Delhi High Court

M/S Ashutosh Infra Private Limited vs M/S Pebble Downtown India (P.) Ltd & Ors on 4 December, 2025

Author:
Jyoti Singh

Bench:
Jyoti Singh

$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 4th December, 2025
+ ARB.P. 1294/2023 and I.A. 16788/2025
M/S ASHUTOSH INFRA PRIVATE LIMITED .....Petitioner
Through: Mr. Anand Kumar, Mr. Aditya Giri,
Mr. Chetan Singh, Mr. Harshit Kumar and
Mr. Preetesh Sharma, Advocates along with AR of
Petitioner.
versus
M/S PEBBLE DOWNTOWN INDIA (P.) LTD & ORS.
.....Respondents
Through: Mr. Akhil Sibal, Senior Advocate
with Mr. Vikas Mishra, Mr. Nikhil Chawla,
Mr. Varun Ahuja, Ms. Sugandha Shahi and Mr.
Nilay Kaushal, Advocates for R-1.
Mr. Dhanesh Relan, Ms. Brinda Ajmani and
Mr. Shikhar Misra, Advocates for R-2.
Mr. Rajshekar Rao, Senior Advocate with
Ms. Nandini Sahni and Ms. Tanya Singh,
Advocates for R-3 & R-4.
+ O.M.P.(I) (COMM.) 152/2023 and CCP(O) 87/2024, I.A. 44069/2024
M/S ASHUTOSH INFRA PVT. LTD. .....Petitioner
Through: Mr. Anand Kumar, Mr. Aditya Giri,
Mr. Chetan Singh, Mr. Harshit Kumar and
Mr. Preetesh Sharma, Advocates along with AR of
Petitioner.
versus
M/S PEBBLE DOWNTOWN INDIA (P.) LTD. AND ORS.
.....Respondents
Through: Mr. Akhil Sibal, Senior Advocate
with Mr. Vikas Mishra, Mr. Nikhil Chawla,
Mr. Varun Ahuja, Ms. Sugandha Shahi and Mr.
Nilay Kaushal, Advocates for R-1.
Mr. Dhanesh Relan, Ms. Brinda Ajmani and

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By:KAMAL KUMAR ARB.P. 1294/2023 & connected matter Page 1 of 58
Signing Date:06.12.2025
17:59:30
Mr. Shikhar Misra, Advocates for R-2.
Mr. Rajshekar Rao, Senior Advocate with
Ms. Nandini Sahni and Ms. Tanya Singh,
Advocates for R-3 & R-4.
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JUDGEMENT

JYOTI SINGH, J.

1. ARB.P. 1294/2023 is filed by the Petitioner under
Section 11(6)
of
the Arbitration and Conciliation Act, 1996 ('1996 Act') for appointment of a
Sole Arbitrator to adjudicate the disputes and differences between the parties
arising out of Settlement Agreement dated 31.12.2021. O.M.P.(I) (COMM.)
152/2023 is filed by the Petitioner under
Section 9
of 1996 Act seeking
multiple interim reliefs.

ARB.P. 1294/2023 and I.A. 16788/2025

2. Case of the Petitioner as set out in the petition is that Petitioner is a
company incorporated and registered under
Companies Act, 1956
. It is the
lawful owner of piece and parcel of land bearing Rectangle No.56, Killa
No.24/2(3-1), 25/1(3-15); Rectangle No.212, Killa No.2/2(0-10); Rectangle
No.65, Killa No.4/2(3-5), 5/1(3-5), admeasuring 13 Kanals 16 Marlas (1.725
acres) situated in revenue estate of Ajronda, Sector-12, Tehsil and District
Faridabad, Haryana. Petitioner and Respondent No.1/M/s Pebble Downtown
India (P.) Ltd. entered into a Collaboration Agreement dated 25.06.2015,
whereby Respondent No.1 was to inter alia develop and construct a
commercial colony on the project land. Disputes having arisen between the
parties out of the Collaboration Agreement, Sole Arbitrator was appointed,
however, after he entered upon reference, parties resolved their disputes and
executed a Settlement Agreement on 31.12.2021 incorporating terms of

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settlement. On joint application filed by Petitioner and Respondent No.1, in
accordance with Clause 69 of Collaboration Agreement, the Arbitrator
passed a Consent Award on 08.04.2022, apportioning and identifying
Petitioner's share as the owner and Respondent No.1's share as Developer in
the commercial project as follows:-

3. It is averred in the petition that parties agreed that after expiry of six
months from the date of receipt of Occupation Certificate i.e. 14.03.2022,
Respondent No.1 will have no right to lease out Petitioner's share in the
project and hence post 14.09.2022, Petitioner executed Sale Deeds dated
29.03.2023 and 31.03.2023 with M/s Shree Sai Sales Corporation in respect
of 3 units out of 24 units falling to Petitioner's share. With an illegal design
and oblique motive to frustrate the sale by the Petitioner, Respondent No.1
executed two ante-dated Lease Deeds on 06.04.2022 and leased out all 16
units and got them registered on 10.04.2023. The ante-dating is evident from
the fact that while the date of execution of the Lease Deeds is shown as
06.04.2022, the date of purchase of the stamp papers is 12.04.2023.

4. It is further stated that at the time of settlement and passing of the
Consent Award, Respondent No.1 had represented that the total carpet area

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on the 4th and 5th floors in the demised premises was 1398.271 sq. mts.,
however, on actual measurement it was found to be 2195 sq. mts. and
therefore, Petitioner is entitled to allocation of 36.25% share in the excess
area on these floors, which Respondent No.1 refused to give. In order to
preserve its share in the demised premises, Petitioner filed a petition in this
Court under
Section 9
of 1996 Act, being O.M.P.(I) (COMM.) 152/2023,
seeking restraint orders against Respondent No.1 as also appointment of
Local Commissioner to re-measure the actual carpet area of the two floors.

5. To complete the chronology of facts it is relevant to mention at this
stage that when the
Section 9
petition was listed on 22.05.2023, Court
observed that prima facie Petitioner was able to show circumstances which
cast a doubt on the execution of Lease Deeds dated 06.04.2022 and thus to
maintain a balance, directed that Respondents No.3 and 4 will remain bound
by their statement that any fitment activity carried out in the subject shops
will be at their own peril and they will not claim special equity/right or title.
A direction was also issued that these Respondents shall not begin
commercial operations from the shops in question without prior permission
of the Court. Respondent No.1 was restrained from dealing with Petitioner's
share in the subject mall. With respect to the second issue of Petitioner's
entitlement to share in the excess area on 4th and 5th floors, it was directed
that this consideration will have to await replies from the Respondents. This
order was challenged before the Supreme Court in SLP (C) No.14880/2023,
which was dismissed. Petitioner sent notice invoking arbitration dated
18.08.2023 to Respondent No.1 under
Section 21
of 1996 Act proposing the
name of a former Judge of the Supreme Court as an Arbitrator, however,
Respondent No.1 did not agree for arbitration. In this backdrop, ARB.P.

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1294/2023 was filed by the Petitioner seeking appointment of a Sole
Arbitrator, invoking clause 37 in the Settlement Agreement and clause QQ
in the Consent Award, the arbitration clauses.

6. Learned counsel for the Petitioner submitted that Petitioner and
Respondent No.1 entered into a Collaboration Agreement to develop and
construct a commercial mall, whereunder Petitioner and Respondent No.1
were entitled to 36.25% and 63.75% shares respectively, in the built-up area.
Disputes between the parties led to appointment of an Arbitrator, however,
the disputes were amicably resolved and Settlement Agreement was
executed, culminating into a Consent Award dated 08.04.2022. Under
Clause 26 of the Collaboration Agreement, Respondent No.1's exclusive
right to lease Petitioner's units expired on 14.09.2022 i.e on expiry of 6
months from the date of receipt of Occupation Certificate and Petitioner
lawfully sold 3 units via Sale Deeds dated 29.03.2023 and 31.03.2023.
Respondent No.1 obstructed the sale by executing ante-dated Lease Deeds
on 06.04.2022, leasing out 16 units with an oblique motive to frustrate the
sale by the Petitioner and thus this issue needs to be adjudicated through
arbitration.

7. It was further contended that the total carpet area on the 4th and 5th
floors of the mall has also come under dispute due to misrepresentation of
by Respondent No.1 at that stage, inasmuch as after obtaining the Auto
CAD of 4th and 5th prepared by architect of Respondent No.1, when the
architect of the Petitioner measured the total carpet area, it was revealed that
the area was 2195 sq. mts. and not 1398.271 sq. mts. and owing to this,
Petitioner was given lesser area of 506.873 sq. mts. i.e., 36.25% on lower
ground floor in exchange of its share at the 4th and 5th floor. Petitioner has

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thus become entitled to further area in the 800 sq. mts. (approx.) excess area,
in the agreed proportion. Respondent No.1, however, refuses to honour the
settlement and thus this legitimate claim of the Petitioner be referred to
arbitration in terms of Clause 37 of the Settlement Agreement and Clause
QQ of the Consent Award.

8. To make good the plea that even after settlement and Consent Award,
Petitioner can seek reference to arbitration, it was argued that at the time of
executing the Settlement Agreement, parties had clearly envisaged that
further disputes may arise and for this reason Clause 37 was incorporated in
the Settlement Agreement, which is an arbitration agreement. Additionally,
Consent Award also contains arbitration Clause QQ for adjudication of
disputes arising out of or in connection with the Settlement Agreement
and/or the Collaboration Agreement. Moreover, sub-Clause (x) of Clause N
of the Consent Award provides that in case deviation in the carpet area
between the last sanctioned plan of the commercial project and proposed
occupation plan of commercial project is less than 20-30 sq. mts., then there
will be no change in owner's or developer's allocation, however, in case the
said carpet area increased beyond 20-30 sq. mts., then the same will be
shared proportionately by the parties as per their allocation, adjacent to their
allocated areas. Since a deviation has been found beyond 20-30 sq. mts. and
Respondent No.1 has declined to share the area proportionately, dispute has
arisen between the parties on this aspect.

9. It was contended that the objection raised by the Respondents that no
reference can be made as the claims are barred by res judicata in light of the
Consent Award and/or are non-arbitrable, cannot be sustained. It is a settled
law that jurisdiction of a referral Court under
Section 11
of 1996 Act is

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confined to determination of existence of a valid arbitration agreement and
whether the petition itself is barred by limitation and all other issues
pertaining to merits of the case; tenability of the claims; issue of res
judicata; arbitrability etc., are in the domain of the Arbitral Tribunal.
In
support of this plea reliance was placed on the judgments of the Supreme
Court in SBI General Insurance Company Limited v. Krish Spinning,
2024 SCC OnLine SC 1754;
Indian Oil Corporation Limited v. SPS
Engineering Limited
, (2011) 3 SCC 507; and of this Court in
Hindustan
Construction Company Ltd. v. Indian Strategic Petroleum Reserves Ltd.
,
2025 SCC OnLine Del 3661.

10. On the objection raised by Respondents No.2, 3 and 4 that they cannot
be referred for arbitration being non-signatories to the arbitration agreement
in the Collaboration Agreement and to the Settlement etc., the submission
was that these Respondents are beneficiaries of the commercial transactions
with Respondent No.1. Respondents No.3 and 4 are shell companies of
Respondent No.1, in favour of whom Respondent No.1 executed ante-dated
Lease Deeds, leasing all remaining 16 units falling to Petitioner's share after
Petitioner sold 3 units from its allocated share, which fact was recognized by
the Court when interim order was passed staying their commercial
operations. Respondent No.2 is in possession of entire 4th and 5th floors,
which includes the area of dispute i.e., 800 sq. mts., approximately.
In any
event, it is for the Arbitrator to decide whether non-signatories to an
arbitration agreement are necessary parties to arbitration, in light of the
judgment of the Supreme Court in
Cox and Kings Limited v. SAP India
Private Limited and Another
, (2024) 4 SCC 1.

11. Arguing on behalf of Respondent No.1, Mr. Akhil Sibal, learned

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Senior Counsel opposed the appointment of Arbitrator on ground of non-
arbitrability of disputes invoking the doctrine of res judicata and urging that
after full and final settlement of disputes and passing of the Consent Award,
there can be no fresh reference. It was emphasized that the Consent Award
dated 08.04.2022 has the force of a final decree under
Section 36
of 1996
Act and cannot be construed as a new contract with an arbitration
agreement. Assuming that the Petitioner has any grievance with the Award,
the only remedy is to challenge the Award under
Section 34
of 1996 Act,
albeit that remedy is now time barred.

12. It was further submitted that in terms of the Settlement Agreement
and Consent Award, Respondent No.1 has fully constructed, built and
developed the Pebble Mall and has handed over peaceful physical
possession of identified and apportioned carpet areas falling to the share of
the Petitioner in June, 2022, which was accepted by the Petitioner, without
any protest and demur and parties have been enjoying their respective
allocations under the agreement and the award till April, 2023, when
Petitioner raised a frivolous dispute of excess area. Respondent No.1 has
already leased 48 out of 57 units apportioned to it and Petitioner is a
confirming party to the lease between Respondent No.1 and Respondent
No.2. In fact Petitioner has also leased 25 out of 26 units apportioned to it
and illegally sold 3 units to M/s Shree Sai Sales Corporation and is enjoying
the rentals. Petitioner has no right to re-open a binding and concluded
settlement acted upon by the parties and whereunder third party rights have
been created and importantly, Respondent No.1 has altered its financial
position.

13. Allegations of fraud and/or misrepresentation with regard to the

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carpet area of 4th and 5th floors were strenuously denied and it was urged that
the area was apportioned based on joint measurements by both the parties, as
recorded in the settlement agreement and Petitioner accepted possession of
its share, without any protest. Contents of paragraphs L, M, N, T, KK and
LL of the Award show that shares of Petitioner and Respondent No.1 were
specifically identified and apportioned in the Pebble Mall and parties agreed
that neither of them will make any further claims or demands with respect to
such apportionment and/or shares. It is trite that when a Court/Tribunal puts
its seal of approval on a Settlement Agreement/ compromise, it ceases to be
a contract and gets the status of decree of a Court, which continues to bind
the parties thereto, unless set aside by a Competent Court. If the plea of the
Petitioner is accepted, no settlement will be final and it will be open to a
party to re-agitate the disputes thus making a mockery of the settlement.
In
this regard, reliance was placed on the judgments in
Bhima Rama Jadhav v.
Abdul Rashid
, 1960 SCC OnLine Kar 21;
Rani Pravabati Roy & Others v.
Saileshnath Roy and Others
, 1977 SCC OnLine Cal 8;
Sarabjit Singh
Chadha v. Dinesh Sehgal
, 2021 SCC OnLine Del 3996; and
Shankar
Sitaram Sontakke and Another v. Balkrishna Sitaram Sontakke and
Others
, (1995) 1 SCR 99.

