Under Section 11, the court’s function is limited to determining the prima facie existence of an arbitration agreement; it must refrain from conducting an intricate evidentiary inquiry into disputed contractual merits or limitation issues, which are reserved for the arbitral tribunal.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 11(6) and 21 - Appointment of arbitrator - Prima facie existence of arbitration agreement - Arbitration clause in tax invoices - Continuous business relations between parties - Referral court’s scope of examination - Limitation period - Pre-reference scrutiny - The court’s role at the pre-reference stage is limited to determining the prima facie existence of an arbitration agreement, avoiding detailed adjudication of disputed contractual documents or underlying merits. (Paras 10, 13, 14, 18, 23)

(B) Arbitration - Existence of agreement - Clause in tax invoices - Where parties have engaged in a long-standing commercial relationship involving multiple transactions and part payments, an arbitration clause stipulated in invoices binds the parties. (Paras 15, 17)

(C) Limitation - Pre-reference inquiry - A referral court should not conduct a roving or intricate evidentiary inquiry into whether claims are time-barred unless such a bar is ex-facie evident from the documents; the issue is best reserved for the arbitrator’s determination. (Paras 20, 23, 24)

Facts of the case:
The petitioner sought the appointment of an arbitrator to resolve disputes regarding outstanding debts for goods supplied under various tax invoices. The respondent challenged the petition on grounds of limitation, the absence of an underlying formal purchase agreement, and the alleged invalidity of the arbitration clause contained within the tax invoices. The respondent further questioned the validity of the notice invoking arbitration.

Findings of Court:
The court held that the existence of tax invoices containing an arbitration clause, validated by a history of continuous commercial transactions and accepted payments, constitutes a prima facie arbitration agreement. The court maintained that it should not engage in a mini-trial regarding disputed contractual documents, the validity of specific clauses, or claims of limitation, as these represent matters within the competence of the arbitral tribunal.

Issues: The main issues were the validity of an arbitration clause incorporated into tax invoices in the absence of a separate formal contract, and the extent to which a court should examine the plea of limitation at the pre-reference stage.

Ratio Decidendi: At the pre-reference stage under Section 11(6), the court’s jurisdiction is confined to verifying the prima facie existence of an arbitration agreement. Challenges regarding the validity of specific contractual documents, the accuracy of limitations, or technicalities of the invocation notice are to be adjudicated by the arbitral tribunal, provided the existence of the agreement is not entirely absent.

Result: Petition allowed; Sole Arbitrator appointed.

Table of Content
1. factual basis of the dispute arising from tax invoices and non-payment. (Para 1 , 2 , 3 , 4 , 5)
2. respondent raises preliminary objections regarding limitation and absence of formal contract. (Para 6 , 7 , 8 , 9 , 10)
3. existence of a valid arbitration clause within tax invoices. (Para 11 , 12 , 13 , 14)
4. tax invoices with arbitration clauses bind parties in continuous business relationships. (Para 15 , 16 , 17 , 18)
5. section 21 notice is procedural and does not require exhaustive disclosure of claims. (Para 19)
6. limitation issues not ex-facie evident are to be determined by the arbitral tribunal. (Para 20 , 21 , 22 , 23 , 24 , 25)
7. appointment of sole arbitrator with all rights left open for adjudication. (Para 26 , 27 , 28 , 29 , 30)

JUDGMENT :

MINI PUSHKARNA, J.

1. The present petition has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), for appointment of an Arbitrator for adjudication of disputes between the parties, arising out of the Tax Invoices dated 10th April, 2019 and 12th April, 2019 (“Tax Invoices”).

2. As per the facts on record, the petitioner since the year 2018 has been supplying Steel Tubular Poles Black to the respondent, and payments have been made by the respondent towards the same on a running account basis.

3. In pursuance to the parties having a running account, part payments were being made by the respondent towards the various invoices that were being raised by the petitioner for the supply of the goods. Thus, a principle amount of Rs. 8,03,807/- is due with respect to the Tax Invoices in question, upon which, taking into account the part payments and interest for the period of non-payment, i.e., 20th September, 2018 till 31st March, 2025, a total outstanding amount of Rs. 38,54,568/- is due against the goods supplied and delivered to the respondent during the aforesaid period.

4. It is noted that disputes arose between the parties on account of non-payment by the respondent for the goods supplied by the petitioner, therefore, the petitioner issued Debit Notes dated 31st May, 2024 and 31st March, 2025, seeking payment of outstanding dues towards the Tax Invoices.

5. Subsequently, as no payment was made by the respondent, therefore, the petitioner issued Legal Notice dated 07th June, 2024, calling upon the respondent to pay the outstanding dues along with interest or in the alternative appoint an Arbitrator. Further, the said Notice was duly served upon the respondent, and a Reply dated 09th July, 2024 was filed by the respondent, denying the validity of the Legal Notice for the purposes of invoking arbitration.

6. This Court notes that the respondent has filed a reply to the present petition raising various objections towards the maintainability of the petition on the ground of the same being barred by limitation.

7. In this regard, learned counsel for the respondent submits that the present petition has been filed in respect of claims which are ex-facie barred by limitation, on the ground that the right of the petitioner would accrue from the date of issuance of the Tax Invoices, therefore, as per the Limitation Act, 1963, the period of limitation of three years already stands expired.

8. Learned counsel for the respondent further submits that the present petition is defective on account of filing with incomplete documents and for not placing on record the underlying contract, i.e., Purchase Order executed between the parties.

9. It is also the case of the respondent that the notice invoking arbitration does not constitute a proper notice as the said notice does not disclose the factual or contractual basis of the claim and contains incorrect statements regarding the transactions between the parties.

10. Per Contra, learned counsel for the petitioner submits that the scope of examination by this Court under Section 11 of the Arbitration Act is limited, and the Court is only required to examine the prima facie existence of an arbitration ag

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2026 Supreme(Del) 919

Under Section 11, the court’s function is limited to determining the prima facie existence of an arbitration agreement; it must refrain from conducting an intricate evidentiary inquiry into disputed contractual merits or limitation issues, which are reserved for the arbitral tribunal.

Cases Referred (1)