Applicability Of Arbitration Clause Is To Be Determined By Arbitrator, Cannot Be Decided In S.11 Plea: Delhi High Court
The Delhi High Court Bench of Justice Sachin Datta has held that contentions regarding the applicability and relevance of an arbitration agreement are to be dealt with by the arbitrator and cannot be gone into at the stage of section 11 petition. Once the existence of arbitration agreement is not disputed, any dispute related to the applicability of the agreement has to be dealt by the arbitrator.
Brief Facts of the case:
The petition under Section 11 of the Arbitration and Conciliation Act, 1996 (“Act”) seeks constitution of an Arbitral Tribunal to adjudicate the disputes between the parties. The disputes between the parties are stated to have arisen in the context of a Gas Supply Agreement (“GSA”) entered into between the parties whereby the respondent agreed to purchase Piped Natural Gas (“PNG”). The respondent was using PNG on a post-paid basis and bills were being generated monthly based on PNG usage of the respondent. However, the respondent was switched to a prepaid gas service plan from October 2020 which required the respondent to recharge its account in advance basis. PNG consumption price was revised multiple times during the period between July 2022 to December 2022, however, the same was not updated by AIUT Technologies LLP (the agency engaged by the petitioner) in the prepaid meter of the respondent.
This caused underpayment for the PNG usage and the petitioner issued a legal notice seeking payment of the outstanding amount alongwith interest. The said liability was denied by the respondent and consequently, disputes arose between the parties. Then, the arbitration clause was invoked, and the petitioner filed a Section 11 petition in the High Court for the constitution of a Tribunal.
Observation of the Court:
The court noted that the execution of the GSA is not denied by the respondent. The said agreement admittedly contains an arbitration clause. It is contemplated therein that the dispute between the parties shall be resolved by way of arbitration. The contention raised by the respondent as regards inapplicability thereof is inextricably connected to the version of the respondent as regards the merits of the controversy involved. It is the case of the petitioner that the terms of the GSA dated 05.03.2018 ceased to apply after October 2022. This is an aspect which requires interpretation of the terms of the contract and an adjudicatory exercise which is best left to be undertaken by a duly constituted Arbitral Tribunal.
Further, the court observed that the arbitration agreement between the parties contemplates that the appointment of the sole Arbitrator shall be made out of a panel of three persons chosen by the petitioner. This appointment procedure is no longer valid in view of the judgment of the Supreme Court in Central Organisation for Railway Electrification Vs. ECI SPIC SMO MCML (JV) A Joint Venture Company (2024). It is held that it is incumbent on the court to appoint an independent sole arbitrator.
Therefore, the court appointed Mr. Anant Vijay Palli, Senior Advocate as the sole arbitrator to adjudicate the dispute.
Case Title: INDRAPRASTHA GAS LIMITED versus M/S CHINTAMANI FOOD AND SNACKS
Case Number: ARB.P. 355/2024
Counsel for the Petitioner: Mr. Abhishek Gupta and Mr. Udit K. Thakur, Advocates.
Counsel for the Respondent: Ms. Srishti Sharma and Mr. Adnan Saifi, Advocates
Date of Judgment: 29.11.2025
