TMI Blog2020 (12) TMI 1227X X X X Extracts X X X X X X X X Extracts X X X X ..... he arbitrator would be bound by the provisions, including provisions which enure and protect the tenants - the landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration. However, 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 non-arbitrability? - HELD THAT:- 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 - 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 non-arbitrability post the award in terms of Sub-clauses (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Application disposed off. - CIVIL APPEAL NO. 2402 OF 2019, 11877 OF 2020, SLP (CIVIL) NOS. 5605-5606 OF 2019 - - - Dated:- 14-12-2020 - N.V. Ramana, Sanjiv Khanna, Krishna Murari, JJ Authored By : Sanjiv Khanna, N.V. Ramana SANJIV KHANNA, J. 1. This judgment decides the reference to three Judges made vide order dated 28th February, 2019 in Civil Appeal No. 2402 of 2019 titled Vidya Drolia and Ors. v. Durga Trading Corporation, as it doubts the legal ratio expressed in Himangni Enterprises v. Kamaljeet Singh Ahluwalia (2017) 10 SCC 706 that landlord-tenant disputes governed by the provisions of the Transfer of Property Act, 1882, are not arbitrable as this would be contrary to public policy. 2. A deeper consideration of the order of reference reveals that the issues required to be answered relate to two aspects that are distinct and yet interconnected, namely: (i) meaning of non-arbitrability and when the subject matter of the dispute is not capable of being resolved through arbitration; and (ii) the conundrum - who decides - whether the court at the reference stage or the arbitral tribunal in the arbitration proceedings would decide the question of non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able by the civil court and not by the arbitrator. The exemption from the applicability of the Rent Act could be withdrawn and thereupon the rights would be governed by the rent control legislation. 5. In Vidya Drolia, another division bench referring to Section 11(6-A) has observed that the referral stage requirement is to only examine 'existence of an arbitration agreement' and not validity of the arbitration agreement. 246th Report of the Law Commission of India had suggested twin examination whether the agreement 'exists' or is 'null and void', albeit the Section 11(6-A), as enacted, requires 'existence of an arbitration agreement', and the prerequisite that the arbitration agreement should not be 'null and void' was deliberately omitted. The wording of Section 11(6-A) was contrasted with Section 16(1) to draw distinction between 'validity of an arbitration agreement' and 'existence of an arbitration agreement'. Reference was made to observations of Kurian Joseph, J. in Duro Felguera, S.A. v. Gangavaram Port Limited (2017) 9 SCC 729, to the effect that the scope of Section 11(6-A) is limited, only to see whether an arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian Trusts Act, 1882 were arbitrable. The disputes under the Trusts Act were held to be non-arbitrable by necessary implication, as the Trusts Act had conferred specific powers on the principal judge of the civil court, which powers an arbitrator could not exercise. The judgment in Vimal Kishor Shah was followed by another Division Bench in Emaar MGF Land Limited v. Aftab Singh (2019) 12 SCC 751, a case relating to the Consumer Protection Act, 1986. Reasoning that the exemption from rent control legislation can be withdrawn and thereupon Arbitration Act would not apply, it was observed, was not a valid justification and ground to hold that the subject matter was not arbitrable. 6. Learned Counsel for the parties have primarily relied upon the reasoning given in Himangni Enterprises and Vidya Drolia and have referred to other case law which we would subsequently examine. To avoid prolixity and repetition, we are not reproducing the respective contentions and arguments, as the same would be dealt with and appreciated during the course of our reasoning. However, we acknowledge that the oral submissions and compilations have been of immense help. Similarly, scholarly writings in b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed to go forward efficaciously or is obstructed by court intervention. At Stage 1, a party opposing arbitration may raise any of a series of legal issues requiring court, rather than arbitrator, decision. These may include any or all of the following claims: (1) the container contract is invalid (for a reason that would not directly invalidate the arbitration clause); (2) no arbitration agreement came into existence between the parties; (3) an existing arbitration agreement is either formally invalid (for example, not in writing) or materially invalid (for example, violative of mandatory law); (4) a disputed issue is not within the scope of the arbitration agreement; (5) mandatory law prohibits a disputed issue, though within the scope of the parties' arbitration agreement, to be arbitrated (a special type of material invalidity respecting a specific issue fraught with public policy concerns, such as (formerly) antitrust or securities fraud); (6) some precondition for permissible arbitration has not been met (for example, a time-limit on initiating arbitration); (7) the party seeking arbitration has waived its right to arbitrate or is estopped from claiming that right. (#St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration Clause part of the contract. 11. The term 'agreement' is not defined in the Arbitration Act, albeit it is defined in Section 10 of the Indian Contract Act, 1872 (for short, the 'Contract Act'),2 as contracts made by free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not thereby expressly declared to be void. Section 10 of the Contract Act also stipulates that aforesaid requirements shall not affect any law in force in India (and not expressly repealed) by which a contract is required to be made in writing, in presence of witnesses or any law relating to registration of documents. Thus, an arbitration agreement should satisfy the mandate of Section 10 of the Contract Act, in addition to satisfying other requirements stipulated in the Section 7 of the Arbitration Act. Sections 12 to 18 of the Contract Act state when a person can be said to be of a sound mind for the purpose of contracting and define the expressions 'consent', 'free consent', 'coercion', 'undue influence' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the term 'arbitration agreement in writing' would include any agreement by exchange of letters, telegrams, electronic mails or communications which provide a record of the agreement or exchange of statements of claim and defence in which one party claims the existence of the agreement and the other party does not deny it. Sub-section (5) to Section 7 states that reference in a contract to a document containing an arbitration Clause would constitute a valid arbitration agreement if the contract is in writing and reference is made to the arbitration Clause that forms a part of the contract. 14. Questions as to the existence of an arbitration agreement also arise when a party opposing the reference raises plea of novation of contract by entering into a new contract in substitution of the original or 'accord and satisfaction' by acceptance of modified obligations in discharge of the contract by performance or simple termination by express or implied consent. Similar plea of discharge can be raised opposing an application for reference on the ground that the claim is long barred and dead or there are no outstanding disputes as the parties have accepted part performanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and the other by the court or judicial authorities. This would defeat the entire purpose and inevitably delay the proceedings and increase cost of litigation, cause harassment and on occasions give rise to conflicting judgments and orders by two different fora. Cause of action in relation to the subject matter relates to the scope of the arbitration agreement and whether the dispute can be resolved by arbitration. Second mandate relating to common parties exposits the inherent limitation of the arbitration process which is consensual and mutual, an aspect we would subsequently examine. 