Calcutta High Court
Dilip Kumar Tarfdar vs Surojit Das And Anr on 17 September, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OD -2
ORDER SHEET
IN THE HIGH COURT AT CALCUTTA
ORIGINAL CIVIL DIVISION
ORIGINAL SIDE
AP/83/2025
DILIP KUMAR TARFDAR
VS
SUROJIT DAS AND ANR
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 17th September, 2025.
Appearance:
Mr. Krishnendu Sarkar, Adv.
Mr. AniruddhaPoddar, Adv.
Mr. Anuran Samanta, Adv.
Ms. Meghla Das, Adv.
.... for the petitioner
Mr. Anant Shaw, Adv.
Mr. MainakGanguly, Adv.
Ms. ArunimaLala, Adv.
Ms. Mandeep Kaur, Adv.
Mr. Jagatjyoti Nag, Adv.
...for the respondent
The Court:This is an application under Section 11 of the Arbitration
and Conciliation Act, 1996. The petitioner submits that disputes arose out of a
partnership deed dated January 11, 2022. The said partnership deed contains
an arbitration clause. Clause 13 thereof provides that all disputes and
differences arising out of an agreement shall be referred to arbitration in
accordance with the provisions of the Indian Arbitration and Conciliation Act,
1996.
Mr. Shaw, learned advocate appearing for the respondent
vehemently opposes the prayer for reference on the ground that the agreement
was an illegal contract being violative of Section 23 of the Indian Contract Act,
1872. He submits that Rules 2007 and 2008 of the consolidated Rules made
under Section 86 of the Bengal Excise Act, 1909 prohibits transfer of license.
Incorporation of partners in respect of any business in which the excise license
to run a foreign liquorshop is in the name of one person, amounts to a deemed
transfer.Such transfer is prohibited by the law. On such score, Mr. Shaw relies
on a decision of the Division Bench of the High Court in Gautam Hazra vs.
Pinaki Hazra reported in 2005(3) CHN 364. Further contention of Mr. Shaw
is that in VidyaDrolia v. Durga Trading Corpn., (2021) 2 SCC 1, para 139
: (2021) 1 SCC (Civ) 549, the Hon'ble Apex Court held that validity of an
agreement which contained the arbitration clause would be a relevant factor for
determining whether the dispute should be referred to arbitration or not.
Heard the rival contentions of the parties.Admittedly, there is a
partnership agreement which contains an arbitration clause. Whether the
agreement is invalid,is a matter which is within the domain of the learned
arbitrator.The learned arbitrator can rule on his own jurisdiction. The
respondent can raise the issue by filing an appropriate application under
Section 16 of the Arbitration and Conciliation Act, 1996. The issues of
jurisdictionand arbitrability shall be decided by the learned Arbitrator. When
there is an arbitration clause, the presumption is in favour of the one-stop
forum for resolution of disputes.
By a letter dated September 30, 2024, the petitioner had accepted
that the partnership was at a loss and decided to dissolve the said
partnership.It was alleged that the other partners neither invested in the
business nor discharged their reciprocal obligations.
The fact that there was an agreement between the parties, is not in
dispute. The deed contains an arbitration clause. The specific case of the
respondent is that the arbitration clause emanatesfrom a void agreement.
In the decision of Goqii Technologies Private Limited v. Sokrati
Technologies Private Limited reported in (2025) 2 SCC 192, the Hon'ble
Apex Court was of the view that the scope of enquiry under Section 11 of the
Arbitration and Conciliation Act, 1996 was limited to ascertaining only a, prima
facie, existence of the arbitration agreement. The relevant portions of the
decision is quoted below:-
"17. Having heard the learned counsel appearing for the parties
and having gone through the materials on record, the short question
that falls for our consideration is whether the High Court committed
any error in dismissing the appellant's application under Section 11 of
the 1996 Act.
18. In a recent pronouncement, relying on the Constitution Bench
judgment of this Court in Interplay Between Arbitration Agreement
under A & C Act, 1996 & Stamp Act, 1899, In re, this Court in SBI
General Insurance Co. Ltd. v. Krish Spg., summarized the law on the
scope and standard of judicial scrutiny that an application under
Section 11(6) of the 1996 Act can be subjected to. The relevant parts
are produced hereinbelow: (KrishSpg. Case, SCC paras 117 & 128)
"117. In view of the observations made by this Court
inInterplay Between Arbitration Agreement under A & C Act, 1996
& Stamp Act, 1899, In re, 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 and adopted in NTPC Ltd. v.
SPML Infra Ltd. 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 Interplay Between Arbitration Agreement under A & C
Act, 1996 & Stamp Act, 1899, In re.
* * *
128. We are also of the view that ex-facie frivolity and
dishonesty in litigation is an aspect which the arbitral tribunal is
equally, if not more, capable to decide upon the appreciation of the
evidence adduced by the parties. We say so because the arbitral
tribunal has the benefit of going through all the relevant evidence
and pleadings in much more detail than the referral court. If the
referral court is able to see the frivolity in the litigation on the
basis of bare minimum pleadings, then it would be incorrect to
doubt that the arbitral tribunal would not be able to arrive at the
same inference, most likely in the first few hearings itself, within
the benefit of extensive pleadings and evidentiary material."