14. Existence of a valid arbitration agreement was also questioned by
Respondent No.1 on the ground that clauses 37 and QQ do not satisfy the
ingredients of
Section 7(1)
of 1996 Act, which provides that an 'arbitration
agreement' means an agreement by the parties to submit to arbitration all or
certain disputes which have arisen or which may arise between them in
respect of a defined legal relationship, whether contractual or not. Neither
the arbitral award nor the Settlement Agreement constitutes 'a defined legal

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relationship' and sans existence of a valid arbitration agreement between the
Petitioner and Respondent No.1, which is a sine qua non for reference under

Section 11
of 1996 Act, no reference can be made to arbitration. The law

laid down by
the Supreme Court in Krish Spinning (supra), ought not to be
interpreted to mean that referral Court's functions are merely administrative
and ministerial and it is not required to apply its mind and test the existence
and validity of the arbitration agreement invoked by a party.
Notably, even
after the judgment of the Supreme Court in Krish Spinning (supra), Courts
have declined appointment of the Arbitrators, where manifestly the disputes
are non-arbitrable and in this context, reliance was placed on the judgments
of the Supreme Court in
Dushyant Janbandhu v. Hyundai Autoever India
Pvt. Ltd.
, (2024) SCC OnLine SC 3691; HPCL Bio-Fuels v. Shahaji
Bhanudas Bhad, (2024) SCC OnLine SC 3190 and of this Court in ARSS
Infrastructure Projects Ltd. v. National Highway and Infrastructure
Development Corporation Ltd., (2025) SCC OnLine Del 1482; and

Jaiprakash Associates Limited v. Nhpc Limited
, (2025) SCC OnLine Del

170. Significantly, in all these cases, existence of arbitration agreement was
not disputed yet the prayer for appointment of Arbitrators was declined.

15. Mr. Sibal attempted to distinguish the judgment of the Supreme Court
in
SPS Engineering
(supra) on the ground that in the said case, there was
no dispute that a valid arbitration clause existed between the parties
fulfilling all ingredients of
Section 7
of 1996 Act. Moreover, it was held that
decision on res judicata requires consideration of pleadings, claims, issues
in the previous round of arbitration in juxtaposition with pleadings, claims
and issues in the second round of arbitration and therefore, this
determination must be left to the Arbitral Tribunal. In the present case, all

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issues pertaining to measurement of the areas is question, their identification
and apportionment stand settled and crystallized in the Consent Award and
no further consideration on facts or documents is required. All disputes qua
the carpet area of the 4th and 5th floors as also the execution of Lease Deeds
in the identified and apportioned areas between the parties were settled and a
quietus was put and thus this is an open and shut case of a reference being
barred by res judicata and the disputes being non-arbitrable.

16. Learned counsel for Respondent No.2/PVR Limited submitted that no
reference can be made to arbitration qua the said Respondent, who is a bona
fide third-party lessee with no privity of contract with the Petitioner.
Respondent No.2 is neither a signatory to the Collaboration Agreement nor
the Settlement Agreement and the Consent Award has nothing to do with the
said Respondent. Answering Respondent's legal relationship was only with
Respondent No.1, strictly governed by clauses of Lease Deed dated
07.10.2022 executed between them with its own distinct arbitration clause
18, envisaging reference of disputes between Respondent No.1 and
Respondent No.2 to arbitration. Furthermore, Petitioner in essence seeks
relief of cancellation of Respondent No.2's Lease Deed which falls within
exclusive jurisdiction of a Civil Court as per
Section 31
of the Specific
Relief Act, 1963 and hence the dispute, if any, is non-arbitrable. For this
proposition, reliance was placed on the judgment of the Supreme Court in

Vidya Drolia and Others v. Durga Trading Corporation
, (2021) 2 SCC 1.
All other arguments addressed by Respondent No.1 were adopted by
Respondent No.2.

17. Arguing on behalf of Respondents No.3 and 4, Mr. Rajshekar Rao,
learned Senior Counsel while adopting the arguments of the other

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Respondents urged that there is no privity of contract between the said
Respondents and the Petitioner. This petition stems out of Clause 37 of
Settlement Agreement and Clause QQ of Consent Award and Respondents
No.3 and 4 are privy to none and have been erroneously impleaded on the
ground that they have acquired rights from Respondent No.1. In essence, the
allegation concerning Respondent Nos.3 and 4 is that the Lease Deeds
executed by Respondent No.1 in their favour were ante-dated, which is
factually incorrect. This petition is only a guise to re-agitate disputes which
stand settled and the terms of settlement are now a part of a Consent Award.
The Consent Award is legally binding as a decree of a Court and cannot be
indirectly challenged by seeking fresh arbitration. Alternatively, even
assuming there is a valid arbitration agreement between Petitioner and
Respondent No.1, the same cannot be invoked and/or enforced against
Respondents No.3 and 4.

18. It was also submitted that Petitioner is wrongly involving
Respondents No.3 and 4 in a demarcation dispute, with which they have no
concern. The lease deeds are independent and distinct transactions, wholly
unrelated with the demarcation dispute or any other dispute arising from
Collaboration Agreement, Settlement Agreement and Consent Award.
Respondent No.1 entered into a Term Sheet dated 09.03.2022 with
Respondent No.3 on behalf of the Petitioner and acting in accordance with
the same, a valid Lease Deed was executed on 06.04.2022, which was
registered on 10.04.2023 and all these transactions were signed well within
six months from the date of Occupation Certificate issued on 14.03.2022.
The same position obtains in respect of Term Sheet dated 09.03.2022 with
Respondent No.4. Petitioner has sold 3 shops to a third party and has no

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locus standi to seek relief of appointment of Arbitrator qua the said shops. It
is only the vendee, who can contest the rights of Respondent No.3 and as a
matter of record, vendee has already filed a suit being CS(COMM.) 12/2025
before the District Court, Faridabad, which is pending adjudication. At the
highest, assuming that Petitioner has any rights qua the lease properties, the
remedy lies before Civil Courts and not in invoking arbitral mechanism.

19. Heard learned Senior Counsels and other counsels appearing for the
respective parties and examined their submissions.

20. By petition under
Section 11
of 1996 Act, Petitioner seeks
appointment of a Sole Arbitrator and reference of disputes for adjudication.
Respondent No.1 has taken two-fold objections to appointment of the
Arbitrator viz: (a) non-existence of valid arbitration agreement between the
parties; and (b) full and final settlement entered into between Petitioner and
Respondent No.1 culminating into a Consent Award. Respondents No.2 to 4
question the reference to arbitration on an additional ground that they are
non-signatories to the original Collaboration Agreement, Settlement
Agreement and Consent Award and cannot be referred to arbitration.

21. Before proceeding to examine the objections raised by the
Respondents, it is imperative to look into the scope and ambit of the
jurisdiction of this Court as a referral Court under
Section 11(6)
of 1996
Act. It is trite that under
Section 11(6)
of 1996 Act, Court is only required to
examine the existence of a valid arbitration agreement on the basis of

Section 7
of 1996 Act and whether the petition is barred by period of
limitation prescribed under
Article 137
of the
Limitation Act, 1963
i.e., 3
years from the date when the right to apply accrues in favour of the
Petitioner and right to apply has been held to commence from the date when

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a valid notice invoking arbitration has been sent by the Petitioner to the
other party and there is a failure or refusal on part of that other party in
complying with the requirements of the notice. In Interplay Between
Arbitration Agreements under
Arbitration and Conciliation Act, 1996
and

Stamp Act, 1899
, in Re, (2024) 6 SCC 1, seven-Judge Bench of the
Supreme Court referred to several earlier judgments on the scope of judicial
interference at the reference stage and noted the paradigm shift in law due to
legislative amendment by the
Arbitration and Conciliation (Amendment
Act
), 2015 ('2015 Amendments'), whereby
Section 11
(6-A) was inserted.
The Supreme Court observed that the decision in SBP & Co. v. Patel
Engineering Ltd. and Another, (
2005) 8 SCC 618 and National Insurance
Company Limited v. Boghara Polyfab Private Limited
, (2009) 1 SCC 267,
allowed for greater judicial interference at pre-arbitral stage and referral
Courts were encouraged to conduct mini trials instead of summarily dealing
with the preliminary issues. The Law Commission recognising that one of
the problems plaguing implementation of the 1996 Act was pendency of

Section 11
applications for years, decided to remedy the situation and
proposed the 2015 Amendment Act to reduce the judicial intervention at
pre-arbitral stage. The Statement of Objects and Reasons as noted in the
judgment states that sub-Section (6-A) was inserted in
Section 11
to provide
that referral Court shall confine to the examination of an arbitration
agreement.

The Supreme Court then referred to the judgment in
Duro
Felguera, S.A. v. Gangavaram Port Limited
, (2017) 9 SCC 729, wherein
the effect and impact of 2015 Amendment Act was clarified and it was held
that the intention of the legislature in incorporating
Section 11
(6-A) was to
limit the scope of referral Court's jurisdiction to only one aspect i.e.,

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existence of an arbitration agreement and to determine this, Court only
needs to examine whether the underlying contract contains a clause which
provides for arbitration pertaining to the disputes which have arisen between
the parties to the agreement.

The Supreme Court then referred to the
judgment in
Mayavati Trading Private Limited v. Pradyuat Deb Burman
,
(2019) 8 SCC 714, passed by three-Judge Bench of the Supreme Court
affirming the reasoning in
Duro Felguera
(supra) and observing that the
examination under
Section 11
(6-A) was confined to examination of
existence of an arbitration agreement and is to be understood in the narrow
sense as also that position of law prior to 2015 Amendment Act, as set forth
by decisions of the Supreme Court in Patel Engineering (supra) and

Boghara Polyfab
(supra), has been legislatively overruled.

22. After referring to several judgments on the issue as also legislative
intent behind incorporating
Section 11
(6-A), the Supreme Court in In Re:

Interplay (supra) held that
Section 11
confines Court's jurisdiction to
examination of existence of an arbitration agreement and the use of the term
'examination' in itself connotes that the scope of power is limited to a prima
facie determination. It was further held that since the 1996 Act is a self-
contained code, the requirement of 'existence' of an arbitration agreement
draws effect from
Section 7
of 1996 Act.
In this context, once again
reference was made to the judgment in
Duro Felguera
(supra), wherein the
Supreme Court held that the referral Court would only consider whether the
underlying contract contains an arbitration agreement which provides for
arbitration pertaining to the disputes which have arisen between the parties
to the agreement. Similarly, validity of the arbitration agreement, in view of

Section 7
, should be restricted to requirement of formal validity such as the

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agreement must be in writing.

It was held that this interpretation also gives
true effect to the doctrine of competence-competence by leaving the issue of
substantive existence and validity of an arbitration agreement to be decided
by Arbitral Tribunal under
Section 16
of 1996 Act and while so holding, the
Supreme Court in In Re: Interplay (supra) clarified the position of law laid
down in
Vidya Drolia
(supra) in context of
Sections 8
and
of 1996 Act.
Relevant passages from the judgment are as follows:-

"152. The extent of judicial interference at the referral stage was
scrutinised by a Bench of two Judges of this Court in
National Insurance
Co. Ltd. v. Boghara Polyfab (P) Ltd. [National Insurance Co.
Ltd.
v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ)
117] This Court held that when the intervention of the Court is sought
under
Section 11
of the Arbitration Act, the following categories of issues
will arise before the Referral Court:

152.1. The issues which the Chief Justice or his designate is bound to
decide. These issues were : first, whether the party making the application
has approached the appropriate High Court; and second, whether there is
a valid arbitration agreement and whether the party who has applied
under
Section 11
of the Act, is a party to such an agreement;
152.2. The issues which the Chief Justice or his designate may choose to
decide or leave them to the decision of the Arbitral Tribunal. These issues
were : first, whether the claim is a dead (long-barred) claim or a live
claim; and second, whether the parties have concluded the
contract/transaction by recording the satisfaction of their mutual rights
and obligations or by receiving the final payment without objection; and
152.3. The issues which the Chief Justice or their designate should leave
exclusively to the Arbitral Tribunal. These issues were : first, whether a
claim made falls within the arbitration clause (as for example, a matter
which is reserved for final decision of a departmental authority and
excepted or excluded from arbitration); and second, merits or any claim
involved in the arbitration.

153. The decisions of this Court in Patel Engg. [SBP & Co. v. Patel Engg.
Ltd., (2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co.
Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ)
117] allowed for greater judicial interference at the pre-arbitral stage. In
effect, the Referral Courts were encouraged to conduct mini trials instead
of summarily dealing with the preliminary issues. This was also noted by
the Law Commission of India, which observed that judicial intervention in
the arbitral proceedings is a pervasive problem in India leading to

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significant delays in the arbitration process. [ Law Commission of India,
246th Report (2014).] The Law Commission recognised that one of the
problems plaguing implementation of the
Arbitration Act
was that
Section
applications were kept pending for years by the Courts. To remedy the
situation, the Law Commission proposed changing the then existing
scheme of the power of appointment being vested in the "Chief Justice" to
the "High Court" and the "Supreme Court". It also clarified that the
power of appointment of arbitrators ought not to be regarded as a judicial
act.

154. Significantly, the Law Commission observed that there was a need to
reduce judicial intervention at the pre-arbitral stage, that is, prior to the
constitution of the Arbitral Tribunal. Accordingly, it proposed limiting the
scope of the judicial intervention at the referral stage under
Sections 8
and
of the Arbitration Act "to situations where the Court/Judicial Authority
finds that the arbitration agreement does not exist or is null and void".

The Law Commission suggested insertion of sub-section (6-A) under

Section 11
which would read:"Any appointment by the High Court or the
person or institution designated by it under sub-section (4) or sub-section
(5) or sub-section (6) shall not be made only if the High Court finds that
the arbitration does not exist or is null and void." In light of the
recommendations of the Law Commission, Parliament passed the

Arbitration and Conciliation (Amendment) Act, 2015
("the 2015
Amendment Act") to incorporate
Section 11
(6-A).

155. The Statement of Objects and Reasons of the 2015 Amendment Act
states that sub-section (6-A) is inserted in
Section 11
to provide that the
Supreme Court or the High Court while considering application under
sub-sections (4) to (6) "shall confine to the examination of an arbitration
agreement". With the coming into force of the 2015 Amendment Act, the
nature of preliminary examination at the referral stage under
Section 11

was confined to the existence of an arbitration agreement. It also
incorporates a non obstante clause which covers "any judgment, decree or
order of any court". By virtue of the non obstante clause,
Section 11
(6-A)
has set out a new position of law, which takes away the basis of the
position laid down by the previous decisions of this Court in Patel
Engg. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara
Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009)
1 SCC 267 : (2009) 1 SCC (Civ) 117] . It is also important to note that
Parliament did not incorporate the expression "or is null and void" as
was suggested by the Law Commission. This indicates that Parliament
intended to confine the jurisdiction of the Courts at the pre-arbitral stage
to as minimum a level as possible.

