What are Arbitrable Disputes?What are Non-Arbitrable Disputes? When does a Dispute, in spite of Arbitration Clause, Not Referred to Arbitration?

Jojy George Koduvath.

Introspection

1. For referring the parties to arbitration, as per Sec. 8(1) and appointing arbitrator under Sec. 11 of the Arbitration Conciliation Act (as amended in 2015), the court has to (“prima facie“) find that a “valid arbitration agreement exists“.
- That is, the Arbitration agreement should be one that is ‘binding’ and ‘subsisting’.
2. SBP & Co. v. Patel Engg. Ltd., 2005-8 SCC 618 (seven-Judge Bench decision), conferred larger powers to arbitrators, it being held –
- it was the Arbitral Tribunal that had to decide, whether there existed a live claim.
- Note: It was prior to 2015 Amendment in the Arbitration Act. (After the Amendment it is not in the exclusive domain of the Arbitrator.)
3. The legislative policy, as revealed from Sect. 11(6) of the Arbitration Act, is to minimise court’s interference at the pre-arbitral stage.
- (See: SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618, National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267, Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, and Pravin Electricals v. Alaxy Infra and Engineering Pvt. Ltd., (2021) 5 SCC 671)
4. Sec. 11(6A) was inserted (in 2015) also with a view to minimise judicial interference at the pre-arbitral stage.
- It said – Courts jurisdiction, while considering arbitration-application, shall stand confined to the examination of the “existence of an arbitration agreement“.
5. The scope of the judicial interference was (indirectly) increased for the following-
- (i) under Sec. 8(1) of the Arbitration Conciliation Act (as amended in 2015), the court has to (prima facie) “find” that a “valid arbitration agreement exists“.
- (ii) the insertion of Sec. 11(6A) directed – Courts shall examine as to “existence of an arbitration agreement“.
6. Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, made it clear – Courts shall make a Prima Facie finding under Sec. 11(6A) – as to “NonArbitrability of disputes”.
- It is held that it is to make a “check” and to protect parties from being forced to arbitrate when the matter is demonstrably “nonarbitrable”, and it is also to cut off the deadwood.
7. The limited scrutiny, “through the eye of the needle”, is necessary and compelling. “If there is the slightest doubt, the rule is to refer the dispute to arbitration” (NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389).

Non-arbitrable matters

Existence of a valid, binding and concluded arbitration agreement is necessary for appointment of an arbitrator by the court.

Sundaram Finance Ltd. v NEPC India Ltd., 1999 2 SCC 479
Wellington Associates Limited v. Kirit Mehta, 2000 4 SCC 272
Panchsheel Constructions v. Davinder Pal Singh Chauhan, 2019 SCCOnlineDel 7176
Quick Heal Technologies Limited v. NCS Computech Private Limited and another, 2020 SCCOnlineBom 693

Following are non-arbitrable matters –

(i) criminal offences
(ii) matrimonial disputes
(iii) guardianship matters
(ix) discharge of the contract – National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd, (2009) 1 SCC 267; New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd.[2015) 2 SCC 424
(x) disputes between licensor/ landlord and licensee/ tenant – Natraj Studios (P) Ltd. v. Navrang Studios, 1981-1 SCC 523
(xi) obtained by fraud, coercion, duress or undue influence, and prima facie, appears it to be lacking in credibility – Union of India v. Master Construction Co.[(2011) 12 SCC 349.
(xii) time-expired contract – Arshad Hussain v. General Officer Commanding , (2022, J&K High Court); Royal Orchid Associated Hotels Private Limited Vs. Kesho Lal Goyal, 2021-276 DLT 713,
(iv) testamentary matters
(v) eviction or tenancy matters (Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., 2011-5 SCC 532)
(vi) absence of a concluded contract (Enercon (India) Ltd. v. Enercon GMBH, 2014-5 SCC 1)
(vii) dead claim and long-barred claim
(viii) insolvency and winding-up matters

Sec. 7(3) of the Arbitration Act – Arbitration arises from a Specific Written Contract

In Harsha Construction v. Union of India, (2014) 9 SCC 246, it is held as under:

“18. Arbitration arises from a contract and unless there is a specific written contract, a contract with regard to arbitration cannot be presumed. Sec. 7(3) of the Act clearly specifies that the contract with regard to arbitration must be in writing. Thus, so far as the disputes which have been referred to in Clause 39 of the contract are concerned, it was not open to the Arbitrator to arbitrate upon the said disputes as there was a specific clause whereby the said disputes had been “excepted “. Moreover, when the law specifically makes a provision with regard to formation of a contract in a particular manner, there cannot be any presumption with regard to a contract if the contract is not entered into by the mode prescribed under the Act.

