances, I have no doubt that a legally valid contract had indeed come into existence between the parties which contained an arbitration clause for adjudication of disputes that may arise between them. Question No. (2) is accordingly answered in the affirmative.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]17. It is in the light of above pronouncements, unnecessary to delve any further on this issue. It is clear that once the existence of the arbitration agreement itself is questioned by any party to the proceeding initiated under Section 11 of the Act, the same will have to be decided by the Chief Justice/designate as the case may be. That is because existence of an arbitration agreement is a jurisdictional fact which will have to be addressed while making an order on a petition under Section 11 of the Act. The position may be different where arbitration proceedings are initiated before a nominated arbitral Tribunal but the opposite party appears to dispute the existence of the arbitration agreement.So also the parties may without approaching the Chief Justice refer the matters in dispute to the nominated Tribunal including the question whether there exists an arbitration agreement. In any such case also the Arbitral Tribunal can determine the existence of the arbitration agreement. Suffice it to say that the power available to the Arbitral Tribunal under Section 16 of the Act does not imply that the issue can be or ought to be left to be determined by the Arbitral Tribunal even in cases where one of the parties has filed a petition under Section 11 of the Act and the other party opposes the making of a reference on the ground that there exists no arbitration agreement between them. It is quite evident that the question whether or not an arbitration agreement exists between the parties will have to be answered for it is only if the answer to that question is in the affirmative that the Chief Justice or his designate can pass an order of reference of the disputes for adjudication. Question No. (1) is answered accordingly.Regarding Question No. 219. That there is a written contract document between the parties, is not in dispute. That an arbitration clause is found in the said contract is also not in dispute. That Shri Sandeep K. Dabir had negotiated the contract on behalf of the respondent is also a fact that is not disputed. That correspondence between the parties was exchanged before the signing of the document and the said correspondence was not only with Shri Dabir but with Shri Sengupta, who according to the respondent, was the competent authority to sign the document is also not in dispute. All that the respondent in the above backdrop argues is that Shri Sandeep K. Dabir was not competent to sign the contract and that Shri Dabir had been misdirected/enticed/misdirected to initial the contract which is according to the respondent, void in terms of the Contract Act, 1872.The question, therefore, is whether the contract set up by the petitioners can be held non est for the two reasons indicated in paragraphs 4 and 8 extracted above. The defence set up by the respondent that the information and correspondence provided by the respondent was only suggestive ofbetween the parties has not impressed me. The documents, information and correspondence when taken in their totality especially in the light of the signed contract document that stipulates the mutual rights and obligations of the parties do not show that the parties were simply negotiating a contract. The information provided, the correspondence exchanged and the documents executed are on the contrary clearly suggestive of the parties having finalized and signed a contract.21. So also the assertion of the respondent that the petitioner hadded Shri Dabri who was admittedly negotiating the contract on its behalf, had no authority to do so need be noticed only to be rejected. There are no particulars leave alone any material to establish that the signatures appended by Shri Dabir to the contract document in token of its acceptance, was vitiated by any misrepresentation or such other considerations that could have the effect of vitiating the contract. In the absence of details and particulars of what, according to the respondent, constituted inducement,on referred to in paragraph 8, it is difficult to see how a fluent use of such expressions can help the respondent in avoiding a contract that had come into existence between the parties. A heavy duty lies upon the party who seeks to avoid a contract on the ground offraud or coercion to prove any such allegation. Nothing of the sort has been done in the instant case by the respondent. So much so the respondent has not even placed on record any charter of duties and powers of Shri Dabir and Shri Sengupta nor has it chosen to place on record any material to suggest that any action was indeed taken against Shri Dabir for the alleged transgression of the limits of his authority and if so the nature of the disciplinary action taken against him. All this information and material was within the special knowledge of the respondent.of such information must, therefore, give rise to an adverse interference against it. The petitioner company had in any event no reason to believe or even suspect that Shri Dabir with whom it was dealing did not have the authority to sign the contract which was finalized between the two companies acting through their representatives. That is so especially when even according to the respondent, Shri Dabir had been authorized to negotiate the terms on behalf of the respondent. If Shri Dabir was competent to negotiate the terms of the contract, the petitioner cannot be said to have induced or defrauded him into signing of the contract, which was forwarded to the respondent and which was returned duly signed by Shri Dabir. The petitioner was in this backdrop justified in proceeding on the basis that the contract was duly negotiated and signed on behalf of the respondent company.22. In the totality of the above circumstances, I have no doubt that a legally valid contract had indeed come into existence between the parties which contained an arbitration clause for adjudication of disputes that may arise between them. Question No. (2) is accordingly answered in the affirmative.