TaxTMI 
TaxTMI 
2020 (12) TMI 1227
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....pable of being resolved through arbitration; and (ii) the conundrum - "who decides" - whether the court at the reference stage or the arbitral tribunal in the arbitration proceedings would decide the question of non-arbitrability. The second aspect also relates to the scope and ambit of jurisdiction of the court at the referral stage when an objection of non-arbitrability is raised to an application Under Section 8 or 11 of the Arbitration and Conciliation Act, 1996 (for short, the 'Arbitration Act'). 3. We are not reproducing and examining the factual matrix, as we are only answering the legal issues raised. However, we would refer, in brief, to the legal reasoning and the ratio in Himangni Enterprises and the counter view expressed in the order of reference in Vidya Drolia. 4. Himangni Enterprises upheld the decision of the High Court and the District Court rejecting the application filed by the Defendant-tenant Under Section 8 of the Arbitration Act in a civil suit seeking its eviction from a shop in a commercial complex in New Delhi. The suit was also for the recovery of arrears of rent and permanent injunction. The tenancy in question was not protecte....
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....reement'. Reference was made to observations of Kurian Joseph, J. in Duro Felguera, S.A. v. Gangavaram Port Limited (2017) 9 SCC 729, to the effect that the scope of Section 11(6-A) is limited, only to see whether an arbitration agreement exists-nothing more, nothing less. The legislative policy and purpose are to essentially minimize judicial intervention at the appointment stage. Referring to Sections 111, 114 and 114A of the Transfer of Property Act, it is observed that there is nothing in this Act and law to show that a dispute relating to the determination of lease, arrears of rent etc. cannot be decided by an arbitrator. The grounds predicated on public policy could be raised before the arbitrator as they could be raised before the court. The arbitrator could well abide by the provisions of Sections 114 and 114A, and apply the public policy considerations for the protection of tenants as a class. Referring to Booz Allen & Hamilton Inc., it was observed that the right in rem is a right exercisable against the world at large and is not amenable to arbitration, whereas in case of rights in personam an interest is protected against a specific individual, and is referable to a....
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....d arguments, as the same would be dealt with and appreciated during the course of our reasoning. However, we acknowledge that the oral submissions and compilations have been of immense help. Similarly, scholarly writings in books and articles expressing diverse views on non-arbitrability and Who Decides Non-arbitrability have facilitated us unclog the legal and jurisprudential nuances and contradictions to try and resolve the issues in the context of domestic law of arbitration in India. 7. At the outset we begin with the caveat that this judgment does not examine and interpret the transnational provisions of arbitration in Part II of the Arbitration Act. Non-Arbitrability 8. Non-arbitrability is basic for arbitration as it relates to the very jurisdiction of the arbitral tribunal. An arbitral tribunal may lack jurisdiction for several reasons. Non-arbitrability has multiple meanings. Booz Allen & Hamilton Inc. refers to three facets of non-arbitrability, namely: (i) Whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties....
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....es fraud); (6) some precondition for permissible arbitration has not been met (for example, a time-limit on initiating arbitration); (7) the party seeking arbitration has waived its right to arbitrate or is estopped from claiming that right. (#Stage 1 is the referral stage.) 9. Validity of the legal ratio in Himangni Enterprises cannot be decided without examining when a subject matter or dispute is non-arbitrable. Understanding of the different facets of non-arbitrability is important as it would help us appreciate the consequences. This would assist in deciding whether the court or the arbitral tribunal has the jurisdiction to decide the particular facet of non-arbitrability. The jurisdiction could well depend on the nature and type of the non-arbitrability alleged. The order of reference in Vidya Drolia draws distinction for the purpose of exercise of jurisdiction between non-arbitrability on account of existence and non-arbitrability on account of the validity of an arbitration agreement. 10. Arbitration is a private dispute resolution mechanism whereby two or more parties agree to resolve their current or future disputes by an arbitral tribunal, as an alternativ....
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.... requirements stipulated in the Section 7 of the Arbitration Act. Sections 12 to 18 of the Contract Act state when a person can be said to be of a sound mind for the purpose of contracting and define the expressions 'consent', 'free consent', 'coercion', 'undue influence', 'fraud' and 'misrepresentation'. Sections 19 to 23 relate to voidability of agreements, the power to set aside contracts induced by undue influence, when both the parties are under mistake as to a matter of fact, effect of a mistake as to the law, effect of a mistake by one party as to a matter of fact and what considerations and objects are lawful and unlawful. Sections 24 to 30 relate to void contracts and Sections 26 and 27 therein state that agreements in restraint of marriage and agreements in restraint of trade, respectively are void, albeit Explanation (1) to Section 27 saves agreements for not carrying out the business of which goodwill is sold. Section 28 of the Contract Act states that agreements in restraint of legal proceedings are void, but Explanation (1) specifically saves contracts by which two or more persons agree that any dispute, or one which may....
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....charge of the contract by performance or simple termination by express or implied consent. Similar plea of discharge can be raised opposing an application for reference on the ground that the claim is long barred and dead or there are no outstanding disputes as the parties have accepted part performance or have absolved the other side from performance, fully or partly, on account of frustration or otherwise. The contention is that once the original contract stands extinguished, abandoned, repudiated or substituted, the arbitration Clause in the underlying/original contract perishes with it. 15. Arbitration being a matter of contract, the parties are entitled to fix boundaries as to confer and limit the jurisdiction and legal authority of the arbitrator. An arbitration agreement can be comprehensive and broad to include any dispute or could be confined to specific disputes. The issue of scope of arbitrator's jurisdiction invariably arises when the disputes that are arbitrable are enumerated or the arbitration agreement provides for exclusions as in case of 'excepted matters'. The arbitration agreement may be valid, but the arbitral tribunal in view of the will of the ....
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....icial proceedings and an application for reference of the dispute to arbitration Under Section 11 of the Arbitration Act. In Booz Allen & Hamilton Inc. it was observed: 32. The nature and scope of issues arising for consideration in an application Under Section 11 of the Act for appointment of arbitrators, are far narrower than those arising in an application Under Section 8 of the Act, seeking reference of the parties to a suit to arbitration. While considering an application Under Section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of "arbitrability" or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the Arbitral Tribunal. If the arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application Under Section 34 of the Act, relying upon Sub-section (2)(b)(i) of that section. However, in SBP & Co. v. Patel Engineering Ltd. and Anr. (2005) 8 SCC 618, the majority judgment of the Constitution Bench of....
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.... of the Arbitration Act need not set out in detail the disputes or the claims and may briefly refer to the subject matter or broad contours of the dispute. However, where judicial proceedings are initiated and pending, specific details of the claims and disputes are normally pleaded and, therefore, the court or the judicial authority has the advantage of these details. There is a difference between a non-arbitrable claim and non-arbitrable subject matter. Former may arise on account of scope of the arbitration agreement and also when the claim is not capable of being resolved through arbitration. Generally non-arbitrability of the subject matter would relate to non-arbitrability in law. Further, the decision in Sukanya Holdings (P) Ltd. has to be read along with subsequent judgment of this Court in Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. and Ors. (2013) 1 SCC 641. The effect of amendment by Act 3 of 2016 with retrospective effect from 20.10.2015 on Sections 8 and 11 of the Arbitration Act with the stipulation that the amendments apply notwithstanding any earlier judgment has been examined by us under the heading Who Decides Non-arbitrability. ....
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....is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, a judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and a judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself. (Vide Black's Law Dictionary.) 38. Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to subordinate rights in pers....
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....ration, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes. 22. Landlord-tenant disputes governed by rent control legislation are not actions in rem, yet they are non-arbitrable. In Booz Allen & Hamilton Inc. reference was made to Russell on Arbitration (22nd Edition) in Para 2.007 at Page 28 wherein the author has observed that certain matters in English Law are reserved for the court alone and if an arbitral tribunal purports to deal with them the resulting award would be unenforceable. These matters would include where the type of remedy required is not one which the arbitral tribunal is empowered to give. Reference was made to Law and Practice of Commercial Arbitration in England (2nd Ed. 1989) by Mustill and Boyd which states that certain types of remedies which the arbitrator can award are l....
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....amasivam and Ors. (2016) 10 SCC 386 referring to the dictum in Booz Allen & Hamilton Inc., has made two important comments: 35...This Court held that this class of actions operates in rem, which is a right exercisable against the world at large as contrasted with a right in personam which is an interest protected against specified individuals. All disputes relating to rights in personam are considered to be amenable to arbitration while rights in rem are required to be adjudicated by courts and public tribunals... xx xx xx 38. Hence, in addition to various classes of disputes which are generally considered by the courts as appropriate for decision by public fora, there are classes of disputes which fall within the exclusive domain of special fora under legislation which confers exclusive jurisdiction to the exclusion of an ordinarily civil court. That such disputes are not arbitrable dovetails with the general principle that a dispute which is capable of adjudication by an ordinary civil court is also capable of being resolved by arbitration. However, if the jurisdiction of an ordinary civil court is excluded by the conferment of exclusive jurisdiction on....
