Question of Novation of Contract Cannot Be Considered in A Petition u/s 11 Arbitration Act: SC

07-04-2021

A Bench comprising of Justices RF Nariman, BR Gavai and Hrishikesh Roy, in Sanjiv Prakash vs. Seema Kukreja, observed that the question of novation of contract containing an arbitration clause cannot be considered by the Court in a petition filed under Section 11 of the Arbitration and Conciliation Act. Detailed arguments on whether an agreement that contains an arbitration clause has or has not been novated cannot possibly be decided in the exercise of a limited prima facie review as to whether an arbitration agreement exists between the parties, the bench noted. This observation by the Court has been made in an appeal against the dismissal of a petition under Section 11 of the Act filed before the High Court of Delhi. The HC was of the view that the MOU ceased to exist on and from the date of the Shareholders’ Agreement which superseded the aforesaid MOU and novated the same. In this appeal, the appellant contended that a Section 11 Court would be duty-bound to refer the parties to the arbitration and leave complex questions of fact and the law relating to novation of a contract under Section 62 of the Contract Act to be decided by an arbitral tribunal. Holding thus, the bench referred the parties to the arbitration and appointed Justice Aftab Alam as sole arbitrator 

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