17. A two Judges' Bench in Booz Allen Hamilton Inc., while interpreting the dictum in Sukanya Holdings (P) Ltd., had drawn a distinction between ambit and scope of judicial inquiry while deciding an application Under Section 8(1) of the Arbitration Act which is filed in pending civil suit/judicial proceedings and an application for reference of the dispute to arbitration Under Section 11 of the Arbitration Act. In Booz Allen Hamilton Inc. it was observed: 32. The nature and scope of issues arising for consideration in an application Under Section 11 of the Act for appointment of arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial authority has to decide that question and his competence to decide cannot be questioned. If it is held that the Chief Justice has no right or duty to decide the question or cannot decide the question, it will lead to an anomalous situation in that a judicial authority Under Section 8 can decide, but not a Chief Justice Under Section 11, though the nature of the objection is the same and the consequence of accepting the objection in one case and rejecting it in the other, is also the same, namely, sending the parties to arbitration. The interpretation of Section 11 that we have adopted would not give room for such an anomaly. We are clearly bound by the dictum of the Constitutional Bench judgment in Patel Engineering Ltd. that the scope and ambit of court's jurisdiction Under Section 8 or 11 of the Arbitration Act is similar. An application Under Section 11 of the Arbitration Act need not set out in detail the disputes or the claims and may briefly refer to the subject matter or broad contours of the dispute. However, where judicial proceedings are initiated and pending, specific details of the claims and disputes are normally pleaded and, therefore, the court or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, Under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes. xx xx xx 37. It may be noticed that the cases referred to above relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he property and the rights of the parties not merely amongst themselves but also against all the persons at any time claiming an interest in that property. Rights in personam are considered to be amenable to arbitration and disputes regarding rights in rem are required to be adjudicated by the courts and public tribunals. The latter actions are unsuitable for private arbitration. Disputes relating to subordinate rights in personam arising from rights in rem are considered to be arbitrable. Paragraph 36 of the judgment in Booz Allen Hamilton Inc. refers to certain examples of non-arbitrable disputes and reads: 36. The well-recognised examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offenses; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined as parties whether they are parties to the mortgage or not. The object of the provisions is to avoid multiplicity of suits/proceedings and to enable all the interested persons to raise their defences and claims, which are to be taken note of while dealing with the claim in the mortgage suit. By passing a preliminary decree or final decree, the court adjudicates, adjusts and safeguards the interests of not only the mortgager or mortgagee but also puisne/mesne mortgagees, persons entitled to the equity of redemption, persons having an interest in the mortgaged property, auction-purchasers and persons in possession, which an arbitral tribunal cannot do. Therefore, a suit for foreclosure or redemption of mortgage property can be dealt with by a public forum and not by a private forum. 24. D.Y. Chandrachud, J. in A. Ayyasamy v. A. Paramasivam and Ors. (2016) 10 SCC 386 referring to the dictum in Booz Allen Hamilton Inc., has made two important comments: 35...This Court held that this class of actions operates in rem, which is a right exercisable against the world at large as contrasted with a right in personam which is an interest protected against specified individuals. Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Act. Under Section 53, no trustee may, without the permission of a principal Civil Court of original jurisdiction, buy or become mortgagee or lessee of the trust property or any part thereof. Here again, such permission can only be given by an arm of the State, namely, the principal Civil Court of original jurisdiction. Under Section 74 of the Indian Trusts Act, under certain circumstances, a beneficiary may apply by petition to a principal Civil Court of original jurisdiction for the appointment of a trustee or a new trustee, and the Court may appoint such trustee accordingly. Here again, such an appointment cannot possibly be by a consensual adjudicator. It can only be done by a petition to a principal Civil Court of original jurisdiction. Also, it is important to note that it is not any civil court that has jurisdiction, but only one designated court, namely, a principal Civil Court of original jurisdiction. All this goes to show that by necessary implication, disputes arising under the Indian Trusts Act cannot possibly be referred to arbitration. 26. In Emaar MGF Land Limited, the Division Bench referred to the object and the purpose behind the Consumer Protection Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt had held that an arbitrator can grant specific performance as there is no prohibition in the Specific Relief Act, 1963. This decision on the question of arbitrability has observed, and in our humble opinion rightly, as under: 34. In our opinion, the view taken by the Punjab, Bombay and Calcutta High Courts is the correct one and the view taken by the Delhi High Court is not correct. We are of the view that the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the parties to agree--with a view to shorten litigation in regular courts--to refer the issues relating to specific performance to arbitration. There is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of a contract relating to immovable property cannot be referred to arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or Section 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immovable property. 35. It is stated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder or decree] declared that it had ceased or should cease; and that anything to which it declares any person to be so entitled was the property of that person at the time from which such judgment, [order or decree] declares that it had been or should be his property. A judgment in rem determines the status of a person or thing as distinct from the particular interest in it of a party to the litigation; and such a judgment is conclusive evidence for and against all persons whether parties, privies or strangers of the matter actually decided. Such a judgment settles the destiny of the res itself and binds all persons claiming an interest in the property inconsistent with the judgment even though pronounced in their absence.6 By contrast, a judgment in personam, although it may concern a res, merely determines the rights of the litigants inter se to the res .7 Distinction between judgments in rem and judgments in personam turns on their power as res judicata,8 i.e. judgment in rem would operate as res judicata against the world, and judgment in personam would operate as res judicata only against the parties in dispute. Use of expressions rights in rem and rights in pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitration are affected or the collective resolution of the disputes by including non-parties is required. Arbitration agreement as an alternative to public fora should not be enforced when it is futile, ineffective, and would be a no result exercise.9 32. Sovereign functions of the State being inalienable and non-delegable are non-arbitrable as the State alone has the exclusive right and duty to perform such functions.10 For example, it is generally