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.... jurisdiction, but only one designated court, namely, a principal Civil Court of original jurisdiction. All this goes to show that by necessary implication, disputes arising under the Indian Trusts Act cannot possibly be referred to arbitration. 26. In Emaar MGF Land Limited, the Division Bench referred to the object and the purpose behind the Consumer Protection Act, 1986 as a law that meets the long-felt necessity of protecting the common man as a consumer against wrongs and misdeeds for which the remedy under the ordinary law has become illusory as the enforcement machinery does not move, or moves ineffectively or inefficiently. Thus, to remove helplessness and empower consumers against powerful businesses and the might of the public bodies, the enactment has constituted consumer forums with extensive and wide powers to award, wherever appropriate, compensations to the consumers and to impose penalties for non-compliance with their orders. The Consumer Protection Act has specific provisions for execution and effective implementation of their orders which powers are far greater than the power of the ordinary civil court. After referring to the amendments made to Sections 8 and....
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....perty cannot be referred to arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or Section 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immovable property. 35. It is stated in Halsbury's Laws of England, 4th Edn., (Arbitration, Vol. 2, para 503) as follows: 503. Nature of the dispute or difference.--The dispute or difference which the parties to an arbitration agreement agree to refer must consist of a justiciable issue triable civilly. A fair test of this is whether the difference can be compromised lawfully by way of accord and satisfaction (Cf. Bac Abr Arbitrament and Award A). 28. In V.H. Patel & Co. and Ors. v. Hirubhai Himabhai Patel and Ors. (2000) 4 SCC 368 this Court has held that in deference to the arbitration Clause covering all matters there was no principle of law or provision that bars an arbitrator from deciding whether the dissolution of a partnership is just and equitable. 29. Having examined and analysed the judgments, we would coalesc....
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....personam, "although it may concern a res, merely determines the rights of the litigants inter se to the res".7 Distinction between judgments in rem and judgments in personam turns on their power as res judicata,8 i.e. judgment in rem would operate as res judicata against the world, and judgment in personam would operate as res judicata only against the parties in dispute. Use of expressions "rights in rem" and "rights in personam" may not be correct for determining non-arbitrability because of the inter-play between rights in rem and rights in personam. Many a times, a right in rem results in an enforceable right in personam. Booz Allen & Hamilton Inc. refers to the statement by Mustill and Boyd that the subordinate rights in personam derived from rights in rem can be ruled upon by the arbitrators, which is apposite. Therefore, a claim for infringement of copyright against a particular person is arbitrable, though in some manner the arbitrator would examine the right to copyright, a right in rem. Arbitration by necessary implication excludes actions in rem. 31. Exclusion of actions in rem from arbitration, exposits the intrinsic limits of arbitration as a private dispute resolut....
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....lds including commerce and economic, legislation in all forms, taxation, eminent domain and police powers which includes maintenance of law and order, internal security, grant of pardon etc., as distinguished from commercial activities, economic adventures and welfare activities.11 Similarly, decisions and adjudicatory functions of the State that have public interest element like the legitimacy of marriage, citizenship, winding up of companies, grant of patents, etc. are non-arbitrable, unless the statute in relation to a regulatory or adjudicatory mechanism either expressly or by clear implication permits arbitration. In these matters the State enjoys monopoly in dispute resolution. 33. Fourth principle of non-arbitrability is alluded to in the Order of Reference, which makes specific reference to Vimal Kishor Shah, which decision quotes from Dhulabhai, a case which dealt with exclusion of jurisdiction of civil courts Under Section 9 of the Code of Civil Procedure. The second condition in Dhulabhai reads as under: 32. (2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the suffic....
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....ty shall be determined by the court or tribunals so empowered and vested with exclusive jurisdiction. Therefore, mere creation of a specific forum as a substitute for civil court or specifying the civil court, may not be enough to accept the inference of implicit non-arbitrability. Conferment of jurisdiction on a specific court or creation of a public forum though eminently significant, may not be the decisive test to answer and decide whether arbitrability is impliedly barred. 34. Implicit non-arbitrability is established when by mandatory law the parties are quintessentially barred from contracting out and waiving the adjudication by the designated court or the specified public forum. There is no choice. The person who insists on the remedy must seek his remedy before the forum stated in the statute and before no other forum. In Transcore v. Union of India and Anr. (2008) 1 SCC 125, this Court had examined the doctrine of election in the context whether an order under proviso to Section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (the 'DRT Act') is a condition precedent to taking recourse to the Securitisation and Reconstruction of ....
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....ference to the courts or public forum is either completely denied or could be curtailed. In essence, it is necessary to examine if the statute creates a special right or liability and provides for the determination of each right or liability by the specified court or the public forum so constituted, and whether the remedies beyond the ordinary domain of the civil courts are prescribed. When the answer is affirmative, arbitration in the absence of special reason is contraindicated. The dispute is non-arbitrable. 35. In M.D. Frozen Foods Exports Private Limited and Ors. v. Hero Fincorp Limited (2017) 16 SCC 741 and following this judgment in Indiabulls Housing Finance Limited v. Deccan Chronicle Holdings Limited and Ors. (2018) 14 SCC 783 it has been held that even prior arbitration proceedings are not a bar to proceedings under the NPA Act. The NPA Act sets out an expeditious, procedural methodology enabling the financial institutions to take possession and sell secured properties for non-payment of the dues. Such powers, it is obvious, cannot be exercised through the arbitral proceedings. 36. In Transcore, on the powers of the Debt Recovery Tribunal (DRT) under the DRT Act, i....
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....nd deny these institutions of the specific rights including the modes of recovery specified in the DRT Act. Therefore, the claims covered by the DRT Act are non-arbitrable as there is a prohibition against waiver of jurisdiction of the DRT by necessary implication. The legislation has overwritten the contractual right to arbitration. 37. In Natraj Studios (P) Ltd., a case under the Arbitration Act, 1940, it was observed that on broader consideration of public policy the disputes were non-arbitrable. In N. Radhakrishnan v. Maestro Engineers and Ors. (2010) 1 SCC 72 reliance was placed on the following observations in Abdul Kadir Samshuddin Bubere v. Madhav Prabharkar Oak and Anr. AIR 1962 SC 406: There is no doubt that when a serious allegation of fraud is laid against the party and the party who charged with the fraud desires that the matter should be tried in the open court it would be sufficient cause for the court for the court not to order an arbitration agreement to be filed and not to make the reference. N. Radhakrishnan upheld the order rejecting the application Under Section 8 of the Arbitration Act on the ground that it would be in furtherance of justice tha....
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....ct to observe that allegations of fraud can be made a subject matter of arbitration by relying on Russell on Arbitration, Redfer Hunter on International Arbitration and Gary B. Born in International Commercial Arbitration. Reliance was placed on the principle of separation and legal effect of the doctrine of competence-competence, to observe: 13. Once an application in due compliance with Section 8 of the Arbitration Act is filed, the approach of the civil court should be not to see whether the court has jurisdiction. It should be to see whether its jurisdiction has been ousted. There is a lot of difference between the two approaches. Once it is brought to the notice of the court that its jurisdiction has been taken away in terms of the procedure prescribed under a special statute, the civil court should first see whether there is ouster of jurisdiction in terms or compliance with the procedure under the special statute. The general law should yield to the special law--generalia specialibus non derogant. In such a situation, the approach shall not be to see whether there is still jurisdiction in the civil court under the general law. Such approaches would only delay the re....
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....tral award.- xx xx xx (2) An arbitral award may be set aside by the Court only if- (a)... (b) the Court finds that-- (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in fore, or (ii) the arbitral award is in conflict with the public policy of India. Explanation 1.--For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.--For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. Section 34(2)(b) consists of two sub-clauses both accrediting the court with the power to set aside an award. Under Sub-clause (i) an award is liable to be set aside when the sub....
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....ion on the court or the special forum set up by law for decision making. Non-arbitrability question cannot be answered by examining whether the statute has a public policy objective which invariably every statue would have. There is a general presumption in favour of arbitrability, which is not excluded simply because the dispute is permeated by applicability of mandatory law. Violation of public policy by the arbitrator could well result in setting aside the award on the ground of failure to follow the fundamental policy of law in India, but not on the ground that the subject matter of the dispute was non-arbitrable. 40. However, the above discussion would not be a complete answer to N. Radhakrishnan that if justice demands, then notwithstanding the arbitration clause, the dispute would be tried in the open court. To accept this reasoning one would have to agree that arbitration is a flawed and compromised dispute resolution mechanism that can be forgone when public interest or public policy demands the dispute should be tried and decided in the court of law. The public policy argument proceeds on the foundation and principle that arbitration is inferior to court adjudication a....
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....o facts, evidence, and relevant case law. Complexity is not sufficient to ward off arbitration. In terms of the mandate of Section 89 of the Code of Civil Procedure and the object and purpose behind the Arbitration Act and the mandatory language of Sections 8 and 11, the mutually agreed arbitration clauses must be enforced. The language of Sections 8 and 11 of the Arbitration Act are peremptory in nature. Arbitration Act has been enacted to promote arbitration as a transparent, fair, and just alternative to court adjudication. Public policy is to encourage and strengthen arbitration to resolve and settle economic, commercial and civil disputes. Amendments from time to time have addressed the issues and corrected the inadequacies and flaws in the arbitration procedure. It is for the stakeholders, including the arbitrators, to assure that the arbitration is as impartial, just, and fair as court adjudication. It is also the duty of the courts at the post-award stage to selectively yet effectively exercise the limited jurisdiction, within the four corners of Section 34(2)(b)(ii) read with Explanation 1 and 2 and check any conflict with the fundamental policy of the applicable law. We w....
