Disposed

Rahul Jain v. Fiitjee Ltd. & Anr.

Delhi HC9 May 2025ARB.P./438/2025

Case brief

AI extract

What is this about?

Former employee sought appointment of an arbitrator under the arbitration clause in FIITJEE's Service Rules to recover approximately Rs. 16 lakhs in unpaid dues including Sincerity Fund, leave encashment and ESOP. Respondents raised no objection. The Court appointed Varun Mohan as sole Arbitrator to conduct proceedings under DIAC aegis.

What did the court decide?

Mr. Varun Mohan appointed sole Arbitrator to adjudicate disputes under DIAC rules and fees schedule.

Rahul Jain Vs Fiitjee Ltd. & Anr. — Arbitration | Delhi HC (2025)

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$~O-1

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IN THE HIGH COURT OF DELHI AT NEW DELHI

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- ARB.P. 438/2025

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Date of Decision : 09.05.2025

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IN THE MATTER OF:

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RAHUL JAIN .....Petitioner

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Through: Mr. Kumar Prashant, Adv.

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versus

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FIITJEE LTD. & ANR. .....Respondents Through: Ms. Disha Sharma, Adv.

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CORAM:

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HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV

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JUDGEMENT

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PURUSHAINDRA KUMAR KAURAV, J. (ORAL)

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The petitioner has filed the instant petition seeking following reliefs: “a. Appoint an arbitrator for adjudicating the dispute(s) and differences between the parties to the present petition in terms of the Service Rule Manual”

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The facts of the case would indicate that the petitioner joined the services of respondent No.1 on 22.01.2014. He appears to have resigned in the year 2023. According to the petitioner, necessary dues were not cleared by the respondents and he then issued notice under Section 21 of the Arbitration and Conciliation, 1996 Act, on 03.06.2024.

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It is further submitted that despite several reminders, the respondents have failed to pay the petitioner his full and final statutory and contractual dues to date. These dues include payments towards the Sincerity Fund,

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Signature Not Verified

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Signature Not Verified Signed By:PURUSHAINDRA KUMAR KA URAV

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Signed By:PRIYA Signing Date:20.05.2025 18:15:47

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Leave Encashment, and ESOP. As per the petitioner, the total amount claimed at the time of issuance of the notice is approximately Rs. 16 lakhs. Learned counsel for the petitioner has also drawn the attention of this Court to the Service Rules for the Employees of FITJEE Ltd.

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While placing reliance on clause 36(a) of the said Service Rules, he submits that there exists an arbitration clause which reads as under:

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“36.(a) All disputes and differences of any nature with regard to the FIITJEE service manual and the interpretation & adjudication of clauses and claims respectively shall be referred to the Sole Arbitrator appointed by the Company i.e. FIITJEE Ltd.. The employee hereby agrees to the appointment of the Sole Arbitrator by the company i.e. FIITJEE Ltd. whenever any dispute arises. The employee undertakes not to oppose the said appointment of the Sole Arbitrator. The arbitration proceedings shall be conducted in accordance with the provisions of the Arbitration & Conciliation Act, 1996 and statutory modification thereof & rules made thereunder. The award of arbitrator shall be final binding on both the parties. The award of the arbitrator shall be final & binding on every matter arising hereunder. It is further agreed that in spite of the fact that the Sole Arbitrator may be known to any of the Directors or share holders or may have been appointed as an arbitrator earlier by the company shall not disqualify him. Even if the Arbitrator may have expressed opinion in similar matter earlier shall also not render him disqualified. The venue of the arbitration shall be Delhi/New Delhi only.”

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Learned counsel appearing for the respondent submits that reserving all the rights and contentions of the respondent, he does not have any objections if the Arbitrator is appointed.

