Supreme Court overrules United India Insurance Co v. Antique Art Exports Pvt. Ltd.

In my earlier post, I had pointed out that the Supreme Court in United India Insurance Co. v. Antique Art Exports Pvt Ltd., had almost overruled the interpretation of Section 11(6A) adopted by a coordinate Bench in  Duro Felguera S.A. Vs. Gangavaram Port Limited . The Bench in Duro Felguera had held that a court under Section 11(6A) cannot look into any other issue except the existence of an arbitration agreement.

On the other hand, in United India Insurance, the SC had held that courts perform a “judicial function” under Section 11(6A) and not merely an “administrative function”. Further, it characterised the SC’s judgement in Duro Felguera as a “general observation” and therefore, an obiter dictum which is not binding on it despite the Division Bench in Duro Felguera, delivering two separate judgments unequivocally holding Section 11(6A) to be limiting the jurisdiction of the Court to mere examination of the existence of an arbitration agreement.

M/s. Mayavathi Trading Pvt Ltd v. Pradyuat Deb Burman

To harmonise the seemingly contradictory position taken by co-ordinate Benches of the same court, a 3 judge bench was set up. The 3 judge Bench after considering the law commission report and other judgements on the issue came to the conclusion that the judgement of the Court in United India Insurance was incorrect. The 3 Judge Bench held:

“This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgment as Section 11(6A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment Duro Felguera, S.A. (supra) – see paras 48 & 59.”

Thus, the 3 Judge Bench has overruled United India Insurance and upheld the reasoning given by the Court in  Duro Felguera S.A.

Omission of Section 11(6A):

It was pointed out to the Court that Section 11(6A) has been omitted by the 2019 Amendment to the Arbitration and Conciliation Act, 1996. However, the Court proceeded to consider the aforementioned issue as the omission clause was not yet notified by the Parliament and Section 11(6A) was in force.

Conclusion:

Irrespective of whether Section 11(6A) is omitted or not, the incorrect interpretation adopted in United India Insurance had to be rectified. Inspite of the legislature trying hard to curtail judicial intervention in appointment of arbitrators, the SC somehow finds a way to frustrate this legislative intent by adopting “interpretations” which are not only contrary to the plain language of the statute but also, the purpose behind such enactments.

Published by Hemanth Rao

I am an Advocate practicing in the High Court of Karnataka at Bangalore.

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