156. The effect and impact of the 2015 Amendment Act was subsequently
clarified by this Court.
In
Duro Felguera, S.A. v. Gangavaram Port
Ltd. [Duro Felguera
,
S.A. v. Gangavaram Port Ltd.
, (2017) 9 SCC 729 :

(2017) 4 SCC (Civ) 764] , Kurien Joseph, J. noted that the intention of the

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legislature in incorporating
Section 11
(6-A) was to limit the scope of the
Referral Court's jurisdiction to only one aspect -- the existence of an
arbitration agreement. To determine the existence of an arbitration
agreement, the Court only needs to examine whether the underlying
contract contains a clause which provides for arbitration pertaining to the
disputes which have arisen between the parties to the agreement. This

Court further held
that
Section 11
(6-A) incorporates the principle of
minimal judicial intervention : (SCC p. 765, para 59)
"59.
The scope of the power under
Section 11(6)
of the 1996 Act was
considerably wide in view of the decisions in SBP & Co. [SBP &
Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara
Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd.,
(2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117] . This position continued
till the amendment brought about in 2015. 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 minimise the Court's intervention at the stage of
appointing the arbitrator and this intention as incorporated in
Section
(6-A) ought to be respected."

157. In 2017, the High-Level Committee to Review the Institutionalisation
of Arbitration Mechanism in India submitted a report noting that while the
2015 amendment facilitated the speedy disposal of
Section 11

applications, they failed to limit judicial interference in arbitral
proceedings. Accordingly, the High-Level Committee recommended the
amendment of
Section 11
to provide for appointment of arbitrators solely
by arbitral institutions designated by the Supreme Court in case of
international commercial arbitrations or the High Court in case of all
other arbitrations. In view of the report of the High-Level Committee,
Parliament enacted the
Arbitration and Conciliation (Amendment) Act,
("the 2019 Amendment Act") omitting
Section 11
(6-A) so as to leave
the appointment of arbitrators to arbitral institutions.
Section 1(2)
of the
2019 Amendment Act provides that amended provisions shall come into
force on such date as notified by the Central Government in the official
gazette. However,
Section 3
of the 2019 Amendment Act which amended

Section 11
by omitting
Section 11
(6-A) is yet to be notified. Till such time,

Section 11
(6-A) will continue to operate.

158.
In
Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman [Mayavati
Trading (P) Ltd.
v. Pradyuat Deb Burman, (2019) 8 SCC 714 : (2019) 4
SCC (Civ) 441] , a three-Judge Bench of this Court affirmed the reasoning
in
Duro Felguera [Duro Felguera, S.A. v. Gangavaram Port Ltd.
, (2017)
9 SCC 729 : (2017) 4 SCC (Civ) 764] by observing that the examination
under
Section 11
(6-A) is "confined to the examination of the existence of
an arbitration agreement and is to be understood in the narrow sense".

Moreover, it held that the position of law prior to the 2015 Amendment
Act, as set forth by the decisions of this Court in Patel Engg. [SBP &

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Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab
[National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC
267 : (2009) 1 SCC (Civ) 117] , has been legislatively overruled. Thus,
this Court gave effect to the intention of the legislature in minimising the
role of the Courts at the pre-arbitral stage to the bare minimum.

159. Thereafter, in
Vidya Drolia [Vidya Drolia v. Durga Trading Corpn.
,
(2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] , another three-Judge Bench of
this Court, affirmed the ruling in
Mayavati Trading [Mayavati Trading (P)
Ltd. v. Pradyuat Deb Burman
, (2019) 8 SCC 714 : (2019) 4 SCC (Civ)
441] that Patel Engg. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618]
has been legislatively overruled.

In
Vidya Drolia [Vidya Drolia v. Durga
Trading Corpn.
, (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] , one of the
issues before this Court was whether the Court at the reference stage or
the Arbitral Tribunal in the arbitration proceedings would decide the
question of non-arbitrability. This Court began its analysis by holding that
an arbitration agreement has to satisfy the mandate of the
Contract Act
, in
addition to satisfying the requirements stipulated under
Section 7
of the
Arbitration Act to qualify as an agreement.

160.
In the course of the decision, one of the questions before this Court
in
Vidya Drolia [Vidya Drolia v. Durga Trading Corpn.
, (2021) 2 SCC 1 :

(2021) 1 SCC (Civ) 549] was the interpretation of the word "existence" as
appearing in
Section 11
. It was held that existence and validity are
intertwined. Further, it was observed that an arbitration agreement does
not exist if it is illegal or does not satisfy mandatory legal requirements.

Therefore, this Court read the mandate of valid arbitration agreement
contained in
Section 8
into the mandate of
Section 11
, that is, "existence of
an arbitration agreement".

161. At the outset,
Vidya Drolia [Vidya Drolia v. Durga Trading Corpn.
,
(2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] noted that "
Section 11
has
undergone another amendment vide Act 33 of 2019 with effect from 9-8-
2019." The purport of the omission of the said clause was further
explained in the following terms : (SCC p. 115, para 145)
"145. Omission of sub-section (6-A) by Act 33 of 2019 was with the
specific object and purpose and is relatable to by substitution of sub-
sections (12), (13) and (14) of
Section 11
of the Arbitration Act by Act
33 of 2019, which, vide sub-section (3-A) stipulates that the High
Court and this Court shall have the power to designate the arbitral
institutions which have been so graded by the Council under Section
43-I, provided where a graded arbitral institution is not available, the
High Court concerned shall maintain a panel of arbitrators for
discharging the function and thereupon the High Court shall perform
the duty of an arbitral institution for reference to the Arbitral
Tribunal.
Therefore, it would be wrong to accept that post omission of
sub-section (6-A) of
Section 11
the ratio in Patel Engg. [SBP &

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Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] would become
applicable."

162.Vidya Drolia [Vidya Drolia v. Durga Trading Corpn.
, (2021) 2 SCC 1
: (2021) 1 SCC (Civ) 549] proceeds on the presumption that
Section 11
(6-
A) was effectively omitted from the statute books by the 2019 Amendment
Act. This is also reflected in the conclusion arrived at by the Court, as is
evident from the following extract : (SCC p. 121, para 154)
"154. ... 154.1.
Ratio of the decision in Patel Engg. [SBP &
Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] on the scope of judicial
review by the Court while deciding an application under
Sections 8
or
11 of the
Arbitration Act
, post the amendments by Act 3 of 2016 (with
retrospective effect from 23-10-2015) and even post the amendments
vide Act 33 of 2019 (with effect from 9-8-2019), is no longer
applicable."

(emphasis supplied)

163. We are of the opinion that the above premise of the Court in
Vidya
Drolia [Vidya Drolia v. Durga Trading Corpn.
, (2021) 2 SCC 1 : (2021) 1
SCC (Civ) 549] is erroneous because the omission of
Section 11
(6-A) has
not been notified and, therefore, the said provision continues to remain in
full force. Since
Section 11
(6-A) continues to remain in force, pending the
notification of the Central Government, it is incumbent upon this Court to
give true effect to the legislative intent.

164. The 2015 Amendment Act has laid down different parameters for
judicial review under
Section 8
and
Section 11
. Where
Section 8
requires
the Referral Court to look into the prima facie existence of
a valid arbitration agreement,
Section 11
confines the Court's jurisdiction
to the examination of the existence of an arbitration agreement. Although
the object and purpose behind both
Sections 8
and
is to compel parties
to abide by their contractual understanding, the scope of power of the
Referral Courts under the said provisions is intended to be different. The
same is also evident from the fact that
Section 37
of the Arbitration Act
allows an appeal from the order of an Arbitral Tribunal refusing to refer
the parties to arbitration under
Section 8
, but not from
Section 11
. Thus,
the 2015 Amendment Act has legislatively overruled the dictum of Patel
Engg. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] where it was
held that
Section 8
and
Section 11
are complementary in nature.
Accordingly, the two provisions cannot be read as laying down a similar
standard.

165. The legislature confined the scope of reference under
Section 11
(6-A)
to the examination of the existence of an arbitration agreement. The use of
the term "examination" in itself connotes that the scope of the power is
limited to a prima facie determination. Since the Arbitration Act is a self-
contained code, the requirement of "existence" of an arbitration
agreement draws effect from
Section 7
of the Arbitration Act.
In
Duro

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Felguera [Duro Felguera, S.A. v. Gangavaram Port Ltd.
, (2017) 9 SCC
729 : (2017) 4 SCC (Civ) 764] , this Court held that the Referral Courts
only need to consider one aspect to determine the existence of an
arbitration agreement -- whether the underlying contract contains an
arbitration agreement which provides for arbitration pertaining to the
disputes which have arisen between the parties to the agreement.
Therefore, the scope of examination under
Section 11
(6-A) should be
confined to the existence of an arbitration agreement on the basis of

Section 7
. Similarly, the validity of an arbitration agreement, in view of

Section 7
, should be restricted to the requirement of formal validity such
as the requirement that the agreement be in writing. This interpretation
also gives true effect to the doctrine of competence-competence by leaving
the issue of substantive existence and validity of an arbitration agreement
to be decided by Arbitral Tribunal under
Section 16
.

We accordingly
clarify the position of law
laid down in

Vidya Drolia [Vidya
Drolia v. Durga Trading Corpn.
, (2021) 2 SCC 1 : (2021) 1 SCC (Civ)
549] in the context of
Section 8
and
Section 11
of the Arbitration Act.

166. The burden of proving the existence of arbitration agreement
generally lies on the party seeking to rely on such agreement. In
jurisdictions such as India, which accept the doctrine of competence-
competence, only prima facie proof of the existence of an arbitration
agreement must be adduced before the Referral Court. The Referral Court
is not the appropriate forum to conduct a mini-trial by allowing the parties
to adduce the evidence in regard to the existence or validity of an
arbitration agreement. The determination of the existence and validity of
an arbitration agreement on the basis of evidence ought to be left to the
Arbitral Tribunal. This position of law can also be gauged from the plain
language of the statute.

167.
Section 11
(6-A) uses the expression "examination of the existence of
an arbitration agreement". The purport of using the word "examination"
connotes that the legislature intends that the Referral Court has to inspect
or scrutinise the dealings between the parties for the existence of an
arbitration agreement. Moreover, the expression "examination" does not
connote or imply a laborious or contested inquiry. [ P. Ramanatha
Aiyar, The Law Lexicon (2nd Edn., 1997) 666.] On the other hand,
Section
provides that the Arbitral Tribunal can "rule" on its jurisdiction,
including the existence and validity of an arbitration agreement. A
"ruling" connotes adjudication of disputes after admitting evidence from
the parties. Therefore, it is evident that the Referral Court is only required
to examine the existence of arbitration agreements, whereas the Arbitral
Tribunal ought to rule on its jurisdiction, including the issues pertaining to
the existence and validity of an arbitration agreement. A similar view was
adopted by this Court in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre
Ltd. [Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC
234]"

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23. In this context, I may also allude to the judgment of the Supreme
Court in Krish Spinning (supra), where one of the questions that fell for
determination was with respect to the scope and standard of judicial scrutiny
under
Section 11(6)
of 1996 Act, more particularly, in light of the second
question whether the execution of a discharge voucher towards full and final
settlement between the parties would operate as bar to invoke arbitration.

24. The Supreme Court referred to earlier judgments of the Supreme
Court including Patel Engineering (supra) and
Boghara Polyfab
(supra)
and observed that in these two decisions the scope of interference under

Section 11
was substantially expanded.

Reference was also made to the
decision in
United India Insurance Company Limited v. Antique Art
Exports Private Limited
, (2019) 5 SCC 362, where reliance was placed on
the judgments in
Union of India and Others v. Master Construction
Company
, (2011) 12 SCC 349 and New India Assurance Company Limited
v. Genus Power Infrastructure Limited, (2015) 2 SCC 424, both decisions
delivered before insertion of
Section 11
(6-A) and it was held that in
Antique
Art
(supra), the Supreme Court had failed to take into account the legislative
intent behind insertion of
Section 11
(6-A), which was succinctly explained
in
Duro Felguera
(supra).

The Supreme Court then referred to and relied on
the judgment in
Mayavati Trading
(supra) overruling the decision in

Antique Art
(supra).

In Krish Spinning (supra), the Supreme Court
observed that the position after the decisions in
Mayavati Trading
(supra)
and
Vidya Drolia
(supra) was that ordinarily, Court while exercising in its
power under
Section 11
of 1996 Act will only look into the existence of an
arbitration agreement and would refuse arbitration only as a demurrer when
the claims are ex facie frivolous and non-arbitrable.
Thereafter, examining

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the effect of the decision in In Re: Interplay (supra), it was held by the
Supreme Court in Krish Spinning (supra) that scope of examination under

Section 11
(6-A) is confined to the existence of an arbitration agreement on
the basis of
Section 7
and this examination is limited to requirement of
formal validity such as the agreement should be in writing and nothing else.

It was observed that for this reason, it was difficult to hold that the
observations made in
Vidya Drolia
(supra) and adopted in
NTPC Limited v.
SPML Infra Limited
, (2023) 9 SCC 385, that jurisdiction of the referral
Court when dealing with the issue of "accord and satisfaction" extends to
weeding out ex facie non-arbitrable and frivolous disputes, would continue
to apply, despite the decision in In Re: Interplay (supra).
Relevant passages
from Krish Spinning (supra), are as follows:-

"73. The net effect of the decisions in SBP & Co. (supra) and
Boghara
Polyfab
(supra) was that the scope for interference available to the
referral courts when acting under
Section 11
of the Act, 1996 was
substantially expanded. The referral courts were conferred with the
discretion to conduct mini trials and indulge in the appreciation of
evidence on the issues concerned with the subject matter of arbitration.
The Law Commission of India in its 246th report took note of the issue of
significant delays being caused to the arbitral process due to enlarged
scope of judicial interference at the stage of appointment of arbitrator and
suggested as follows:

i. First, that the power of appointment conferred upon the Chief
Justice be devolved on to the Supreme Court and the High Court, as
the case may be; and
ii. Secondly, the power of appointment under
Section 11
be clarified to
be an administrative power and not a judicial one.

iii. Thirdly, the scope of interference under
Sections 8
and
respectively of the Act, 1996 be restricted only to those cases where
the court finds that no arbitration agreement exists or is null and void.

74. The Law Commission suggested the insertion of
Section 11
(6-
A) in the
Act, 1996
. The aforesaid recommendations of the Commission were taken
note of by the Parliament and accordingly the Act, 1996 was amended in
2015 to incorporate
Section 11
(6-A), which reads thus:
"(6A) The Supreme Court or, as the case may be, the High Court,

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while considering any application under subsection (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."

