TaxTMI 
TaxTMI 
2025 (12) TMI 1068
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....passed by the High Court for the State of Telangana at Hyderabad [In Arbitration Application No. 81 of 2019 dated 17.02.2023.] under Section 11(6) of the Arbitration and Conciliation Act, 1996 [Hereinafter, "Act, 1996"] constituting an Arbitral Tribunal (AT) for resolution of dispute as per the arbitration clause 22.2 in General Conditions of Contract (GCC). The contest by the two appellants is on the ground that first respondent, being one of the members of the Consortium, could not have invoked arbitration in its individual capacity. This is based on the simple plea that the arbitration agreement is only between the appellant APGENCO, the purchaser and the "Consortium". While considering an application under Section 11, we are of the opinion that the High Court was justified in constituting the AT on the basis of a prima facie test of arbitrability. We have further held that it is for the AT to examine the preliminary issue in detail by considering the contractual provisions and the surrounding evidence. We have thus upheld the order passed by the High Court constituting the AT. II. Facts: 3. Facts that are necessary for disposal of these appeals are that the appellant APGE....
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....d asserted counter claims predicated on losses alleged to have been suffered due to first respondent's non-performance. Gammon India Ltd. (respondent no. 3) also protested first respondent's unilateral communication, asserting that it lacked authority to act without the consent of other consortium members. 7. As the appellant did not release the claimed amount, first respondent issued another letter dated 03.04.2018, stating that disputes had clearly arisen between the parties. Through this communication, first respondent formally invoked the arbitration clause and nominated a former Judge of this Court as its nominee arbitrator, and called upon the appellant to appoint its arbitrator. Appellant neither responded to said notice nor has taken steps to constitute the AT. Aggrieved by this inaction, first respondent instituted proceedings under Section 11(6) before the High Court, and the appellant promptly objected to maintainability on the ground that the first respondent as an individual member, cannot unilaterally invoke arbitration. 8. The High Court, however, allowed the Section 11(6) application and referred the disputes to arbitration. The said judgment is assailed in th....
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.... misplaced. The GCC is a pre bid document. Upon acceptance of the bid by a consortium, the contractual relationship culminates into Purchase Orders. In fact, the three Purchase Orders contain identical jurisdictional clauses conferring exclusive jurisdiction upon civil courts at Hyderabad or Secunderabad, with no provision for arbitration as a dispute resolution mechanism. The Purchase Orders constitute the principal contracts governing the relationship between the purchaser on one hand and the Consortium, as a collective entity, on the other. 10.4 Relying on the judgments of the Delhi High Court in Consulting Engineers Group Ltd. v. National Highway Authority of India (NHAI) [2022 SCC OnLine Del 3253] and the Bombay High Court in MSEDCL v. Godrej and Boyce Manufacturing Company Ltd. [2019 SCC OnLine Bom 3920.] , it is urged that an individual consortium member lacks the competence to invoke arbitration in the absence of authority from the other members of the consortium. 10.5 The Group of Companies doctrine is wholly inapplicable as per the judgment of this Court in Cox and Kings Ltd. v. SAP India Pvt. Ltd. [(2024) 4 SCC 1], which clarifies that mutual intention is indispens....
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...., and that the Consortium of respondent nos. 1 to 3 was duly constituted in accordance with the tender terms. The Purchase Orders issued pursuant to the Letter of Intent explicitly incorporated the Tender Specification, which in turn incorporated the GCC including Clause 22.2 which contains the operative arbitration agreement. 11.2 In view of the principles laid down in M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd. [(2009) 7 SCC 696], Inox Wind Ltd. v. Thermocables Ltd. [(2018) 2 SCC 519], and NBCC (India) Ltd. v. Zillion Infraprojects Pvt. Ltd. [2024 SCC OnLine SC 323], the arbitration clause stands validly incorporated by reference into the Purchase Orders. The jurisdiction clause contained in the Purchase Orders, which confers jurisdiction on courts at Hyderabad, is not inconsistent with the GCC, thereby indicating that Hyderabad was intended to be the juridical seat of arbitration. 11.3 Identical issues were examined in proceedings arising out of the same project with TSPGCL, the successor of the appellant in Telangana after bifurcation of the State, where this Court appointed a former judge of this Court as arbitrator after rejecting identical object....
