BEFORE THE HON’BLE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Under Article 136 of the Constitution of India

Case No. SLP(CIVIL) 5605-5606/2019

Vidya Drolia And Others ............................................................................. Appellant

vs.

Durga Trading Corporation ........................................................................ Respondent

MEMORIAL FOR THE RESPONDENTS

1 | P a g e MEMORANDUM ON BEHALF OF REPSONDENT

 Table of contents

S. No. Particulars Page No.

1. List of Abbreviations
2. Index of Authorities
3. Statement of Jurisdiction
4. Statement of Facts
5. Statement of Issues
6. Summary of Arguments
7. Arguments Advanced
Issue- 1. whether the disputes sought to be referred to arbitration
under Section 11(6) fell within the scope of the arbitration clause;

Issue-2 Whether the cause of action and subject matter of the

dispute relates to actions in rem or personam.

8. Prayer

List of Abbreviations

Abbreviation Abbreviated word

Hon’ble Honourable
HC High Court
V. Versus
& And
i.e. That is
s/d Signed
Art. Article
SC Supreme Court
AIR All India Report

Index of Authorities

Statutes:

1. The constitution of India

2. Arbitration and Conciliation Act, 1996

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 STATEMENT OF JURISDICTION

The Respondent humbly submits before the Hon’ble Supreme Court of India, the
memorandum for the Respondent in an appeal filed by the Petitioner under
Article 136 of the Indian Constitution. However, the Respondent seeks
permission from this Hon’ble Court to contend the maintainability of this
Special Leave Petition. The present memorandum set forth the facts,
contentions, and arguments in the present case.

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 STATEMENT OF FACTS

1. A Tenancy Agreement was entered into between the landlord’s predecessor-in-title (Shree
Bajrang Land & Trading Company) and the appellants/tenant on 02.02.2006 in respect of
certain godowns and other structures.
2. The maximum period of tenancy was for 10 years. The initial period was 5 years, with an
option for renewal for another 5 years with a 10% enhancement in the rent.
3. It was agreed that the tenant should pay the agreed rent of Rs.12,985/- per month. It was
also agreed that upon expiry or earlier determination of the lease, the tenant shall deliver
vacant and peaceful possession of the premises. As mentioned in Clause 23 of the
agreement.
4. On 16.10.2012, the tenancy was attorned in the name of the respondent, and the appellants
paid rent to the respondent as the earlier landlord had surrendered his leasehold rights in
favour of the respondent with effect from 01.11.2012.
5. On 24.08.2015, a letter was sent by the respondent calling upon the appellants to deliver
vacant and peaceful possession on the expiry of the 10 years, i.e., on 01.02.2016. A
reminder to this effect was also sent on 30.12.2015. As the tenant did not vacate the
premises, arbitration was invoked by the respondent on 29.02.2016 by a notice sent to the
appellants.
6. On 28.04.2016, the respondent filed the present Section 11 petition before the Calcutta High
Court for appointment of an arbitrator.
7. On 07.09.2016, the High Court passed the impugned order appointing an arbitrator, after
rejecting the appellants’ objections on the arbitrability of the dispute between the parties.
After this, the arbitral proceedings began and as many as 18 sittings have taken place.
8. Even though four arbitration sittings took place after this judgment, a review/recall
application was filed by the appellants before the Calcutta High Court on 04.06.2018 in light
of this judgment. This review was dismissed by the Calcutta High Court on 08.06.2018.

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 ISSUES RAISED

[ISSUE 1]
WHETHER THE DISPUTES TO BE REFERRED TO ARBITRATION
UNDER SECTION 11(6) FELL WITHIN THE SCOPE OF THE
ARBITRATION CLAUSE?

[ISSUE 2]
WHETHER THE CAUSE OF ACTION AND SUBJECT MATTER OF THE
DISPUTE RELATES TO ACTIONS IN REM OR PERSONAM?

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 SUMMARY OF ARGUMENTS

ISSUE I- WHETHER THE DISPUTES SOUGHT TO BE REFERRED TO

ARBITRATION UNDER SECTION 11(6) FELL WITHIN THE SCOPE OF THE
ARBITRATION CLAUSE?