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The law with respect to the scope and standard of judicial scrutiny under Section 11(6) of the 1996 Act has been fairly well settled. This Court as well in the order dated 24.04.2025 in case of ARB.P. 145/2025 titled as Pradhaan Air Express Pvt Ltd v. Air Works India Engineering Pvt Ltd has extensively dealt with the scope of interference at the stage of Section 11. The Court held as under:-

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Signature Not Verified

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Signature Not Verified

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Signed By:PRIYA Signing Date:20.05.2025 18:15:47

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Signed By:PURUSHAINDRA KUMAR KA URAV

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“9. The law with respect to the scope and standard of judicial scrutiny under Section 11(6) of the 1996 Act has been fairly well settled. The Supreme Court in the case of SBI General Insurance Co. Ltd. v. Krish Spinning, while considering all earlier pronouncements including the Constitutional Bench decision of seven judges in the case of Interplay between Arbitration Agreements under the Arbitration & Conciliation Act, 1996 & the Indian Stamp Act, 1899 , In re¹ has held that scope of inquiry at the stage of appointment of an Arbitrator is limited to the extent of prima facie existence of the arbitration agreement and nothing else.

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10. It has unequivocally been held in paragraph no.114 in the case of SBI General Insurance Co. Ltd that observations made in Vidya Drolia v. Durga Trading Corpn., and adopted in NTPC Ltd. v. SPML Infra Ltd. ,² that the jurisdiction of the referral court when dealing with the issue of “accord and satisfaction” under Section 11 extends to weeding out ex-facie non-arbitrable and frivolous disputes would not apply after the decision of Re: Interplay . The abovenoted paragraph no.114 in the case of SBI General Insurance Co. Ltd reads as under:-

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“114. In view of the observations made by this Court in In Re: Interplay (supra), it is clear that the scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else. For this reason, we find it difficult to hold that the observations made in Vidya Drolia (supra) and adopted in NTPC v. SPML (supra) that the jurisdiction of the referral court when dealing with the issue of “accord and satisfaction” under Section 11 extends to weeding out ex-facie non-arbitrable and frivolous disputes would continue to apply despite the subsequent decision in In Re: Interplay (supra).”

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11. Ex-facie frivolity and dishonesty are the issues, which have been held to be within the scope of the Arbitral Tribunal which is equally capable of deciding upon the appreciation of evidence adduced by the parties. While considering the aforesaid pronouncements of the Supreme Court, the Supreme Court in the case of Goqii Technologies (P) Ltd. v. Sokrati Technologies (P) Ltd., however, has held that the referral Courts under Section 11 must not be misused by one party in order to force other parties to the arbitration agreement to participate in a timeconsuming and costly arbitration process. Few instances have been delineated such as, the adjudication of a non-existent and malafide claim

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1 2023 SCC OnLine SC 1666.

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2 ( 2023) 9 SCC 385.

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Signature Not Verified

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Signature Not Verified

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Signed By:PURUSHAINDRA KUMAR KA URAV

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Signed By:PRIYA Signing Date:20.05.2025 18:15:47

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through arbitration. The Court, however, in order to balance the limited scope of judicial interference of the referral Court with the interest of the parties who might be constrained to participate in the arbitration proceedings, has held that the Arbitral Tribunal eventually may direct that the costs of the arbitration shall be borne by the party which the Arbitral Tribunal finds to have abused the process of law and caused unnecessary harassment to the other parties to the arbitration.

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12. It is thus seen that the Supreme Court has deferred the adjudication of aspects relating to frivolous, non-existent and malafide claims from the referral stage till the arbitration proceedings eventually come to an end. The relevant extracts of Goqii Technologies (P) Ltd. reads as under:-

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“20. As observed in Krish Spg. [SBI General Insurance Co. Ltd. v. Krish Spg., (2024) 12 SCC 1 : 2024 SCC OnLine SC 1754 : 2024 INSC 532] , frivolity in litigation too is an aspect which the referral court should not decide at the stage of Section 11 as the arbitrator is equally, if not more, competent to adjudicate the same.