75. Interestingly,
Section 11
(6-A) was omitted by the 2019 amendment to
the Act, 1996 on the basis of a report of the High-Level Committee to
Review the Institutionalisation of Arbitration Mechanism in India.
However, in the absence of the omission being notified,
Section 11
(6-
A) of
the Act, 1996
continues to remain on the statute book and thus has to be
given effect as such.

76. The impact of the addition of
Section 11
(6-A) was elaborately
discussed by this Court in
Duro Felguera, S.A. v. Gangavaram Port Ltd

reported in (2017) 9 SCC 729 as follows:

"48. [...] From a reading of
Section 11
(6-A), 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.

xxx xxx xxx

59. The scope of the power under
Section 11(6)
of the 1996 Act was
considerably wide in view of the decisions in SBP and Co. [(2005) 8
SCC 618] and Boghara Polyfab [(2009) 1 SCC 267]. This position
continued till the amendment brought about in 2015. 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 minimise the Court's intervention at the
stage of appointing the arbitrator and this intention as incorporated in

Section 11
(6-A) ought to be respected."

(Emphasis supplied)

77. Despite the decision in
Duro Felguera
(supra), this Court in
United
India Insurance Co. Ltd. v. Antique Art Exports Pvt. Ltd.
reported in
(2019) 5 SCC 362, while dealing with the issue of "full and final
settlement" in the context of appointment of an arbitrator, held that mere
bald allegation by a party that the discharge voucher was obtained under
coercion or undue influence would not entitle it to seek referral of the
dispute to arbitration unless it is able to produce prima facie evidence of
the same during the course of proceedings under
Section 11(6)
of the Act,
1996. Important paragraphs from
the said decision
are extracted
hereinbelow:

"15. From the proposition which has been
laid down by
this Court,

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what reveals is that a mere plea of fraud, coercion or undue influence
in itself is not enough and the party who alleged is under obligation to
prima facie establish the same by placing satisfactory material on
record before the Chief Justice or his Designate to exercise power
under
Section 11(6)
of the Act, which has been considered by this
Court in New India Assurance Co. Ltd. case [...]
xxx xxx xxx

17. It is true that there cannot be a rule of its kind that mere allegation
of discharge voucher or no claim certificate being obtained by
fraud/coercion/undue influence practised by other party in itself is
sufficient for appointment of the arbitrator unless the claimant who
alleges that execution of the discharge agreement or no claim
certificate was obtained on account of fraud/coercion/undue influence
practised by the other party is able to produce prima facie evidence to
substantiate the same, the correctness thereof may be open for the
Chief Justice/his Designate to look into this aspect to find out at least
prima facie whether the dispute is bona fide and genuine in taking a
decision to invoke
Section 11(6)
of the Act.

18. In the instant case, the facts are not in dispute that for the two
incidents of fire on 25-9-2013 and 25-10-2013, the appellant
Company based on the Surveyor's report sent emails on 5-5-2016 and
24-6-2016 for settlement of the claims for both the fires dated 25-9-
2013 and 25-10-2013 which was responded by the respondent through
email on the same date itself providing all the necessary information
to the regional office of the Company and also issued the discharge
voucher in full and final settlement with accord and satisfaction.
Thereafter, on 12-7-2016, the respondent desired certain information
with details, that too was furnished and for the first time on 27-7-
2016, it took a U-turn and raised a voice of undue influence/coercion
being used by the appellant stating that it being in financial distress
was left with no option than to proceed to sign on the dotted lines. As
observed, the phrase in itself is not sufficient unless there is a prima
facie evidence to establish the allegation of coercion/undue influence,
which is completely missing in the instant case.

19. In the given facts and circumstances, we are satisfied that the
discharge and signing the letter of subrogation was not because of
any undue influence or coercion as being claimed by the respondent
and we find no difficulty to hold that upon execution of the letter of
subrogation, the claim was settled with due accord and satisfaction
leaving no arbitral dispute to be examined by an arbitrator to be
appointed under
Section 11(6)
of the Act.

20. The submission of the learned counsel for the respondent that after
insertion of sub-section (6-A) to Section 11 of the Amendment Act,
2015 the jurisdiction of this Court is denuded and the limited mandate

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of the Court is to examine the factum of existence of an arbitration
and relied on the judgment in
Duro Felguera, S.A. v. Gangavaram
Port Ltd. [Duro Felguera
,
S.A. v. Gangavaram Port Ltd.
, (2017) 9
SCC 729 : (2017) 4 SCC (Civ) 764] The exposition in this decision is
a general observation about the effect of the amended provisions
which came to be examined under reference to six arbitrable
agreements (five agreements for works and one corporate guarantee)
and each agreement contains a provision for arbitration and there
was serious dispute between the parties in reference to constitution of
Arbitral Tribunal whether there has to be Arbitral Tribunal pertaining
to each agreement. In the facts and circumstances, this Court took
note of sub-section (6-A) introduced by the Amendment Act, 2015 to

Section 11
of the Act and in that context observed that the preliminary
disputes are to be examined by the arbitrator and are not for the
Court to be examined within the limited scope available for
appointment of arbitrator under
Section 11(6)
of the Act. Suffice it to
say 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.

21. In the instant case, prima facie no dispute subsisted after the
discharge voucher being signed by the respondent without any demur
or protest and claim being finally settled with accord and satisfaction
and after 11 weeks of the settlement of claim a letter was sent on
27-7-2016 for the first time raising a voice in the form of protest
that the discharge voucher was signed under undue influence and
coercion with no supportive prima facie evidence being placed on
record in absence thereof, it must follow that the claim had been
settled with accord and satisfaction leaving no arbitral dispute
subsisting under the agreement to be referred to the arbitrator for
adjudication.

22. In our considered view, the High Court has committed a manifest
error in passing the impugned order and adopting a mechanical
process in appointing the arbitrator without any supportive evidence
on record to prima facie substantiate that an arbitral dispute subsisted
under the agreement which needed to be referred to the arbitrator for
adjudication."

(Emphasis supplied)

78. It is pertinent to observe that in
Antique Art
(supra) the Court placed
reliance on the decisions in
Master Construction
(supra) and New India
Assurance (supra). Both these decisions were delivered before the
insertion of
Section 11
(6-A) by the 2015 amendment to the Act, 1996.

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Thus, this Court in
Antique Art
(supra) failed to take into account the
legislative intent behind the introduction of
Section 11
(6-A), which was
also succinctly explained in
Duro Felguera
(supra).

79. A three-Judge Bench of this Court in
Mayavati Trading Private
Limited v. Pradyut Deb Burman
reported in (2019) 8 SCC 714 overruled
the decision in
Antique Art
(supra) and clarified that the position of law
existing prior to the 2015 amendment to the Act, 1996 under which
referral courts had the power to examine the aspect of "accord and
satisfaction" had come to be legislatively overruled by
Section 11
(6-
A) of
the Act, 1996
.

The Court, while affirming the reasoning given in
Duro
Felguera
(supra), observed thus:

"10. This being the position, 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 [
United India Insurance Co. Ltd. v. Antique Art Exports (P)
Ltd.
, (2019) 5 SCC 362 : (2019) 2 SCC (Civ) 785] , as
Section 11
(6-A)
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 in
Duro Felguera, SA [Duro Felguera, SA
v. Gangavaram Port Ltd.
, (2017) 9 SCC 729 : (2017) 4 SCC (Civ)
764] -- see paras 48 & 59

11. We, therefore, overrule the judgment in
Antique Art Exports (P)
Ltd. [United India Insurance Co. Ltd. v. Antique Art Exports (P) Ltd.
,
(2019) 5 SCC 362 : (2019) 2 SCC (Civ) 785] as not having laid down
the correct law but dismiss this appeal for the reason given in para 3
above."

(Emphasis supplied)
xxx xxx xxx

90.
In
NTPC Ltd. v. SPML Infra Ltd.
reported in (2023) 9 SCC 385, a
twoJudge Bench of this Court was again faced with the issue of "accord
and satisfaction" in the context of a
Section 11
petition for appointment of
arbitrator.

Placing reliance on
Vidya Drolia
(supra), this Court gave the
"Eye of the Needle" test to delineate the contours of the power of
interference which the referral court may exercise under
Section 11
of the
Act, 1996. The first prong of the said test requires the court to examine the
validity and existence of the arbitration agreement which includes an
examination of the parties to the agreement and the privity of the applicant
to the contract. The second prong of the test requires the court to, as a
general rule, leave all questions of non-arbitrability to the arbitral
tribunal and only as a demurrer reject the claims which are ex-facie and
manifestly non-arbitrable. However, it was clarified that the standard of

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the aforesaid scrutiny is only prima facie, that is, unlike the pre-2015
position, the scrutiny does not entail elaborate appreciation of evidence
and conduct of mini trials by the referral courts. The relevant observations
made therein are reproduced hereinbelow:

"24. Following the general rule and the principle
laid down in

Vidya
Drolia [Vidya Drolia v. Durga Trading Corpn.
, (2021) 2 SCC 1 :

(2021) 1 SCC (Civ) 549] , this Court has consistently been holding
that the Arbitral Tribunal is the preferred first authority to determine
and decide all questions of non-arbitrability.
In
Pravin Electricals (P)
Ltd. v. Galaxy Infra & Engg. (P) Ltd. [Pravin Electricals (P) Ltd.
v.
Galaxy Infra & Engg. (P) Ltd., (2021) 5 SCC 671, paras 29, 30 :
(2021) 3 SCC (Civ) 307] , Sanjiv Prakash v. Seema Kukreja [Sanjiv
Prakash v. Seema Kukreja, (2021) 9 SCC 732 : (2021) 4 SCC (Civ)
597] , and Indian Oil Corpn. Ltd. v. NCC Ltd. [Indian Oil Corpn. Ltd.

v. NCC Ltd., (2023) 2 SCC 539 : (2023) 1 SCC (Civ) 88] , the parties
were referred to arbitration, as the prima facie review in each of these
cases on the objection of non-arbitrability was found to be
inconclusive. Following the exception to the general principle that the
Court may not refer parties to arbitration when it is clear that the
case is manifestly and ex facie nonarbitrable, in BSNL v. Nortel
Networks (India) (P) Ltd. [BSNL v. Nortel Networks (India) (P) Ltd.,
(2021) 5 SCC 738 : (2021) 3 SCC (Civ) 352] (hereinafter "Nortel
Networks") and Secunderabad Cantonment Board v. B.
Ramachandraiah & Sons [Secunderabad Cantonment Board v. B.
Ramachandraiah & Sons, (2021) 5 SCC 705 : (2021) 3 SCC (Civ)
335] , arbitration was refused as the claims of the parties were
demonstrably time-barred.

Eye of the needle

25. The abovereferred precedents crystallise the position of law that
the pre-referral jurisdiction of the Courts under
Section 11(6)
of the
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. These are matters which
require a thorough examination by the Referral Court. The secondary
inquiry that may arise at the reference stage itself is with respect to
the non-arbitrability of the dispute.

26. As a general rule and a principle, the Arbitral Tribunal is the
preferred first authority to determine and decide all questions of non-
arbitrability. As an exception to the rule, and rarely as a demurrer,
the Referral Court may reject claims which are manifestly and ex
facie nonarbitrable [
Vidya Drolia v. Durga Trading Corpn.
, (2021) 2
SCC 1, para 154.4 : (2021) 1 SCC (Civ) 549] [...]

27. The standard of scrutiny to examine the non-arbitrability of a

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claim is only prima facie. Referral Courts must not undertake a full
review of the contested facts; they must only be confined to a primary
first review [
Vidya Drolia v. Durga Trading Corpn.
, (2021) 2 SCC 1,
para 134 : (2021) 1 SCC (Civ) 549] and let facts speak for themselves.
This also requires the Courts to examine whether the assertion on
arbitrability is bona fide or not.

[
Vidya Drolia v. Durga Trading
Corpn.
, (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] The prima facie
scrutiny of the facts must lead to a clear conclusion that there is not
even a vestige of doubt that the claim is non-arbitrable.

[BSNL v.
Nortel Networks (India) (P) Ltd., (2021) 5 SCC 738, para 47 : (2021)
3 SCC (Civ) 352] On the other hand, even if there is the slightest
doubt, the rule is to refer the dispute to arbitration [
Vidya Drolia v.
Durga Trading Corpn.
, (2021) 2 SCC 1, para 154.4 : (2021) 1 SCC
(Civ) 549]."

(Emphasis supplied)

91. The justification given in
NTPC v. SPML
(supra) for allowing the
scrutiny of arbitrability at the stage of
Section 11
petition was that the
referral court is under a duty to protect the parties from being forced to
arbitrate when the matter is demonstrably non-arbitrable, and any
interference by the referral court preventing such ex-facie meritless
arbitration could be termed as legitimate. It was observed thus:

"28. The limited scrutiny, through the eye of the needle, is necessary
and compelling. It is intertwined with the duty of the Referral Court to
protect the parties from being forced to arbitrate when the matter is
demonstrably non-arbitrable . It has been termed as a legitimate
interference by Courts to refuse reference in order to prevent wastage
of public and private resources [
Vidya Drolia v. Durga Trading
Corpn.
, (2021) 2 SCC 1, para 139 : (2021) 1 SCC (Civ) 549] .

Further, as noted in
Vidya Drolia [Vidya Drolia v. Durga Trading
Corpn.
, (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] , if this duty within
the limited compass is not exercised, and the Court becomes too
reluctant to intervene, it may undermine the effectiveness of both,
arbitration and the Court [
Vidya Drolia v. Durga Trading Corpn.
,
(2021) 2 SCC 1, para 139 : (2021) 1 SCC (Civ) 549] .