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....ire contract and above all, the agreement of arbitration, rendering it void, or (2) whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain." to observe in Avitel Post Studioz Limited: it is clear that serious allegations of fraud arise only if either of the two tests laid down are satisfied and not otherwise. The first test is satisfied only when it can be said that the arbitration Clause or agreement itself cannot be said to exist in a clear case in which the court finds that the party against whom breach is alleged cannot be said to have entered into the agreement relating to arbitration at all. The second test can be said to have been met in cases in which allegations are made against the State or its instrumentalities of arbitrary, fraudulent, or mala fide conduct, thus, necessitating the hearing of the case by a writ court in which questions are raised which are not predominantly questions arising from the contract itself or breach thereof but questions arising in the public law domain. The judgment in Avitel Post Studioz Limited interprets Section 17 of the Contract Act to hold that Se....
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.... caution as observed in Olympus Superstructures Pvt. Ltd.: 35...Reference is made there to certain disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, which cannot be referred to arbitration. It has, however, been held that if in respect of fats relating to a criminal matter, say, physical injury, if there is a right to damages for personal injury, then such a dispute can be referred to arbitration (Keir v. Leeman). Similarly, it has been held that a husband and a wife may refer to arbitration the terms on which they shall separate, because they can make a valid agreement between themselves on that matter (Soilleux v. Herbst, Wilson v. Wilson and Cahill v. Cahill). 46. Applying the above principles to determine non-arbitrability, it is apparent that insolvency or intracompany disputes have to be addressed by a centralized forum, be the court or a special forum, which would be more efficient and has complete jurisdiction to efficaciously and fully dispose of the entire matter. They are also actions in rem. Similarly, grant and issue of patents and registration of trademarks are e....
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....r foreclose arbitration. However, landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations. Such rights and obligations can only be adjudicated and enforced by the specified court/forum, and not through arbitration. Who decides non-arbitrability? 50. Lord Mustill's well-known comparison of the relationship between courts and arbitrators to a relay race, reads: Ideally, the handling of arbitrable disputes should resemble a relay race. In the initial stages, before the arbitrators are seized of the dispute, the baton is in the grasp of the court; for at that stage there is no other organisation which could take steps to prevent the arbitration agreement for being ineffectual. When the arbitrators take charge they take over the baton and retain it until they have made an award. At this point, having no longer a function to fill, the arbitrators hand back the baton so that the court can in case of need lend its coercive powers to the enforcement of the award. Thus, the legal problem of allocation of decision....
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....sion of non-arbitrability issues at the reference stage would invariably stop, derail and thwart the proceedings in the courts for years. 54. The Arbitration Act based upon the UNCITRAL Model Law introduced an entirely new regimen with the objective to promote arbitration in commercial and economic matters as an alternative dispute resolution mechanism that is fair, responsive and efficient to contemporary requirements. One of the primary objectives of the Arbitration Act is to reduce and minimize the supervisory role of courts. Accordingly, the statutory powers of the arbitral tribunal to deal with and decide jurisdictional issues of non-arbitrability were amplified and the principles of separation and competence-competence were incorporated, while the courts retained some power to have a 'second look' in the post-award challenge proceeding. On the jurisdiction of the court at the referral stage, views of this Court have differed and there have been statutory amendments to modify and obliterate the legal effect of the court decisions. 55. The legal position as to who decides the question of non-arbitrability under the Arbitration Act can be divided into four phases. ....
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....his first statement on the substance of the dispute, refer the parties to arbitration. (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.] (2) The application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. (2) The application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. [Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under Sub-section (1), and the said agreement or certified copy is retained by the other party t....
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....he third arbitrator who shall act as the presiding arbitrator. (3-A) The Supreme Court and the High Court shall have the power to designate, arbitral institutions, from time to time, which have been graded by the Council Under Section 43-I, for the purposes of this Act: Provided that in respect of those High Court jurisdictions, where no graded arbitral institution are available, then, the Chief Justice of the concerned High Court may maintain a panel of arbitrators for discharging the functions and duties of arbitral institution and any reference to the arbitrator shall be deemed to be an arbitral institution for the purposes of this section and the arbitrator appointed by a party shall be entitled to such fee at the rate as specified in the Fourth Schedule: Provided further that the Chief Justice of the concerned High Court may, from time to time, review the panel of arbitrators.] (4) If the appointment procedure in Sub-section (3) applies and-- (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days fro....
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...., including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. (6) Where, under an appointment procedure agreed upon by the parties,-- (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. (6) Where, under an appointment procedure agreed upon by the parties,-- (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of the....
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....ting from the prospective arbitrator in terms of Sub-section (1) of Section 12, and have due regard to-- (a) any qualifications required for the arbitrator by the agreement of the parties; and (b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator. (8) [The arbitral institution referred to in Sub-sections (4), (5) and (6)], before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of Sub-section (1) of Section 12, and have due regard to-- (a) any qualifications required for the arbitrator by the agreement of the parties; and (b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.] (9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. (9) In the case of appointment of sole or third....
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....High Court within whose local limits the principal Civil Court referred to in Clause (e) of Sub-section (1) of Section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court. (12) (a) Where the matters referred to in Sub-sections (4), (5), (6), (7), (8) and Sub-section (10) arise in an international commercial arbitration, the reference to the Supreme Court or, as the case may be, the High Court in those Sub-sections shall be construed as a reference to the Supreme Court; and (b) where the matters referred to in Sub-sections (4), (5), (6), (7), (8) and Sub-section (10) arise in any other arbitration, the reference to the Supreme Court or, as the case may be, the High Court in those Sub-sections shall be construed as a reference to the High Court within whose local limits the principal Civil Court referred to in Clause (e) of Sub-section (1) of Section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court. (12) Where the matter referred to in Sub-sections (4), (5), (6) and (8) arise in an international commercial arbitration or any other arbitration, the ....
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....cluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. (4) The arbitral tribunal may, in either of the cases referred to in Sub-section (2) or Sub-section (3), admit a later plea if it considers the delay justified. (5) The arbitral tribunal shall decide on a plea referred to in Sub-section (2) or Sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. (6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with Section 34. xx xx xx Sub-sections (1) and (2) of Section 34 of the Arbitration Act read as under: 34. Application for setting aside arbitral award.--(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-sec....
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....Section 43 of the Arbitration Act reads as under: 43. Limitations.-(1) The Limitation Act, 1963 (36 of 1963), shall apply to arbitrations as it applies to proceedings in Courts. (2) For the purposes of this Section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred in Section 21. (3) Where an arbitration agreement to submit future disputes to arbitration provides that any claim to which the agreement applies shall be barred unless the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper." 57. In, Rani Construction Pvt. Ltd. the Constitution Bench reiterated the earlier view expressed in Mehul Construction Co., that an order appointing an arbitrator Under Section 11 of the Arbitration Act is an administrative order that did not mandate notice and hearing of the other party. Being an administrative ord....
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....tration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator Under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral Tribunal. In Patel Engineering Ltd., the Court also held that Section 16 of the Arbitration Act makes explicit, what is otherwise implicit, that the arbitral tribunal has jurisdiction to Rule on its own jurisdiction, including ruling on objections to existence or validity of the arbitration agreement, but this provision would apply when the parties have gone to the arbitral tribunal without recourse to Sections 8 or 11 of the Arbitration Act and not when the court at the reference stage has decided the jurisdictional issues. Decision of the court at....
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.... Chief Justice/his designate may decide them, if necessary, by taking evidence. Alternatively, he may leave those issues open with a direction to the Arbitral Tribunal to decide the same. If the Chief Justice or his designate chooses to examine the issue and decides it, the Arbitral Tribunal cannot re-examine the same issue. The Chief Justice/his designate will, in choosing whether he will decide such issue or leave it to the Arbitral Tribunal, be guided by the object of the Act (that is expediting the arbitration process with minimum judicial intervention). Where allegations of forgery/fabrication are made in regard to the document recording discharge of contract by full and final settlement, it would be appropriate if the Chief Justice/his designate decides the issue. 24. What is however clear is when a Respondent contends that the dispute is not arbitrable on account of discharge of the contract under a settlement agreement or discharge voucher or no-claim certificate, and the claimant contends that it was obtained by fraud, coercion or undue influence, the issue will have to be decided either by the Chief Justice/his designate in the proceedings Under Section 11 of the....
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....d in arbitration. 61. Paragraph 22 of Boghara Polyfab Private Limited, if read carefully, states that the factors to be considered while deciding an application Under Sections 8 and 11 of the Arbitration Act would require an examination of whether there exists an arbitration agreement, that is, the agreement provides for arbitration proceedings in respect of disputes which have arisen between the parties to the agreement. The latter portion requires the court to apply its mind whether the disputes which have arisen can be settled by the arbitration agreement. The aforesaid observations, in our opinion, would be in conformity with the majority decision of the Constitution Bench in Patel Engineering Ltd. wherein it was observed that Sections 8 and 11 of the Arbitration Act are complimentary in nature and the Court, while exercising powers under the two Sections on whether the matter should be referred to arbitration, enjoys equal powers, otherwise, it would lead to an anomalous situation in that a judicial authority has wider power Under Section 8 but lesser power of examination Under Section 11. 62. In Arasmeta Captive Power Company Private Limited and Anr. v. Lafarge India Pr....
