Arbitration and Conciliation Act, 1996 – s.11(6) – Appointment of arbitrators – Scope of jurisdiction of the referral Court: Held: SBP & Co. case expanded the scope of the Court’s power under Section 11 while empowering the referral courts to decide several preliminary issues – Boghara Polyfab case went to the extent of identifying three categories of preliminary issues that may arise for consideration in an application under Section 11 – However, the insertion of Section 11(6A) through the 2015 Amendment to the Act, 1996 stipulated that the Courts under Section 11 shall confine their examination to the ‘existence’ of an arbitration agreement – It legislatively overruled the decisions in SBP & Co. and Boghara Polyfab by virtue of its non-obstante clause – Duro Felguera case, in clear terms, clarified the effect of the change brought in by Section 11(6A) and stated that all that the Courts need to see is whether an arbitration agreement exists - nothing more, nothing less – Vidya Drolia case endorsed the prima facie test in examining the existence and validity of an arbitration agreement both under Sections 8 and 11 respectively – However, it was clarified that in cases of debatable and disputable facts and reasonably good arguable case, etc. the Court may refer the parties to arbitration since the arbitral tribunal has the authority to decide disputes including the question of jurisdiction – It was further stated that jurisdictional issues concerning whether certain parties are bound by a particular arbitration under the group-company doctrine etc. in a multi-party arbitration raise complicated questions of fact which are best left to the tribunal to decide – In Re: Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, the position taken in Vidya Drolia case was clarified to state that the scope of examination under Section 11(6) should be confined to the “existence of the arbitration agreement” under Section 7 of the Act, 1996 and the “validity of an arbitration agreement” must be restricted to the requirement of formal validity such as the requirement that the agreement be in writing – Krish Spinning case cautioned that the Courts delving into the domain of the arbitral tribunal at the Section 11 stage run the risk of leaving the claimant remediless if the Section 11 application is rejected – The Cox and Kings case specifically dealt with the scope of inquiry under Section 11 when it comes to impleading the non-signatories in the arbitration proceedings – While saying that the referral court would be required to prima facie rule on the existence of the arbitration agreement and whether the non-signatory party is a veritable party to the arbitration agreement, it also said that in view of the complexity in such a determination, the arbitral tribunal would be the proper forum. [Para 65]
Arbitration and Conciliation Act, 1996 – Whether in the instant case, on a prima facie view, the SRG Group being a nonsignatory to the Family Arrangement Agreement (FAA), can be referred to arbitration:
Held: An important factor to be considered by the Courts and Tribunals is the participation of the non-signatory in the performance of the underlying contract – The intention of the parties to be bound by an arbitration agreement can be gauged from the circumstances that surround the participation of the nonsignatory party in the negotiation, performance, and termination of the underlying contract containing such an agreement – Further, when the conduct of the non-signatory is in harmony with the conduct of the others, it might lead the other party or parties to legitimately believe that the non-signatory was a veritable party to the contract containing the arbitration agreement – However, in order to infer consent of the non-signatory party, their involvement in the negotiation or performance of the contract must be positive, direct and substantial and not be merely incidental – Thus, the conduct of the non-signatory party along with the other attending circumstances may lead the referral court to draw a legitimate inference that it is a veritable party to the arbitration agreement – In the instant case, the clauses of FAA such as clause 2.1.4 read with Schedule 7, clause 2.1.6 read with Schedule 8, clause 2.1.7, gives an impression, though prima facie, that the SRG Group may be connected to the FAA and forms part of the settlement contemplated therein – However, this aspect needs to be looked into more closely by the Arbitral Tribunal – On bare perusal of the email exchanges produced by the petitioner, it appears prima facie that several contested questions of fact need to be first resolved – A detailed examination of numerous disputed questions of fact are imperative in deciding whether the SRG Group participated in the negotiation and performance of the underlying contract and can be bound by the arbitration agreement – There is a limited jurisdiction afforded under Section 11(6) of the Act, 1996 – This Court cannot conduct a mini trial and delve into contested or disputed questions of fact – Therefore, considering the complexity involved in the determination of the question whether the SRG Group is a veritable party to the arbitration agreement or not, it would be appropriate for the arbitral tribunal to take a call on the question after taking into consideration the evidence that may be adduced by the parties before it and the application of the legal doctrine as elaborated in the decision in Cox and Kings case. [Paras 70, 71, 77, 78, 79, 80]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Ankit Gyan. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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