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21. Before we conclude, we must clarify that the limited jurisdiction of the referral courts under Section 11 must not be misused by parties in order to force other parties to the arbitration agreement to participate in a time consuming and costly arbitration process. This is possible in instances, including but not limited to, where the claimant canvasses the adjudication of non-existent and mala fide claims through arbitration.

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22. With a view to balance the limited scope of judicial interference of the referral courts with the interests of the parties who might be constrained to participate in the arbitration proceedings, the Arbitral Tribunal may direct that the costs of the arbitration shall be borne by the party which the Tribunal ultimately finds to have abused the process of law and caused unnecessary harassment to the other party to the arbitration. Having said that, it is clarified that the aforesaid is not to be construed as a determination of the merits of the matter before us, which the Arbitral Tribunal will rightfully be equipped to determine.”

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13. In view of the aforesaid, the scope at the stage of Section 11 proceedings is akin to the eye of the needle test and is limited to the extent of finding a prima facie existence of the arbitration agreement and nothing beyond it. The jurisdictional contours of the referral Court, as

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Signature Not Verified

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Signature Not Verified

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Signed By:PRIYA Signing Date:20.05.2025 18:15:47

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Signed By:PURUSHAINDRA KUMAR KA URAV

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meticulously delineated under the 1996 Act and further crystallised through a consistent line of authoritative pronouncements by the Supreme Court, are unequivocally confined to a prima facie examination of the existence of an arbitration agreement. These boundaries are not merely procedural safeguards but fundamental to upholding the autonomy of the arbitral process. Any transgression beyond this limited judicial threshold would not only contravene the legislative intent enshrined in Section 8 and Section 11 of the 1996 Act but also risk undermining the sanctity and efficiency of arbitration as a preferred mode of dispute resolution. The referral Court must, therefore, exercise restraint and refrain from venturing into the merits of the dispute or adjudicating issues that fall squarely within the jurisdictional domain of the arbitral tribunal. It is thus seen that the scope of enquiry at the referral stage is conservative in nature. A similar view has also been expressed by the Supreme Court in the case of Ajay Madhusudan Patel v. Jyotrindra S. Patel” .

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In view of the fact that disputes have arisen between the parties and there is an arbitration clause in the contract, this Court is inclined to appoint an Arbitrator to adjudicate upon the disputes between the parties.

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Accordingly, Mr. Varun Mohan (Mobile No.- +91 9643728966 and email [email protected]) is appointed as the sole Arbitrator. 9. The arbitration would take place under the aegis of the Delhi International Arbitration Centre (DIAC) and would abide by its rules and regulations. The learned Arbitrator shall be entitled to fees as per the Schedule of Fees maintained by the DIAC.

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The learned arbitrator is also requested to file the requisite disclosure under Section 12 (2) of the Act within a week of entering on reference. 11. The registry is directed to send a receipt of this order to the learned arbitrator through all permissible modes, including through e-mail. 12. All rights and contentions of the parties in relation to the claims/counter-claims are kept open, to be decided by the learned Arbitrator on their merits, in accordance with law.

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Signature Not Verified

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Signature Not Verified

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Signed By:PRIYA Signing Date:20.05.2025 18:15:47

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Signed By:PURUSHAINDRA KUMAR KA URAV

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Needless to say, nothing in this order shall be construed as an expression of opinion of this Court on the merits of the controversy between the parties. Let the copy of the said order be sent to the appointed Arbitrator through the electronic mode as well.

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Accordingly, the instant petition stands disposed of.

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PURUSHAINDRA KUMAR KAURAV, J

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MAY 09, 2025/p/sph

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Signature Not Verified Signed By:PURUSHAINDRA KUMAR KA URAV

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Signature Not Verified

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Signed By:PRIYA Signing Date:20.05.2025 18:15:47

Rahul Jain v. Fiitjee Ltd. & Anr.

Case brief

What is this about?

What did the court decide?

Rahul Jain v. Fiitjee Ltd. & Anr.

Case brief

What is this about?

What did the court decide?

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