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....ve issue is given. Even at the cost of repetition we must state that it is only for the purpose of finding out whether the arbitral procedure has to be started that the Chief Justice has to record satisfaction that there remains a live issue in between the parties. The same thing is about the limitation which is always a mixed question of law and fact. The Chief Justice only has to record his satisfaction that prima facie the issue has not become dead by the lapse of time or that any party to the agreement has not slept over its rights beyond the time permitted by law to agitate those issues covered by the agreement. It is for this reason that it was pointed out in the above paragraph that it would be appropriate sometimes to leave the question regarding the live claim to be decided by the Arbitral Tribunal. All that he has to do is to record his satisfaction that the parties have not closed their rights and the matter has not been barred by limitation. Thus, where the Chief Justice comes to a finding that there exists a live issue, then naturally this finding would include a finding that the respective claims of the parties have not become barred by limitation. xx xx xx ....
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....o the court has been made in a pending proceeding, arbitration proceedings may commence and continue and even an award can be made. Section 16, it was held, incorporates the principles of separation and competence-competence thereby clearly indicating that the arbitrator can decide his or her own jurisdiction even when the validity of the main contract or the arbitration agreement is challenged. Section 34 states that the Court can go into three different aspects of arbitrability at the post-award stage. Therefore, the Arbitration Act itself envisages that the arbitral tribunal should Rule on the questions of non-arbitrability subject to the second look of the court post the award. This helps in expeditious and quick disposal of matters before the court at the first stage while reserving the court's power to examine the three facets of arbitrability at the third stage. This also prevents the possibility of a multiplicity of trials, an aspect highlighted in Sukanya Holdings (P) Ltd. On the ambit of the Court's jurisdiction at the reference stage, it was observed that the correct approach to the review of the arbitration agreement would be restricted to prima facie finding th....
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....view. [T]he object of the Act would be defeated if the proceedings remain pending in the court even after commencing of the arbitration. It is precisely for this reason that I am inclined to the view that at the pre-reference stage contemplated by Section 45, the court is required to take only a prima facie view for making the reference, leaving the parties to a full trial either before the Arbitral Tribunal or before the court at the post-award stage. D.M. Dharmadhikari, J. in his partly concurring opinion agreed with the view expressed by B.N. Srikrishna, J. on most of the above aspects with the following reservation: 112. Whether such a decision of the judicial authority or the court, of refusal to make a reference on grounds permissible Under Section 45 of the Act would be subjected to further re-examination before the Arbitral Tribunal or the court in which eventually the award comes up for enforcement in accordance with Section 48(1)(a) of the Act, is a legal question of sufficient complexity and in my considered opinion since that question does not directly arise on the facts of the present case, it should be left open for consideration in an appropriate....
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....he scope of the power Under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. and Boghara Polyfab. This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists--nothing more, nothing less. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected. 67. Dr. D.Y. Chandrachud, J. in A. Ayyasamy observed that Section 8 of the Arbitration Act has made a departure from Article 8 of UNCITRAL Model Law as the former uses the expression 'judicial authority' rather than court and the words "unless it finds that the agreement is null and void, inoperative and incapable of being performed" mentioned in Article 8 do not find place in Section 8. Section 16 empowers the arbitral tribunal to Rule upon its own jurisdiction, including the ruling with respect to the existence or validity of the arbitration agreement. Further Clause (b) to Section 16(1) stipulates that a decision by an arbitral tribunal....
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....dence in India must evolve towards strengthening the institutional efficacy of arbitration. Deference to a forum chosen by parties as a complete remedy for resolving all their claims is but part of that evolution. Minimising the intervention of courts is again a recognition of the same principle. 68. In Garware Wall Ropes Limited v. Coastal Marine Constructions and Engineering Limited (2019) 9 SCC 209, the question related to the effect of an arbitration Clause contained in the master contract which was required to be stamped. The second part of Section 7(2) was applicable. The issue was whether the judge hearing the Section 11 application should impound the main contract and ensure that duty and penalty, if any, are paid or in view of Sub-section (6-A) to Section 11 this issue should be examined and decided by the arbitrator. The argument drawing distinction between validity and existence was raised before the Court (see paragraph 5 which records the contention) but was rejected for several reasons, including the reasoning given in Patel Engineering Ltd., to hold that it is difficult to accede to the argument that Section 16 of the Arbitration Act makes it clear that an arbitra....
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.... it was observed that it is necessary to ensure that the intention of the parties does not evaporate into thin air when there is a challenge to the legality, validity, finality, or breach of the underlying contract. This is the mandate of Section 16 of the Arbitration Act which accepts the concept that the main contract and the arbitration agreement form two different contracts. It is true that support of the national courts would be required to ensure the success of arbitration but this would not detract from the legitimacy or independence of the collateral arbitration agreement even if it is contained in a contract, which is claimed to be void or voidable or un-concluded. However, this judgment was distinguished in Garware Wall Ropes Limited as a case relating to the controversy whether an arbitration Clause was to apply even if there is no concluded contract, but the finding was to the contrary as the case was within the second part and not under the first part of Section 7(2) of the Arbitration Act. In Enercon (India) Ltd., on facts it was held that the arbitration Clause was separate from the main contract as the disputes relating to the intellectual property right license agr....
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....changed between the insurance company and the insured in the years 2013 and 2014. However, reference was made to the concurring opinion of Dr. D.Y. Chandrachud, J. in A. Ayyasamy, and it was observed that the decision was not applicable to the case at hand. The decision in Chloro Controls India Private Limited was held to be not remotely relevant for deciding the lis in the said case. 70. This decision in Narbheram Power and Steel Private Limited was followed in Hyundai Engg. & Construction Co. Ltd., wherein a similar arbitration Clause had come up for consideration. However, in this case, reference was made to Section 11(6-A) of the Arbitration Act. It is, therefore, clear that on two occasions, in Narbheram Power and Steel Private Limited and Hyundai Engineering and Construction Company Limited, a three Judges' Bench of this Court affirmatively and in clear terms held that the question of non-arbitrability relating to the enquiry whether the dispute was governed by the arbitration clause, can be examined by the courts at the reference stage and may not be left unanswered to be examined and decided by the arbitral tribunal. These are decisions by a Bench of three Judges and....
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....ractual aspects; and whether a claim is non-arbitrable. The latter question would be arbitrable and not for the courts to decide at the referral stage. However, on referring to Articles II(1) and II(3) of the New York Convention the author did observe that it seems to include arbitrability of subject matter within the essential meaning of an arbitration agreement. 73. Emmanuel Gaillard and Yas Banifatemi in Negative Effect of Competence-Competence: The Rule of Priority in Favour of the Arbitrators observe that it is the basic requirement that the parties to the arbitration agreement should honour their undertaking to submit to the arbitration any dispute covered by the agreement. This entails the consequence that the courts are prohibited from hearing such disputes. On the question of courts' interference at the reference stage in terms of Article II(3) of the New York Convention, they are of the opinion that there is no indication provided as to the standard that should be applied for such determination, that is, whether the courts are required to conduct in-depth investigation into the merits of the existence and validity of the arbitration agreement and issue a final deci....
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....voids duplication of a strictly legal debate. Another condition is that the court must be satisfied that the challenge to the arbitrator's jurisdiction is not a delaying tactic and that it will not unduly impair the conduct of arbitration proceedings. This means that the court, when considering one of the exceptions, may allow the arbitrator to Rule on his or her competence as would be best for the arbitration process. 74. Referring to the House of Lords decision in Premium Nafta Products Ltd., the authors have observed that the decision reaffirms the principle of severability of an arbitration agreement and the proper approach is to stay the court proceedings in favour of arbitration. Lord Hoffmann speaking for the House of Lords in Premium Nafta Products Ltd. has observed: to determine on the evidence before the court that [an arbitration agreement] does exist in which case (if the disputes fall within the terms of that agreement) a stay must be granted, in the light of the mandatory 'shall' in Section 9(4). It is this mandatory provision which is the statutory enactment of the relevant Article of the New York Convention, to which the United Kingdom is a p....
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.... The French approach, as the paper notes, is that if an arbitral tribunal is already seized of the matter, the court will refuse jurisdiction and leave questions as to existence, validity and scope of the arbitration agreement to the arbitrators. However, if the arbitral tribunal is not yet seized of the matter, the court will undertake a limited scrutiny of the challenge and will retain jurisdiction only if the arbitration agreement is manifestly null. The German Law of Kompetenz-Kompetenz prior to the new 1998 German Arbitration Act was relatively unique, or arguably so, as some commentaries maintain that when express power to decide their jurisdiction is conferred on the arbitrator, then it would exclude judicial scrutiny at state 1 and stage 3. However, the 1998 German Arbitration Act based upon UNCITRAL Model Law, states that the court may only decide the arbitrator's jurisdiction if requested to do so before the arbitral tribunal is constituted. The German Law expostulates preference for the arbitrator to decide the jurisdiction in an interim award. Referring to the UNCITRAL Model Law, reference is made to the competence-competence as spelled in Article 8(1) which direct....