accepted that monopoly rights can only be granted by the State. Correctness and validity of the State or sovereign functions cannot be made a direct subject matter of a private adjudicatory process. Sovereign functions for the purpose of Arbitration Act would extend to exercise of executive power in different fields including commerce and economic, legislation in all forms, taxation, eminent domain and police powers which includes maintenance of law and order, internal security, grant of pardon etc., as distinguished from commercial activities, economic adventures and welfare activities.11 Similarly, decisions and adjudicatory functions of the State that have public interest element like the legitimacy of marriage, citizenship, windi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it. Dhulabhai's case is not directly applicable as it relates to exclusion of jurisdiction of civil courts, albeit we respectfully agree with the Order of Reference that the condition No. 2 is apposite while examining the question of non-arbitrability. Implied legislative intention to exclude arbitration can be seen if it appears that the statute creates a special right or a liability and provides for determination of the right and liability to be dealt with by the specified courts or the tribunals specially constituted in that behalf and further lays down that all questions about the said right and liability shall be determined by the court or tribunals so empowered and vested with exclusive jurisdiction. Therefore, mere creation of a specific forum as a substitute for civil court or specifying the civil court, may not be enough to accept the inference of implicit non-arbitrability. Conferment of jurisdiction on a specific court or creation of a public forum though eminently significant, may not be the decisive test to answer and decide whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the mandatory law and arbitration as an alternative. Conversely and in a given case when there is repugnancy and inconsistency, the right of choice and election to arbitrate is denied. This requires examining the text of the statute, the legislative history, and 'inherent conflict' between arbitration and the statute's underlying purpose 12 with reference to the nature and type of special rights conferred and power and authority given to the courts or public forum to effectuate and enforce these rights and the orders passed. When arbitration cannot enforce and apply such rights or the award cannot be implemented and enforced in the manner as provided and mandated by law, the right of election to choose arbitration in preference to the courts or public forum is either completely denied or could be curtailed. In essence, it is necessary to examine if the statute creates a special right or liability and provides for the determination of each right or liability by the specified court or the public forum so constituted, and whether the remedies beyond the ordinary domain of the civil courts are prescribed. When the answer is affirmative, arbitration in the absence of sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d clarify the legal position as the decision in HDFC Bank Ltd. has been referred to in M.D. Frozen Foods Exports Private Limited, but not examined in light of the legal principles relating to non-arbitrability. Decision in HDFC Bank Ltd. holds that only actions in rem are non-arbitrable, which as elucidated above is the correct legal position. However, non-arbitrability may arise in case the implicit prohibition in the statute, conferring and creating special rights to be adjudicated by the courts/public fora, which right including enforcement of order/provisions cannot be enforced and applied in case of arbitration. To hold that the claims of banks and financial institutions covered under the DRT Act are arbitrable would deprive and deny these institutions of the specific rights including the modes of recovery specified in the DRT Act. Therefore, the claims covered by the DRT Act are non-arbitrable as there is a prohibition against waiver of jurisdiction of the DRT by necessary implication. The legislation has overwritten the contractual right to arbitration. 37. In Natraj Studios (P) Ltd., a case under the Arbitration Act, 1940, it was observed that on broader consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself of the entire contract which contains the arbitration Clause or the validity of the arbitration Clause itself...Such categories of non-arbitrable subjects are carved out by the courts, keeping in mind the principle of common law that certain disputes which are of public nature, etc. are not capable of adjudication and settlement by arbitration and for resolution of such disputes, courts i.e. public fora, are better suited than a private forum of arbitration... D.Y. Chandrachud, J. in his concurring judgment unclasped the mandatory nature of Section 8 of the Arbitration Act to observe that allegations of fraud can be made a subject matter of arbitration by relying on Russell on Arbitration, Redfer Hunter on International Arbitration and Gary B. Born in International Commercial Arbitration. Reliance was placed on the principle of separation and legal effect of the doctrine of competence-competence, to observe: 13. Once an application in due compliance with Section 8 of the Arbitration Act is filed, the approach of the civil court s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity. Whether a subject matter or a dispute should be held as non-arbitrable on public policy is vexed and not free from difficulty as reflected in the strong opinions expressed in the judgments. Indeed, under the Arbitration Act, 1940, the case law in view of the statutory discretion Under Sub-section (4) to Sections 20 and 34 clearly supports and accepts the role and relevance of public policy. Legal position under the Arbitration Act as examined under the heading 'Who decides non-arbitrability', however, is different. 39. We begin by examining Sub-clauses (i) and (ii) of Clause (b) to Sub-section (2) to Section 34, which read as under: 34. Application for setting aside arbitral award.- xx xx xx (2) An arbitral award may be set aside by the Court only if- (a)... (b) the Court finds that-- (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in fore, or (ii) the arbitral award is in conflict with the public policy of India. Explanation 1.--For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e merits of the case do not imply that the right to arbitrate is taken away. Mandatory law may require a particular substantive Rule to be applied, but this would not preclude arbitration. Implied non-arbitrability requires prohibition against waiver of jurisdiction, which happens when a statute gives special rights or obligations and creates or stipulates an exclusive forum for adjudication and enforcement. An arbitrator, like the court, is equally bound by the public policy behind the statute while examining the claim on merits. The public policy in case of non-arbitrability would relate to conferment of exclusive jurisdiction on the court or the special forum set up by law for decision making. Non-arbitrability question cannot be answered by examining whether the statute has a public policy objective which invariably every statue would have. There is a general presumption in favour of arbitrability, which is not excluded simply because the dispute is permeated by applicability of mandatory law. Violation of public policy by the arbitrator could well result in setting aside the award on the ground of failure to follow the fundamental policy of law in India, but not on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot form the basis to overwrite and nullify the arbitration agreement. This would be contrary to and defeat the legislative intent reflected in the public policy objective behind the Arbitration Act. Arbitration has considerable advantages as it gives freedom to the parties to choose an arbitrator of their choice, and it is informal, flexible and quick. Simplicity, informality and expedition are hallmarks of