[Cites 7, Cited by 0]
Delhi High Court
Ms Shree Binayak Infra Developers Pvt ... vs Ms Legit Hospitality Pvt Ltd & Ors on 11 February, 2026
$~6
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 11.02.2026
+ ARB.P. 1868/2025
M/S SHREE BINAYAK INFRA DEVELOPERS PVT LTD
.....Petitioner
Through: Mr. Rahat Bansal, Advocate.
versus
MS LEGIT HOSPITALITY PVT LTD & ORS. ....Respondents
Through: Mr. Rishub Kapoor, Advocate.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
% JUDGEMENT (ORAL)
1. The present petition has been filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996, ["the Act"], seeking the
appointment of a Sole Arbitrator to adjudicate upon the disputes inter
se the parties arising out of the Lease Agreement dated 26.02.2022
["Agreement"].
2. The said Agreement contains an Arbitration Clause being
Clause 12, which reads as under:
"12. ARBITRATION
12.1 ANY dispute or differences arising between the parties
shall be resolved amicably at the first instance. Unresolved
dispute, controversies, contests, disputes, if any shall be
submitted to the arbitration of a sole arbitrator, to be
appointed by the Lessor. The arbitration shall be conducted
in accordance with provisions of the Arbitration and
Conciliation Act 1996 along with the Rules there under.
And any amendments thereto. The arbitration shall be
conducted in English. The decision /award of the arbitrator
shall be final/conclusive and binding on the Parties. The
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seat of the arbitrator shall be at New Delhi."
3. The material on record indicates that the Petitioner herein
invoked Arbitration in terms of Section 21 of the Act vide legal notice
dated 29.07.2025.
4. Thereafter, vide Order dated 10.11.2025, this Court issued
notice to the Respondent. Subsequently, by Order dated 19.12.2025,
the matter was referred to the Delhi High Court Mediation and
Conciliation Centre for exploring the possibility of settlement between
the parties.
5. This Court has heard the learned counsel for the parties and
with their able assistance has perused the documents on record.
6. This Court is cognizant of the scope of interference at the stage
of a Petition under Section 11 of the Act. The law with respect to the
scope and standard of judicial scrutiny under Section 11(6) of the Act
has been fairly well settled. A Coordinate bench of this Court, in
Pradhaan Air Express Pvt Ltd v. Air Works India Engineering Pvt
Ltd [2025 SCC OnLine Del 3022], has extensively dealt with the
scope of interference at the stage of Section 11. The Court held as
under:-
"9. The law with respect to the scope and standard of judicial
scrutiny under Section 11(6) of the 1996 Act has been fairly well
settled. The Supreme Court in the case of SBI General Insurance
Co. Ltd. v. Krish Spinning,1 while considering all earlier
pronouncements including the Constitutional Bench decision of
seven judges in the case of Interplay between Arbitration
Agreements under the Arbitration & Conciliation Act, 1996 &
the Indian Stamp Act, 1899, In re2 has held that scope of inquiry
at the stage of appointment of an Arbitrator is limited to the extent
of prima facie existence of the arbitration agreement and nothing
else.
10. It has unequivocally been held in paragraph no. 114 in the
case of SBI General Insurance Co. Ltd. that observations made
in Vidya Drolia v. Durga Trading Corpn.,3 and adopted in NTPC
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Ltd. v. SPML Infra Ltd.,4 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 not apply after the decision of Re :
Interplay. The abovenoted paragraph no. 114 in the case of SBI
General Insurance Co. Ltd. reads as under:--
" 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)."
11. Ex-facie frivolity and dishonesty are the issues, which have
been held to be within the scope of the Arbitral Tribunal which is
equally capable of deciding upon the appreciation of evidence
adduced by the parties. While considering the aforesaid
pronouncements of the Supreme Court, the Supreme Court in the
case of Goqii Technologies (P) Ltd. v. Sokrati Technologies (P)
Ltd.,5 however, has held that the referral Courts under Section 11
must not be misused by one party in order to force other parties to
the arbitration agreement to participate in a time-consuming and
costly arbitration process. Few instances have been delineated such
as, the adjudication of a non-existent and malafide claim through
arbitration. The Court, however, in order to balance the limited
scope of judicial interference of the referral Court with the interest
of the parties who might be constrained to participate in the
arbitration proceedings, has held that the Arbitral Tribunal
eventually may direct that the costs of the arbitration shall be borne
by the party which the Arbitral Tribunal finds to have abused the
process of law and caused unnecessary harassment to the other
parties to the arbitration.
