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Case

Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. (1999)

Say the ratio out loud before you open Reasoning — recalling it unprompted is exactly what the exam pays for.

Why it matters

Consent cannot create jurisdiction that the law gives to a particular court alone. This is the standard illustration of a non-arbitrable subject matter, and the shortest way into the arbitrability discussion in this paper.

Facts

The parties agreed to refer to arbitration the question of the winding up of a company, and an application was made to refer them to arbitration under s. 8.

Held

Section 8 is attracted only to arbitrable disputes — those which the arbitrator is competent or empowered to decide. The power to order the winding up of a company is conferred on the company court by the Companies Act. Since the arbitrator has no jurisdiction to wind up a company, the court cannot make such a reference under s. 8.

Reasoning

Step one — look for the source of the remedy. Winding up is a statutory remedy vested by name in a designated court. The remedy and the forum are given together.

Step two — an arbitrator cannot grant what only a court may grant. An award purporting to wind up a company would be a nullity, so referring the dispute would be futile.

Step three — agreement does not enlarge competence. The parties' consent is the source of the tribunal's authority over them; it is not a source of authority over third parties, creditors or the register.

Exam use

It opens: Which disputes are not arbitrable? — with Chiranjilal Shrilal Goenka on probate as the companion illustration.

Frame the test in an essay as the course frames it: a dispute is non-arbitrable where the relief sought operates in rem or is entrusted by statute to a special forum. Winding up affects the general body of creditors and contributories; probate produces a judgment in rem; each is therefore outside the reach of a private tribunal.

Contrast it with the ordinary case, where the relief claimed binds only the parties to the reference; there the tribunal's authority, drawn from their consent, is enough.

It does not decide that no dispute involving a company can be arbitrated; ordinary contractual claims between a company and its counterparty remain arbitrable. It is the winding-up relief that is reserved.

Parts of the judgment

Precedents cited