The respondent stated that there was an agreement made between applicant and the respondent
regarding the appointment of an arbitrator if is there any dispute arises. Also, more than 15
hearings took place which shows arbitration may help to resolve the dispute. Parties by mutual
agreement forgo their right in law to have their disputes adjudicated in the courts/public
forum. It will be seen that though the Law Commission Report speaks not only of “existence”
but also of an arbitration clause being null and void, this has not translated itself into the
language of Section 11(6A). Until 2005, the SC was of the view that the appointment of an
arbitrator under section 11(6) was merely an administrative order 9. In 2005, a constitutional
bench of the SC constituting seven judges overruled this ratio. Thus, the scope of the courts
under 11(6) was interpreted as follows: the court must look into its jurisdiction, the existence of
an arbitration agreement, and the arraying of appropriate parties. The court may examine if the
claim is time-barred and whether the contract is concluded. However, the court shall
not consider the arbitrability and merits of the claim. It was also held that should an objection as
to the arbitrability be raised on the ground that the agreement was obtained by fraud, etc., the
court would then be required to consider its validity.
.

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ISSUE II- WHETHER THE CAUSE OF ACTION AND SUBJECT MATTER
OF THE DISPUTE RELATES TO ACTIONS IN REM OR PERSONAM.

The present case was a dispute between the Tennant and the Landlord and there was a
breach of contract done by the appellant. Since Cause of action of dispute or its
subject matter relates to actions in rem, which do not pertain to subordinate rights in
personam that arise from rights in rem. Such actions normally would not affect third-
party rights or have erga omnes affect or require centralized adjudication. An award
passed deciding landlord-tenant disputes can be executed and enforced like a decree
of the civil court. Landlord-tenant disputes do not relate to the inalienable and
sovereign functions of the State. The provisions of the Transfer of Property Act do not
expressly or by necessary implication bar arbitration.

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 ARGUMENTS ADVANCED

[ISSUE – I] WHETHER THE DISPUTES SOUGHT TO BE REFERRED TO

ARBITRATION UNDER SECTION 11(6) FELL WITHIN THE SCOPE OF THE
ARBITRATION CLAUSE?

Lease deeds are arbitrable if they are not covered by special statutes. Allegations of fraud can be
made subject matters of arbitration when they are in connection with a civil dispute, and do not
have the seriousness of circumstances better described under criminal laws. It is the arbitral
tribunal that has the first authority to determine arbitrability.

In the case of SBP & Co. v. Patel Engineering Ltd. (‘Patel Engineering’) S.L.P. (CIVIL) NO.
3205/2004, a seven-judge bench of the Supreme Court concluded that judicial authorities have
the power to examine the validity of an arbitration agreement. It further held that this power of
the Court is judicial and has to be mandatorily exercised when a jurisdictional issue comes
before it.

The case of Patel Engineering was re-affirmed by a two-judge bench of the Supreme Court in
the case of the National Insurance Company Ltd. v. Boghara Polyfab Pvt. Ltd. (‘Boghara’) AIR
2009 SUPREME COURT 170, 2008. In Boghara, the Court identified and segregated three
categories of issues that arose for consideration under Section 11 applications. The first
category pertains to the mandatory issues that the Chief Justice/Designate is bound to decide
such as, whether the party making the application has approached the appropriate High Court
and whether there exists a valid arbitration agreement between the parties. More lucidly, it can
be inferred that the Chief Justice/Designate must decide the arbitrability of the dispute at the
reference stage itself and the issues based on merit or other claims shall be left to the exclusivity
of the arbitral tribunal. The second category pertains to the issues that can be decided either by
the Chief Justice/Designate or by arbitral tribunal such as the issue of a claim being time-barred.
The third category pertains to the issues reserved only to be decided by the arbitral tribunal, like
issues related to the merits of the claim and scope of the arbitration clause.

