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of <h1>Consortium contract arbitration invoked by one member: tribunal appointment upheld at Section 11 stage, appeal dismissed</h1> The dominant issue was whether, at the Section 11 stage, a HC could constitute an arbitral tribunal when arbitration was invoked by a single consortium ... Invocation of arbitration in its individual capacity by one of the members of the Consortium - constitution of AT on the basis of a prima facie test of arbitrability - HELD THAT:- The legislative policy under the Act 1996 strongly favours minimal judicial intervention at the pre arbitral stage. A long line of precedents, such as Duro Felguera SA v Gangavaram Port Ltd [2017 (10) TMI 1304 - SUPREME COURT], the Constitution Bench decision in Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, In Re [2023 (12) TMI 897 - SUPREME COURT (LB)] have authoritatively settled that the enquiry under Section 11 is confined to a prima facie determination of the existence of an arbitration agreement and no further. The referral court is required to undertake only a prima facie determination of the existence of an arbitration agreement and refrain from entering into contentious factual or legal issues related to authority, capacity, arbitrability, maintainability, or merits of claims. It is certainly a matter of institutional discipline for the referral courts to enable “parties” to identify and exercise alternative remedies, particularly that of arbitration, with clarity and consistency. The question whether a member of a consortium can itself invoke Section 11 of the Act, 1996 is not one that admits of a monolithic or a uniform answer. Answer to that question will necessarily depend on enquiry into the terms of the principal contract, as well as the Consortium Agreement. The specific terms of the Consortium Agreement, parties to that agreement, and the nature of the rights and mutual obligations that the agreement creates will have to be examined in detail. Once the High Court was satisfied that an arbitration agreement prima facie existed, an aspect neither seriously disputed nor refutable at this stage, its decision to constitute the AT cannot be faulted - It is also an admitted fact that the AT thereafter examined the issue as to whether the applicant is a veritable party or not. The High Court has not committed any error in constituting the AT in exercise of its powers under Sections 11(6) and 11(6-A) of the Act, 1996. The AT will consider all questions including preliminary objections relating to maintainability of the arbitration on their own merit. Appeal dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether, at the Section 11(6) stage, the Court's scrutiny is confined to a prima facie examination of the existence of an arbitration agreement under Section 11(6-A), leaving disputes on 'capacity/authority' and other preliminary objections to the Arbitral Tribunal under Section 16. (ii) Whether the High Court erred in constituting the Arbitral Tribunal when arbitration was invoked by a single consortium member in its individual capacity, despite objections that only the consortium could invoke arbitration and that maintainability issues required rejection at the referral stage. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Scope of Court's enquiry under Section 11(6) read with Section 11(6-A), and allocation of jurisdiction to the Arbitral Tribunal under Section 16 Legal framework (as discussed by the Court): The Court examined the statutory restraint in Section 11(6-A) limiting the referral court to examining the 'existence of an arbitration agreement', and the competence of the Arbitral Tribunal under Section 16 to rule on its own jurisdiction, including objections concerning existence, validity, and jurisdictional objections. The Court emphasised minimal judicial intervention at the pre-arbitral stage and the doctrinal basis of kompetenz-kompetenz. Interpretation and reasoning: The Court held that, post Section 11(6-A), the referral court must undertake only a prima facie determination of the existence of an arbitration agreement and should not enter into contentious issues requiring detailed contractual construction or evidence. The Court reasoned that disputes such as whether an entity is a 'veritable party', questions of authority/capacity, maintainability, arbitrability-related objections, and merits-linked controversies typically require deeper factual and legal enquiry and therefore fall within the Arbitral Tribunal's domain under Section 16. The Court rejected the approach that would require a 'mini trial' at the Section 11 stage by assessing disputed facts and surrounding evidence in depth. Conclusions: The Court conclusively decided that the High Court correctly applied the prima facie test of 'existence of an arbitration agreement' and was not required (and was not permitted) to adjudicate disputed questions regarding an individual consortium member's authority/capacity to invoke arbitration, the continuing existence of the consortium, need for consent of other consortium partners, or maintainability concerns linked to liquidation; these must be left to the Arbitral Tribunal under Section 16. Issue (ii): Validity of the High Court's constitution of the Arbitral Tribunal despite objections that an individual consortium member could not invoke arbitration Legal framework (as discussed by the Court): The Court considered that the referral court's role is confined to prima facie satisfaction on the existence of the arbitration agreement, and that complexities regarding whether a consortium member qualifies as a 'party' (or 'veritable party') to the arbitration agreement should generally be decided by the Arbitral Tribunal after considering contractual provisions and surrounding evidence. Interpretation and reasoning: The Court acknowledged the objection that a consortium member, in its individual capacity, could not invoke arbitration, but held that the answer is not uniform and depends on detailed examination of the principal contract, the consortium agreement, and the rights/obligations created thereby. The Court held that, at the referral stage, it is sufficient if there is a prima facie basis to treat the invoking party as qualifying for reference to arbitration; the deeper determination-whether the invoking member is in fact entitled to invoke arbitration individually, whether the consortium continues, and whether consent of other members is necessary-requires evidence-based adjudication by the Arbitral Tribunal. The Court also treated the existence of an arbitration agreement as prima facie established for Section 11 purposes, making the High Court's constitution of the tribunal unimpeachable within the narrow Section 11(6-A) enquiry. Conclusions: The Court upheld the High Court's order constituting the Arbitral Tribunal, holding that no jurisdictional error occurred at the Section 11 stage. The Court directed that all preliminary objections-including the objection that arbitration could not be invoked unilaterally by one consortium member, as well as questions about consortium status, consent requirements, and maintainability issues connected to liquidation-remain open for determination by the Arbitral Tribunal under Section 16.
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