1. Leave and license agreement dispute — recovery of license fees and security deposit — challenge to arbitrability under Section 41, Presidency Small Cause Courts Act, 1882. (Para 3 , 4 , 5 , 6 , 7 )
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2026 Supreme(SC) 7
SUPREME COURT OF INDIA
J. B. PARDIWALA, K.V. VISWANATHAN, JJ.
Motilal Oswal Financial Services Limited – Appellant
Versus
Santosh Cordeiro and Another – Respondent
Civil Appeal No. 36 of 2026 (@ Special Leave Petition (Civil) No. 5834 of 2025)
Decided On : 05-01-2026
Advocates appeared:
For the Appellant : Mr. Chirag M. Shah, Adv. Ms. Sanjana Saddy, AOR
For the Respondent: Mr. Rishabh Shah, Adv., Mr. Dhaval Mehrotra, Adv., Ms. Shivani Bansal, Adv., Ms. Aditi Desai, Adv. For M/s. ADS Legal, AOR.
For the Appellant : Mr. Chirag M. Shah, Adv. Ms. Sanjana Saddy, AOR
For the Respondent: Mr. Rishabh Shah, Adv., Mr. Dhaval Mehrotra, Adv., Ms. Shivani Bansal, Adv., Ms. Aditi Desai, Adv. For M/s. ADS Legal, AOR.
Arbitration agreements under the Arbitration & Conciliation Act remain valid and binding despite exclusive jurisdiction claims by special statutes like the Presidency Small Cause Courts Act.
Headnote:(A) Arbitration & Conciliation Act, 1996 - Section 11 - Presidency Small Cause Courts Act, 1882 - Section 41 - Appointment of arbitrator - Dispute regarding a Leave and License Agreement - The High Court allowed an application under Section 11 appointing an arbitrator for the dispute - Appellant contended the dispute was non-arbitrable due to Section 41, but the court noted jurisdiction issues regarding the premises and executed its power to resolve the dispute rather than remand - The existence of an arbitration agreement was affirmed despite objections citing public policy considerations. (Paras 4, 7, 18-28)
(B) Jurisdiction - The court examined the relationship between arbitration agreements and statutory provisions, ruling that an arbitration clause remains valid and enforceable in essence but must comply with legal provisions concerning jurisdiction, clarifying that disputes of this nature can be arbitrated as they pertain to personal rights. (Paras 20, 27)
Judgement Key Points
Certainly. Based on the provided legal document, here are the key points:
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The Supreme Court affirmed that arbitration agreements under the Arbitration & Conciliation Act remain valid and enforceable even when there are claims of exclusive jurisdiction by special statutes, such as the Presidency Small Cause Courts Act (!) (!) .
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The dispute involved a Leave and License Agreement concerning immovable property, with an arbitration clause specifying Mumbai as the seat of arbitration and referring to the Arbitration & Conciliation Act, 1996 (!) (!) .
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The appellant argued that jurisdiction was exclusively with the Small Causes Court under the 1882 Act, citing its provisions that generally confer exclusive jurisdiction for recovery of possession and license fees relating to immovable property in Greater Bombay (!) (!) .
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The respondent contended that the dispute was purely monetary—specifically for payment of license fees or damages for the lock-in period—and not for possession or rent, thus falling within the scope of the arbitration clause (!) (!) .
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The High Court initially appointed an arbitrator, but the appellant challenged this, asserting that the dispute was non-arbitrable due to the provisions of the 1882 Act, particularly Section 41, which confers exclusive jurisdiction on Small Causes Courts for certain landlord-tenant disputes (!) (!) .
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The Supreme Court clarified that the mere existence of a jurisdictional statute like the 1882 Act does not automatically invalidate arbitration agreements, especially when the dispute pertains to a monetary claim rather than possession or rent recovery (!) (!) .
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The Court emphasized that the scope of judicial review at the Section 11 stage is limited to examining the existence of an arbitration agreement, not its validity or the substantive arbitrability of the dispute (!) (!) .
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The Court discussed the legislative history and clarified that arbitration clauses are generally valid unless explicitly rendered invalid by specific statutes or public policy considerations. It also clarified that provisions like Section 41 of the 1882 Act do not automatically nullify arbitration agreements concerning monetary disputes (!) (!) .
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The Court highlighted the importance of the doctrine of competence-competence, which allows arbitral tribunals to rule on their jurisdiction, including the existence and validity of arbitration agreements, thereby reinforcing the limited role of courts at the appointment stage (!) (!) (!) .
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Ultimately, the Supreme Court held that the arbitration agreement in this case was valid and that the High Court erred in holding otherwise. The appeal was dismissed, and the arbitrator was directed to proceed with the adjudication within six months (!) .
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The Court also noted that the question of whether the dispute is arbitrable under specific statutes depends on the nature of the claim—whether it is for possession, rent, or monetary damages—and that disputes purely for monetary recovery are generally arbitrable unless explicitly excluded by law (!) (!) .
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The decision underscores that provisions conferring jurisdiction on specialized courts do not automatically preclude arbitration unless the dispute falls squarely within the scope of those statutes, such as cases involving recovery of possession or rent under landlord-tenant laws (!) (!) .
Please let me know if you require a more detailed analysis or assistance with drafting legal documents based on these points.
