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The Delhi High Court has recently observed that the Tribunal can adjudicate upon the objection of jurisdiction raised before it after its constitution without being influenced or affected by the decision under Rule 20 of the Delhi International Arbitration Centre (Arbitration Proceedings) Rules, 2018. 

"The Delhi International Arbitration Center merely has to see as to whether it can administer the Arbitration or not. A detailed hearing is not required. The Chairperson is not expected to adjudicate upon jurisdiction under the Arbitration and Conciliation Act, 1996. The Chairperson has to merely consider the objections raised and take a prima facie view in the matter. The fact that the Coordinator of the center may have received the objections, responses to that, etc., and placed a note for the approval of the Chairperson, cannot be said to be contrary to the procedure, so long as the Chairperson approves the final decision", the Single Bench of Justice Prathiba M. Singh noted.

In the present matter, the petitioner and respondent No 3 entered into an Agreement on 17th January 2017. The Agreement contained an Arbitration Clause. The parties agreed to refer disputes arising out of the Agreement to the Delhi International Arbitration Center at the High Court of Delhi, as per the Delhi International Arbitration Centre (Arbitration Proceedings) Rules, 2018. In September 2018, the petitioner withdrew from the said Agreement, and post this, respondent number 3 invoked the Arbitration clause and initiated Arbitration proceedings for adjudication of disputes. Thus, the petitioner filed an application under Rule 20 of the Delhi International Arbitration Centre (Arbitration Proceedings) Rules, 2018, to challenge Arbitration's request by respondent No.3. In their application, the petitioner averred that the Arbitration could not have proceeded before the Delhi International Arbitration Center. The petitioners approached the Micro & Small Enterprises Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006. Invoking Arbitration is premature as section 18(1), section 18(4), and Section 24 of the Micro, Small and Medium Enterprises Development Act, 2006 bars jurisdiction of Delhi International Arbitration Center, the petitioner further contended. The Coordinator of Delhi International Arbitration Center vide order dated 16th February 2020 rejected the petitioner's application because the petitioner could not claim benefits under the Micro, Small and Medium Enterprises Development Act, 2006. After that, the petitioner filed the present petition challenging the Coordinator of the Delhi International Arbitration Center.

Rule 20 permitted a party to raise objections to the competence of the DIAC. It states that,

 20. Jurisdiction

20.1 Any objection by a party to the existence or the competence of the DIAC to administer an arbitration before the Tribunal is appointed shall be placed in the first instance before the Chairperson or the Sub- Committee appointed by the Chairperson for that purpose.

20.2 If the Chairperson or the Sub- Committee appointed by the Chairperson sustains the objection, the proceedings shall be terminated. In all other cases, the Tribunal shall decide such objection under Section 16 of the Act."

The Bench observed that Rule 20 of the Delhi International Arbitration Centre (Arbitration Proceedings) Rules, 2018 is a provision that was incorporated as a part of the institutional arbitral mechanism in the Delhi International Arbitration Centre to ensure that cases that do not have an arbitration agreement or which prima facie do not fall within the Agreement's scope could be terminated at that stage itself.

Further, it was also observed by the Bench that arbitral institution's role in prima facie examination was to ensure that parties are not made to participate in protracted arbitral proceedings in cases where it was apparent that there was no Arbitration Agreement or that the parties who were a part of the dispute were not a part of the Agreement or did not agree to Institutional Rule's applicability.

Thus, while dismissing the petition, the Bench opined that there was no infirmity in the decision and communication issued by the Delhi International Arbitration Centre to the petitioners.

"A detailed note was put up before the Chairperson along with the proposed decision on the objection, which the Chairperson has approved. Hence, it is clear that Rule 20.1 has been complied with. Moreover, a perusal of the contract's arbitration clause leaves no doubt that the disputes are to be referred to the DIAC and the Arbitration is to be conducted as per the DIAC Rules. The objections relating to jurisdiction based on the interplay between the MSMED Act and the Arbitration and Conciliation Act 1996 are to be raised before the Arbitral Tribunal once constituted and be adjudicated under law. The opinion of the Chairperson under Rule 20.1 would not in any manner be binding or affect the adjudication of the jurisdictional issues by the Arbitral Tribunal", the Bench further noted.

Case Title: Jeph Bev Private Limited & Ors. V. Delhi International Arbitration Centre & Ors.

Law Point/ Statute Involved: Rule 20 of the Delhi International Arbitration Centre (Arbitration Proceedings) Rules, 2018

 

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