In the case of Emaar India Ltd Vs. Tarun Agarwal Projects LLP. The parties signed a Collaboration Agreement on May 7, 2009 in order to create a residential colony in Gurugram . After that, the parties signed an additional agreement dated 19.04.2011.A disagreement developed between the parties as a result of the appellants' alleged contract violation. In response, the respondent served legal notice requesting ownership of the apartments and a specific amount of money. The appellants were asked to choose their arbitrator after the respondent named its arbitrator.
However, the appellant declined to name the arbitrator in its response to the notice of arbitration since the purported dispute fell beyond the purview of the arbitration agreement. The High Court then granted the respondent's plea for the appointment of the arbitrator.
The appellant appealed the impugned ruling to the Supreme Court after being upset by it.
The Court determined that Clause 36 mandates that all disputes, except those falling under Clause 36, must be submitted to arbitration if they are related to Clauses 3, 6, or 9 of the Contract. The Court further held that Clause 37 mandates that all disputes, save and except those falling under Clause 36, must be submitted to arbitration.As a result, if a disagreement falls under Clause 36, there cannot be arbitration, according to the Court, because Clause 37 expressly excludes from arbitration those problems falling under Clause 36.
The Court ruled that an arbitration agreement must be properly interpreted and that the parties' purpose to exempt some matters from arbitration must be given effect. Furthermore, it was decided that a party could not ask for more than what was specified in the contract and that the court could not, even if it were appropriate, create a new contract on their behalf.
In Vidya Drolia and Indian Oil Corporation Limited v. NCC Limited , the Court held that where an objection to that effect is raised by the respondent, the High Courts can initiate a preliminary investigation to decide the question of "Excepted Matters" when appointing the arbitrator.
The High Court erred in choosing the arbitrator without first evaluating whether the issue genuinely falls inside the purview of the arbitration provision or the "excepted" category, the Court concluded.
As a result, the Court overturned the contested order and returned the case to the High Court so that it might conduct a preliminary investigation into the aforementioned issue.