IN CASE OF DOUBT OVER EXISTENCE OF VALID ARBITRATION AGREEMENT, DISPUTE MUST BE SENT TO ARBITRATION: DELHI HIGH COURT

May 14, 2021

The Delhi High Court in the matter of Knowledge Podium Systems v. SM Professional Services, held that in case there is a doubt over the existence of a valid arbitration agreement, the dispute must be sent to arbitration. When there is doubt with respect to such non-existence, the court has to refer the matter to arbitration, the High Court ruled.

The order was passed by a single-judge Bench of Justice Jayant Nath while dealing with a suit for recovery of Rs. 2.5 crore in connection with a lease deed between the plaintiff and the defendant. The defendant leased a property to the plaintiff on certain conditions, pursuant to which the plaintiff deposited an interest-free refundable deposit of Rs. 1,90,14,720/-.

Perusing Section 8 and the Supreme Court’s decision in VidyaDrolia and Ors. vs. Durga Trading Corporation, the Court stated that for rejection of a Section 8 application, a party has to make out a prima facie case of non-existence of valid arbitration agreement, by summarily portraying a strong case.

M. Ravindranath Reddy v. G. Kishan&Ors. on 17 January, 2020 Bench: A.I.S. Cheema, KanthiNarahari, V. P. Singh National Company Law Appellate Tribunal, New Delhi Company Appeal (AT) (Insolvency) No. 331 of 2019

AnupSushil Dubey v. National Agriculture Co-operative Marketing Federation of India Limited&Ors National Company Law Appellate Tribunal, New Delhi Company Appeal (AT) (Insolvency) No. 229 of 2020.

In the present case, the Court opined, it could not be prima facie said that there was a completely new contract and that the old registered lease deed had been novated. Stating that the issue would require deeper consideration and was best left to the arbitral tribunal, the Court decided to allow the application under Section 8.