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- practice and procedure
- civil law
Table of Contents
2. Whether exclusive jurisdiction of Small Causes Court under Section 41, 1882 Act, renders the arbitration agreement invalid and the dispute non-arbitrable. (Para 11 , 12 )
3. Section 11(6A) limits judicial review to the existence of an arbitration agreement; Section 41, 1882 Act does not automatically neutralize arbitration clauses for monetary claims. (Para 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 )
4. Referral courts under Section 11(6A) must only examine the existence of an arbitration agreement, leaving substantive jurisdiction and validity to the tribunal under Section 16. (Para 16 , 17 , 25 )
5. Appeal dismissed — appointment of arbitrator upheld — directions to conclude proceedings within six months. (Para 27 , 28 )
6. What is the scope of judicial examination under Section 11(6A) of the Arbitration and Conciliation Act, 1996?
The court's jurisdiction is limited to a prima facie examination of the existence of an arbitration agreement. It should not conduct a laborious or contested inquiry, leaving the substantive ruling on jurisdiction and validity to the arbitral tribunal under Section 16. (Para 14 , 15 , 16 , 17 )
7. Does the conferral of exclusive jurisdiction on the Small Causes Court under Section 41 of the 1882 Act automatically render a dispute non-arbitrable?
No. Mere conferral of jurisdiction on a specific court or creation of a public forum is not the decisive test for non-arbitrability. Section 41 confers jurisdiction but does not ex proprio vigore neutralize arbitration clauses in agreements. (Para 21 )
8. How does the doctrine of kompetenz-kompetenz apply to the validity of an arbitration agreement?
Under Section 16 of the A&C Act, the arbitral tribunal is empowered to rule on its own jurisdiction, including objections regarding the existence or validity of the arbitration agreement, ensuring the separability of the arbitration clause from the main contract. (Para 24 , 25 )
9. Does an agreement to refer disputes to arbitration violate Section 28 of the Contract Act, 1872?
No. Section 28 contains exceptions that specifically save contracts by which parties agree to refer disputes to arbitration, ensuring such agreements are not rendered illegal as restraints on legal proceedings. (Para 21 )
JUDGMENT :
K.V. Viswanathan, J.
1. Leave granted.
2. The present appeal calls in question the correctness of the order dated 02.05.2024 passed by the Single Judge of the High Court of Judicature at Bombay in Commercial Arbitration Application No.9 of 2024. By the said order, the learned Single Judge allowed the Section 11 Application filed by the respondent under the Arbitration & Conciliation Act, 1996 (for short “the A&C Act”) and appointed an arbitrator to adjudicate the dispute between the parties. The only objection taken by the appellant herein was that the dispute is non-arbitrable in view of Section 41 of the Presidency Small Cause Courts Act, 1882 (for short “the 1882 Act”). The learned Single Judge made a short shrift of the said objection by holding that the place where the property in question, which was the subject matter of the dispute, was situated, i.e. Malad, was outside the jurisdiction of the Small Causes Court. This finding has now turned out to be a damp squib, since parties before us are ad idem that Malad area is covered under the jurisdiction of the Small Causes Court. We could have rest content by remanding the matter to the High Court for fresh consideration. However, that will only prolong the dispute and, hence, we have decided to answer the issues arising in the case ourselves.
BRIEF FACTS OF THE CASE: -
3. With regard to the premises situated at Unit No.718, admeasuring 2925 sq. ft., 7th Floor, Palm Spring Centre, Link Road, Malad (West), Mumbai, the appellant entered into a Leave and License Agreement on 06.10.2017 with the respondent. The period of the Leave and License was 60 months from 01.10.2017 to 30.10.2022. Though the appellant terminated the said agreement on 31.12.2019, after exchange of correspondence between the parties, the said termination was reversed and an Addendum dated 13.03.2020 was entered into extending the Leave and License period from 60 months to 96 months with a lock-in period of 72 months.
4. According to the appellant, due to COVID-19 pandemic, they were unable to continue the arrangement and citing the force majeure clause in the agreement, they handed over the keys and vacant peaceful possession of the premises to the respondent on 09.09.2020. According to the appellant, they intimated the respondents about the same on 10.10.2020 by writing an email. The appellant also sought refund of the security deposit.
5. On 28.06.2023, the respondent No.1 called upon the appellant to pay a sum of Rs.94,40,152/- along with interest @ 24% towards the alleged arrears of license fees for the balance lock-in period i.e. from 01.09.2020 to 14.06.2023. The appellants wrote back on 17.07.2023 denying any liability and seeking refund of security deposit of Rs. 10 lakhs.
6. The appellant on 17.07.2023 received a notice dated 15.07.2023 issued by the respondent under Section 21 of the A&C Act invoking Clause 33 of the arbitration agreement of the Leave and License Agreement dated 06.10.2017 and Addendum dated 13.03.2020. Clause 33 of the Leave and License Agreement dated 06.10.2017 reads as under: -
“In the event of the any dispute or difference arising between the Licensors and the Licensee hereto concerning or relating to the interpretation of these presents or the interpretation or effect of any provisions thereof or relating to the liability or obligation on the part of any of the parties hereto, the same shall be referred to arbitration and Sole Arbitrator shall be appointed by the mutual consent of the Parties. The award passed by the sole arbitrator shall be binding on both the parties. The arbitration shall be in Mumbai and in accordance with and subject to the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re- enhancements thereof for the time being in force.”
This was followed by an application under Section 11 of the A&C Act filed on 13.08.2023 by the respondent seeking appointment of a sole arbitrator in accordance with clause 33 set out ab
