Arbitration and Conciliation Act, 1996 – Arbitration and Conciliation Amendment Act, 2015 – s.11(6) – Pre-referral jurisdiction – Before the High Court, appellant raised objection with regard to the existence of an arbitration agreement – High Court/referral court held that the issue of arbitrability of the dispute can be addressed by Arbitral Tribunal – Thereafter, High Court referred the disputes for arbitration and appointed a arbitrator – On appeal, held: Pre-referral jurisdiction of the court u/s. 11(6) of the Arbitration Act is very narrow and inheres two inquiries – The primary inquiry is about the existence and the validity of an arbitration agreement and the Secondary inquiry is with respect to the non-arbitrability of the dispute – The issue of existence and the validity of an arbitration agreement has to be to conclusively and finally decided by the referral court at the referral stage itself and the same should not be left to be determined by the Arbitral Tribunal as it goes to the root of the matter – Furthermore, it is the duty of the referral court to decide the said issue first conclusively to protect the parties from being forced to arbitrate when there does not exist any arbitration agreement and/or when there is no valid arbitration agreement at all – In the instant case, the referral court (High Court) has not decided the said issue conclusively and finally, which ought to have been done by it and Court has left it to be decided by the Arbitral Tribunal – Judgment of High Court quashed and set aside – Matter remitted back to the High Court.
Allowing the appeals, the Court
HELD: 1. As per the settled position of law, pre-referral jurisdiction of the court under Section 11(6) of the Arbitration Act is very narrow and inheres two inquiries. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant’s privity to the said agreement. The said matter requires a thorough examination by the referral court. The Secondary inquiry that may arise at the reference stage itself is with respect to the non-arbitrability of the dispute. Both are different and distinct. So far as the first issue with respect to the existence and the validity of an arbitration agreement is concerned, as the same goes to the root of the matter, the same has to be to conclusively decided by the referral court at the referral stage itself. Now, so far as the non-arbitrability of the dispute is concerned, even as per the law laid-down by this Court in the case of Vidya Drolia, the court at prereferral stage and while examining the jurisdiction under Section 11(6) of the Act may even consider prima facie examining the arbitrability of claims. As observed, the prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straightforward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage. However, so far as the dispute with respect to the existence and validity of an arbitration agreement is concerned and when the same is raised at pre-referral stage, the referral court has to decide the said issue conclusively and finally and should not leave the said issue to be determined by the arbitral tribunal. The reason is that the issue with respect to the existence and validity of an arbitration agreement goes to the root of the matter. If the dispute/issue with respect to the existence and validity of an arbitration agreement is not conclusively and finally decided by the referral court while exercising the pre-referral jurisdiction under Section 11(6) and it is left to the arbitral tribunal, it will be contrary to Section 11(6A) of the Arbitration Act. It is the duty of the referral court to decide the said issue first conclusively to protect the parties from being forced to arbitrate when there does not exist any arbitration agreement and/or when there is no valid arbitration agreement at all. [Para 5.3][407-C-H; 408-B-C]
2. The referral court has not decided the said issue conclusively and finally and referral court has left it to be decided by the arbitral tribunal. The submission on behalf of the contesting respondent relying upon some observations made in paragraph
22 of the impugned order that the referral court has in fact opined that the four agreements are indisputably interconnected is concerned, it is required to be noted that the observations made in paragraph 22 are to be read along with the prayer of the appellant to appoint different arbitrator(s). However, in paragraph 13, it is specifically observed by the referral court that “this Court cannot finally pronounce one way or the other on this aspect.” In paragraph 14 also, it is specifically observed that the arbitrability of the dispute raised viz-a-viz the arbitration clause 27.3 of SHA1, is an involved issue, can be addressed by the learned arbitral tribunal. Thus, the referral court has not pronounced anything finally on the existence and validity of the arbitration agreement which ought to have been done by the referral court. [Para 6]
Vidya Drolia and Ors. Vs. Durga Trading Corporation (2021) 2 SCC 1; N.N. Global Mercantile Private Limited Vs. Indo Unique Flame Ltd. and Ors. 2023 SCC Online SC 495; NTPC Ltd. Vs. SPML Infra Ltd. 2023 SCC
Online SC 389; Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. and Ors. (2013)
1 SCC 641 : [2012] 13 SCR 402; Olympus
Superstructures (P) Ltd. Vs. Meena Vijay Khetan (1999)
5 SCC 651 : [1999] 3 SCR 490 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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