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....hing Inc. is explained below.) He observes that the United States Supreme Court has frequently been more receptive to international as opposed to domestic agreements. An important consideration being that international agreements are commercial and involve sophisticated, generally well-advised parties and there is a need for uniformity of interpretation under the New York Convention. 76. The United States Supreme Court in Buckeye Check Cashing Inc., relying on earlier decisions in Prima Paint Corpn. v. Flood & Conklin Mfg. Co. 18 L Ed 2d 1270 : 388 US 395 (1967) and Southland Corpn. v. Keating 79 L Ed. 2d 1 : 465 US 1 (1984), in respect of the domestic American law has clarified the legal position as establishing the following propositions: First, as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. Second, unless the challenge is to the arbitration Clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance...Applying them to this case, we conclude that because Respondents challenge the Agreement, but not specifically its arbitration provisions, th....
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....s--only to replace it with the equally abstract distinct between "invalidity" and "nonexistence"? These are all, as a colleague of mine likes to say, nothing but word balloons. Ingenious riffs on this metaphysical distinction between contract "invalidity" and contract "nonexistence" have long been a staple of Continental legal learning. It has been well-established for over a century in learned treatises on the law of obligations. Its tendency to take metaphor for reality, its personification of legal concepts, its characterization of doctrine in terms of what is "unthinkable" or "impossible"...of all of this exemplifies the worst excesses of formalism....But like the "void/voidable" distinction that it closely resembles...to which indeed it may even be identical ...this is not only slippery, but serves no instrumental function whatever. Happily, some modern scholarship seems now at last to appreciate that the whole notion of "nonexistence" is not only sterile and purely verbal...but what is worse, is completely unnecessary. And particularly when we come to the doctrine of "separability," this is a distinction that leads precisely. Foot note 50 reads as: ....
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.... be regarded as a judicial act. This would rationalise the law and provide greater incentive for the High Court and/or Supreme Court to delegate the power of appointment (being a non-judicial act) to specialised, external persons or institutions. The Commission has further recommended an amendment to Section 11(7) so that decisions of the High Court (regarding existence/nullity of the arbitration agreement) are final where an arbitrator has been appointed, and as such are non-appealable. The Commission further proposes the addition of Section 11(13) which requires the Court to make an endeavour to dispose of the matter within sixty days from the service of notice on the opposite party. xx xx xx 31. The Commission is of the view that, in this context, the same test regarding scope and nature of judicial intervention, as applicable in the context of Section 11, should also apply to Sections 8 and 45 of the Act-since the scope and nature of judicial intervention should not change upon whether a party (intending to defeat the arbitration agreement) refuses to appoint an arbitrator in terms of the arbitration agreement, or moves a proceeding before a judicial authority....
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....roposed to introduce the Arbitration and Conciliation (Amendment) Bill, 2015, to replace the Arbitration and Conciliation (Amendment) Ordinance, 2015, which inter alia, provides for the following, namely-- (i) to amend the definition of "Court" to provide that in the case of international commercial arbitrations, the Court should be the High Court; (ii) to ensure that an Indian Court can exercise jurisdiction to grant interim measures, etc., even where the seat of the arbitration is outside India; (iii) an application for appointment of an arbitrator shall be disposed of by the High Court or Supreme Court, as the case may be, as expeditiously as possible and an endeavour should be made to dispose of the matter within a period of sixty days; (iv) to provide that while considering any application for appointment of arbitrator, the High Court or the Supreme Court shall examine the existence of a prima facie arbitration agreement and not other issues; (v) to provide that the Arbitral Tribunal shall make its award within a period of twelve months from the date it enters upon the reference and that the parties may, however, extend such period ....
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....ses an arbitral tribunal to Rule and decide on the existence, validity or rescission of the underlying contract without an earlier adjudication of the questions by the referral court. 82. An interesting and relevant exposition, when assertions claiming repudiation, rescission or 'accord and satisfaction' are made by a party opposing reference, is to found in Damodar Valley Corporation v. K.K. Kar (1974) 1 SCC 141, which had referred to an earlier judgment of this Court in Union of India v. Kishorilal Gupta & Bros. AIR 1959 SC 1362, to observe: 11. After a review of the relevant case law, Subba Rao, J., as he then was, speaking for the majority enunciated the following principles: "(1) An arbitration Clause is a collateral term of a contract as distinguished from its substantive terms; but none the less it is an integral part of it; (2) however comprehensive the terms of an arbitration Clause may be, the existence of the contract is a necessary condition for its operation; it perishes with the contract; (3) the contract may be non est in the sense that it never came legally into existence or it was void ab initio; (4) though the contract was validly executed, the....
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....n case of expressed negative effect, the statute would govern and should be followed. Implied negative effect curtails and constrains interference by the court at the referral stage by necessary implication in order to allow the arbitral tribunal to Rule as to their jurisdiction and decide non-arbitrability questions. As per the negative effect, courts at the referral stage are not to decide on merits, except when permitted by the legislation either expressly or by necessary implication, such questions of non-arbitrability. Such prioritisation of arbitral tribunal over the courts can be partial and limited when the legislation provides for some or restricted scrutiny at the 'first look' referral stage. We would, therefore, examine the principles of competence-competence with reference to the legislation, that is, the Arbitration Act. 84. Section 16(1) of the Arbitration Act accepts and empowers the arbitral tribunal to Rule on its own jurisdiction including a ruling on the objections, with respect to all aspects of non-arbitrability including validity of the arbitration agreement. A party opposing arbitration, as per Sub-section (2), should raise the objection to jurisdi....
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....ing in force. Thus, the competence-competence principle, in its negative effect, leaves the door open for the parties to challenge the findings of the arbitral tribunal on the three issues. The negative effect does not provide absolute authority, but only a priority to the arbitral tribunal to Rule the jurisdiction on the three issues. The courts have a 'second look' on the three aspects Under Section 34 of the Arbitration Act.25 86. The courts at the referral stage do not perform ministerial functions. They exercise and perform judicial functions when they decide objections in terms of Sections 8 and 11 of the Arbitration Act. Section 8 prescribes the courts to refer the parties to arbitration, if the action brought is the subject of an arbitration agreement, unless it finds that prima facie no valid arbitration agreement exists. Examining the term 'prima facie', in Nirmala J. Jhala v. State of Gujarat and Anr. (2013) 4 SCC 301, this Court had noted: 48. A prima facie case does not mean a case proved to the hilt but a case which can be said to be established if the evidence which is led in support of the case were [to be] believed. While determining whe....
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...., but it means different things in different contexts. For the purpose of an application Under Section 18, I would hold that what must be shown is a case which is somewhat more than merely arguable, but need not be one which appears more likely than not to succeed. It shall use the term "good arguable case" in that sense. It represents a relatively low threshold which retains flexibility for the Court to do what is just, while excluding those cases where the jurisdictional merits were so low that reluctant Respondents ought not to be put to the expense and trouble of having to decide how to deal with arbitral proceedings where it was very likely that the tribunal had no jurisdiction. In this connection it is important to remember that crossing the threshold of "good arguable case" means that the Court has power to make one of the orders listed in Section 18(3). It remains for consideration whether it should do so as a matter of discretion. Appropriate at this stage would be a reference to the judgment of the Delhi High Court in NCC Ltd. v. Indian Oil Corporation Ltd.,27 wherein it has been held as under: 59.1 In my view, the scope of examination as to whether or not the....
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....agreement and whether the party who has applied for reference is party to such agreement would be subject to more thorough examination in comparison to the second and third categories/issues which are presumptively, save in exceptional cases, for the arbitrator to decide. In the first category, we would add and include the question or issue relating to whether the cause of action relates to action in personam or rem; whether the subject matter of the dispute affects third party rights, have erga omnes effect, requires centralized adjudication; whether the subject matter relates to inalienable sovereign and public interest functions of the State; and whether the subject matter of dispute is expressly or by necessary implication non-arbitrable as per mandatory statue(s). Such questions arise rarely and, when they arise, are on most occasions questions of law. On the other hand, issues relating to contract formation, existence, validity and non-arbitrability would be connected and intertwined with the issues underlying the merits of the respective disputes/claims. They would be factual and disputed and for the arbitral tribunal to decide. We would not like be too prescriptive, albeit ....
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.....C.R. 801 : 2007 SCC 34, which read: 85. If the challenge requires the production and review of factual evidence, the court should normally refer the case to arbitration, as arbitrators have, for this purpose, the same resources and expertise as courts. Where questions of mixed law and fact are concerned, the court hearing the referral application must refer the case to arbitration unless the questions of fact require only superficial consideration of the documentary evidence in the record. 86. Before departing from the general Rule of referral, the court must be satisfied that the challenge to the arbitrator's jurisdiction is not a delaying tactic and that it will not unduly impair the conduct of the arbitration proceeding. This means that even when considering one of the exceptions, the court might decide that to allow the arbitrator to Rule first on his or her competence would be best for the arbitration process. Judgment in Dell's case has been elucidated and diluted by the Supreme Court of Canada in TELUS Communications Inc. v. Avraham Wellman, viz. interpretation of Section 7(5) of the Arbitration Act, 1991, an aspect with which we are not concern....