12. It is thus seen that the Supreme Court has deferred the
adjudication of aspects relating to frivolous, non-existent
and malafide claims from the referral stage till the arbitration
proceedings eventually come to an end. The relevant extracts
of Goqii Technologies (P) Ltd. reads as under:--
"20. As observed in Krish Spg. [SBI General Insurance
Co. Ltd. v. Krish Spg., (2024) 12 SCC 1 : 2024 INSC
532], frivolity in litigation too is an aspect which the
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referral court should not decide at the stage of Section 11
as the arbitrator is equally, if not more, competent to
adjudicate the same.
21. Before we conclude, we must clarify that the limited
jurisdiction of the referral courts under Section 11 must
not be misused by parties in order to force other parties to
the arbitration agreement to participate in a time
consuming and costly arbitration process. This is possible
in instances, including but not limited to, where the
claimant canvasses the adjudication of non-existent and
mala fide claims through arbitration.
22. With a view to balance the limited scope of judicial
interference of the referral courts 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. Having said that, it is
clarified that the aforesaid is not to be construed as a
determination of the merits of the matter before us, which
the Arbitral Tribunal will rightfully be equipped to
determine."
13. In view of the aforesaid, the scope at the stage of Section
11 proceedings is akin to the eye of the needle test and is limited to
the extent of finding a prima facie existence of the arbitration
agreement and nothing beyond it. The jurisdictional contours of the
referral Court, as meticulously delineated under the 1996 Act and
further crystallised through a consistent line of authoritative
pronouncements by the Supreme Court, are unequivocally confined
to a prima facie examination of the existence of an arbitration
agreement. These boundaries are not merely procedural safeguards
but fundamental to upholding the autonomy of the arbitral process.
Any transgression beyond this limited judicial threshold would not
only contravene the legislative intent enshrined in Section 8 and
Section 11 of the 1996 Act but also risk undermining the sanctity
and efficiency of arbitration as a preferred mode of dispute
resolution. The referral Court must, therefore, exercise restraint and
refrain from venturing into the merits of the dispute or adjudicating
issues that fall squarely within the jurisdictional domain of the
arbitral tribunal. It is thus seen that the scope of enquiry at the
referral stage is conservative in nature. A similar view has also
been expressed by the Supreme Court in the case of Ajay
Madhusudan Patel v. Jyotrindra S. Patel6."
7. Learned counsel appearing on behalf of the parties submit that
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there is no consensus as to whether the mediation proceedings resulted
in a successful settlement. However, notwithstanding their respective
positions in that regard, both parties are ad idem that the disputes in
the present matter be referred to arbitration.
8. The value of the dispute/claims is submitted to be
approximately Rs. 15,00,000/-.
9. Accordingly, this Court requests Mr. Shyam Sharma,
Advocate (Mob. No. 9810153965) to enter upon the reference and
adjudicate the disputes between the parties.
10. The Registry is directed to send a copy of this order to the
learned Arbitrator through all permissible modes, including through e-
mail.
11. The learned Sole Arbitrator may proceed with the arbitration
proceedings, subject to furnishing to the parties the requisite
disclosures as required under Section 12(2) of the Act.
12. The learned Sole Arbitrator shall be entitled to a fee in
accordance with the Fourth Schedule of the Act or as may otherwise
be agreed to between the parties and the learned Sole Arbitrator.
13. The parties shall share the learned Sole Arbitrator's fee and
arbitral costs equally.
14. All rights and contentions of the parties in relation to the
claims/counter-claims are kept open, to be decided by the learned
Arbitrator on their merits, in accordance with law.
15. Needless to say, nothing in this order shall be construed as an
expression of opinion of this Court on the merits of the controversy
between the parties.
16. Accordingly, the present Petition, along with all pending
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BHATIA
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Application(s), if any, are disposed of in the aforesaid terms.
HARISH VAIDYANATHAN SHANKAR, J.
FEBRUARY 11, 2026/nd/kr/dj