arbitration. Arbitrators are required to be impartial and independent, adhere to natural justice, and follow a fair and just procedure. Arbitrators are normally experts in the subject and perform their tasks by referring to facts, evidence, and relevant case law. Complexity is not sufficient to ward off arbitration. In terms of the mandate of Section 89 of the Code of Civil Procedure and the object and purpose behind the Arbitration Act and the mandatory language of Sections 8 and 11, the mutually agreed arbitration clauses must be enforced. The language of Sections 8 and 11 of the Arbitration Act are peremptory in nature. Arbitration Act has been enacted to promote arbitration as a transparent, fair, and just alternative to court adjudication. Public policy is to encourage and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined the law on invocation of 'fraud exception' in great detail and holds that N. Radhakrishnan as a precedent has no legs to stand on. We respectfully concur with the said view and also the observations made in paragraph 14 of the judgment in Avitel Post Studioz Limited, which quotes observations in Rashid Raza v. Sadaf Akhthar (2019) 8 SCC 710: 4. The principles of law laid down in this appeal make a distinction between serious allegations of forgery/fabrication in support of the plea of fraud as opposed to simple allegations . Two working tests laid down in para 25 are: (1) does this plea permeate the entire contract and above all, the agreement of arbitration, rendering it void, or (2) whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain. to observe in Avitel Post Studioz Limited: it is clear that serious allegations of fraud arise only if either of the two tests laid down are satisfied and not otherwise. The first test is satisfied only when it can be said that the arbitration Clause or agreement itself cannot be said to exist in a clear case in which the court finds that the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le; and (4) when the subject-matter of the dispute is expressly or by necessary implication non-arbitrable 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 non-arbitrable. Only when the answer is affirmative that the subject matter of the dispute would be non-arbitrable. However, the aforesaid principles have to be applied with care and caution as observed in Olympus Superstructures Pvt. Ltd.: 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 fats 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to inalienable and sovereign functions of the State. The provisions of the Transfer of Property Act do not expressly or by necessary implication bar arbitration. Transfer of Property Act, like all other Acts, has a public purpose, that is, to regulate landlord-tenant relationships and the arbitrator would be bound by the provisions, including provisions which enure and protect the tenants. 49. In view of the aforesaid, we overrule the ratio laid down in Himangni Enterprises and hold that landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration. However, 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 non-arbitrability? 50. Lord Mustill's well-known comparison of the relationship between courts and arbitrators to a relay race, reads: Ideally, the handling of arbitrable disputes should resemble a relay race. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of termination, novation, frustration and 'accord and satisfaction' when contested on facts, was determined and decided at the first or at the reference stage by the courts. The principle being that the court should be satisfied about the existence of a valid arbitration agreement and that the disputes have arisen with regard to the subject matter of the arbitration agreement. At this stage, the court would be, however, not concerned with the merits or sustainability of the disputes. Despite best efforts to contain obstructive tactics, adjudication and final decision of non-arbitrability issues at the reference stage would invariably stop, derail and thwart the proceedings in the courts for years. 54. The Arbitration Act based upon the UNCITRAL Model Law introduced an entirely new regimen with the objective to promote arbitration in commercial and economic matters as an alternative dispute resolution mechanism that is fair, responsive and efficient to contemporary requirements. One of the primary objectives of the Arbitration Act is to reduce and minimize the supervisory role of courts. Accordingly, the statutory powers of the arbitral tribunal to deal with and decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 11 has undergone another amendment vide Act 33 of 2019 with effect from 9th August, 2019. Section 8, pre and post Act 3 of 2016, read as under: SECTION 8 (before Act 3 of 2016) SECTION 8 (post Act 3 of 2016) 8. Power to refer parties to arbitration where there is an arbitration agreement.-- 8. 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 so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for appointing the arbitrator or arbitrators. (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. (3) Failing any agreement referred to in Sub-section (2), in an arbitration with three arbitrations, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (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. (3-A) The Supreme Court and the High Court shall have the power to designate, arbitral institutions, from time to time, which have been graded by the Council Under Section 43-I, for the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... request of a party, by the Chief Justice or any person or institution designated by him. 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. 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 on an application of the party in accordance with the provisions contained in Sub-section (4)]. (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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-B) 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 Chief Justice or the person or institution designated by him is final. (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. (7) [* * *] (8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to-- (a) any qualifications required of the arbitrator by the agreement of the parties; and (b) other considerations as are likely to secure the appointment of any independent and impartial arbitrator. (8) The Supreme Court or, as the case may be, the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (10) [* * *] (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, the Chief Justice or his designate to whom the request has been first made under the relevant Sub-section shall alone be competent to decide on the request. (11) Where more than one request has been made under Sub-section (4) or Sub-section (5) or Sub-section (6) to 3 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 (11) Where more than one request has been made under Sub-section (4) or Sub-section (5) or Sub-section (6) to different arbitral institutions, the arbitral institution to which the request has been first made under the relevant Sub-section shall be competent to appoint. (12) (a) Where the matters referred to in Sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to Chief Justice in those Sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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. (14) The arbitral institution shall determine the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal subject to the rates specified in the Fourth Schedule. xx xx xx Section 16 of the Arbitration Act reads as under: 16. Competence of arbitral tribunal to Rule on its jurisdiction.--(1) The arbitral tribunal may Rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,-- (a) an arbitration Clause which forms part of a contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that-- (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. Explanation 1--For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty to that agreement and the subsistence of an arbitrable dispute require to be decided and the decision on these aspects is a prelude to the Chief Justice considering whether the requirements of Sub-section (4), Sub-section (5) or Sub-section (6) of Section 11 are satisfied when approached with the request for appointment of an arbitrator...... 