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Arbitration Act: Preliminary inquiry under Section 11 before appointment of the arbitrator(s)

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The Law

Section 11(6A) of the Arbitration Act provides that while appointing the arbitrator(s), the court shall confine to the examination of the existence of an arbitration agreement. (Please note that Section 11(6A) has been omitted vide Amedment Act of 2019 but the relevant clause of the amendment act has not come into force till date.)

The law simply implies that once there is an arbitration agreement in existence, the court shall appoint the arbitrator(s) and the arbitrator(s) will decide all the issues.

The Question

• What is the scope of judicial review and jurisdiction of the court under Section 8 and 11 of the Arbitration Act?
• While dealing with an application for appointment of arbitrators, can the court hold a preliminary inquiry on whether the dispute is arbitrable or not?

The Case Laws

Vidya Drolia and Ors. vs. Durga Trading Corporation, (2021) 2 SCC 1.

It was observed that the Court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non­existent, invalid or the disputes are non-­arbitrable, though the nature and facet of non­arbitrability would, to some extent, determine the level and nature of judicial scrutiny. It was also observed that such restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably “non­-arbitrable”.

However, it was clarified that the court by default would refer the matter to arbitration

• when contentions relating to non­-arbitrability are plainly arguable;
• when consideration in summary proceedings would be insufficient and inconclusive;
• when facts are contested;
• when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings.

In M/s. Emaar India Ltd. vs. Tarun Aggarwal Projects LLP,.2022 LiveLaw (SC) 823.

The agreement between the parties contained two clauses on dispute resolution. The first clause provided the right to get the agreement specifically enforced through appropriate court of law in case of certain disputes. The second clause provided for settlement of other disputes through arbitration. The High Court appointed the arbitrator without recording a finding as to whether the dispute falls under the first clause or the second.

The Supreme Court set aside the order of the High Court and observed that the high court was at least required to hold a primary inquiry/review and prima facie come to conclusion on whether the dispute falls under the first clause or not and whether the dispute is arbitrable or not. The Supreme Court therefore remitted the matter back to the High Court to pass a fresh order after holding a preliminary inquiry.

Concluding Remarks

The scope of judicial review and jurisdiction of the court under Section 8 and 11 of the Arbitration Act is extremely limited and restricted.

Generally, the arbitrator has the authority to determine and decide all questions of non-arbitrability. However, in rare cases when it is manifestly evident that the arbitration agreement is non­existent, invalid or the disputes are non-­arbitrable, the courts can interfere even before the appointment of the arbitrator.