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.... of the Arbitration Act would continue to apply and guide the courts on its scope of jurisdiction at stage one, that is the pre-arbitration stage. Omission of Sub-section (6-A) by Act 33 of 2019 was with the specific object and purpose and is relatable to by substitution of Sub-sections (12), (13) and (14) to Section 11 of the Arbitration Act by Act 33 of 2019, which, vide Sub-section (3A) stipulates that the High Court and this Court shall have the power to designate the arbitral institutions which have been so graded by the Council Under Section 43-I, provided where a graded arbitral institution is not available, the concerned High Court shall maintain a panel of arbitrators for discharging the function and thereupon the High Court shall perform the duty of an arbitral institution for reference to the arbitral tribunal. Therefore, it would be wrong to accept that post omission of Sub-section (6-A) to Section 11 the ratio in Patel Engineering Ltd. would become applicable. 92. We now proceed to examine the question, whether the word 'existence' in Section 11 merely refers to contract formation (whether there is an arbitration agreement) and excludes the question of enfor....
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....that the insurer repudiated the claim, though an arbitration Clause did "exist", so to speak, in the policy, it would not exist in law, as was held in that judgment, when one important fact is introduced, namely, that the insurer has not admitted or accepted liability. Likewise, in the facts of the present case, it is clear that the arbitration Clause that is contained in the subcontract would not "exist" as a matter of law until the sub-contract is duly stamped, as has been held by us above. The argument that Section 11(6-A) deals with "existence", as opposed to Section 8, Section 16 and Section 45, which deal with "validity" of an arbitration agreement is answered by this Court's understanding of the expression "existence" in Hyundai Engg. case, as followed by us."; Existence and validity are intertwined, and arbitration agreement does not exist if it is illegal or does not satisfy mandatory legal requirements. Invalid agreement is no agreement. (ii) The court at the reference stage exercises judicial powers. 'Examination', as an ordinary expression in common parlance, refers to an act of looking or considering something carefully in order to discove....
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....ates arbitration. (vii) Exercise of the limited prima facie review does not in any way interfere with the principle of competence- competence and separation as to obstruct arbitration proceedings but ensures that vexatious and frivolous matters get over at the initial stage. (viii) Exercise of prima facie power of judicial review as to the validity of the arbitration agreement would save costs and check harassment of objecting parties when there is clearly no justification and a good reason not to accept plea of non-arbitrability. In Subrata Roy Sahara v. Union of India (2014) 8 SCC 470, this Court has observed: 191. The Indian judicial system is grossly afflicted with frivolous litigation. Ways and means need to be evolved to deter litigants from their compulsive obsession towards senseless and ill-considered claims. One needs to keep in mind that in the process of litigation, there is an innocent sufferer on the other side of every irresponsible and senseless claim. He suffers long-drawn anxious periods of nervousness and restlessness, whilst the litigation is pending without any fault on his part. He pays for the litigation from out of his savings (or ....
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....d in the two decisions. (x) In addition to Garware Wall Ropes Limited case, this Court in Narbheram Power and Steel Private Limited and Hyundai Engg. & Construction Co. Ltd., both decisions of three Judges, has rejected the application for reference in the insurance contracts holding that the claim was beyond and not covered by the arbitration agreement. The court felt that the legal position was beyond doubt as the scope of the arbitration Clause was fully covered by the dictum in Vulcan Insurance Co. Ltd. Similarly, in M/s. PSA Mumbai Investments PTE. Limited, this Court at the referral stage came to the conclusion that the arbitration Clause would not be applicable and govern the disputes. Accordingly, the reference to the arbitral tribunal was set aside leaving the Respondent to pursue its claim before an appropriate forum. (xi) The interpretation appropriately balances the allocation of the decision-making authority between the court at the referral stage and the arbitrators' primary jurisdiction to decide disputes on merits. The court as the judicial forum of the first instance can exercise prima facie test jurisdiction to screen and knockdown ex facie m....
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....w. Particularly in the case of international contracts, they want a quick and efficient adjudication and do not want to take the risks of delay and, in too many cases, partiality, in proceedings before a national jurisdiction. In Narbheram Power and Steel Private Ltd., this Court while dealing with the arbitration Clause in the insurance agreement, has held that the arbitration Clause should be strictly construed, relying on the principles of strict interpretation that apply to insurance contracts. These observations have been repeated in other cases. What is true and applicable for men of commerce and business may not be equally true and apply in case of laymen and to those who are not fully aware of the effect of an arbitration Clause or had little option but to sign on the standard form contract. Broad or narrow interpretations of an arbitration agreement can, to a great extent, effect coverage of a retroactive arbitration agreement. Pro-arbitration broad interpretation, normally applied to international instruments, and commercial transactions is based upon the approach that the arbitration Clause should be considered as per the true contractual language and what it says,....
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.... retrospective effect from 23.10.2015) and even post the amendments vide Act 33 of 2019 (with effect from 09.08.2019), is no longer applicable. (b) Scope of judicial review and jurisdiction of the court Under Section 8 and 11 of the Arbitration Act is identical but extremely limited and restricted. (c) The general Rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence-competence, is that the arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred power of "second look" on aspects of non-arbitrability post the award in terms of Sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or Sub-clause (i) of Section 34(2)(b) of the Arbitration Act. (d) Rarely as a demurrer the court may interfere at the Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is nonexistent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricte....
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.... the development of arbitration in India is not attributable to the success in arbitration, rather to the failures of the Court. This reflects an uncomfortable relationship which arbitration has had with litigation all these days. The judicial hesitancy of the courts to be more accommodative towards the tribunal and the need for respecting arbitral awards requires this Court to extensively reflect and bring the Court's jurisprudence in tune with the liberal intention sought to be furthered post the 2015 amendment to the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act"). 101. Before we delve into the merits of the matters, we need to have a brief reference to the facts which are necessary for the disposal of these cases. As all the cases are similar, we take facts from Civil Appeal No. 2402 of 2019, to indicate the history of this litigation and the questions which arise from the same. In the year 2006, Appellants (tenants) entered into a tenancy agreement with the predecessor title holder with respect to certain buildings. Clause 23 of the agreement contained a dispute resolution clause. In the year 2012, the tenancy was attorned to the Respondent....
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....t extent does the Court decide the question of non-arbitrability Under Section 11 of the Act? II. Whether tenancy disputes are capable of being resolved through arbitration? 105. Before we analyze the issue, we need to observe arguments canvassed by the counsel appearing for the parties, who set the tone for these cases. 106. Learned Senior Counsel, Mr. K.V. Vishwanathan, appearing for the Petitioners in SLP (C.) No. 5605-5606 of 2019, submitted as under: * That Section 11(6A) of the Act is a unique provision, which is neither traceable to UNCITRAL Model Law nor any other domestic legislation. * In spite of the absence of legislative provision in other countries, Courts have adjudicated on the existence of the arbitration agreement at the stage of the appointment of the arbitrator itself. * The standard of 'good arguable case' as expounded in Noble Denton Middle East v. Noble Denton International Ltd., [2010] EWHC 2574 (Comm.), should be applied by the Courts to examine the existence of a valid arbitration agreement. * Therefore, the scope of judicial enquiry at the stage of reference/appointment is not limited to the mere ....
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....to a situation of a lease expiring by efflux of time. * certain High Court judgments had, after the judgment in Himangni Enterprises (supra), distinguished the said judgment on this and other grounds. As an alternative submission, he said that, in any case, Himangni Enterprises (supra) would require reconsideration as it did not state the law correctly. 111. We answer the two questions in seriatim. 112. Arbitration is a creature of consensus. It is completely dependent on party autonomy and the intention expressed in the agreement. A contract, having multiple clauses including arbitration agreements, can be divided into two parts. The clauses relating to the commercial relationship, i.e., the obligations and duties of each party, can be referred to as the 'main contract'. The arbitration agreement so to say is a separate contract in itself. 113. The separability of the arbitration agreement from the main contract, historically existed in Roman law. Since early times, arbitration was viewed with suspicion, which allowed for the development of separability. Ironically, the 'pro-arbitration' function of separability in the present day is a late 19th a....
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.... Clause part of the contract. 117. Section 5 emphasizes a very important principle, that judicial interference in arbitral proceedings should be minimum and should be limited to instances where it is specifically provided for under the Act. Although the provision envisages a wide amplitude, various judgments of this Court have restricted the utility of same. [ICICI Bank Ltd. v. Sidco Leathers Ltd., (2006) 10 SCC 452] 118. Section 8 of the Act in its present and earlier form, are extracted below: Section 8 prior to Act 3 of 2016 Section 8 after Act 3 of 2016 Section 8 after Act 33 of 2019 Power to refer parties to arbitration where there is an arbitration agreement.-(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) The application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. (3) Notwithstanding that a....
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....bitration agreement or a duly certified copy thereof: Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under Sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court. (3) Notwithstanding that an application has been made under Sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. Under the old Arbitration Act, 1940, the Court had the discretion in referring the parties to arbitration, however such discretion is done away with after the coming into force of the 1996 Act. The Arbitration and Conciliation Act, 1996 does not, in specific terms, exclude any category of disputes--civil or commercial--from arbitrability. Intrinsic legislative material is in fact to the contrary. Section 8 co....
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....free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in Sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in Sub-section (3) applies and - (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (5) Failing any agreement referred to in Sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (6) Where, under an appointment procedure agree....
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....l limits the principal Civil Court referred to in Clause (e) of Sub-section (1) of Section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court. Appointment of arbitrators.-- (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to Sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in Sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in Sub-section (3) applies and -- (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institutio....