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. It may not be possible at that stage, to decide whether a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after had enumerated them as under: 22.1 The issues (first category) which the Chief Justice/his designate will have to decide are: (a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied Under Section 11 of the Act, is a party to such an agreement. 22.2 The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are: (a) Whether the claim is a dead (long-barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. 22.3 The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are: (i) Whether a claim made falls within the arbitration Clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration. 23. It is clear from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitral tribunal to decide the same. Where the Chief Justice or his designate examines the issue and decides it, the arbitral tribunal cannot re-examine the issue. The Chief Justice or his designate would exercise this choice being guided by the object of the Arbitration Act, that is, expediting the arbitration process with minimum judicial intervention. Where dispute arises on account of settlement agreement, discharge voucher, no claim certificate amounting to discharge or accord and satisfaction, and the other side contends that such certificates were obtained by fraud, coercion or undue influence, the issue will have to be decided either by the Chief Justice or his designate in proceedings Under Section 11 or by the arbitral tribunal as directed by the order Under Section 11 of the Act. A claim for arbitration cannot be rejected merely or solely on the ground that the settlement agreement or discharge voucher had been executed if its validity is disputed. The third category would cover all other questions within the arbitration clause, which the court believed are within the exclusive jurisdiction of the arbitral tribunal at the first stage. This was explained by giving an examp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain circumstances the Chief Justice or his designate is also required to see whether a long-barred claim is sought to be restricted and whether the parties had concluded the transaction by recording satisfaction of the mutual rights and obligations or by receiving the final payment without objection. Thereafter, reference was made to the opinion expressed in judgment in Shree Ram Mills Ltd. v. Utility Premises (P) Ltd. (2007) 4 SCC 599, which it was contented had taken a different view from one in Boghara Polyfab Private Limited. Disagreeing, the Court referred to the three Judge Bench decision in Chloro Controls India Private Limited which had considered the issue whether there was any variance between Shree Ram Mills Ltd. and Boghara Polyfab Private Limited, to hold that there was none and both the judgments are capable of being read in harmony to bring in line with the law declared in Patel Engineering Ltd. In particular, a reference was made to the following portion of the paragraph 27 of Shree Ram Mills Ltd. and paragraph 119 of Chloro Controls India Private Limited which read as under: 27. ... If the Chief Justice does not, in the strict sense, decide the issue, in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess is likely to usher in catastrophe in jurisprudence developed in this field. We are disposed to think so as it is not apposite to pick up a line from here and there from the judgment or to choose one observation from here or there for raising it to the status of the ratio decidendi . That is most likely to pave one on the path of danger and it is to be scrupulously avoided. The propositions set out in SBP, in our opinion, have been correctly understood by the two-Judge Bench in Boghara Polyfab (P) Ltd. and the same have been appositely approved by the three-Judge Bench in Chloro Controls India (P) Ltd. and we respectfully concur with the same. We find no substance in the submission that the said decisions require reconsideration, for certain observations made in SBP, were not noticed. We may hasten to add that the three-Judge Bench has been satisfied that the ratio decidendi of the judgment in SBP is really inhered in para 39 of the judgment. 63. B.N. Srikrishna, J. in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. and Anr. (2005) 7 SCC 234, a case relating to transnational arbitration under the New York Convention, had invoked the principle of ex visceribus actus for in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment laid emphasis on the fact that the Rule of priority in favour of the arbitrators is counter-balanced by the courts' power to review the existence and validity of the arbitration agreement at the end of the arbitral process. It was elucidated: Even if the court takes the view that the arbitral agreement is not vitiated or that it is not invalid, inoperative or unenforceable, based upon purely a prima facie view, nothing prevents the arbitrator from trying the issue fully and rendering a final decision thereupon ... Even after the court takes a prima facie view that the arbitration agreement is not vitiated on account of factors enumerated in Section 45, and the arbitrator upon a full trial holds that there is no vitiating factor in the arbitration agreement and makes an award, such an award can be challenged Under Section 48(1)(a). The award will be set aside if the party against whom it is invoked satisfies the court inter alia that the agreement was not valid under the law to which the parties had subjected it or under the law of the country where the award was made. The two basic requirements, namely, expedition at the pre-reference stage, and a fair opportunity t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reliance was placed on paragraph 48 and 59 in Duro Felguera S.A. The concluding paragraph in Mayavati Trading Private Limited records: 10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgment, as Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment in Duro Felguera, SA. 66. Paragraph 48 and paragraph 59 of Duro Felguera, S.A. referred to above, read as under: 48...From a reading of Section 11(6-A), the intention of the legislature is crystal clear i.e. the court should and need only look into one aspect--the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple--it needs to be seen if the agreement contains a Clause which provides for arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion of Scalia, J. of the Supreme Court of America in Buckeye Check Cashing Inc. v. Cardegna 163 L Ed 2d 1038 : 546 US 440 (2006) that arbitration agreement is severable from the remainder of the contract and unless the challenge is to the arbitration Clause itself, the issue of contract's validity should be considered by the arbitrator in the first instance. In conclusion, it was observed: 48. The basic principle which must guide judicial decision-making is that arbitration is essentially a voluntary assumption of an obligation by contracting parties to resolve their disputes through a private tribunal. The intent of the parties is expressed in the terms of their agreement. Where commercial entities and persons of business enter into such dealings, they do so with a knowledge of the efficacy of the arbitral process. The commercial understanding is reflected in the terms of the agreement between the parties. The duty of the court is to impart to that commercial understanding a sense of business efficacy. xx xx xx 53. The Arbitration and Conciliation Act, 1996, should in my view be interpreted so as to bring in line the principles underlying its interpretation in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to make a proposal; (b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise; xx xx xx (g) An agreement not enforceable by law is said