Therefore, this
Court or a High Court, as the case may be, while exercising
jurisdiction under
Section 11(6)
of the Act, is not expected to act
mechanically merely to deliver a purported dispute raised by an
applicant at the doors of the chosen arbitrator, as explained in
DLF
Home Developers Ltd. v. Rajapura Homes (P) Ltd. [DLF Home
Developers Ltd.
v. Rajapura Homes (P) Ltd., (2021) 16 SCC 743,
paras 22, 26]"

92. The position that emerges from the aforesaid discussion of law on the
subject as undertaken by us can be summarised as follows: -

i. There were two conflicting views which occupied the field under the

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Arbitration Act, 1940
. While the decisions in Damodar Valley (supra)
and Amar Nath (supra) took the view that the disputes pertaining to
"accord and satisfaction" should be left to the arbitrator to decide,
the view taken in
P.K. Ramaiah
(supra) and Nathani Steels (supra)
was that once a "full and final settlement" is entered into between the
parties, no arbitrable disputes subsist and therefore reference to
arbitration must not be allowed.

ii.
Under the Act, 1996
, the power under
Section 11
was characterised
as an administrative one as acknowledged in the decision in Konkan
Railway (supra) and this continued till the decision of a seven-Judge
Bench in SBP & Co. (supra) overruled it and significantly expanded
the scope of judicial interference under
Sections 8
and
Special

Leave Petition (C) Nos. 3792/2024 & 7220/2024 Page 62 of 85

respectively of the Act, 1996.
The decision in
Jayesh Engineering

(supra) adopted this approach in the context of "accord and
satisfaction" cases and held that the issue whether the contract had
been fully worked out and whether payments had been made in full
and final settlement of the claims are issues which should be left for
the arbitrator to adjudicate upon.

iii. The decision in SBP & Co. (supra) was applied in
Boghara
Polyfab
(supra) and it was held by this Court that the Chief Justice or
his designate, in exercise of the powers available to them under

Section 11
of the Act, 1996, can either look into the question of
"accord and satisfaction" or leave it for the decision of the arbitrator.
However, it also specified that in cases where the Chief Justice was
satisfied that there was indeed "accord and satisfaction", he could
reject the application for appointment of arbitrator. The prima facie
standard of scrutiny was also expounded, stating that the party
seeking arbitration would have to prima facie establish that there was
fraud or coercion involved in the signing of the discharge certificate.

The position elaborated in
Boghara Polyfab
(supra) was adopted in a
number of subsequent decisions, wherein it was held that a mere bald
plea of fraud or coercion was not sufficient for a party to seek
reference to arbitration and prima facie evidence for the same was
required to be provided, even at the stage of the
Section 11
petition.

iv. The view taken by SBP & Co. (supra) and
Boghara Polyfab
(supra)
was seen by the legislature as causing delays in the disposal of

Section 11
petitions, and with a view to overcome the same,
Section
(6-A) was introduced in the Act, 1996 to limit the scope of enquiry
under
Section 11
only to the extent of determining the "existence" of
an arbitration agreement.

This intention was acknowledged and given
effect to by this Court in the decision in
Duro Felguera
(supra)
wherein it was held that the enquiry under
Section 11
only entailed an
examination whether an arbitration agreement existed between the
parties or not and "nothing more or nothing less".

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v. Despite the introduction of
Section 11
(6-A) and the decision in

Duro Felguera
(supra), there have been diverging views of this Court
on whether the scope of referral court under
Section 11
of the Act,
1996 includes the power to go into the question of "accord and
satisfaction".

In
Antique Art
(supra) it was held that unless some
prima facie proof of duress or coercion is adduced by the claimant,
there could not be a referral of the disputes to arbitration.

This view,
however, was overruled in
Mayavati Trading
(supra) which reiterated
the view taken in
Duro Felguera
(supra) and held that post the 2015
amendment to the Act, 1996, it was no more open to the Court while
exercising its power under
Section 11
of the Act, Special Leave
Petition (C) Nos. 3792/2024 & 7220/2024 Page 64 of 85 1996 to go
into the question of whether "accord and satisfaction" had taken
place.

vi. The decision in
Vidya Drolia
(supra) although adopted the view
taken in
Mayawati Trading
(supra) yet it provided that in exceptional
cases, where it was manifest that the claims were exfacie time barred
and deadwood, the Court could interfere and refuse reference to
arbitration.

Recently, this view in the context of "accord and
satisfaction" was adopted in
NTPC v. SPML
(supra) wherein the "eye
of the needle" test was elaborated. It permits the referral court to
reject arbitration in such exceptional cases where the plea of fraud or
coercion appears to be ex-facie frivolous and devoid of merit.

93. Thus, the position after the decisions in
Mayavati Trading
(supra) and

Vidya Drolia
(supra) is that ordinarily, the Court while acting in exercise
of its powers under
Section 11
of the Act, 1996, will only look into the
existence of the arbitration agreement and would refuse arbitration only
as a demurrer when the claims are ex-facie frivolous and non-arbitrable.
iii. What is the effect of the decision of this Court in In Re: Interplay
Between Arbitration Agreements under the
Arbitration and Conciliation
Act
1966 and the
Indian Stamp Act
1899 on the scope of powers of the
referral court under
Section 11
of the Act, 1996?

94. A seven-Judge Bench of this Court, in In Re: Interplay Between
Arbitration Agreements under the
Arbitration and Conciliation Act
and the
Indian Stamp Act
1899 reported in 2023 INSC 1066, speaking
eruditely through one of us, Dr Dhananjaya Y. Chandrachud, Chief
Justice of India, undertook a comprehensive analysis of
Sections 8
and
respectively of the Act, 1996 and, inter alia, made poignant observations
about the nature of the power vested in the Courts insofar as the aspect of
appointment of arbitrator is concerned. Some of the relevant observations
made by this Court in In Re: Interplay (supra) are extracted hereinbelow:

"179. [...] However, the effect of the principle of competence-
competence is that the arbitral tribunal is vested with the power and
authority to determine its enforceability. The question of

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enforceability survives, pending the curing of the defect which renders
the instrument inadmissible. By appointing a tribunal or its members,
this Court (or the High Courts, as the case may be) is merely giving
effect to the principle enshrined in
Section 16
. The appointment of an
arbitral tribunal does not necessarily mean that the agreement in
which the arbitration clause is contained as well as the arbitration
agreement itself are enforceable. The arbitral tribunal will answer
precisely these questions.

xxx xxx xxx

185. The corollary of the doctrine of competence-competence is that
courts may only examine whether an arbitration agreement exists on
the basis of the prima facie standard of review. The nature of
objections to the jurisdiction of an arbitral tribunal on the basis that
stamp-duty has not been paid or is inadequate is such as cannot be
decided on a prima facie basis. Objections of this kind will require a
detailed consideration of evidence and submissions and a finding as to
the law as well as the facts. Obligating the court to decide issues of
stamping at the
Section 8
or
Section 11
stage will defeat the legislative
intent underlying the
Arbitration Act
.

186. The purpose of vesting courts with certain powers under
Sections
and
of the Arbitration Act is to facilitate and enable arbitration
as well as to ensure that parties comply with arbitration agreements.
The disputes which have arisen between them remain the domain of
the arbitral tribunal (subject to the scope of its jurisdiction as defined
by the arbitration clause). The exercise of the jurisdiction of the courts
of the country over the substantive dispute between the parties is only
possible at two stages:

a. If an application for interim measures is filed under
Section 9
of
the Arbitration Act; or
b. If the award is challenged under
Section 34
. Issues which
concern the payment of stamp-duty fall within the remit of the
arbitral tribunal. The discussion in the preceding segments also
make it evident that courts are not required to deal with the issue of
stamping at the stage of granting interim measures under

Section 9
."

(Emphasis supplied)
xxx xxx xxx

110. The scope of examination under
Section 11
(6-A) is confined to the
existence of an arbitration agreement on the basis of
Section 7
. The
examination of validity of the arbitration agreement is also limited to the
requirement of formal validity such as the requirement that the agreement
should be in writing.

111. The use of the term 'examination' under
Section 11
(6-A) as

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distinguished from the use of the term 'rule' under
Section 16
implies that
the scope of enquiry under
section 11
(6-A) is limited to a prima facie
scrutiny of the existence of the arbitration agreement, and does not include
a contested or laborious enquiry, which is left for the arbitral tribunal to
'rule' under
Section 16
. The prima facie view on existence of the
arbitration agreement taken by the referral court does not bind either the
arbitral tribunal or the court enforcing the arbitral award.

112. The aforesaid approach serves a two-fold purpose - firstly, it allows
the referral court to weed out non-existent arbitration agreements, and
secondly, it protects the jurisdictional competence of the arbitral tribunal
to rule on the issue of existence of the arbitration agreement in depth.

113. Referring to the Statement of Objects and Reasons of the Arbitration
and Conciliation (Amendment) Act, 2015, it was observed in In Re:

Interplay (supra) that the High Court and the Supreme Court at the stage
of appointment of arbitrator shall examine the existence of a prima facie
arbitration agreement and not any other issues. The relevant observations
are extracted hereinbelow:

"209. The above extract indicates that the Supreme Court or High
Court at the stage of the appointment of an arbitrator shall
"examine the existence of a prima facie arbitration agreement and
not other issues". These other issues not only pertain to the validity
of the arbitration agreement, but also include any other issues which
are a consequence of unnecessary judicial interference in the
arbitration proceedings. Accordingly, the "other issues" also include
examination and impounding of an unstamped instrument by the
referral court at the
Section 8
or
Section 11
stage. The process of
examination, impounding, and dealing with an unstamped instrument
under the
Stamp Act
is not a timebound process, and therefore does
not align with the stated goal of the
Arbitration Act
to ensure
expeditious and time-bound appointment of arbitrators. [...]"

(Emphasis supplied)

114. In view of the observations made by this Court in In Re: Interplay
(supra), it is clear that the scope of enquiry at the stage of appointment of
arbitrator is limited to the scrutiny of prima facie existence of the
arbitration agreement, and nothing else.
For this reason, we find it
difficult to hold that the observations made in
Vidya Drolia
(supra) and
adopted in
NTPC v. SPML
(supra) that the jurisdiction of the referral
court when dealing with the issue of "accord and satisfaction" under

Section 11
extends to weeding out ex-facie non-arbitrable and frivolous
disputes would continue to apply despite the subsequent decision in In Re:

Interplay (supra).

115. The dispute pertaining to the "accord and satisfaction" of claims is
not one which attacks or questions the existence of the arbitration

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agreement in any way. As held by us in the preceding parts of this
judgment, the arbitration agreement, being separate and independent from
the underlying substantive contract in which it is contained, continues to
remain in existence even after the original contract stands discharged by
"accord and satisfaction".

116. The question of "accord and satisfaction", being a mixed question of
law and fact, comes within the exclusive jurisdiction of the arbitral
tribunal, if not otherwise agreed upon between the parties. Thus, the
negative effect of competence-competence would require that the matter
falling within the exclusive domain of the arbitral tribunal, should not be
looked into by the referral court, even for a prima facie determination,
before the arbitral tribunal first has had the opportunity of looking into it.

117. By referring disputes to arbitration and appointing an arbitrator by
exercise of the powers under
Section 11
, the referral court upholds and
gives effect to the original understanding of the contracting parties that
the specified disputes shall be resolved by arbitration. Mere appointment
of the arbitral tribunal doesn't in any way mean that the referral court is
diluting the sanctity of "accord and satisfaction" or is allowing the
claimant to walk back on its contractual undertaking. On the contrary, it
ensures that the principal of arbitral autonomy is upheld and the
legislative intent of minimum judicial interference in arbitral proceedings
is given full effect. Once the arbitral tribunal is constituted, it is always
open for the defendant to raise the issue of "accord and satisfaction"

before it, and only after such an objection is rejected by the arbitral
tribunal, that the claims raised by the claimant can be adjudicated.

118. Tests like the "eye of the needle" and "ex-facie meritless", although
try to minimise the extent of judicial interference, yet they require the
referral court to examine contested facts and appreciate prima facie
evidence (however limited the scope of enquiry may be) and thus are not in
conformity with the principles of modern arbitration which place arbitral
autonomy and judicial non-interference on the highest pedestal.

xxx xxx xxx

127. In Arif Azim (supra), while deciding an application for appointment
of arbitrator under
Section 11(6)
of the Act, 1996, two issues had arisen
for our consideration:

i.
Whether the Limitation Act, 1963
is applicable to an application for
appointment of arbitrator under
Section 11(6)
of the Arbitration and
Conciliation Act, 1996? If yes, whether the petition filed by M/s Arif
Azim was barred by limitation?

ii. Whether the court may decline to make a reference under
Section
of Act, 1996 where the claims are ex-facie and hopelessly
timebarred?

128. On the first issue, it was observed by us that the
Limitation Act, 1963

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is applicable to the applications filed under
Section 11(6)
of the Act, 1996.
Further, we also held that it is the duty of the referral court to examine
that the application under
Section 11(6)
of the Act, 1996 is not barred by
period of limitation as prescribed under
Article 137
of the
Limitation Act,
, i.e., 3 years from the date when the right to apply accrues in favour
of the applicant. To determine as to when the right to apply would accrue,
we had observed in paragraph 56 of the said decision that "the limitation
period for filing a petition under
Section 11(6)
of the Act, 1996 can only
commence once a valid notice invoking arbitration has been sent by the
applicant to the other party, and there has been a failure or refusal on
part of that other party in complying with the requirements mentioned in
such notice."

129. Insofar as the first issue is concerned, we are of the opinion that the
observations made by us in Arif Azim (supra) do not require any
clarification and should be construed as explained therein.

130. On the second issue it was observed by us in paragraph 67 that the
referral courts, while exercising their powers under
Section 11
of the Act,
1996, are under a duty to "prima-facie examine and reject non-arbitrable
or dead claims, so as to protect the other party from being drawn into a
timeconsuming and costly arbitration process."

131. Our findings on both the aforesaid issues have been summarised in
paragraph 89 of the said decision thus:

"89. Thus, from an exhaustive analysis of the position of law on the
issues, we are of the view that while considering the issue of limitation
in relation to a petition under
Section 11(6)
of the Act, 1996, the
courts should satisfy themselves on two aspects by employing a two-
pronged test - first, whether the petition under
Section 11(6)
of the
Act, 1996 is barred by limitation; and secondly, whether the claims
sought to be arbitrated are ex-facie dead claims and are thus barred
by limitation on the date of commencement of arbitration proceedings.
If either of these issues are answered against the party seeking
referral of disputes to arbitration, the court may refuse to appoint an
arbitral tribunal."

132.
Insofar as our observations on the second issue are concerned, we
clarify that the same were made in light of the observations made by this
Court in many of its previous decisions, more particularly in
Vidya Drolia

(supra) and
NTPC v. SPML
(supra).
However, in the case at hand, as is
evident from the discussion in the preceding parts of this judgment, we
have had the benefit of reconsidering certain aspects of the two decisions

referred to above
in the light of the pertinent observations made by a
seven-Judge Bench of this Court in In Re: Interplay (supra).

133. Thus, we clarify that while determining the issue of limitation in
exercise of the powers under
Section 11(6)
of the Act, 1996, the referral

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court should limit its enquiry to examining whether Section 11(6)
application has been filed within the period of limitation of three years or
not. The date of commencement of limitation period for this purpose shall
have to be construed as per the decision in Arif Azim (supra). As a natural
corollary, it is further clarified that the referral courts, at the stage of
deciding an application for appointment of arbitrator, must not conduct an
intricate evidentiary enquiry into the question whether the claims raised
by the applicant are time barred and should leave that question for
determination by the arbitrator. Such an approach gives true meaning to
the legislative intention underlying Section 11(6-
A) of the Act
, and also to
the view taken in In Re: Interplay (supra).