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....ent of an independent and impartial arbitrator. (9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. (10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by Sub-section (4) or Sub-section (5) or Sub-section (6), to it. (11) Where more than one request has been made under Sub-section (4) or Sub-section (5) or Sub-section (6) to different High Courts or their designates, the High Court or its designate to whom the request has been first made under the relevant Sub-section shall alone be competent to decide on the request. (12)(a) Where the matters referred to in Sub-sections (4), (5), (6), (7), (8) and Sub-section (10) arise in an international commercial arbitration, the reference to the "Supreme Court or, as the case may be, the High Court" in those Sub-sections shall be construed as a reference to the "Suprem....
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....l of arbitrators for discharging the functions and duties of arbitral institution and any reference to the arbitrator shall be deemed to be an arbitral institution for the purposes of this section and the arbitrator appointed by a party shall be entitled to such fee at the rate as specified in the Fourth Schedule: Provided further that the Chief Justice of the concerned High Court may, from time to time, review the panel of arbitrators. (4) If the appointment procedure in Sub-section (3) applies and -- (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be. (5) Failing any agreement referred to in Sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the ....
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....d (8) arise in an international commercial arbitration or any other arbitration, the reference to the arbitral institution in those Sub-sections shall be construed as a reference to the arbitral institution designated under Sub-section (3-A). (13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the arbitral institution within a period of thirty days from the date of service of notice on the opposite party. (14) The arbitral institution shall determine the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal subject to the rates specified in the Fourth Schedule. Explanation.-- For the removal of doubts, it is hereby clarified that this Sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) where parties have agreed for determination of fees as per the rules of an arbitral institution. 121. Section 12 imposes, upon a person approached to be an arbitrator, the obligation to disclose to the parties in writing any circumstance that may give rise to justifiable doubts as to his independence and impart....
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....he time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the arbitration award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that- (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public p....
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....ot so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be as set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that-- (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy India. Explanation 1.-- For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contrav....
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....ation agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that-- (i) the subject-matter of the dispute is not capa....
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....ion under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in Sub-section (5) is served upon the other party. The intention of the legislators to provide for Section 34 in its present form, is to have a limited review of the award instead of a full-fledged appeal process. A party intending to object to an award, is first required to file an application Under Section 34(1) indicating the objections along with the copy of an award and other necessary documents, which are required as proof to satisfy grounds provided Under Section 34(2)(a) and (b) of the Act. Such complete petition is required to be filed within the time period prescribed Under Section 34(3) of the Act, failing which the appeal is rendered nugatory. The limitation prescribed Under Section 34(3) is bound with the right to file objections itself. The objections filed Under Section 34 must be relatable to the limited grounds provided Under Section 34(2) of the Act. It is the legislative intention to provide for numerous limitations Under Section 34 of the Act, which are required to be strictly adhered to so as to make Indian ar....
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.... at odds with non-judicial/arbitral mechanism which is therefore less formal. But our understanding is that that the Rule of law is less in tension with arbitration than critics imagine, because they both aim to serve the same goal-the pursuit of justice. 126. On a plain reading of the Act, whenever a dispute arises between parties, they are free to approach an appropriate judicial forum to get their dispute resolved. If the parties have contemplated an arbitration agreement, then they can approach a tribunal for getting the matter resolved. Once they choose the non-judicial method, a party aggrieved by the award, has a chance to approach judicial institutions Under Section 34 and 37 (appeal jurisdiction), if the award is violative of the grounds provided thereunder. 127. With this understanding, we need to have regards to certain precedents of this Court, in order to understand the dispute. The case, which started the debate was the case of Konkan Railway Corpn. Ltd. v. Mehul Construction Co., (2000) 7 SCC 201, wherein a Bench of three Judges of this Court, emphasized the utility of 'Chief Justice' as occurring under the earlier Section 11, to come to a conclusion th....
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....e same. Fifth, the principle of Kompetenz-Kompetenz, as enshrined Under Section 16, will come to play only if the parties approach the Arbitral Tribunal, without taking recourse to Section 8 or 11. Sixth, it is incongruous to permit the order of the Chief Justice Under Section 11(6) of the Act being subjected to scrutiny Under Article 226 of the Constitution. Seventh, the Court on earlier instances did not concentrate on the threshold satisfaction of the Chief Justice, before the same is referred to an arbitration. Eighth, it would be a wasteful exercise for parties to arbitrate on the jurisdiction, only to find that tribunal did not have sufficient jurisdiction to entertain the arbitration. 130. The minority view posits that the function of the Chief Justice was administrative rather than judicial, for the following reasons: First, merely because a decision adversely affects a party, cannot be the sole reason to conclude that the function is judicial. Second, finality of decision taken by the Chief Justice Under Section 11(7) refers to only matters such as qualification, independence and impartiality of the arbitrator. The a....
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.... decide the validity, operation, capability of performance of the arbitration agreement. In various cases the parties may not resort to Section 45 in the first place, and to overcome such eventuality, the legislature has enacted Section 48(1)(a). In other words, if the court is not asked to satisfy itself as to the validity of the agreement at a pre-award stage (Section 45), then by virtue of Section 48, it is given another opportunity to do so. Apart from this, Under Section 48, the court may refuse to enforce the foreign award on the ground other than the invalidity of the arbitration agreement. As far as the question of Section 50 is concerned, it is well settled in law that an appeal is a creature of statute (M. Ramnarain (P) Ltd. v. State Trading Corpn. of India Ltd. [ (1983) 3 SCC 75]) and a right to appeal inheres in no one. (Gujarat Agro Industries Co. Ltd. v. Municipal Corpn. of the City of Ahmedabad [ (1999) 4 SCC 468]). The legislature Under Section 50 has clearly allowed appeal only in case the judicial authority refuses to refer the parties to arbitration or refuses to enforce the foreign award. The fact that a provision is not made for an appeal in case reference is m....
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.... void" or "inoperative" or "incapable of being performed" within the meaning of Section 45 of the Act, the judicial authority or the court must afford full opportunities to the parties to lead whatever documentary or oral evidence they want to lead and then decide the question like trial of a preliminary issue on jurisdiction or limitation in a regular civil suit and pass an elaborate reasoned order. Where a judicial authority or the court refuses to make a reference on the grounds available Under Section 45 of the Act, it is necessary for the judicial authority or the court which is seized of the matter to pass a reasoned order as the same is subject to appeal to the appellate court Under Section 50(1)(a) of the Act and further appeal to this Court Under Sub-section (2) of the said section. 132. In Shree Ram Mills Ltd. v. Utility Premises (P) Ltd., (2007) 4 SCC 599, while observing the scope of the Court Under Section 11(6), the Court held as under: 27........ A glance on this para would suggest the scope of the order Under Section 11 to be passed by the Chief Justice or his designate. Insofar as the issues regarding territorial jurisdiction and the existence of the ar....
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....hat the respective claims of the parties have not become barred by limitation. 133. The next jurisprudential jump was provided by National Insurance Company Limited v. Boghara Polyfab Private Limited, (2009) 1 SCC 267, wherein this Court observed as under: 19. In SBP & Co. v. Patel Engg. Ltd. [ (2005) 8 SCC 618], a seven-Judge Bench of this Court considered the scope of Section 11 of the Act and held that the scheme of Section 11 of the Act required the Chief Justice or his designate to decide whether there is an arbitration agreement in terms of Section 7 of the Act before exercising his power Under Section 11(6) of the Act and its implications. ... This Court held: (SCC pp. 660-61 & 663, paras 39 & 47) 39.... He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by r....
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.... if necessary, by taking evidence. Alternatively, he may leave those issues open with a direction to the Arbitral Tribunal to decide the same. If the Chief Justice or his designate chooses to examine the issue and decides it, the Arbitral Tribunal cannot re-examine the same issue. The Chief Justice/his designate will, in choosing whether he will decide such issue or leave it to the Arbitral Tribunal, be guided by the object of the Act (that is expediting the arbitration process with minimum judicial intervention). Where allegations of forgery/fabrication are made in regard to the document recording discharge of contract by full and final settlement, it would be appropriate if the Chief Justice/his designate decides the issue. (emphasis supplied) 134. In Chloro Controls India Private Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641, this Court had to expound the scope of Section 45 in a multi-party arbitration. The Court held as under: 84. The issue of whether the courts are empowered to review the existence and validity of the arbitration agreement prior to reference is more controversial. A majority of the countries admit to the positive effect o....
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....avour to clear the maze, so that certainty remains "A Definite" and finality is "Final". The Court answering the question, answered thus: 40. From the aforesaid authorities it is luculent that the larger Bench in SBP [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618], after deliberating at length with regard to the role of the Chief Justice or his designate, while dealing with an application Under Section 11(6) of the Act, has thought it appropriate to define what it precisely meant in para 39 of the judgment. The majority, if we allow ourselves to say so, was absolutely conscious that it required to be so stated and hence, it did so. The deliberation was required to be made as the decision in Konkan Railway Corpn. Ltd. v. Rani Construction (P) Ltd. [(2002) 2 SCC 388] where the Constitution Bench had held that an order passed by the Chief Justice Under Section 11(6) is an administrative order and not a judicial one and, in that context, the Bench in many a paragraph proceeded to state about the role of the Chief Justice or his designate. The phrases which have been emphasised by Mr. Ranjit Kumar, it can be irrefragably stated, they cannot be brought to the eminence of ra....