to be void; (h) An agreement enforceable by law is a contract; 22. When an arbitration Clause is contained in a contract , it is significant that the agreement only becomes a contract if it is enforceable by law. We have seen how, under the Stamp Act, an agreement does not become a contract, namely, that it is not enforceable in law, unless it is duly stamped. Therefore, even a plain reading of Section 11(6-A), when read with Section 7(2) of the 1996 Act and Section 2(h) of the Contract Act, would make it clear that an arbitration Clause in an agreement would not exist when it is not enforceable by law. This is also an indicator that SMS Tea Estates has, in no manner, been touched by the amendment of Section 11(6-A). Thereafter, reference was made to paragraph 83 in Enercon (India) Ltd. v. Enercon GmbH (2014) 5 SCC 1 : (2014) 3 SCC (Civ) 59 wherein the concept of separability of arbitration Clause or agreement from the underly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that the arbitration Clause that is contained in the sub-contract would not exist as a matter of law until the sub-contract is duly stamped, as has been held by us above. The argument that Section 11(6-A) deals with existence , as opposed to Section 8, Section 16 and Section 45, which deal with validity of an arbitration agreement is answered by this Court's understanding of the expression existence in Hyundai Engg. case, as followed by us. 69. In Narbheram Power and Steel Private Limited, a three Judges' Bench of this Court had decided the Civil Appeal arising from an application Under Section 11(6) of the Arbitration Act in an insurance contract. Primarily relying upon the decision of three Judges' Bench in Vulcan Insurance Co. Ltd. v. Maharaj Singh and Anr. (1976) 1 SCC 943, it was held that the disputes were not arbitrable as in terms of the arbitration Clause as the insurer had disputed and not accepted the liability. The arbitration Clause applies only if there is a dispute pertaining to the quantum. This decision, though dated 2nd May 2018, did not refer to Section 11(6-A) of the Arbitration Act and interpret the same. The Civil Appeal had arisen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerning jurisdiction of arbitral tribunal rather than the validity of the arbitration agreement. Referring to Article V(1)(a) and Article V(2)(a) of the New York Convention, he draws a distinction between in-arbitrability and invalidity. Arbitration agreements are sui generis contracts with both contractual and jurisdictional features. The latter is wider in scope. The courts at the referral stage may review only whatever is related to the formation of the arbitration agreement as a substantive contract, that is, contractual aspects of the arbitration agreement and jurisdictional aspects of the arbitration agreement should be left to the arbitral tribunal. In other words, at the stage of referral, the courts may review only whatever is related to the formation of the arbitration agreement (the contractual aspects of the arbitration agreement) and the issues relating to the jurisdictional aspects of the arbitration agreement, which as per the author includes the question relating to non-arbitrability of the claims, should be under the exclusive jurisdiction of the arbitral tribunals. Thus, distinction is drawn between validity in terms of substantive and formal validity of an arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and India (Shin-Etsu Chemical Co. Ltd.) to observe that the court's review at the first stage is limited to prima facie verification of existence and validity of the arbitration Clause without the question being analysed in detail which the tribunal is empowered to decide when necessary. At the reference stage, the court shall decline jurisdiction if the summary examination of the arbitration agreement does not allow it to find that the agreement is null and void, inoperative and incapable of being performed. The Canadian courts, apply the general Rule that in any case involving an arbitration clause, a challenge to arbitrator's jurisdiction must be resolved first by the arbitrator and the court will depart from this Rule of systematic referral of arbitration only if the challenge to arbitrator's jurisdiction is solely based on a question of law. Exercise of court's jurisdiction in the latter case would be justified as the court is the forum to which the parties first apply when requesting for referral and that the arbitrator's jurisdiction regarding his or her jurisdiction can be reviewed by the court. Further, it allows the court to decide the legal argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itration process by an obstructing party even in case of a genuine agreement to arbitration. An extremely pro-arbitration approach with no or minimal judicial scrutiny might send all the questions to the arbitrators. At the same time arbitration is no holy grail and not all parties resisting arbitration are obstructionists. A party must have its say in the court, unless he has agreed to arbitrate. A good legal order must decide what weight be given to these competing values and how to structure the process to maximize overall value by reducing opportunities for obstructionism while preserving legitimate claims for reasonably prompt judicial decision. Referring to the competence-competence and severability principles the author has observed: Competence-competence thus addresses the who decides question on a broader scale and is more central to resolving the policy tension between protecting arbitration from obstruction, on one hand, and preserving legitimate disputes over arbitrator jurisdiction for a prompt court hearing, on the other... Whereas separability is universally accepted, competence-competence is controversial and has spawned a range of different national responses. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess it finds . The British Act allows the arbitrator to render his/her decision on jurisdiction either in the preliminary award or in the final award, but allows the parties to insist the arbitrators for preliminary and an early decision as a check against wasteful proceedings. The paper also deals with the American approach in domestic and international arbitration. In domestic law the issues of arbitrability have been divided into procedural and substantial objections. Procedural arbitrability issues include whether a time limit for bringing a claim has been observed or whether a party has waived its right to arbitrate and also issues like waiver or estoppel thereby denying a party from claiming the right or any pre-condition for invoking arbitration has not been made, etc. These issues are 'gateway questions'22 that are presumptively for the arbitrator to decide and not for the courts to decide, at least at the first stage. The substantive aspects are those wherein the court at the first stage would go into prima facie examination. Substantive issues pertaining to the validity and existence of the arbitration agreement (Legal position in domestic law post-Buckeye Check C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement. Distinction is drawn and different principles apply to 'container contract' with an arbitration clause, and stand-alone arbitration agreement.23 Buckeye Check Cashing Inc. ruled that courts must send to arbitrators any challenge to the validity of the contract as a whole, (the container contract), while courts themselves must resolve any challenge directed specifically to the arbitration clause . When arbitrators hear any challenge to the container contract's validity, Buckeye Check Cashing Inc. cautioned: The issue of the contract's validity is different from the issue of whether any agreement between the alleged obligor and oblige was ever concluded. 