134. The observations made by us in Arif Azim (supra) are accordingly
clarified. We need not mention that the effect of the aforesaid clarification
is only to streamline the position of law, so as to bring it in conformity
with the evolving principles of modern-day arbitration, and further to
avoid the possibility of any conflict between the two decisions that may
arise in future. These clarifications shall not be construed as affecting the
verdict given by us in the facts of Arif Azim (supra), which shall be given
full effect to notwithstanding the observations made herein.
F. CONCLUSION

135. The existence of the arbitration agreement as contained in Clause 13
of the insurance policy is not disputed by the appellant. The dispute raised
by the claimant being one of quantum and not of liability, prima facie,
falls within the scope of the arbitration agreement. The dispute regarding
"accord and satisfaction" as raised by the appellant does not pertain to
the existence of the arbitration agreement, and can be adjudicated upon by
the arbitral tribunal as a preliminary issue."

25. From a conspectus of the aforesaid judgments, it is crystal clear that
the scope of jurisdiction under Section 11(6) of 1996 Act is limited to
examining the existence of a valid arbitration agreement between the parties
on the touchstone of Section 7 of 1996 Act and whether the petition is
barred by limitation and no more. It is nobody's case that the petition is time
barred. Therefore, I will now examine whether there exists an arbitration
agreement between Petitioner and Respondent No.1 for reference of disputes
raised by the Petitioner to arbitration. At the cost of repetition, I may briefly
recapitulate the narrative of facts. Petitioner and Respondent No.1 entered
into a Collaboration Agreement dated 25.06.2015, whereby Respondent

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No.1 was to inter alia develop and construct a commercial project on the
project land. Disputes having arisen, Petitioner took recourse to Section 9 of
1996 Act and filed a petition before District Court, Faridabad. However,
during the pendency of the petition, parties entered into an amicable
settlement and terms of settlement were incorporated in a Settlement
Agreement dated 31.12.2021. In the meantime, the Arbitrator appointed by
the parties entered upon reference. After Settlement Agreement was
executed, parties jointly approached the Arbitrator and a Consent Award
was passed on 08.04.2022 in terms of the settlement. According to the
Petitioner, post the Consent Award disputes once again arose between the
parties, owing to execution of ante-dated Lease Deeds dated 06.04.2022 by
Respondent No.1, leasing 16 units to third parties as also in respect of the
total carpet area on the 4th and 5th floors in the Mall, in lieu of which
Petitioner had taken an area of 506.873 sq. mts. i.e., 36.25% of 1398.271 sq.
mts. on Lower Ground Floor. Petitioner asserts that after the Consent Award
when Auto CAD of 4th and 5th floors was obtained and the Architect of the
Petitioner company measured the total carpet area, it was revealed that the
actual area was 2195 sq. mts. and not 1398.271 sq. mts. as represented by
Respondent No.1 at the time of settlement. Hence, Petitioner sought its share
in the extra area of 800 sq. mts. (approximately), proportionate to its agreed
share and also sent a notice under Section 21 of 1996 Act but Respondent
No.1 declined to indulge on the ground that there was full and final
settlement of all the disputes and any further claim was barred by res
judicata and consequently, the disputes were non-arbitrable.

26. Ordinarily, if the parties enter into a full and final settlement of their
disputes and in a pending arbitration a Consent Award is passed, Court

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would not entertain a petition under Section 11 of 1996 Act. However, the
Supreme Court has held in Krish Spinning (supra) that a dispute pertaining
to full and final settlement itself, by necessary implication being a dispute
arising out of or in relation to or under the substantive contract, would not be
precluded from reference to arbitration as the arbitration agreement
contained in the original contract continues to be in existence even after the
parties have discharged the original contract by "accord and satisfaction". It
was observed that there is no rule of an absolute kind which precludes
arbitration in cases where a full and final settlement has been arrived at.
Relevant passages are as follows:-

"54. Although ordinarily no arbitrable disputes may subsist after
execution of a full and final settlement, yet any dispute pertaining to the
full and final settlement itself, by necessary implication being a dispute
arising out of or in relation to or under the substantive contract, would not
be precluded from reference to arbitration as the arbitration agreement
contained in the original contract continues to be in existence even after
the parties have discharged the original contract by "accord and
satisfaction".

55. The aforesaid position of law has also been consistently followed by
this Court as evident from many decisions.
In
Boghara Polyfab
(supra),
while rejecting the contention that the mere act of signing a "full and final
discharge voucher" would act as a bar to arbitration, this Court held as
follows:

"44. ... None of the three cases relied on by the appellant lay down a
proposition that mere execution of a full and final settlement receipt
or a discharge voucher is a bar to arbitration, even when the validity
thereof is challenged by the claimant on the ground of fraud, coercion
or undue influence. Nor do they lay down a proposition that even if
the discharge of contract is not genuine or legal, the claims cannot be
referred to arbitration. [...]"

56. Again, in
R.L. Kalathia and Company v. State of Gujarat
reported in
(2011) 2 SCC 400, it was re-iterated that the mere issuance of the no-dues
certificate would not operate as a bar against the raising of genuine
claims even after the date of issuance of such certificate. The relevant
observations are extracted hereinbelow:

"13. From the above conclusions of this Court, the following
principles emerge:

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(1) Merely because the contractor has issued "no-dues certificate",
if there is an acceptable claim, the court cannot reject the same on
the ground of issuance of "no-dues certificate".

(ii) Inasmuch as it is common that unless a discharge certificate is
given in advance by the contractor, payment of bills are
generally delayed, hence such a clause in the contract would not be
an absolute bar to a contractor raising claims which are
genuine at a later date even after submission of such "no-claim
certificate".

(iii) Even after execution of full and final discharge voucher/receipt
by one of the parties, if the said party is able to establish that he is
entitled to further amount for which he is having adequate
materials, he is not barred from claiming such amount merely
because of acceptance of the final bill by mentioning "without
prejudice" or by issuing "no-dues certificate".

(Emphasis supplied)

57. The position that emerges from the aforesaid discussion is that there is
no rule of an absolute kind which precludes arbitration in cases where a
full and final settlement has been arrived at. In
Boghara Polyfab
(supra),
discussing in the context of a case similar to the one at hand, wherein the
discharge voucher was alleged to have been obtained on ground of
coercion, it was observed that the discharge of a contract by full and final
settlement by issuance of a discharge voucher or a no-dues certificate
extends only to those vouchers or certificates which are validly and
voluntarily executed. Thus, if the party said to have executed the discharge
voucher or the no dues certificate alleges that the execution was on
account of fraud, coercion or undue influence exercised by the other party
and is able to establish such an allegation, then the discharge of the
contract by virtue of issuance of such a discharge voucher or no dues
certificate is rendered void and cannot be acted upon.

58. It was further held in
Boghara Polyfab
(supra) that the mere execution
of a full and final settlement receipt or a discharge voucher would not by
itself operate as a bar to arbitration when the validity of such a receipt or
voucher is challenged by the claimant on the ground of fraud, coercion or
undue influence. In other words, where the parties are not ad idem over
accepting the execution of the no-claim certificate or the discharge
voucher, such disputed discharge voucher may itself give rise to an
arbitrable dispute.

59. Once the full and final settlement of the original contract itself
becomes a matter of dispute and disagreement between the parties, then
such a dispute can be categorised as one arising "in relation to" or "in
connection with" or "upon" the original contract which can be referred to
arbitration in accordance with the arbitration clause contained in the

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original contract, notwithstanding the plea that there was a full and final
settlement between the parties."

27. From a plain reading of the aforesaid passages, it is clear that
execution of a full and final settlement may not preclude a party from taking
recourse to arbitration if a dispute arises from the settlement itself and this
law applies with full vigour in the present case for an additional reason that
the parties themselves envisaged and agreed to refer disputes arising from
the Settlement Agreement to arbitration by incorporating Clause 37 in the
Settlement Agreement, which is as follows:-

"37. The Parties agree that in case of any dispute arising out of or in
connection therewith or in relation thereto then the Parties shall try to
resolve the same amicably failing which the same shall be decided through
the arbitration by a sole arbitrator to be mutually appointed by the Parties
herein in accordance with law. The award passed by the sole arbitrator
shall be in English. The seat and venue of the said arbitration proceedings
shall be at New Delhi. The award passed by the Sole Arbitrator shall be
binding the Parties."

28. A bare reading of the clause shows that parties agreed that in case any
dispute arose out of or in connection with the Settlement Agreement or in
relation thereto, parties shall try to resolve the same amicably failing which
the disputes shall be decided through arbitration by a Sole Arbitrator and the
award passed by the Sole Arbitrator shall be binding on the parties. Clause
37 on a plain reading, satisfies all ingredients of Section 7 of 1996 Act
inasmuch as the agreement is in writing; it evidences the intention of the
parties to refer the disputes arising from the Settlement Agreement to
arbitration as dispute resolution mechanism and parties agreed to be bound
by the decision of the Arbitrator. Therefore, tested on the touchstone of
Section 7, Clause 37 is an arbitration agreement between Petitioner and
Respondent No.1. [Ref.: In Re: Interplay (supra)].

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29. According to the Petitioner, the disputes have purportedly arisen
owing to the fact that the total carpet area on the 4th and 5th floors of the Mall
is 2195 sq. mts. as against 1398.271 sq. meters represented by Respondent
No.1 at the time of settlement and Respondent No.1 refuses to apportion the
extra area of 800 sq. meters (approximately) as per the agreed shares.
Petitioner asserts that disputes have also arisen since Respondent No.1
executed ante-dated Lease Deeds on 06.04.2022 and illegally leased all 16
units beyond the expiry of 6 months from the date of issue of Occupation
Certificate. The disputes flagged by the Petitioner thus arise out of and are in
relation to or under the Settlement Agreement and by virtue of Clause 37 are
referrable to arbitration.

30. Coming to the next argument of the Respondents that no reference
can be made to arbitration once the earlier arbitral proceedings have
culminated into a Consent Award dated 08.04.2022, there can be no quarrel
with the legal proposition that an arbitral award is enforceable as a decree of
the Court. It is equally well settled that if a party is aggrieved by an arbitral
award, the remedy is to challenge the same under Section 34 of 1996 Act.
However, in the present case, the matter does not rest here inasmuch as the
Consent Award also contains an arbitration agreement as follows:-

"QQ. An arbitral award hereby holding that in case of any dispute arising
out of or in connection with the Settlement Agreement and/or
Collaboration Agreement or in relation thereto then the Claimant and the
Respondent shall try to resolve the same amicably failing which the same
shall be decided through the arbitration by a sole arbitrator to be mutually
appointed by them in accordance with law. The award passed by the sole
arbitrator shall be in English. The seat and venue of the said arbitration
proceedings shall be at New Delhi. The award passed by the Sole
Arbitrator shall be binding on the Claimant and the Respondent."

31. Clause QQ clearly provides that in case of any dispute arising out of
or in connection with not only the Settlement Agreement but also

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Collaboration Agreement or in relation thereto shall be resolved by the
parties amicably, failing which the dispute will be decided through
arbitration by the Sole Arbitrator to be mutually appointed by them in
accordance with law and the award passed by the Sole Arbitrator shall be
binding on them. Clearly, Clause QQ passes muster of Section 7 of 1996 Act
and is an arbitration agreement. The incorporation of Clause QQ in the
Consent Award is a reflection that parties envisaged that despite settlement
and the Consent Award, disputes may arise in future and decided that they
will be adjudicated through arbitration. As noted above, disputes have arisen
between the parties inter alia with respect to the actual carpet area on 4th and
5th floors of the Mall as also alleged ante-dating of Lease Deeds dated
06.04.2022 by Respondent No.1.
In fact the existence of Clauses 37 and QQ
is the distinguishing feature of this case for which reason the judgements
relied upon by Respondent No.1 in
Dushyant Janbandhu
(supra); HPCL
Bio-Fuels (supra); ARSS Infrastructure (supra); and
Jaiprakash
Associates
(supra) are inapplicable as none of these cases had arbitration
clauses in the Settlement Agreements.

32. Much was argued between the parties with respect to the arbitrability
of the disputes and bar of res judicata. Broadly understood, contention of
the Respondents was that the alleged disputes, which are sought to be
referred to arbitration by the Petitioner, stood settled and the Settlement
Agreement merged in the Consent Award and reference of these disputes is
barred by res judicata as also that the disputes arising out of Lease Deeds
are non-arbitrable. It is trite that the question whether the disputes sought to
be referred are arbitrable or not is to be determined and decided by the
Arbitral Tribunal and is beyond the remit of a referral Court under Section

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11 of 1996 Act. This very question came up for consideration in In Re:

Interplay (supra).
It was held that the view taken in
Vidya Drolia
(supra)
that exercise of power of judicial review to examine the existence of
arbitration agreement also includes inter alia a prima facie view related to
non-arbitrability of the disputes, is erroneous since omission of Section
11(6-A) has not been notified and continues to remain in full force and
therefore, Courts must give true effect to the legislative intent i.e., the scope
of jurisdiction under Section 11 of 1996 Act must be restricted to
determination of existence of valid arbitration agreement between the
parties.

This issue also came up for consideration before the Supreme Court
in Krish Spinning (supra) and the Supreme Court reemphasised and
reiterated that the scope of examination under Section 11(6-A) is confined to
existence of an arbitration agreement on the basis of Section 7 of 1996 Act
and nothing else and after the judgment in In Re: Interplay (supra), it is
difficult to hold that the observations in
Vidya Drolia
(supra) that the
jurisdiction of the referral Court when dealing with issue of "accord and
satisfaction" under Section 11 extends to weeding out ex facie non-
arbitrable disputes. This judgment is also important and relevant for the
present case since it specifically deals with the issue whether on a plea of
'full and final settlement' and "accord and satisfaction", by a party
contesting the appointment of the Arbitrator, reference can be refused.
Negating this plea, the Supreme Court held that dispute regarding "accord
and satisfaction" or full and final settlement of all disputes does not pertain
to existence of arbitration agreement and can be adjudicated only by an
Arbitral Tribunal.

33. More specifically, in the context of a plea of res judicata, I may

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allude to the judgment in
SPS Engineering
(supra), where the Supreme
Court held that the question whether a claim is barred by res judicata does
not arise for consideration in a proceeding under Section 11 of 1996 Act.

Such an issue will have to be examined by the Arbitral Tribunal since
decision on res judicata requires consideration of pleadings as also claims
and issues etc. and the limited scope of Section 11 does not permit such
examination on facts or in law. Relevant passage is as follows:-

"16. The question whether a claim is barred by res judicata, does not
arise for consideration in a proceeding under
Section 11
of the Act. Such
an issue will have to be examined by the Arbitral Tribunal. A decision on
res judicata requires consideration of the pleadings as also the
claims/issues/points and the award in the first round of arbitration, in
juxtaposition with the pleadings and the issues/points/claims in the second
arbitration. The limited scope of
Section 11
of the Act does not permit such
examination of the maintainability or tenability of a claim either on facts
or in law. It is for the Arbitral Tribunal to examine and decide whether the
claim was barred by res judicata. There can be no threshold consideration
and rejection of a claim on the ground of res judicata, while considering
an application under
Section 11
of the Act."