Arbitrator NOT to decide Matters which are Not Arbitrable, even if an Issue framed

In Harsha Construction v. Union of India, (2014) 9 SCC 246, it is held as under:

“19. If a nonarbitrable dispute is referred to an Arbitrator and even if an issue is framed by the Arbitrator in relation to such a dispute, in our opinion, there cannot be a presumption or a conclusion to the effect that the parties had agreed to refer the issue to the Arbitrator. In the instant case, the respondent authorities had raised an objection relating to the arbitrability of the aforestated issue before the Arbitrator and yet the Arbitrator had rendered his decision on the said “excepted ” dispute. In our opinion, the Arbitrator could not have decided the said “excepted ” dispute. We, therefore, hold that it was not open to the Arbitrator to decide the issues which were not arbitrable; and the award, so far as it relates to disputes regarding nonarbitrable disputes is concerned, is bad in law and is hereby quashed. ” (Referred to in- Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678)

Sec. 8(1) – Existence of a Valid Arbitration Agreement must be “Found”

Sec. 8(1) of the Arbitration Conciliation Act reads (after 2015 Amendment) as under:

“(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

Sec. 11(6A) Amendment – Courts are bound to decide on “Nonarbitrability”

Sec. 11(6A) of the Arbitration Act reads as under:

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

An Arbitral Tribunal may lack jurisdiction for several reasons and nonarbitrability has multiple meanings. (See: Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678)

If only there is an arbitrable dispute, on the facet of the matter, then only the dispute should be left to the arbitrator. (See: Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1)

It is with a view to protect parties from being forced to undergo an empty formality and a cumbersome procedure.
When it is manifestly and ex facie NOT certain – whether the dispute is arbitrable or not, it should be best left to the arbitrator in an application under Sec. 16 of the Arbitration Act
That is, if it is found at Sec. 8 or 11 stage that it requires further/deeper consideration, it should be best left to the arbitrator.
In such a case, it is for the arbitrator to decide the arbitrability of the dispute, first.

Non-Arbitrable Dispute – After Sec. 11(6A) Amendment, in 2015

NTPC Ltd. v. SPML Infra Ltd. (2023 SCC OnLine SC 389) – discharge of the contract, (i) for, the SPML had withdrawn the Writ Petition, and therefore, there was discharge of the contract by accord and satisfaction, and (ii) for the Contract stood discharged/novated in terms of the Settlement Agreement.
VGP Marine Kingdom Pvt Ltd v. Kay Ellen Arnold, 2023-1 SCC 597 – unless on the facet it is found that the dispute is not arbitrable, and if it requires further/deeper consideration, the dispute with respect to the arbitrability should be left to the arbitrator.
Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1 – the court should determine the level and nature of judicial scrutiny as to the arbitrability. It should not be left to the arbitrator when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are nonarbitrable. At the stage of Sec. 11, a preliminary inquiry is permissible if a dispute is raised with respect to the arbitrability.
Arshad Hussain v. General Officer Commanding , (2022, J&K High Court) it is pointed out that for appointing an arbitrator under Sec. 11, there should be a live dispute/claim subsisting which is capable of being arbitrated upon; and the Chief Justice or his designate in appointing an arbitrator under Sec. 11(6) of the Act was enjoined upon to examine the existence of the arbitration agreement between the parties and whether there existed a live arbitral claim/dispute. In this case the petition for appointment of an independent arbitrator to resolve the dispute regarding renewal of allotment of shop was dismissed, inter alia, for the agreement clearly provided that it was valid only for a period of one year and be renewed for the next year. It was not mandatory to renew the agreement and it was not renewed. Therefore, it was held that the petitioner was not entitled for appointment of an arbitrator for want of an arbitration agreement, existence of arbitral dispute.

Expiry of Contract by Efflux of Time – Arbitration Clause Cannot be Invoked

It was held by the Supreme Court, in Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362, as under:

“10. The following principles relevant to the present case emerge from the aforesaid discussion:
- (1) An arbitration clause is a collateral term of a contract as distinguished from its substantive terms; but nonetheless it is an integral part of it;
- (2) however comprehensive the terms of an arbitration clause may be, the existence of the contract is a necessary condition for its operation; it perishes with the contract;
- (3) … (4) … (5) … (6) …..”