77. Prof. Alan Scott Rau24 questions the abstract distinction between 'invalidity and nonexistence as nothing . The author while supporting the principle of separability rejects the argument that formation of a contract is different from enforcement of the contract as when the agreement is invalid there is no agreement to anything. He observes: But how much of an improvement is it, really, to sweep away the conceptual distinction between void and voidable contracts--only to replace it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the enforcement of the contract containing the arbitration clause. Courts should send cases to arbitration only after rejecting any such defenses. 79. In order to appreciate the effect of the amendments made by Act 3 of 2016, it would be appropriate to refer to the Law Commission's 246th Report which had given reasons for amendments to Sections 8 and 11 of the Arbitration Act, including insertion of Sub-section (6-A) to Section 11. The said reasons read as under: 24. Two further sets of amendments have been proposed in this context. First, it is observed that a lot of time is spent for appointment of arbitrators at the very threshold of arbitration proceedings as applications Under Section 11 are kept pending for many years. In this context, the Commission has proposed a few amendments. The Commission has proposed changing the existing scheme of the power of appointment being vested in the Chief Justice to the High Court and the Supreme Court and has expressly clarified that delegation of the power of appointment (as opposed to a finding regarding the existence/nullity of the arbitration agreement) shall not be regarded as a judicial act. This would rationali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by the arbitral tribunal. However, if the judicial authority concludes that the agreement does not exist, then the conclusion will be final and not prima facie. The amendment also envisages that there shall be a conclusive determination as to whether the arbitration agreement is null and void. In the event that the judicial authority refers the dispute to arbitration and/or appoints an arbitrator, Under Sections 8 and 11 respectively, such a decision will be final and non-appealable. An appeal can be maintained Under Section 37 only in the event of refusal to refer parties to arbitration, or refusal to appoint an arbitrator. The Law Commission's Report specifically refers to the decision of this Court in Shin-Etsu Chemical Co. Ltd., a decision relating to transnational arbitration covered by the New York Convention. 80. The Statement of Objects and Reasons of Act 3 of 2016 read as under: Statement of Objects and Reasons *** 6. It is proposed to introduce the Arbitration and Conciliation (Amendment) Bill, 2015, to replace ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne agreement, even when it is only a Clause and an integral part of the underlying or container contract. Clause (b) formulates a legal Rule that a decision by the arbitral tribunal holding that the main contract is null and void shall not ipso jure entail invalidity of the arbitration clause. Successful challenge to the existence or invalidity or rescission of the main contract does not necessarily embrace an identical finding as to the arbitration agreement, provided the court is satisfied that the arbitration Clause had been agreed upon. The arbitration agreement can be avoided only on the ground which relates directly to the arbitration agreement. Notwithstanding the challenge to the underlying or container contract, the arbitration Clause in the underlying or container contract survives for determining the disputes. The principle prevents boot-strapping as it is primarily for the arbitral tribunal and not for the court to decide issues of existence, validity and rescission of the underlying contract. Principle of separation authorises an arbitral tribunal to Rule and decide on the existence, validity or rescission of the underlying contract without an earlier adjudication of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . in Kishorilal Gupta Bros. to observe that he had only disagreed with the majority on the effect of settlement on the arbitration clause, as he had held that arbitration Clause did survive to settle the dispute as to whether there was or was not an 'accord and satisfaction'. It was further observed that this principle laid down by Sarkar, J. that 'accord and satisfaction' does not put an end to the arbitration clause, was not disagreed to by the majority. On the other hand, proposition (6) seems to be laying the weight on to the views of Sarkar, J. These decisions were under the Arbitration Act, 1940. The Arbitration Act specifically incorporates principles of separation and competence-competence and empowers the arbitral tribunal to Rule on its own jurisdiction. 83. Principles of competence-competence have positive and negative connotations. As a positive implication, the arbitral tribunals are declared competent and authorised by law to Rule as to their jurisdiction and decide non-arbitrability questions. In case of expressed negative effect, the statute would govern and should be followed. Implied negative effect curtails and constrains interference by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake an award, even when an application Under Sub-section (1) to Section 8 is pending consideration of the court/forum. Therefore, pendency of the judicial proceedings even before the court is not by itself a bar for the arbitral tribunal to proceed and make an award. Whether the court should stay arbitral proceedings or appropriate deference by the arbitral tribunal are distinctly different aspects and not for us to elaborate in the present reference. 85. Section 34 of the Act is applicable at the third stage post the award when an application is filed for setting aside the award. Under Section 34, an award can be set aside - (i) if the arbitration agreement is not valid as per law to which the party is subject; (ii) if the award deals with the disputes not contemplated by or not falling within the submission to arbitration, or contains a decision on the matter beyond the scope of submission to arbitration; and (iii) when the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force. Thus, the competence-competence principle, in its negative effect, leaves the door open for the parties to challenge the findings of the arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on agreement exists or the disputes/subject matter are not arbitrable, the application Under Section 8 would be rejected. At this stage, the court should not get lost in thickets and decide debatable questions of facts. Referral proceedings are preliminary and summary and not a mini trial. This necessarily reflects on the nature of the jurisdiction exercised by the court and in this context, the observations of B.N. Srikrishna, J. of 'plainly arguable' case in Shin-Etsu Chemical Co. Ltd. are of importance and relevance. Similar views are expressed by this Court in Vimal Kishore Shah wherein the test applied at the pre-arbitration stage was whether there is a good arguable case for the existence of an arbitration agreement. The test of good arguable case has been elaborated by the England and Wales High Court in Silver Dry Bulk Company Limited v. Homer Hulbert Maritime Company Limited (2017) EWHC 44 (Comm.), in the following words: Good arguable case is an expression which has been hallowed by long usage, but it means different things in different contexts. For the purpose of an application Under Section 18, I would hold that what must be shown is a case which is som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition should follow the more conservative course of allowing parties to have their say before the arbitral tribunal. 