34. Relying on the aforesaid judgment of the Supreme Court, this Court in

Dault Ram Dharam Bir Auto Private Limited and Others v. Pivotal
Infrastructure Private Limited and Others
, 2023 SCC OnLine Del 2363,
agreed with the contention of the Petitioner that the question whether the
claim of 10% share in the built-up area stood settled in terms of past
litigations between the parties was akin to a plea of res judicata and could
not be decided in a petition under Section 11 of 1996 Act.

This view was
taken earlier by another Coordinate Bench of this Court in
Parsvnath
Developers Limited and Another v. Rail Land Development Authority
,
2018 SCC OnLine Del 12399 and it was held that the question whether
reference to arbitration would be barred by principle of
Order II Rule 2 CPC

and/or principles of res judicata or estoppel cannot be decided by a referral

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Court. Legislature has by way of 2015 Amendment Act inserted Section
11(6-A) restricting the scrutiny of the Court at this stage only to existence of
arbitration agreement. This judgement was upheld by the Supreme Court.

To
the same effect is the judgement of this Court in
Hindustan Construction

(supra). Accordingly, the contention of the Respondents that this Court must
first adjudicate on whether the disputes sought to be referred for arbitration
by the Petitioner are barred by res judicata and are non-arbitrable, only
deserves to be rejected.
In Krish Spinning (supra), the Supreme Court held
that it is not an absolute rule that disputes cannot be referred to arbitration if
there is full and final settlement as disputes may still arise from the
settlement and this judgement would apply with greater vigour in the present
case since the parties themselves envisaged this situation and agreed to
include an arbitration agreement not just in the Settlement Agreement but
also in the Consent Award.

35. Respondents No.2 to 4 have contested reference to arbitration on the
ground that they are non-signatories to the arbitration agreement,
Collaboration Agreement, Settlement Agreement as also not privy to the
Consent Award. Petitioner is right in contending that the question whether a
non-signatory is bound by the arbitration agreement is completely
independent of the question concerning the existence of an arbitration
agreement and therefore, whether or not a non-signatory is a veritable party
to the arbitration agreement should be left for determination by the Arbitral
Tribunal.
In ASF Buildtech Private Limited v. Shapoorji Pallonji and
Company Private Limited, (2025) 9 SCC 76, the Supreme Court referring to
and relying on the judgment in
Cox and Kings
(supra) held that the entire
exercise of determining whether a non-signatory is bound by an arbitration

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agreement, necessitates a far more expansive enquiry, which transcends the
limited question of mere existence of an arbitration agreement since it
entails interpretation of the scope and contours of the principal agreement,
an assessment of commercial understanding between the parties,
examination of nature and purpose underlying the principal contract and
character of transactions etc. It was thus held that by no stretch of
imagination can the issue whether non-signatory is bound by the arbitration
agreement be characterised as one that is either significant or sine qua non to
the determination of existence of the arbitration agreement. The question
involves a more nuanced determination and therefore, even if it is assumed
that referral Court in its jurisdiction under Section 11 of 1996 Act has the
discretion to examine this question, Court should not only refrain but rather
loathe the exercise of such discretion and leave the same to the Arbitral
Tribunal.

In this context, I may also refer to the judgments of the Supreme
Court in
Adavya Projects Pvt. Ltd. v. Vishal
structural Pvt. Ltd. and
Others, 2025 SCC OnLine SC 806; and
OPG Power Generation Private
Limited v. Enexio Power Cooling Solutions India Private Limited and
Another
, (2025) 2 SCC 417.
Relevant passages from the judgment in ASF
Buildtech (supra) are as follows:-

"74. From above, it is manifest that the test for determining the
applicability of the 'Group of Companies' doctrine is intrinsically factual
in nature, necessitating a close and context-specific inquiry.
However, Cox
and Kings (I
) (supra) did not merely stop at just establishing the factual
nature of such an exercise, but further proceeded to expound, the extent
and depth in which the aforementioned factual factors must be determined
in the course of such exercise by laying down the threshold standards for
determining the applicability of the said doctrine.

Placing reliance on one
another decision of this Court in
Oil and Natural Gas Corporation
Ltd. v. Discovery Enterprises Pvt. Ltd.
, (2022) 8 SCC 42, it held that the
test for determining applicability of the 'Group of Companies' doctrine
envisages a cumulative and holistic determination of the factual aspects
such as the relationship between and among the legal entities within the

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corporate group structure, their underlying contractual obligations, the
commonality of the subject matter and the composite nature of the
transactions undertaken, and their overall participation in the
project/subject-matter for achieving a common purpose. The relevant
observations read as under:--

"110.
In
Discovery Enterprises
(supra), this Court refined and
clarified the cumulative factors that the courts and tribunals should
consider in deciding whether a company within a group of companies
is bound by the arbitration agreement:

"40. In deciding whether a company within a group of companies
which is not a signatory to arbitration agreement would nonetheless
be bound by it, the law considers the following factors:

(i) The mutual intent of the parties;

(ii) The relationship of a non-signatory to a party which is a signatory
to the agreement;

(iii) The commonality of the subject-matter;

(iv) The composite nature of the transactions; and

(v) The performance of the contract."

xxx xxx xxx

76. Owing to the intrinsic character of the test -- being one that entails a
fact- intensive inquiry involving a mixed question of fact and law -- and
further, given the extensive standard it demands, requiring a
comprehensive and holistic appraisal of all material facts and attendant
circumstances, it may be safely concluded that the arbitral tribunal is the
more appropriate and competent forum to adjudicate upon the issue of
whether a non-signatory is bound by the arbitration agreement, as the
arbitral as it has the innate advantage of going through all the relevant
evidence and pleadings in greater depth and detail than the referral court
at the pre-reference stage, and as such is uniquely positioned to undertake
such a nuanced determination.

II. Determining the "existence" viz-à-viz the intention of parties from
"express words" of an Arbitration Agreement.

77.
In order to resolve the question whether the issue of a non-signatory
being bound by an arbitration agreement could be said to be inextricably
intertwined with the determination of the "existence" of the arbitration
agreement, it is apposite to once again advert to
Cox and Kings
(I
) (supra), more particularly, as to the manner in which it envisages the
identification and determination of the binding effect of an arbitration
agreement upon a non-signatory, based on the factual aspects delineated
by it, as mentioned in the foregoing paragraphs.

78.
Cox and Kings (I
) (supra) observed that the "legal relationship of a

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non- signatory to a party which is a signatory to the agreement" must be
analyzed in the context of the underlying substantive contract which
contains the arbitration agreement. This may be ascertained either from
the duty or relationship attributed to the non-signatory within the
underlying contract or may be inferred from its conduct with respect to
such contract. If the underlying contract forms basis for a subject-matter
common to both the signatory and the non-signatory or any composite
transaction by them, then it would be a positive indicum for inferring the
consent of the non-signatory to arbitrate with respect to the subject-
matter. Transactions by a non-signatory which are interlinked with the
underlying contract in such manner, in the absence of which the
performance of the contract may not be feasible, is one another instance
for inferring this consent.
Placing reliance on Chloro Controls (supra) it
observed that factors such as "commonality of the subject- matter" or
"composite transaction" would have to be gathered from the conjoint
reading of the principal and supplementary agreements on the one hand,
and the intention of the parties and their conduct on the other. Amongst
these, the participation of the non-signatory in the performance of the
underlying contract is the most crucial factor to discern the intention of
the parties.

"112.
Section 7
of the Arbitration Act broadly talks about an
agreement by the parties in respect of a defined legal relationship,
whether contractual or not. Such a legal relationship must give rise to
legal obligations and duties. In a corporate group, a company may
have various related companies. The legal relationship must be
analysed in the context of the underlying contract containing the
arbitration agreement. The nature of the contractual relationship can
either be formally encrusted in the underlying contract, or it can also
be inferred from the conduct of the signatory and non-signatory
parties with respect to such contract. [...]

115. In case of multiple parties, the necessity of a common subject-
matter and composite transaction is an important factual indicator.
An arbitration agreement arises out of a defined legal relationship
between the parties with respect to a particular subject matter.
Commonality of the subject matter indicates that the conduct of the
non-signatory party must be related to the subject matter of the
arbitration agreement. For instance, if the subject matter of the
contract underlying the arbitration agreement pertains to distribution
of healthcare goods, the conduct of the non-signatory party should
also be connected or in pursuance of the contractual duties and
obligations, that is, pertaining to the distribution of healthcare goods.
The determination of this factor is important to demonstrate that the
non-signatory party consented to arbitrate with respect to the
particular subject matter.

116. In case of a composite transaction involving multiple

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agreements, it would be incumbent for the courts and tribunals to
assess whether the agreements are consequential or in the nature of a
follow-up to the principal agreement. This Court in Canara
Bank (supra) observed that a composite transaction refers to a
situation where the transaction is interlinked in nature or where the
performance of the principal agreement may not be feasible without
the aid, execution, and performance of the supplementary or ancillary
agreements.

117. The general position of law is that parties will be referred to
arbitration under the principal agreement if there is a situation where
there are disputes and differences "in connection with" the main
agreement and also disputes "connected with" the subject- matter of
the principal agreement In Chloro Controls (supra), this Court
clarified that the principle of "composite performance" would have to
be gathered from the conjoint reading of the principal and
supplementary agreements on the one hand, and the explicit intention
of the parties and attendant circumstances on the other. The common
participation in the commercial project by the signatory and non
signatory parties for the purposes of achieving a common purpose
could be an indicator of the fact that all the parties intended the non-
signatory party to be bound by the arbitration agreement. [...]"

118. The participation of the non-signatory in the performance of the
underlying contract is the most important factor to be considered by
the courts and tribunals. The conduct of the non- signatory parties is
an indicator of the intention of the non- signatory to be bound by the
arbitration agreement. The intention of the parties to be bound by an
arbitration agreement can be gauged from the circumstances that
surround the participation of the non signatory party in the
negotiation, performance, and termination of the underlying contract
containing such agreement. The UNIDROIT Principle of International
Commercial Contract, 201698 provides that the subjective intention of
the parties could be ascertained by having regard to the following
circumstances:

(a) preliminary negotiations between the parties;

(b) practices which the parties have established between themselves;

(c) the conduct of the parties subsequent to the conclusion of the
contract;

(d) the nature and purpose of the contract;

(e) the meaning commonly given to terms and expressions in the trade
concerned; and

(f) usages."

(Emphasis supplied)

79. What can be discerned from the above is that, the entire exercise of

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determining whether a non-signatory is bound by an arbitration
agreement, in contradistinction to the narrow question of the "existence"
of the arbitration agreement, necessitates a far more expansive inquiry.
This inquiry transcends the limited question of the mere "existence" as it
entails an interpretation of the scope and contours of the principal
agreement, an assessment of the commercial understanding between the
parties, examination of the nature and purpose underlying the principal
contract, and the character of the transactions and conduct of the parties
viz-à-viz the object and wisdom of the parties underlying contractual
arrangement. Such an exercise mandates a detailed and comparative
evaluation of the substantive provisions of both the principal and
supplementary agreements, and not merely of the arbitration agreement or
clause in isolation.

80. The determination of the "existence" of an arbitration agreement, by
contrast, is confined to examining the formal validity of the arbitration
agreement or the arbitration clause itself, where only the arbitration
agreement or clause, as the case may be has to be looked into. It does not
require delving into the broader legal relationships emerging from the
underlying contractual framework.
Cox and Kings (I
) (supra) specifically
mandates a holistic appraisal of the principal and supplementary
agreements in tandem with the parties' intention and conduct, thereby
demanding an inquiry far more extensive than that required for the mere
establishment of the existence of the arbitration agreement.

81. Thus, by no stretch of imagination can the issue of whether a non-
signatory is bound by the arbitration agreement be characterized as one
that is either significant or sine qua non to the determination of the
arbitration agreement's "existence". The former necessitates a substantive
examination of the entire contractual relationship, whereas the latter is a
limited exercise directed only at confirming the formal validity of the
arbitration agreement itself. Such a question is not one of "existence" of
the arbitration agreement, but one of interpretation and scope of the
principle agreement.

xxx xxx xxx

84. From the above exposition of law, it can be seen that this Court in
Cox
and Kings (I
) (supra) recognized that there exists a fine but pertinent
distinction between determining the "existence" of an arbitration
agreement and determining the intention of the parties from the "express
words" used in the arbitration agreement, when dealing with the question
whether a non- signatory is bound by the arbitration agreement or not.
The former only deals with determining whether an arbitration agreement
exists and is present in the record of agreement or the written materials as
delineated under Section 7 sub- section (4)(b) of the Act, 1996. The latter,
in contrast, involves construction and interpretation of the "express
words" that has been used in such material from the surrounding

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circumstances such as nature and object of the contract and the conduct of
the parties during the formation, performance, and discharge of the
contract, and how the arbitration agreement fits within the broader
contractual framework.

85. Once the referral court, identifies an arbitration agreement that
satisfies the formal requirements of
Section 7
of the Act, 1996, either from
the record of agreement or the written materials under sub-section (4), the
"existence" of the arbitration agreement is said to have been established,
even though, its binding nature qua the non-signatory may not be
established, as it is entirely possible for a referral court to arrive at
finding that prima-facie there exists an arbitration agreement in terms of

Section 7
of the Act, 1996 without resolving the question of whether a non-
signatory is bound by such arbitration agreement or not, as it depends on
additional factors beyond mere existence.

86. Once, the "existence" of the arbitration agreement is said to have
been established, the condition stipulated in terms of Section 11 sub-
section (6
A) of the Act, 1996
, is said to have been fulfilled, and the referral
courts have no option but to refer the dispute to arbitration,
notwithstanding whether the intention of a non-signatory as a veritable
partly to such agreement is established or not. Apart from the pre-
condition of examining the "existence" of an arbitration agreement,

Section 11
of the Act, 1996 does not either contemplate or require
determination of the "defined legal relationship" in terms of Section 7,
nor does it mandate an assessment of the futuro intention of the parties,
whether signatories or non-signatories, from the "express words" of the
arbitration agreement. This limited inquiry does not extend to the
substantive legal consequences or implications of such arbitration
agreement. The question of whether a non-signatory is bound by the
arbitration agreement is entirely separate from the question of its
"existence." The latter is a relatively straightforward, procedural
determination based on the formal presence of the agreement, whereas the
former involves a substantive and contextual inquiry into the mutual intent
of the parties, which may be examined by the arbitral tribunal.

