Judgment Name: Extramarks Private Limited v. Mes Central School

Citation: 2022 LiveLaw (Del) 438

Single-judge Bench: Sanjeev Sachdeva. J

Date: 11th May, 2022

Keywords: Arbitration, Independent Transaction, Section 11 of the Arbitration and Conciliation Act

FACTS

In Extramarks Private Limited v. Mes Central School, the two parties entered into an agreement for the provision of educational services and a separate agreement for the supply of hardware such as laptops. However, as of 26th April 2017, the agreement for education services was terminated, and the Respondent filed a civil suit for the recovery of money from the purchase order for the hardware. The Petitioner required the appointment of an arbitrator as a part of their agreement, and since the agreement was completely separate from the other agreement providing educational services, the Respondent had the power to invoke Section 11 of the Arbitration and Conciliation Act, 1996 “the Act”). The Court stated that the two agreements are separate, and filing written statements in a civil suit regarding the purchase of the laptops would not be relevant to the current case. Furthermore, the supply of laptops did not happen as a continuance or as a part of the agreement, so that no claim can exist regarding the same within arbitration. Concurrently, the Court also expanded the limitation period through its suo motu motion due to the spread of COVID.

ISSUE

Whether in the above situation, a party’s right to invoke arbitration exists if they file a written statement as a part of a dispute not covered under the agreement but relevant to the arbitration.

ANALYSIS

This decision allows the separation of two agreements arising out of similar objects and ensures that a person’s right to arbitration is not waived due to a civil suit filed in another case. This prevents the judicial overreach on arbitration, as it allows the development of arbitration by ensuring creators of arbitration clauses the right to exercise them judicially. This principle was also upheld in the case of A. Ayyasamy v. A. Paramasivam & Ors, where the parties filed an application under Section 11 of the Act, despite having already filed a civil suit since acts of fraud were not arbitrable.

However, the Supreme Court decided to reverse this position by allowing “fraud” within the jurisdiction of the Arbitral Tribunal while also laying parameters for its use within arbitration and referring the case to arbitration through its powers under Section 8 of the Act.

CONCLUSION

Thus, the Delhi High Court in Extramarks Private Limited v. Mes Central School followed the stance taken by the Supreme Court in Ayyaswamy and protected the party’s right to invoke arbitration, which is indicative of an open approach to the development of Arbitral Tribunals and an expansion in the scope of arbitrable topics, slowly allowing alternative dispute resolution to provide an efficient alternative to existing civil litigation. This case, therefore, paves the way towards ensuring the smooth functioning of courts dealing with the issue of the scope of arbitration.

[This case note has been authored by Aditya Joby, who is a Senior Editor at Mapping ADR.]