Therefore, before the 2015 Amendment, Courts had the jurisdiction to decide arbitrability at the
reference stage thus undermining the commercial wisdom of the parties. This also ousted the
jurisdiction of the arbitral tribunal. On the recommendations of the 246th Law Commission
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Report, Sections 8 and 11 of the Act were amended to ensure the synchronization of the Indian
Arbitration Law with the international standards. In lieu of this, Parliament added the phrase
“refer parties to arbitration, unless prima facie no valid arbitration agreement exists”.
with the addition of Section 11(6-A), power of the Court was limited to examining whether an
arbitration agreement is null and void, inoperative, and incapable of being performed.

Further, Justice B.N. Srikrishna in the case of Shin-Etsu Chemical Co. Ltd. v. AkshOptifibre,
Appeal (Civil) 5048 of 2005 iterated that the Court’s review at the reference stage should be
limited to prima facie verification of existence and validity of the arbitration agreement without
analyzing in detail whether the arbitral tribunal is empowered to decide the subject matter or
not.

It shall thus be given due consideration that after the 2015 Amendment, the Court at reference
stage cannot take away the jurisdiction of the arbitral tribunal and adjudicate by itself. The court
can do so after summary examination if the arbitration agreement is found to be null and void,
inoperative, and incapable of being performed.

The Court relied upon Duro Felguera SA v. Gangavaram Port Ltd. Arbitration Petition No. 30
of 2016 (‘Duro Felguera’), which held that prior to the 2015 Amendment, Section 11 (6) of Act
was wide in nature as it gave enormous powers to the Court to decide arbitrability of disputes.
This position changed after the 2015 Amendment. Thereafter, the Courts are only required to
see whether there is an arbitration agreement between the parties – nothing more, nothing less.
The reasoning laid down in Duro Felguera is in line with the purpose of the amendment and is
essential to minimize the Court’s intervention at the reference stage.
If the judicial authority is of the opinion that prima facie the arbitration agreement exists, then it
shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be
finally determined by the arbitral tribunal. However, if the judicial authority concludes that the
agreement does not exist, then the conclusion will be final and not prima facie. The amendment
also envisages that there shall be a conclusive determination as to whether the arbitration
agreement is null and void.

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ISSUE II- WHETHER THE CAUSE OF ACTION AND SUBJECT MATTER
OF THE DISPUTE RELATES TO ACTIONS IN REM OR PERSONAM.
The right in rem is a right exercisable against the world at large and is not amenable to
arbitration, whereas in the case of rights in personam, an interest is protected against a
specific individual, and is referable to arbitration.
Actions in personam refer to actions determining the rights and interests of the parties
themselves in the subject matter of the case, whereas actions in rem refer to actions
determining the title to the property and the rights of the parties, not merely among
themselves but also against all persons at any time claiming an interest in that
property.
In the case of Booz-Allen & Hamilton Inc. vs Sbi Home Finance Ltd. & Ors. AIR
2011 SUPREME COURT 2507 distinguishes actions in personam, that is, actions that
determine the rights and interests of parties themselves in the subject matter of the
case, and actions in rem which refer to actions determining the title of the property
and the rights of the parties not merely amongst themselves but also against all the
persons at any time claiming an interest.
Further, it was held that certain matters in English Law are reserved for the court
alone and if an arbitral tribunal purports to deal with them the resulting award would
be unenforceable. These matters would include where the type of remedy required is
not on that the arbitral tribunal is empowered to give.

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 PRAYER

Wherefore, in the light of facts stated, issues raised, arguments advanced and authorities cited, it
is most humbly prayed and implored before the Hon’ble Court, that it may graciously be
pleased to:

1. Declare the consent decree upheld by the High Court as null and void.
2. To continue the arbitration proceeding so that justice will not be delayed.

AND/OR

Pass any order, direction, or relief that may deem fit in the best interest of Justice, Fairness,
Equity and Good Conscience.

For which act of your honours kinds the Respondent shall remain ever grateful and pray.

Place:

s/d -

Date: / / 2024 Counsel for the Respondent

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