Section 11 referral stage limits courts to a prima facie review; disputed novation must go to arbitration.

At the Section 11 referral stage, the Court applies only a prima facie test to see whether an arbitration agreement exists and should not finally decide disputed questions of novation or contract construction where the parties' rival documents and an entire agreement clause require a merits inquiry. Questions of validity, enforceability, and novation are ordinarily for the arbitral tribunal unless non-existence or non-arbitrability is manifest. The plea that the memorandum of understanding stood novated by the later shareholders' agreement could not be conclusively determined at referral stage, so the dispute was referred to arbitration.

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Issues: Whether, at the Section 11 referral stage, the Court could finally decide the plea that the memorandum of understanding stood novated by the later shareholders' agreement and thereby decline appointment of an arbitrator, or whether such a controversy had to be left to the arbitral tribunal.

Analysis: The dispute turned on competing versions of the contractual arrangement between the parties, including the scope of the memorandum of understanding, the shareholders' agreement, and the effect of the entire agreement clause. The governing principle under the amended arbitration law is that the referral court applies only a prima facie examination to see whether an arbitration agreement exists, and in debatable cases it should not undertake a detailed construction of the rival contracts or a full merits inquiry. Questions of novation, validity, and enforceability of the arbitration agreement are ordinarily intertwined with the merits and are for the arbitral tribunal to decide, unless the case is one where non-existence or non-arbitrability is manifest.

Conclusion: The plea of novation could not be conclusively decided at the Section 11 stage, and the matter had to be referred to arbitration.

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