Court Directs Kerala High Court Arbitration Centre to Nominate Arbitrator for Resolution of Dispute Under Share Transfer Agreement
In a significant decision, the Kerala High Court has directed the Kerala High Court Arbitration Centre to appoint an arbitrator from its Panel-III to adjudicate disputes arising from a share transfer agreement between Avira Tharakan and Cyriac Njavally. The judgment, delivered by Justice S. Manu, emphasizes the limited role of the referral court under Section 11 of the Arbitration and Conciliation Act, 1996, which is confined to a prima facie examination of the existence of an arbitration agreement.
The legal tussle between Avira Tharakan, the petitioner, and Cyriac Njavally, the respondent, revolves around the transfer of 1803 equity shares in Tharakan Web Innovations Private Limited. Despite an affidavit confirming the transfer, disputes arose when Njavally claimed ownership of 117 shares, leading to proceedings at the National Company Law Tribunal (NCLT), which were subsequently dismissed.
Justice Manu, while noting the arbitration clause in the agreement, rejected the respondent's contention that the disputes were non-arbitrable and outside the clause's scope due to ongoing NCLT proceedings. The court underscored that issues of arbitrability and limitation are best left to the arbitral tribunal, aligning with precedents set by the Supreme Court.
The court's decision to proceed with arbitration reflects its stance that deeper inquiries into the agreement's fulfillment and the timing of the claims should be addressed by the arbitrator, not the referral court. This judgment reiterates the judiciary's support for arbitration as an effective means of dispute resolution, ensuring that procedural hurdles do not impede the arbitration process.
The Kerala High Court's directive to the Arbitration Centre sets the stage for the resolution of this corporate dispute, encouraging parties to seek redress through arbitration rather than prolonged litigation.
Bottom Line :
Arbitration - Referral jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996 is limited to the prima facie examination of the existence of an arbitration agreement, with deeper scrutiny left to the arbitral tribunal.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 11(6A), 16
Avira Tharakan v. Cyriac Njavally, (Kerala) : Law Finder Doc id # 2962608