The aforesaid Apex Court decision, Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362, was referred to in Union of India v. Jagdish Kaur, AIR 2007 All- 67 as under:

“20. The suit was instituted by the landlady on 1 -7-2004 after expiry of term of agreement. Courts below have rightly held that after expiry of five years, the agreement was non- existent and the arbitration clause was not applicable. This view finds support from the law laid down by Hon’ble the Apex Court in Union of India v. Kishori Lal Gupta and Brothers, (1959) AIR SC 1362.”

See also: Cosme Farma Laboratories Ltd. Vs. Shwarde Pharmaceutical Pvt. Ltd., 2013-2 GoaLR 559.

Expiry of Contract by Efflux of Time – Can Arbitration Clause be Invoked?

It is beyond doubt that the arbitration clause cannot be invoked in a case where the period of limitation provided for suits is elapsed.

If the period fixed in a contract for sale of a property (where time is essence of contract) is over and the vendor alleges breach from the part of purchaser, there will not be a valid and subsisting contract from the view of the vendor. In such a case –

if a dispute arises (even within the limitation period for taking legal action), the “existence or validity of an arbitration agreement” has to be decided by the Court, for referring the parties to arbitration, under Sec. 8(1), and appointing arbitrator under Sec. 11, of the Arbitration Conciliation Act.

Arbitration Clause in an Expired Contract, Cannot be invoked

Relying on Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362 it is held in Eigen Technical Service Pvt. Ltd. v. Vatika Limited, 2013-172 Pun LR 27: 2013-4 Arb LR 367, that one cannot invoke arbitration clause in a redundant, and perished contract by efflux of time. The court relied on an Allahabad decision stating as under:

“ High Court of Allahabad in a judgment dated 10.11.2006 passed in Writ Petition No. 21275 of 2006 titled as Union of India Thru’ Secry., Ministry of Postal v. Jagdish Kaur has also observed that arbitration clause contained in an expired agreement is also deemed as expired and is no more valid.”

Validity of Arbn. Agmnt. Decided by Court; Arbitrators have no Conclusive Power

In Uttar Pradesh Rajkiya Nirman Nigam Limited v. Indure Private Limited, 1996-2 SCC 667: AIR 1996 SC 1373, it is held as under:

14. In “Law of Arbitration” by Justice Bachawat (2nd Edn.) at page 155 it is stated that
- “the question whether matters referred to were within the ambit of clause for reference of any difference or dispute which may arise between the parties, it is for the Court to decide”. ….
15. The clear settled law thus is that the existence or validity of an arbitration agreement shall be decided by the Court alone. Arbitrators, therefore, have no power or jurisdiction to decide or adjudicate conclusively by themselves the question since it is the very foundation on which the arbitrators proceed to adjudicate the disputes.”

An arbitration clause is to be strictly construed

The parties are bound by the clauses in the agreement. The Court will not rewrite any clause in equity. An arbitration clause is required to be strictly construed. (See: Oriental Insurance Co Ltd. v. Narbheram Power and Steel (P) Ltd., (2018) 6 SCC 534; (Referred to in- Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678)).

In Rajasthan State Industrial Development and Investment Corporation v. Diamond and Gem Development Corporation Ltd.; (2013) 5 SCC 470, it is held that a party cannot claim anything more than what is covered by the terms of the contract, for the reason that the contract is a transaction between two parties and has been entered into with open eyes and by understanding the nature of contract; and that thus the contract being a creature of an agreement between two or more parties has to be interpreted giving literal meanings unless there is some ambiguity therein. The contract is to be interpreted giving the actual meaning to the words contained in the contract and it is not permissible for the Court to make a new contract, however reasonable, if the parties have not made it themselves. It is further observed that the terms of the contract have to be construed strictly without altering the nature of a contract as it may affect the interest of either of the parties adversely. (Referred to in- Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678)

Different Facets of Non-Arbitrability

In Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, (on a reference to three-judge-bench) referring Booz Allen and Hamiltan Inc. Vs. SBI Home Finance Ltd., (2011) 5 SCC 532, it is held that there are facets of nonarbitrability, as under:

“(i) Whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the Arbitral Tribunal) or whether they would exclusively fall within the domain of public fora (courts).
(ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the “excepted matters ” excluded from the purview of the arbitration agreement.
(iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the Arbitral Tribunal, or whether they do not arise out of the statement of claim and the counterclaim filed before the Arbitral Tribunal.
A dispute, even if it is capable of being decided by arbitration and falling within the scope of an arbitration agreement, will not be “arbitrable ” if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such a joint list of disputes, does not form part of the disputes raised in the pleadings before the Arbitral Tribunal. “

