Office for Alternative Architecture Vs. Ircon Infrastructure and Services Ltd.
[Civil Appeal No.________ of 2024 arising out of SLP (C) No. 28104/2023]
Manoj Misra, J.
1. Leave granted.
2. This appeal impugns the judgment and order of the High Court of Delhi at New Delhi1 dated 06.09.2023 whereby, while appointing an arbitral tribunal in exercise of power under Section 112 of the Arbitration and Conciliation Act, 19963, the High Court excluded certain claims, as stated in paras 48 (ii), (iii) and (iv) of the claim petition, by holding them to be non-arbitrable /excepted matters in view of clause 50 and 50.2 of the agreement.
3. In a nutshell, the case of the appellant, inter alia, is that while exercising power under Section 11 of the 1996 Act, the Court has to only examine whether the arbitration agreement exists or not and if it exists, an Arbitrator is to be appointed who, thereafter, would decide whether the claims fall within the excepted category or not. It is thus prayed that the impugned order to the extent it excludes certain claims be set aside by leaving it open to the parties to raise all pleas before the arbitral tribunal.
4. Per contra, the learned counsel for the respondent submitted that the High Court is empowered to exclude non-arbitrable claims in light of the decision of this Court in "Emaar India Limited vs. Tarun Aggarwal Projects LLP and Anr.4".
5. We have considered the rival submissions and have perused the materials on record.
6. The short question that falls for our consideration is whether while exercising power under Section 11 of the 1996 Act, the Court has to confine its consideration as to the existence of an arbitration agreement between the parties. If so, whether it would be permissible, while exercising jurisdiction under Section 11, to hold that some of the claims raised are non-arbitrable or fall within excepted category.
7. Sub-section (6A) of Section 11, which was inserted by Act 3 of 2016, with effect from 23.10.2015, makes it clear that while considering an application under sub-section (4) or sub-section (5) or sub-section (6), the Supreme Court or the High Court, as the case may be, shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.
8. Act 33 of 2019 omitted sub-section (6A) but the amending Act has not been notified thus far. In consequence, sub-section (6A) of Section 11 of the 1996 Act remains in the statute book.
9. The statement of objects and reasons of the 2015 amendment with reference to insertion of sub-section (6A) in Section 11 of the 1996 Act, reads thus:
"(iii) an application for appointment of an Arbitrator shall be disposed of by the High Court or the Supreme Court, as the case may be, as expeditiously as possible and an endeavour should be made to dispose of the matter within a period of 60 days.
(iv) to provide that while considering any application for appointment of Arbitrator, the High Court or the Supreme Court shall examine the existence of a prima facie arbitration agreement and not other issues."
10. The significance of the use of the expression "not other issues" in the statement of objects and reasons of the 2015 amendment was noticed by a seven-Judge bench of this Court in In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 18995, and it was observed:
"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 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."
11. Relying on the above observations made by this Court in In Re: Interplay (supra), a three-judge bench of this Court in "SBI General Insurance Co. Ltd. vs. Krish Spinning6" observed:
"114. 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 vs. Durga Trading Corporation 7 (supra) and adopted in 'NTPC vs. SPML Infra Limited 8 (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)".
Emphasis Supplied
12. As the above decision has been rendered by a three-Judge bench of this Court after considering the seven-Judge bench decision of this Court in In Re: Interplay (supra), we are of the view that the respondent cannot profit from certain observations made by a two-Judge bench of this Court in Emaar (supra).
In our view, therefore, the High Court fell in error in bisecting the claim of the appellant into two parts, one arbitrable and the other not arbitrable, when it found arbitration agreement to be there for settlement of disputes between the parties. The correct course for the High Court was to leave it open to the party to raise the issue of non-arbitrability of certain claims before the arbitral tribunal, which, if raised, could be considered and decided by it.
13. The appeal is, therefore, allowed. The order of the High Court to the extent it excludes claims mentioned in para 48 (ii), (iii) and (iv), as referred to in paragraph 8 of the impugned order, is set aside. The parties are, however, at liberty to take the plea of non-arbitrability of certain claims before the arbitral tribunal, which shall decide the same without being prejudice by any observations made in the order of the High Court. There is no order as to costs.
....................J. (Pamidighantam Sri Narasimha)
....................J. (Manoj Misra)
New Delhi;
May 13, 2025