87. What follows from this is that, the question whether a non-signatory is
bound by the arbitration agreement is completely independent of the
question concerning the "existence" of an arbitration agreement. The two
inquiries -- while related -- are distinct in nature and function. The
"existence" of an arbitration agreement pertains solely to its formal
presence in the contractual documentation, as per the requirements under
the Act, 1996 and once established, it obligates the referral of the dispute
to arbitration. By contrast, the question of whether a non-signatory is
bound by the arbitration agreement involves a more nuanced
determination of the parties' intentions, contractual relationships, and the
broader context of the agreement, which is not confined to the formal text
of the arbitration clause alone.

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88. Thus, even in the absence of the non-signatory being made a party to
the proceedings before the referral court, and where the question of its
impleadment has neither been raised nor addressed or left open to the
arbitral tribunal by the referral court, the arbitral tribunal would be full
empowered to examine this issue in the first instance and determine
whether any non- signatory is bound by the arbitration agreement based
on the factual circumstances of the case, and if necessary, implead such
non-signatory to the arbitration proceedings.

xxx xxx xxx

90. This is further fortified from the fact that,
Cox and Kings (I
) (supra) in
its subsequent paragraphs, more particularly paragraph No.164, while
discussing the scope of
Section 11
of the Act, 1996, distinctively refers to
and treats the criterion of "existence of arbitration agreement" and
"veritable party to the arbitration agreement", as two separate and
independent inquiries, thereby underscoring that the determination of the
existence of an arbitration agreement stands apart from the assessment of
whether a non-signatory can be bound to it.

xxx xxx xxx

92. Thus, what has been conveyed in so many words by Ajay Madhusudan
Patel (supra) is that the inquiry into whether a non-signatory is bound by
an arbitration agreement is not, in its essence, an inquiry into the formal
or juridical existence of the arbitration agreement itself. It is an exercise
of determining the functional concept of consent within the existing
arbitration agreement rather than the existence of the arbitration
agreement itself. It is to cull out and discern the intention of various
parties -- whether signatories or otherwise -- in relation to their
willingness to be bound by the arbitration mechanism embedded in the
contract.

93. Put differently, although notionally the exercise of determining
'existence of the arbitration agreement qua the non-signatory', may, on
the surface appear to be concerned with the arbitration agreement or
clause in question, yet one must be mindful that the actual focus of
such exercise lies in determining the existence of consent of the parties
through fact patterns to such arbitration agreement or clause and not
vice-versa. It is the existence of mutual consent to arbitrate -- not the
formal existence of the arbitration agreement -- that is the heart of this
inquiry.

94. There runs no umbilical cord between the exercise of determining the
"existence of the arbitration agreement" and determining its "existence
qua the non-signatory". The latter is an independent and substantive
determination that falls outside the narrow and circumscribed domain of
the referral court's singular obligation under Section 11 sub-section (6
A)
of the Act, 1996
and as such cannot be conflated to be one pertaining to or

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attacking the "existence" of an arbitration.

95. Even if it is assumed for a moment that the referral court in its
jurisdiction under
Section 11
of the Act, 1996 has the discretion to
determine whether a non-signatory is a veritable party to the arbitration
agreement or not, by virtue of
Cox and Kings (I
) (supra), the referral court
should only refrain but rather loathe the exercise of such discretion. Any
discretion which is conferred upon any authority, be it referral courts must
be exercised reasonably and in a fair manner. Fairness in this context
does not just extend to a non-signatory's rights and its apprehension of
prejudice, fairness also demands that the arbitration proceedings is given
due time to gestate so that the entire dispute is holistically decided. Any
determination even if prima-facie by a referral court on such aspects
would entail an inherent risk of frustrating the very purpose of resolution
of dispute, if the referral courts opine that a non- signatory in question is
not a veritable party. On the other hand, the apprehensions of prejudice
can be properly mitigated by leaving such question for the arbitral
tribunal to decide, as such party can always take recourse to
Section 16
of
the Act, 1996 and thereafter in appeal under Section 37, and where it is
found that such party was put through the rigmarole of arbitration
proceedings vexatiously, both the tribunal and the courts, as the case may
be, should not only require that all costs of arbitration insofar as such
non- signatory is concerned be borne by the party who vexatiously
impleaded it, but the arbitral tribunal would be well within its powers to
also impose costs.

III. Decision of Cox and Kings (II) and Ajay Madhusudan and the scope
of
Section 11
of the Act, 1996 for joinder of non-signatories to
arbitration proceedings.

96. The aforesaid may be looked at from one another angle. This Court
in
Cox and Kings (I
) (supra) also discussed the role and scope of
jurisdiction of the referral courts and arbitral tribunals under Section(s)
11 and 16 of the Act, 1996, particularly in the context of binding a non-
signatory to the arbitration agreement. It reiterated that under Section 11,
the referral court only has to determine the prima-facie existence of an
arbitration agreement. Whereas, the issue of determining parties to an
arbitration agreement is quite distinct from "existence" of the arbitration
agreement, as such issue goes to the very root of the jurisdiction
competence of the arbitral tribunal, and thus, empowered to decide the
same under Section 16.

Placing reliance on the decision of this Court
in
Shin-Etsu Chemical Co Ltd. v. Aksh Optifibre Ltd.
reported in, (2005) 7
SCC 234, it held that the referral court should not unnecessarily interfere
with arbitration proceedings, and rather allow the arbitral tribunal to
exercise its primary jurisdiction for deciding such issues. The relevant
observations read as under:--

"157. When deciding the referral issue, the scope of reference

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under both Sections 8 and 11 is limited. Where Section 8 requires
the referral court to look into the prima facie existence of a
valid arbitration agreement, Section 11 confines the court's
jurisdiction to the existence of the examination of an arbitration
agreement.

158.
Section 16
of the Arbitration Act enshrines the principle of
competence competence in Indian arbitration law. The provision
empowers the arbitral tribunal to rule on its own jurisdiction,
including any ruling on any objections with respect to the existence or
validity of arbitration agreement. Section 16 is an inclusive provision
which comprehends all preliminary issues touching upon the
jurisdiction of the arbitral tribunal. The doctrine of competence
competence is intended to minimize judicial intervention at the
threshold stage. The issue of determining parties to an arbitration
agreement goes to the very root of the jurisdictional competence of the
arbitral tribunal.

161. The above position of law leads us to the inevitable conclusion
that at the referral stage, the court only has to determine the prima
facie existence of an arbitration agreement. If the referral court
cannot decide the issue, it should leave it to be decided by the
arbitration tribunal. unnecessarily interfere with arbitration
proceedings, and rather allow the arbitral tribunal to exercise its
primary jurisdiction.
In
Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre
Ltd.125
, this Court observed that there are distinct advantages to
leaving the final determination on matters pertaining to the validity of
an arbitration agreement to the tribunal [...]"

(Emphasis supplied)

97.
Cox and Kings (I
) (supra) further observed that in case of joinder of
non- signatory parties to an arbitration agreement, the referral court will
be required to prima-facie rule on the existence of the arbitration
agreement and whether the non-signatory is a veritable party to the
arbitration. However, it further clarified that, due to the inherent
complexity in determining whether the non- signatory is indeed a veritable
party, the referral court should leave this question for the arbitral tribunal
to decide as it can delve into the factual and circumstantial evidence along
with its legal aspects for deciding such an issue. The relevant observations
read as under:--

"163. [...] Thus, when a non-signatory person or entity is arrayed as
a party at Section 8 or Section 11 stage, the referral court should
prima facie determine the validity or existence of the arbitration
agreement, as the case may be, and leave it for the arbitral tribunal to
decide whether the non signatory is bound by the arbitration
agreement.

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164. In case of joinder of non-signatory parties to an arbitration
agreement, the following two scenarios will prominently emerge :

first, where a signatory party to an arbitration agreement seeks
joinder of a non-signatory party to the arbitration agreement; and
second, where a non-signatory party itself seeks invocation of an
arbitration agreement. In both the scenarios, the referral court will be
required to prima facie rule on the existence of the arbitration
agreement and whether the non-signatory is a veritable party to the
arbitration agreement. In view of the complexity of such a
determination, the referral court should leave it for the arbitral
tribunal to decide whether the non signatory party is indeed a party to
the arbitration agreement on the basis of the factual evidence and
application of legal doctrine. The tribunal can delve into the factual,
circumstantial, and legal aspects of the matter to decide whether its
jurisdiction extends to the non-signatory party. In the process, the
tribunal should comply with the requirements of principles of natural
justice such as giving opportunity to the non-signatory to raise
objections with regard to the jurisdiction of the arbitral tribunal. This
interpretation also gives true effect to the doctrine of competence-
competence by leaving the issue of determination of true parties to an
arbitration agreement to be decided by arbitral tribunal under Section

16."

(Emphasis supplied)

98. Thus, even if it is assumed for a moment, that the question whether a
non- signatory is a veritable party to the arbitration agreement is
intrinsically connected with the issue of "existence" of arbitration
agreement, the referral courts should still nevertheless, leave such
questions for the determination of the arbitral tribunal to decide, as such
an interpretation gives true effect to the doctrine of competence-
competence enshrined under
Section 16
of the Act, 1996.

99. This hands-off approach of referral courts in relation to the question
of whether a non-signatory is a veritable party to the arbitration
agreement or not was reiterated in Cox and Kings (II), wherein one of us,
(J.B. Pardiwala J.), observed that once an arbitral tribunal stands
constituted, it becomes automatically open to all parties to raise any
preliminary objections, including preliminary objections touching upon
the jurisdiction of such tribunal, and to seek an early determination
thereof. Consequently, the issue of impleadment of a non-signatory was
deliberately left for the arbitral tribunal to decide, after taking into
consideration the evidence adduced before it by the parties and the
principles enunciated under
Cox and Kings (I
) (supra).

100. Similarly, in Ajay Madhusudan (supra) it was held that since a
detailed examination of numerous disputed questions of fact was required
for determining whether the non-signatory is a veritable party to the

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arbitration agreement, the same cannot be examined in the limited
jurisdiction under
Section 11
of the Act, 1996 as it would tantamount to a
mini trial. Accordingly, the arbitral tribunal was found to be the
appropriate forum for deciding the said issue on the basis of the evidence
that may be adduced by the parties.

101. This approach is necessitated by the inherent complexity involved in
determining whether a non-signatory qualifies as a veritable party to the
arbitration agreement, a determination that hinges upon a multiplicity of
factual aspects and demands a high threshold of satisfaction based on a
cumulative and holistic evaluation of the entire factual matrix. Such an
intricate and evidence-driven exercise makes the arbitral tribunal the most
appropriate forum to adjudicate the matter, as it possesses the
institutional advantage of conducting a comprehensive scrutiny of all
evidences and materials adduced by the parties.

102. Furthermore, the legislative intent underlying
Section 11
of the Act,
1996 -- particularly sub-section (6A) -- is to ensure the expeditious
disposal of applications for the appointment of arbitrators. This legislative
objective militates against referral courts undertaking any elaborate or
detailed factual inquiry, which would inevitably delay proceedings.
Prudence thus dictates that the referral courts confine themselves to
a prima-facie examination of the existence of the arbitration agreement
and leave substantive determinations, such as the binding nature of non-
signatories, to the arbitral tribunal. An additional and equally compelling
consideration is that the power exercised by the referral courts under

Section 11
of the Act, 1996 is judicial in nature. Consequently, referral
courts must refrain from embarking upon an intricate evidentiary inquiry
or making final determinations on matters that are within the jurisdiction
of the arbitral tribunal. Any premature adjudication or opinion by the
referral court would not only usurp the tribunal's role as the forum of first
instance for dispute resolution but could also cause irremediable
prejudice. In particular, if the referral court were to refuse impleadment of
a non-signatory, there would be no statutory right of appeal available to
challenge such a refusal. In contrast, determinations made by the arbitral
tribunal -- including on issues of jurisdiction and impleadment -- are
amenable to challenge under
Section 16
of the Act, 1996 and, thereafter,
under Section 37. Accordingly, the better course of action is for referral
courts to refrain altogether from delving, into the issue of whether a non-
signatory is a veritable party to the arbitration agreement, and to leave
such matters for the arbitral tribunal to decide in the first instance."

36. It is thus luminously clear that the question whether Respondents
No.2 to 4 being non-signatories are veritable parties to the arbitration
agreement will have to be left to be decided by the Arbitral Tribunal and

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cannot be subject matter of adjudication in the present petition.
Accordingly, Respondents No.2 to 4 are deleted from the array of parties in
the present petition with liberty to the Petitioner to seek their impleadment
during the arbitral proceedings and as and when an application is filed by the
Petitioner, the same shall be decided by the Arbitral Tribunal in accordance
with law.

37. In light of the existence of valid arbitration agreement between the
Petitioner and Respondent No.1, this Court finds no impediment in
appointing a Sole Arbitrator to adjudicate the disputes arising between the
parties. Accordingly, Ms. Justice Mukta Gupta (Mobile No. 9650788600),
former judge of this Court is appointed as Sole Arbitrator to adjudicate the
disputes between the parties. Fees of the learned Arbitrator will be fixed as
per Fourth Schedule of the 1996 Act.

38. Learned Arbitrator shall give disclosure under Section 12 of the 1996
Act before entering upon reference.

39. It is made clear that this Court has not expressed any opinion on the
merits of the case and all rights and contentions of the parties are left open.

40. Petition is disposed of in the aforesaid terms along with pending
application.

O.M.P.(I) (COMM.) 152/2023 and I.A. 44069/2024

41. This petition is filed by the Petitioner under Section 9 of 1996 Act
inter alia for restraining Respondent No.1 from dealing with third parties in
respect of any portion of the demised premises and more particularly,
dealing with the 4th and 5th floors as also Respondents No.1, 3 and 4 from
interfering with peaceful possession and enjoyment of commercial shop
Nos.1 and 2 on the Upper Ground Floor and commercial shop No.1 on the

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3rd Floor. By judgment dated 22.05.2023, Court restrained Respondent No.1
from dealing with Petitioner's share in the subject Mall and the interim order
has continued till date.

42. Since an Arbitrator has been appointed in the petition under Section
11 of 1996 Act, it is directed that this petition will be treated as an
application under Section 17 of 1996 Act by the learned Arbitrator and
decided in accordance with law. Interim order dated 22.05.2023 shall
continue till the application is taken up for consideration by the learned
Arbitrator, whereafter it will be open to the Arbitrator to continue, vacate,
modify or vary the order as per law. Copy of this petition shall be forwarded
to the Arbitrator digitally within two weeks from today.

43. It is made clear that Court has not expressed any opinion on the merits
of the petition and all rights and contentions of the parties are left open.

44. Petition is disposed of in the aforesaid terms along with pending
application.

CCP(O) 87/2024

45. List on 22.12.2025.

JYOTI SINGH, J
DECEMBER 04 , 2025/YA/S.Sharma

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