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....s claims arise from its allocated scope of work and relate to moneys allegedly due to it. 11.8 The appellant's objections concern the entitlement to invoke arbitration, not the existence of the arbitration agreement. Such issues fall squarely within the AT's jurisdiction under Section 16. IV. Analysis and Reasoning: 12. The reason for referring to the submissions of the appellants as well as the respondent in detail is only to flag and highlight certain preliminary and jurisdictional questions that will fall for consideration before the AT in the event we hold that the referral court need not examine these questions in view of Sections 11(6-A) and 16 of the Act, 1996. 13. We must, at the outset, address an important submission advanced on behalf of the appellants, namely, that in the present case there exists no arbitration agreement insofar as the individual constituent of a consortium is concerned. This submission is founded upon certain decisions of the Delhi High Court [2022 SCC OnLine Del 3253, Consulting Engineers Group Ltd. v. National Highway Authority of India (NHAI)] and the Bombay High Court [2019 SCC OnLine Bom 3920, MSEDCL v. Godrej and Boyce Manufacturing ....
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....ourts to enable "parties" to identify and exercise alternative remedies, particularly that of arbitration, with clarity and consistency. The question whether a member of a consortium can itself invoke Section 11 of the Act, 1996 is not one that admits of a monolithic or a uniform answer. Answer to that question will necessarily depend on enquiry into the terms of the principal contract, as well as the Consortium Agreement. The specific terms of the Consortium Agreement, parties to that agreement, and the nature of the rights and mutual obligations that the agreement creates will have to be examined in detail. Reference court will, however, confine its enquiry only to a prima facie satisfaction as to whether a member of a consortium qualifies as a "party" to the arbitration agreement. This prima facie satisfaction is sufficient for the referral court to constitute and refer the dispute to the AT. Thereafter, it is for the AT to undertake the detailed enquiry as to whether a member of the consortium is in fact a veritable party to the arbitration agreement or not. This is exactly the limited enquiry permitted and prescribed in Cox & Kings (supra), the relevant portion of which is as ....
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....ied) 17. Beyond the prima facie enquiry, it should be the discipline of the referral court to refrain from undertaking a detailed enquiry on basis of evidence to arrive at a finding of fact in the nature of a 'proof'. The scope of such an enquiry, by virtue of Section 11(6-A) is very well articulated in the decision of this Court in Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, In Re [(2024) 6 SCC 1] wherein this Court observed: "165. The legislature confined the scope of reference under Section 11(6-A) to the examination of the existence of an arbitration agreement. The use of the term "examination" in itself connotes that the scope of the power is limited to a prima facie determination. Since the Arbitration Act is a self-contained code, the requirement of "existence" of an arbitration agreement draws effect from Section 7 of the Arbitration Act. In Duro Felguera [Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 : (2017) 4 SCC (Civ) 764], this Court held that the Referral Courts only need to consider one aspect to determine the existence of an arbitration agreement - whether the underlying contr....
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....he parties. Therefore, it is evident that the Referral Court is only required to examine the existence of arbitration agreements, whereas the Arbitral Tribunal ought to rule on its jurisdiction, including the issues pertaining to the existence and validity of an arbitration agreement. A similar view was adopted by this Court in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. (2005) 7 SCC 234." 18. Following this Court's mandate in the above decision, this Court in Managing Director Bihar State Food and Civil Supply Corporation Limited v. Sanjay Kumar [2025 SCC OnLine SC 1604: 2025 INSC 933.] explaining the contemporary legal position of the referral court emphasised that: "27. The curtains have fallen. Courts exercising jurisdictions under Section 11(6) and Section 8 must follow the mandate of sub-section (6A), as interpreted and mandated by the decisions of this Court and their scrutiny must be "confine(d) to the examination of the existence of the arbitration agreement"." 19. Once the High Court was satisfied that an arbitration agreement prima facie existed, an aspect neither seriously disputed nor refutable at this stage, its decision to constitute the AT cann....