13 May 2025 Arbitration Law >> Business & Commercial Law   |   Civil Appeals >> Civil & Consumer Law  

An appeal of Office For Alternative Architecture v/s Ircon Infrastructure And Services Ltd. concerning a Delhi High Court order from September 6, 2023. The High Court, while appointing an arbitral tribunal under Section 11 of the Arbitration and Conciliation Act, 1996 (the 1996 Act), excluded specific claims (paras 48 (ii), (iii), and (iv) of the claim petition) by deeming them non-arbitrable or "excepted matters" based on clauses 50 and 50.2 of the agreement.

The appellant's core argument is that under Section 11 of the 1996 Act, a court's role is strictly limited to determining the existence of an arbitration agreement. Once established, an arbitrator should be appointed, and it is then the arbitrator's responsibility to decide whether specific claims fall within an "excepted category" or are non-arbitrable. Therefore, the appellant sought to set aside the High Court's exclusion of certain claims, allowing all pleas to be raised before the arbitral tribunal.

Conversely, the respondent argued that the High Court is empowered to exclude non-arbitrable claims, citing a previous Supreme Court decision in Emaar India Limited vs. Tarun Aggarwal Projects LLP and Anr.

The central question before the court was whether, when exercising powers under Section 11 of the 1996 Act, a court should only examine the existence of an arbitration agreement, or if it can also rule on the arbitrability of specific claims or whether they fall into an "excepted category."

The court referred to Sub-section (6A) of Section 11, inserted by a 2016 amendment (effective October 23, 2015), which explicitly states that the Supreme Court or High Court "shall... confine to the examination of the existence of an arbitration agreement." Although a 2019 amendment aimed to omit sub-section (6A), it has not yet been notified and thus remains in effect.

The court highlighted the legislative intent behind the 2015 amendment, particularly the phrase "not other issues," as interpreted by a seven-Judge bench in In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899. This interpretation limits the scope of inquiry at the arbitrator appointment stage to the prima facie existence of the arbitration agreement, excluding other issues, including the validity of the arbitration agreement itself.

Further, a three-judge bench in SBI General Insurance Co. Ltd. vs. Krish Spinning reinforced this limited scope, stating that the referral court's jurisdiction at the arbitrator appointment stage is confined to prima facie existence, and thus, previous observations allowing referral courts to "weed out ex-facie non-arbitrable and frivolous disputes" would no longer apply.

Based on these precedents, the court concluded that the High Court erred by dividing the appellant's claims into arbitrable and non-arbitrable parts. The correct approach, the court stated, would have been to appoint the arbitrator and allow the parties to raise the issue of non-arbitrability of specific claims before the arbitral tribunal, which would then consider and decide them.

Consequently, the appeal was allowed. The High Court's order excluding claims mentioned in para 48 (ii), (iii), and (iv) was set aside. The parties are now free to argue the non-arbitrability of these claims before the arbitral tribunal, which will decide the matter without being influenced by the High Court's earlier observations.

  Section 11, Arbitration and Conciliation Act - 1996  

  Arbitration and Conciliation Act, 1996