2023 (5) TMI 510 - SC - Indian Laws

Jurisdiction of the referral court at pre-referral stage - existence and validity of an arbitration agreement - Section 11(6) of the Arbitration and Conciliation Amendment Act, 2015 - HELD THAT - Post-Arbitration and Conciliation Amendment Act, 2015, the jurisdiction of the court under Section 11(6) of the Act is limited to examining whether an arbitration agreement exists between the parties nothing more, nothing less . Thus, as per the Section 11(6A) of the Act, it is the duty cast upon the referral court to consider the dispute/issue with respect to the existence of an arbitration agreement. It is required to be noted that 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 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. 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. The impugned common judgment and order passed by the High Court in respective Arbitration Petitions, referring the disputes to arbitration is hereby quashed and set aside. The matter is remitted back to the High Court/referral court to decide the respective arbitration petitions afresh - Appeal allowed.

Summary

Issues involved:
The judgment deals with the pre-referral jurisdiction of the Court under Section 11(6) of the Arbitration and Conciliation Amendment Act, 2015.

Issue 1: Existence of an arbitration agreement/clause

The appellant raised an objection regarding the existence of an arbitration clause in the MOU-2, while the respondent argued that other agreements (SHA-1, SHA-2, MOU-1) are interconnected with MOU-2, which contains the arbitration clause. The High Court referred the disputes for arbitration based on the complexity of the transaction involved and appointed an arbitrator.

Issue 2: Pre-referral jurisdiction of the Court under Section 11(6) of the Act

The appellant argued that the Court must conclusively decide on the existence and validity of an arbitration agreement at the pre-referral stage under Section 11(6) and not leave it to the Arbitral Tribunal. They relied on recent decisions emphasizing the Court's duty to protect parties from being forced into arbitration when the matter is non-arbitrable. The Court observed that post-Arbitration and Conciliation Amendment Act, 2015, the Court's jurisdiction is limited to examining the existence of an arbitration agreement.

Decision:

The Court found that the High Court did not conclusively decide on the existence and validity of the arbitration agreement, which was necessary at the pre-referral stage. The matter was remitted back to the High Court/referral court to decide the arbitration petitions afresh within three months, focusing on the existence and validity of the arbitration agreement. The Court did not express any opinion on the merits of the existence and validity of the arbitration agreement or the interconnection of the agreements, leaving it to the High Court/referral court to decide on its own merits.