In the decision of Interplay Between Arbitration Agreements
under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, In
Re reported in (2024) 6 SCC 1, the Hon'ble Supreme Court discussed the
scope of interference by a referral court and held that the referral court was
entitled to cause a, prima facie, examination with regard to existence of an
arbitration clause..The relevant paragraphs of Interplay (supra) are as
follows:-
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
16 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. AkshOptifibre Ltd. [Shin-Etsu Chemical
Co. Ltd. v. AkshOptifibre Ltd., (2005) 7 SCC 234]"
Reference is made to the decision of the Hon'ble Supreme Court in
Aslam Ismail Khan Deshmukh vs ASAP Fluids Private Limited and
Another reported in (2025) 1 SCC 502. The relevant part is quoted below:-
"50. As evident from the aforesaid discussion and especially in
light of the observations made in KrishSpg. [SBI General Insurance
Co. Ltd. v. KrishSpg., (2024) 12 SCC 1 : 2024 SCC OnLine SC
1754] , this Court cannot conduct an intricate evidentiary enquiry
into the question of when the cause of action can be said to have
arisen between the parties and whether the claim raised by the
petitioner is time-barred. This has to be strictly left for the
determination by the Arbitral Tribunal. All other submissions
made by the parties regarding the entitlement of the petitioner to
4,00,000 and 2,00,010 equity shares in Respondent 1 company
are concerned with the merits of the dispute which squarely falls
within the domain of the Arbitral Tribunal.
51. It is now well-settled law that, at the stage of Section 11
application, the referral Courts need only to examine whether the
arbitration agreement exists -- nothing more, nothing less. This
approach upholds the intention of the parties, at the time of
entering into the agreement, to refer all disputes arising between
themselves to arbitration. However, some parties might take undue
advantage of such a limited scope of judicial interference of the
referral Courts and force other parties to the agreement into
participating in a time-consuming and costly arbitration process.
This is especially possible in instances, including but not limited
to, where the claimant canvasses either ex facie time-barred claims
or claims which have been discharged through "accord and
satisfaction", or cases where the impleadment of a non-signatory to
the arbitration agreement is sought, etc.
52. In order to balance such a limited scope of judicial interference
with the interests of the parties who might be constrained to
participate in the arbitration proceedings, the Arbitral Tribunal
may direct that the costs of the arbitration shall be borne by the
party which the Tribunal ultimately finds to have abused the
process of law and caused unnecessary harassment to the other
party to the arbitration."
In my opinion, all objections can be raised before the learned
arbitrator as the referral Court is not the appropriate Court to decide the
validity of the agreement at this stage, when the respondent no. 1 has himself
referred to the same and decided to dissolve the partnership. Secondly, the
scope of the referral Court is only to ascertain the existence of an arbitration
agreement. Section 116A which was inserted by the amendment 2016,
although proposed to be omitted by the amending Act of 2019 has not yet been
notified. Accordingly, the said provision remains in the statute book. It provides
that the High Court shall notwithstanding any judgment, decree and order of
the Court, confine its examination to the existence of the arbitration
agreement. The Hon'ble Apex Court has also held that the referral Court should
not travel into the area of evidence but, only satisfy itself about the existence of
an arbitration clause. The decision in Gautam Hazra (supra) was rendered in a
case where a plaint was rejected by the learned Trial Judge on the ground that
the suit was barred by law. Such decision was upheld on the ground that
Sections 207 and 208 prohibited deemed transfer and only the Collector could
induct partners into the business. This issue was decided on the basis of the
provision of Order 7 Rule 11 of the Code ofCivil Procedure. The Trial Court has
the power to reject a plaint on such ground. Here, therespondent canraise the
point on the invalidity of the deed of partnership before the learned arbitrator
at the very initial stage, by filing an appropriate application.
All other issues raised by Mr. Shaw shall also be open for
adjudication by the learned arbitrator. The decision of Vidya Drolia (Supra) has
now been clarified by subsequent decisions of the Hon'ble Apex Court. The
Apex Court has also clarified the distinction between examination by a Court
under Sections 8 and 11 of the said Act. While Section 8 requires the Court to
make an enquiry with regard to the validity of an arbitration agreement. The
enquiry under Section 11 will be in respect of existence of an arbitration
agreement. The sections are clear and distinct.
Moreover, if the learned Arbitrator holds that the respondent was
unnecessarily dragged into a litigation, then costs may be imposed on the
petitioner.
Under such circumstances, this application is allowed by appointing -
Smt. Chandreyi Alam, learned Advocate, Bar Association, Room No. 11, as the
sole arbitrator, to arbitrate upon the dispute between the parties.
The learned Arbitrator shall comply with the provisions of Section 12
of the Arbitration and Conciliation Act, 1996. The learned Arbitrator shall be at
liberty to fix her remuneration as per the Schedule of the Arbitration and
Conciliation Act, 1996.
(SHAMPA SARKAR, J.)
TR/