It is ultimately concluded in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, in para 76 as under:

“45. In view of the above discussion, we would like to propound a fourfold test for determining when the subject matter of a dispute in an arbitration agreement is not arbitrable:
(1) When cause of action and subject-matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.
(2) When cause of action and subject-matter of the dispute affects thirdparty rights; have erga omnes effect; require centralized adjudication, and mutual adjudication would not be appropriate and enforceable;
(3) When cause of action and subject-matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable;
(4) When the subject-matter of the dispute is expressly or by necessary implication nonarbitrable as per mandatory statute(s).
These tests are not watertight compartments; they dovetail and overlap, albeit when applied holistically and pragmatically will help and assist in determining and ascertaining with great degree of certainty when as per law in India, a dispute or subject matter is nonarbitrable. Only when the answer is affirmative that the subject matter of the dispute would be nonarbitrable.
However, the aforesaid principles have to be applied with care and caution as observed in Olympus Superstructures (P) Ltd. Vs. Meena Vijay Khetan and Ors.; (1999) 5 SCC 651: (SCC p. 669, para 35)
“35. …Reference is made there to certain disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, which cannot be referred to arbitration.
It has, however, been held that if in respect of facts relating to a criminal matter, say, physical injury, if there is a right to damages for personal injury, then such a dispute can be referred to arbitration (Keir v. Leeman). Similarly, it has been held that a husband and a wife may refer to arbitration the terms on which they shall separate, because they can make a valid agreement between themselves on that matter (Soilleux v. Herbst, Wilson v. Wilson and Cahill v. Cahill). ” (Quoted in- Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678)

As regards the Prima facie examination of Courts, it is held in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, as under:

“87. Prima facie examination is not full review but a primary first review to weed out manifestly and ex facie non-existent and invalid arbitration agreements and non-arbitrable disputes. The prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straight forward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage.”

In Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, our Apex Court overruled two decisions.

1. N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 (which, inter alia, observed that allegations of fraud can be made a subject matter of arbitration when they relate to a civil dispute).
2. Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 (which held that landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration).

It was pointed out in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, (i) that fraud, which would vitiate and invalidate the arbitration clause, is an aspect relating to non- arbitrability; they are non-arbitrable; and (ii) that the landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations. Such rights and obligations can only be adjudicated and enforced by the specified court/forum, and not through arbitration.

Who Decides Nonarbitrability – Prima Facie Test by Court

As to ‘who decides on nonarbitrability of the dispute’, it is observed in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, there is only limited scope for review by the court. It is to check and protect parties from being forced to arbitrate when the matter is demonstrably “nonarbitrable” and to cut off the deadwood. It is held in Vidya Drolia v. Durga Trading Corporation as under:

“96. Discussion under the heading ‘Who decides Arbitrability?’ can be crystallized as under:
(a) Ratio of the decision in Patel Engineering Ltd. (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.
(b) Scope of judicial review and jurisdiction of the court under Section 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.
(c) The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence competence, is that the arbitral tribunal is the preferred first authority to determine and decide all questions of non arbitrability. The court has been conferred power of “second look” on aspects of nonarbitrability post the award in terms of-
- subclauses (i), (ii) or (iv) of Section 34(2)(a) or
- subclause (i) of Section 34(2)(b) of the Arbitration Act.
(d) Rarely as a demurrer the court may interfere at the Section 8 or 11 stage when it is manifestly and ex facie certain that–
- the arbitration agreement is nonexistent,
- invalid or
- the disputes are nonarbitrable,
though the nature and facet of nonarbitrability would, to some extent, determine the level and nature of judicial scrutiny.
The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably “nonarbitrable”, and to cut off the deadwood. The court by default would refer the matter when contentions relating to nonarbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the arbitral tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism.” (Quoted in: Emaar India Ltd. v. Tarun Aggarwal Projects, AIR 2022 SC 4678; NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389)

In NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389, it is held (Dr. Dhananjaya Y. Chandrachud; CJI) as under:

“25. Eye of the Needle: The above-referred 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 nonarbitrability of the dispute.”

In NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389, sub-section (6A) added to Section 11, with respect to “pre-referral jurisdiction”, was referred to, and the following decisions were relied on-

Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1,
National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267,
Union of India v. Master Construction Co., (2011) 12 SCC 349,
New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd., (2015) 2 SCC 424,
United India Insurance Co. Ltd. v. Antique Art Exports Pvt. Ltd., (2019) 5 SCC 362.

In Union of India v. Master Construction Co., (2011) 12 SCC 349, it was observed as under:

“18. In our opinion, there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher or no-claim certificate has been obtained by fraud, coercion, duress or undue influence and the other side contests the correctness thereof, the Chief Justice/his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to validity of the discharge voucher or no-claim certificate or settlement agreement, prima facie, appears to be lacking in credibility, there may not be a necessity to refer the dispute for arbitration at all.”

In New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd., (2015) 2 SCC 424, it was observed as under:

“10. In our considered view, the plea raised by the respondent is bereft of any details and particulars, and cannot be anything but a bald assertion. Given the fact that there was no protest or demur raised around the time or soon after the letter of subrogation was signed, that the notice dated 31-3-2011 itself was nearly after three weeks and that the financial condition of the respondent was not so precarious that it was left with no alternative but to accept the terms as suggested, we are of the firm view that the discharge in the present case and signing of letter of subrogation were not because of exercise of any undue influence. Such discharge and signing of letter of subrogation was voluntary and free from any coercion or undue influence. In the circumstances, we hold that upon execution of the letter of subrogation, there was full and final settlement of the claim. Since our answer to the question, whether there was really accord and satisfaction, is in the affirmative, in our view no arbitrable dispute existed so as to exercise power under Section 11 of the Act. The High Court was not therefore justified in exercising power under Section 11 of the Act.”

In United India Insurance Co. Ltd. v. Antique Art Exports Pvt. Ltd., (2019) 5 SCC 362, it was observed as under:

“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.”

Earlier View

Arbitrator to decide – whether valid arbitration agreement, claim barred

In SBP & Co. v. Patel Engg. Ltd., 2005 8 SCC 618, a seven-Judge Bench of the Apex Court held as under:

“39. It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense, whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection.”

Matters that Require Evidence

In SBP & Co. v. Patel Engg. Ltd., 2005 8 SCC 618, a seven-Judge Bench of the Apex Court held further as under:

“It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral Tribunal. (quoted in: Ashapura Mine -Chem Ltd. v. Gujarat Mineral Development Corporation, 2015-8 SCC 193)

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End Notes:

Sec. 8 of the Arbitration And Conciliation Act, 1996 (after 2015 Amendment)
Power to refer parties to arbitration where there is an arbitration agreement.
 (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.


Sec. 11 A of the Arbitration And Conciliation Act, 1996
11. Appointment of arbitrators.
(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and—
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment,
the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court.
(6) Where, under an appointment procedure agreed upon by the parties,—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.
(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision.
(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties; and
(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, different High Courts or their designates, the High Court or its designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the "Supreme Court or, as the case may be, the High Court" in those sub-sections shall be construed as a reference to the "Supreme Court"; and
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to the Supreme Court or, as the case may be, the High Court in those sub-sections shall be construed as a reference to the "High Court" within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.
(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.
(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.
Explanation.— For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.

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Book No, 1 – Civil Procedure Code

Power of attorney

Title, ownership and Possession

Principles and Procedure

Land Laws/ Transfer of Property Act

Evidence Act – General

Contract Act

Easement

Stamp Act & Registration

Will

Arbitration

Divorce

Book No. 2: A Handbook on Constitutional Issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India

General Principles
Dedication and Vesting
Trustees and Management
Breach of Trust
- Breach of Trust and Removal of Trustees
Suits by or against Trusts
- Suits By or Against Trusts and Trustees
- Remedies Under Sec. 92 CPC
Law on Hindu Religious Endowments
- Philosophy of Idol Worship
Temples, Gurudwaras, Churches and Mosques – General
- Legal Personality of Temples, Gurudwaras, Churches and Mosques
Constitutional Principles
Ayodhya and Sabarimala Disputes
- Ayodhya Disputes: M. Siddiq case – Pragmatic Verdict
- Sabarimala Review Petitions & Reference to 9-Judge Bench
- SABARIMALA REVIEW and Conflict in Findings between Shirur Mutt Case & Durgah Committee Case
General

What are Arbitrable Disputes?What are Non-Arbitrable Disputes? When does a Dispute, in spite of Arbitration Clause, Not Referred to Arbitration?

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