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....nsurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267]. This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists--nothing more, nothing less. The legislative policy and purpose is essentially to minimize the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected. (emphasis supplied) 137. However, in Oriental Insurance Company Ltd. v. Narbheram Power and Steel Private Limited, ("Oriental Insurance") (2018) 6 SCC 534, a three-Judge Bench of this Court, following the decision in Vulcan Insurance v. Maharaj Singh, (1976) 1 SCC 943, dismissed an application Under Section 11 of the Act after examining the arbitrability of the dispute. It may be noted that the Court did not answer the question as to the power of the Court Under Section 11 of the Act in this case. 138. Similarly, in United India Insurance Company Limited v. Hyundai Engineering and Construction Company Limited, ("Hyundai Engineering") (2018) 17 SCC 607, the Court examined the arbitrability of the dispute as we....
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...., SA v. Gangavaram Port Ltd., (2017) 9 SCC 729, for ready reference, read as follows: 48. Section 11(6-A) added by the 2015 Amendment, reads as follows: 11. (6-A) The Supreme Court or, as the case may be, the High Court, while considering any application Under Sub-section (4) or Sub-section (5) or Sub-section (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement. (emphasis supplied) From a reading of Section 11(6-A), the intention of the legislature is crystal clear i.e. the court should and need only look into one aspect-- the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple--it needs to be seen if the agreement contains a Clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement. xx xx xx 59. The scope of the power Under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 and National In....
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....y of arbitration agreement' as occurring Under Section 8 of the Act. There is no doubt that 'validity' to be examined Under Section 8(2) of the Act, could be interpreted to mean formal validity as expressed Under Section 7 of the Act. Such an interpretation would operate as a full application of the negative facet of Section 16, as the jurisdiction of the Court to step-in at the-reference stage would be limited. However, the burden of the precedents stops us from accepting such a narrow interpretation. 145. This brings us to the issue whether the issue of 'arbitrability' can be analyzed by the Courts Under Section 8 or 11 of the Act? 146. There is no doubt that 'arbitrability' has acquired various meaning around the world. In this context, this Court is required to first identify the various meaning for the aforesaid term, in order to recognize its meaning in the Indian context. Outside the United States of America, the term "arbitrability" has a reasonably precise and limited meaning, relating to whether specific classes of disputes are barred from arbitration because of national legislation or judicial authority. In the United States of America, ....
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....ge', which resulted in the Government of Spain and France taking action against the Captain of the ship and other officers under the Spanish Code of Criminal Procedure, as well as instituting a case against the Owner to pay punitive damages under the Spanish Penal Code. It may be noted that the claim was also brought against the insurer of the ship for indemnity. Those claims were based both on the insurer's obligation to indemnify the owners against their obligations under the International Convention on Civil Liability for Oil Pollution Damage and on its obligation to indemnify them against their independent liability for the tortious acts of the master, chief officer and chief engineer. The insurers took pre-emptive action by commencing arbitral proceedings for declaratory relief: a declaration that France and Spain were bound by the arbitration Clause provided in the insurers' Rules and that the insurers were not liable under the underlying contract. The relief sought was granted in favour of the insurers in the form of arbitral awards. The insurers attempted to enforce the arbitral awards in England before the judgment was rendered in the Spanish legal proceedings.....
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.... a dispute which is otherwise arbitrable, ceases to be so. 151. It is important to note that various countries have already allowed inter-partes arbitration with respect to in rem rights concerning intellectual property etc., through a statutory framework. It is worthwhile to study the feasibility of the same, if we want to provide impetus to arbitration. 152. On a different note, we need to keep in mind that an arbitration agreement would, as a necessary implication, carry with it a presumption of a one-stop mechanism. When parties decide to enter into an arbitration agreement, they agree to take all their disputes before arbitration. This presumption, is a rebuttable presumption. Therefore, Section 8 and 11 has to be interpreted with sufficient strictness, wherein the jurisdiction of the Court to decide issues should be limited to those expressly provided by the law. 153. This Court has dealt with various judgments on the issue of arbitrability, which are required to be discussed at this point. The first case is of Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532, wherein a Division Bench dealt with the ambit of Section 8 and 11 (prior to amendment....
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....istration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes. The Court came to the aforesaid conclusion, of ascertaining certain subject matters as non-arbitrable, on two main reasons, (1.) that certain matters are excluded for examination by a private forum; (2) that in rem rights cannot be arbitrated. 154. In A. Ayysamy v. A. Paramsivam, (2016) 10 SCC 386, this Court had to deal with an issue concerning the arbitrability of fraud under the Act, prior to the 2015 amendment. The Court by two separate opinions delivered by Justice A.K. Sikri and Dr. D.Y. Chandrachud, has recognized that the Court at the reference stage, could classify a matter and accordingly refer a matter to arbitration which does not have serious allegations of fraud. 155. In Emaar MGF Land Limited v. Aftab Singh, (2019) 12 SCC 751, this Court held that Consumer Protection Act cases are not arbitrable. On a perusal of the judgment, no doubt reliance was placed on the Booz Allen Case (supra) and there is....
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....the Act. Having said so, in clear cases where the subject matter arbitrability is clearly barred, the Court can cut the deadwood to preserve the efficacy of the arbitral process. 159. At this stage a word of caution needs to be said for arbitrators. They have been given jurisdiction to decide on the subject matter arbitrability. They are required to identify specific public policy in order to determine the subject matter arbitrability. Merely because a matter verges on a prohibited territory, should not by in itself stop the arbitrator from deciding the matter. He/she should be careful in considering the question of non-arbitrability. 160. This brings us to the question of what prima facie case means, as is required to determine the non-existence of a valid arbitration agreement Under Section 8 of the Act. The meaning and scope of 'prima facie' has greatly varied in common law as well as the civil law systems. Immediately, at least two meanings can be attributed to this term. First, it means a party is said to have established a prima facie case when he has satisfied his burden of producing evidence. The second meaning postulates that a party has established a prima f....
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....derlying such nomenclature/description as to-- -- the scope of such powers -- i.e. the scope of arguments which a court (Chief Justice) will consider while deciding whether to appoint an arbitrator or not -- i.e. whether the arbitration agreement exists, whether it is null and void, whether it is voidable, etc.; and which of these it should leave for decision of the Arbitral Tribunal. -- the nature of such intervention -- i.e. would the court (Chief Justice) consider the issues upon a detailed trial and whether the same would be decided finally or be left for determination of the Arbitral Tribunal. 30. After a series of cases culminating in the decision in SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618, the Supreme Court held that the power to appoint an arbitrator Under Section 11 is a "judicial" power. The underlying issues in this judgment, relating to the scope of intervention, were subsequently clarified by Raveendran, J. in National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267, ..... ..... 32. In relation to the nature of intervention, the exposition of the law is to be found in the decision of the Sup....
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....1, however, the negative language used under the amended Section 8 mandates for referring a matter to arbitration unless the Court prima facie finds that no valid arbitration exists. It is to be noted that a finding of non-existence of arbitration agreement is final subject to the appeal process only, without further scope for arbitration tribunal to decide anything as there can be no further reference. If that be the case, then the usage of phrase 'prima facie' stands at odds with the established precedents on prima facie standards. In this context, we can only stress on the requirement of quality legislative drafting protocols to eliminate such complications. 164. From the aforesaid discussion, we can conclude that the Respondent/Defendant has to establish a prima facie case of non-existence of valid arbitration agreement, wherein it is to be summarily portrayed that a party is entitled to such a finding. If a party cannot satisfy the Court of the same on the basis of documents produced, and rather requires extensive examination of oral and documentary production, then the matter has to be necessarily referred to the Tribunal for full trial. Such limited jurisdiction v....
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....This view is confirmed by the Duro Felguera case (supra), wherein the reference to the contractual aspect of arbitration agreement is ingrained under the Section 7 analysis. A mere agreement is not legally binding, unless it satisfies the core contractual requirements, concerning consent, consideration, legal relationship, etc. In Mayavati Trading Case (supra) and Garware Wall Ropes Ltd. v. Coastal Marine Construction and Engineering Ltd., [2019] 9 SCC 209, the aforesaid stand has been confirmed. Therefore, the scope of the Court to examine the prima facie validity of an arbitration agreement includes only the determination of the following: 92. Whether the arbitration agreement was in writing? or 93. Whether the arbitration agreement was contained in exchange of letters, telecommunication, etc? 94. Whether the core contractual ingredients qua the arbitration agreement were fulfilled? 95. On rare occasions, whether the subject-matter of dispute is arbitrable? At the cost of repetition, we note that Section 8 of the Act mandates that a matter should not be referred to an arbitration by a court of law unless it finds that prima facie there is no....
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....rred to us, we agree with the conclusions reached by our learned brother. 173. Before we part, the conclusions reached, with respect to question No. 1, are: a. Sections 8 and 11 of the Act have the same ambit with respect to judicial interference. b. Usually, subject matter arbitrability cannot be decided at the stage of Sections 8 or 11 of the Act, unless it's a clear case of deadwood. c. The Court, Under Sections 8 and 11, has to refer a matter to arbitration or to appoint an arbitrator, as the case may be, unless a party has established a prima facie (summary findings) case of non-existence of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding. d. The Court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above, i.e., 'when in doubt, do refer'. e. The scope of the Court to examine the prima facie validity of an arbitration agreement includes only: a. Whether the arbitration agreement was in writing? or b. Whether the arbitration agreement was contained in exchange of letters....