Appointment Of Arbitrator: SC/HC Jurisdiction Confined To The Examination Of Existence Of Arbitration Agreement: SC [Read Judgment]

Three judge bench comprising Justice RF Nariman, Justice R. Subhash Reddy and Justice Surya Kant overruled a judgment that had held that appointment of an arbitrator is a judicial power and is not a mere administrative function leaving some degree of judicial intervention; when it comes to the question to examine the existence of a prima facie arbitration agreement, it is always necessary to ensure that the dispute resolution process does not become unnecessarily protracted.

Section 11(6A) reads: The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement."

In Mayavti Trading Pvt. Ltd. vs. Pradyuat Deb Burman, the court said:

It is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgment as Section 11(6A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment Duro Felguera, S.A. (supra) – see paras 48 & 59."

In Duro Felguera vs. Gangavaram Port Limited., it was held that after the 2015 amendment, the power of the Court to appoint the arbitrator under Section 11 has been narrowed down to expressly state that the Court need only examine the existence of arbitration agreement. Regarding the scope of Section 11(6A), it was observed as here-under:-

From a reading of Section 11(6A), the intention of the legislature is crystal clear i.e. the Court should and need only look into one aspect- the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple - it needs to be seen if the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement.

After the amendment, all that the Courts need to see is whether an arbitration agreement exists - nothing more, nothing less. The legislative policy and purpose is essentially to minimize the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11 (6A) ought to be respected.

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