Picasso Digital Media Pvt. Ltd. Petitioner v. Pick-A-Cent Consulatancy Service Pvt. Ltd.

Factual and Procedural Background

A Memorandum of Understanding dated 1 July 2009 was entered into between the Petitioner and the Respondent at New Delhi under which the Petitioner agreed to grant the Respondent a franchise of "Picasso Animation College" at Bangalore. The MoU contains clause 8 providing that any dispute or difference arising from the Agreement would be referred to a sole arbitrator. The Respondent does not deny execution of the MoU or existence of the arbitration clause. The Respondent contended before the Court that the Petitioner made a misrepresentation and played a fraud, and therefore the dispute should be litigated in Court rather than referred to arbitration.

Legal Issues Presented

1. Whether an arbitration agreement exists between the parties governing the disputes arising from the MoU.
2. Whether allegations of fraud/misrepresentation preclude reference of the dispute to arbitration and instead require adjudication by a Court (as argued using N. Radhakrishnan v. Maestro Engineers (2009)).
3. What is the effect of the post‑2015 amendment to Section 11 of the Arbitration and Conciliation Act, 1996 (specifically sub‑section (6A)) on the Court's power to examine allegations raised to resist appointment of an arbitrator.

Arguments of the Parties

Respondent's Arguments

• The Respondent argued that the Petitioner committed a fraud by misrepresenting that it was the sole and exclusive owner of the marks in question, which induced the Respondent to execute the Agreement.
• Relying on N. Radhakrishnan v. Maestro Engineers (2009) (13) SCALE 403, the Respondent submitted that where allegations of fraud are made, the appropriate forum is the Court and such disputes should not be referred to arbitration.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court began by recording undisputed facts: the parties entered into the MoU dated 1 July 2009 and the MoU contains an arbitration clause (clause 8). It noted the Respondent's objection based on an earlier decision (N. Radhakrishnan) that fraud allegations should be tried by a Court. The Court then examined the legal position in light of the amendments to the Arbitration and Conciliation Act, 1996 effective 23 October 2015, in particular sub‑section (6A) of Section 11 which provides that, while considering applications under Section 11, the Supreme Court or High Court "shall... confine to the examination of the existence of an arbitration agreement."

Applying Section 11(6A), the Court limited its inquiry to whether an arbitration agreement exists between the parties. Because the Respondent did not deny having entered into the MoU containing the arbitration clause, the Court held it could not decide the substantive contention of misrepresentation/fraud at this stage. The Court concluded that questions of misrepresentation and the merits of the parties' claims and counter‑claims must be addressed in the arbitration proceedings.

On that basis, without expressing any opinion on the merits, the Court appointed a sole arbitrator and directed the arbitration to proceed under the aegis of the Delhi International Arbitration Centre, with fees governed by the Delhi High Court Arbitration Centre (Arbitrators' Fees) Rules, and required compliance with the Arbitration and Conciliation Act, 1996 as amended.

Holding and Implications

DISPOSED OF

Direct effect on the parties:

• The petition is disposed of and the Court appointed Ms. Bimla Makin, a former District & Sessions Judge, Delhi (Mob. No. 9910384624), as the sole Arbitrator to adjudicate the disputes between the parties, including claims and counter‑claims.
• The arbitration shall proceed under the aegis of the Delhi International Arbitration Centre (DAC) and the Arbitrator's fees shall be in terms of the Delhi High Court Arbitration Centre (Arbitrators' Fees) Rules.
• The requirements of the Arbitration and Conciliation Act, 1996 as amended with effect from 23 October 2015 shall be complied with. Copies of the order are to be communicated to the learned Arbitrator and the Additional Coordinator, DAC.

Broader implications:

The Court confined its role to determining existence of an arbitration agreement in light of Section 11(6A) and did not adjudicate substantive allegations of fraud. The opinion does not purport to set any new legal precedent beyond applying the post‑2015 statutory limitation on the Court's inquiry under Section 11; it expressly refrains from commenting on the merits of the underlying dispute.