The referral court's jurisdiction is strictly confined to a prima facie examination of the existence of an arbitration agreement. Contentious issues of law and fact, including accord and satisfaction, are within the exclusive adjudicatory domain of the Arbitral Tribunal and should not be determined at the appointment stage.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 11(6) and 11(6-A) - Appointment of arbitrator - Scrutiny by referral court - Scope is limited to a prima facie examination of the existence of an arbitration agreement - Court’s role is facilitative and procedural to give effect to the parties' agreed dispute resolution mechanism - It shall not embark upon an adjudication of contentious factual or legal issues which are reserved for the Arbitral Tribunal. (Paras 6, 7)

(B) Arbitration - Existence of agreement - Where parties are in agreement to refer disputes to arbitration and the existence of the agreement is prima facie established, the court must proceed to appoint an arbitrator - Such appointment does not signify an expression of opinion on the merits of the controversy between the parties. (Paras 8, 14)

Facts of the case:
The petitioner approached the court for the appointment of a sole arbitrator pursuant to a dispute resolution clause in a memorandum of understanding as the parties failed to resolve disputes amicably. The respondent filed a reply consenting to the reference of the matter to arbitration while reserving the right to raise objections in future proceedings.

Findings of Court:
The court observed that the referral jurisdiction is strictly limited to the prima facie existence of the arbitration agreement. As there was no dispute regarding the requirement to arbitrate, the court exercised its power to appoint a sole arbitrator to resolve the underlying disputes.

Issues: The central issues were the scope and standard of judicial scrutiny under the statute at the stage of appointment of an arbitrator and the extent to which the court can examine the validity or potential merit of the underlying disputes.

Ratio Decidendi: The court held that the enquiry at the stage of appointment of an arbitrator is limited to a prima facie scrutiny of the existence of the arbitration agreement; all substantive issues regarding the merits of the dispute or accord and satisfaction fall under the exclusive jurisdiction of the Arbitral Tribunal.

Result: Petition allowed; Sole arbitrator appointed.

Table of Content
1. existence of a valid arbitration agreement and invocation process. (Para 1 , 2 , 3)
2. parties' mutual consent to proceed to arbitration despite ongoing factual disputes. (Para 4 , 5)
3. limited judicial scope under section 11 to prima facie existence of arbitration agreement. (Para 6 , 7 , 8)
4. appointment of the sole arbitrator and final disposal of the referral application. (Para 9 , 10 , 11 , 12 , 13 , 14 , 15)

JUDGMENT :

Harish Vaidyanathan Shankar, J.

1. The present Petition has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996[Act], seeking the appointment of a Sole Arbitrator in terms of the Memorandum of Understanding dated 15.02.2024[MoU] for the resolution of disputes inter se the parties.

2. Material on record indicates that the MoU envisages the Dispute Resolution Clause being Clause 3.2, which reads as under:

“3.2. GOVERNING LAW & DISPUTE RESOLUTION:

a. This Agreement shall be governed and construed in accordance with the laws of India.

b. If any dispute arises between the Seller(s) and Purchaser(s)(s) during the subsistence of this Agreement or thereafter. in connection with the validity, interpretation. implementation or alleged breach of any provision of this Agreement ("Dispute"), each of the said Party shall Endeavour to settle such Dispute amicably. The attempt to bring about an amicable settlement shall be considered to have failed If not resolved within thirty (30) days from the date of the Dispute.

c. In the event the Dispute is not settled in accordance with the above sub-clause. either of the Seller or the Purchaser(s) shall be entitled to serve a notice in writing referring the Dispute to arbitration to be conducted under the provisions of the Arbitration and Conciliation Act, 1996, by a sole arbitrator to be appointed mutually by both the parties.

d. The venue of arbitration shall be New Delhi and the proceedings of arbitration shall be in the English language.

e. Each party to the Dispute shall bear its own legal costs, In relation to the arbitration proceedings and share among themselves equally the fee and other expenses payable to arbitrator(s), or as otherwise decided by the arbitrator.

f. Subject to the dispute resolution mechanism agreed hereinabove, the courts at New Delhi shall have the exclusive jurisdiction to entertain any dispute arising out of this Agreement.”

3. Material on record further indicates that the Notice invoking Arbitration under Section 21 of the Act was issued by the Petitioner on 10.10.2024.

4. Learned counsel appearing on behalf of the Respondents has filed his Reply and has conveyed that they have no objection to the disputes as between the parties being referred to Arbitration.

5. He further submits that certain factual assertions that have been made in the present Petition are misleading and reserves the right to raise appropriate objections in that regard in accordance with the law.

6. In this backdrop, this Court deems it apposite to note that the legal position governing the scope and standard of judicial scrutiny under Section 11(6) of the Act is no longer res integra. A three-Judge Bench of the Hon’ble Supreme Court in SBI General Insurance Co. Ltd. v. Krish Spinning ,(2024) 12 SCC 1, after taking into consideration the authoritative pronouncement of the seven-Judge Bench in Interplay Between Arbitration Agreements under Arbitration Act, 1996 & Stamp Act, 1899, In re: (2024) 6 SCC 1, comprehensively delineated the contours of judicial intervention at the stage of Section 11 of the Act. The excerpt of Krish Spg (supra) reads as under:-

“(c) Judicial interference under the 1996 Act

110. The parties have been conferred with the power to decide and agree on the procedure to be adopted for appointing arbitrators. In cases where the agreed upon procedure fails, the courts have been vested with the power to appoint arbitrators upon the request of a party, to resolve the deadlock between the parties in appointing the arbitrators.

111. Section 11

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2026 Supreme(Del) 946

Cases Referred (2)