88. The nature and facet of non-arbitrability could also determine the level and nature of scrutiny by the court at the referral stage. Stravos Brekoulakis has differentiated between contractual aspects of arbitration agreement which the court can examine at referral stage and jurisdictional aspects of arbitration agreement which he feels should be left to the arbitral tribunal. John J. Barcelo III, referring to some American decisions had divided the issue of non-arbitrability into procedural and substantive objections. The procedurals are 'gateway questions' which would presumptively be for the arbitrator to decide at least at the first stage. In the Indian context, we would respectfully adopt the three categories in Boghara Polyfab Private Limited. The first category of issues, namely, whether the party has approached the appropriate High Court, whether there is an arbitration agreement and whether the party who has applied for reference is party to such agreement would be subject to more thorough examination in comparison to the second and third categ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to delay or defer and to discourage parties from using referral proceeding as a rue to delay and obstruct. In such cases a full review by the courts at this stage would encroach on the jurisdiction of the arbitral tribunal and violate the legislative scheme allocating jurisdiction between the courts and the arbitral tribunal. Centralisation of litigation with the arbitral tribunal as the primary and first adjudicator is beneficent as it helps in quicker and efficient resolution of disputes. 90. The Court would exercise discretion and refer the disputes to arbitration when it is satisfied that the contest requires the arbitral tribunal should first decide the disputes and Rule on non-arbitrability. Similarly, discretion should be exercised when the party opposing arbitration is adopting delaying tactics and impairing the referral proceedings. Appropriate in this regard, are observations of the Supreme Court of Canada in Dell Computer Corporation v. Union des consommateurs and Olivier Dumoulin [2007] 2 S.C.R. 801 : 2007 SCC 34, which read: 85. If the challenge requires the production and review of factual evidence, the court should normally refer the case to arbitration, as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application is filed for stay of judicial proceeding and for reference to arbitration. Amendments to Section 8 vide Act 3 of 2016 have not been omitted. Section 11 covers the situation where the parties approach a court for appointment of an arbitrator. Mayavati Trading Private Ltd., in our humble opinion, rightly holds that Patel Engineering Ltd. has been legislatively overruled and hence would not apply even post omission of Sub-section (6-A) to Section 11 of the Arbitration Act. Mayavati Trading Private Ltd. has elaborated upon the object and purposes and history of the amendment to Section 11, with reference to Sub-section (6-A) to elucidate that the Section, as originally enacted, was facsimile with Article 11 of the UNCITRAL Model of law of arbitration on which the Arbitration Act was drafted and enacted. Referring to the legislative scheme of Section 11, different interpretations, and the Law Commission's Reports, it has been held that the omitted Sub-section (6-A) to Section 11 of the Arbitration Act would continue to apply and guide the courts on its scope of jurisdiction at stage one, that is the pre-arbitration stage. Omission of Sub-section (6-A) by Act 33 of 2019 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. Existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law. We would proceed to elaborate and give further reasons: (i) In Garware Wall Ropes Ltd., this Court had examined the question of stamp duty in an underlying contract with an arbitration Clause and in the context had drawn a distinction between the first and second part of Section 7(2) of the Arbitration Act, albeit the observations made and quoted above with reference to 'existence' and 'validity' of the arbitration agreement being apposite and extremely important, we would repeat the same by reproducing paragraph 29 thereof: 29. This judgment in Hyundai Engg. case is important in that what was specifically under consideration was an arbitration Clause which would get activated only if an insurer admits or accepts liability. Since on facts it was found that the insurer repudiated the claim, though an arbitration Clause did exist , so to speak, in the policy, it would not exist in law, as was held in that judgment, when one important fact is introduced, nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arameters. Section 11 does not prescribe any standard of judicial review by the court for determining whether an arbitration agreement is in existence. Section 8 states that the judicial review at the stage of reference is prima facie and not final. Prima facie standard equally applies when the power of judicial review is exercised by the court Under Section 11 of the Arbitration Act. Therefore, we can read the mandate of valid arbitration agreement in Section 8 into mandate of Section 11, that is, 'existence of an arbitration agreement'. (vi) Exercise of power of prima facie judicial review of existence as including validity is justified as a court is the first forum that examines and decides the request for the referral. Absolute hands off approach would be counterproductive and harm arbitration, as an alternative dispute resolution mechanism. Limited, yet effective intervention is acceptable as it does not obstruct but effectuates arbitration. (vii) Exercise of the limited prima facie review does not in any way interfere with the principle of competence- competence and separation as to obstruct arbitration proceedings but ensures that vexatious and frivolous matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Felguera specifically states that the resolution has to exist in the arbitration agreement, and it is for the court to see if the agreement contains a Clause which provides for arbitration of disputes which have arisen between the parties. Paragraph 59 is more restrictive and requires the court to see whether an arbitration agreement exists - nothing more, nothing less. Read with the other findings, it would be appropriate to read the two paragraphs as laying down the legal ratio that the court is required to see if the underlying contract contains an arbitration Clause for arbitration of the disputes which have arisen between the parties-nothing more, nothing less. Reference to decisions in Patel Engineering Ltd. and Boghara Polyfab Private Limited was to highlight that at the reference stage, post the amendments vide Act 3 of 2016, the court would not go into and finally decide different aspects that were highlighted in the two decisions. (x) In addition to Garware Wall Ropes Limited case, this Court in Narbheram Power and Steel Private Limited and Hyundai Engg. Construction Co. Ltd., both decisions of three Judges, has rejected the application for reference in the insuranc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolve the question of principles applicable to interpretation of an arbitration clause. This is important and directly relates to scope of the arbitration agreement. In Premium Nafta Products Ltd., on the question of interpretation and construction of an arbitration clause, it is observed: In approaching the question of construction, it is therefore necessary to inquire into the purpose of the arbitration clause. As to this, I think there can be no doubt. The parties have entered into a relationship, an agreement or what is alleged to be an agreement or what appears on its face to be an agreement, which may give rise to disputes. They want those disputes decided by a tribunal which they have chosen, commonly on the grounds of such matters as its neutrality, expertise and privacy, the availability of legal services at the seat of the arbitration and the unobtrusive efficiency of its supervisory law. Particularly in the case of international contracts, they want a quick and efficient adjudication and do not want to take the risks of delay and, in too many cases, partiality, in proceedings before a national jurisdiction. In Narbheram Power and Steel Private Ltd., this Court wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession 'existence of an arbitration agreement' in Section 11 of the Arbitration Act, would include aspect of validity of an arbitration agreement, albeit the court at the referral stage would apply the prima facie test on the basis of principles set out in this judgment. In cases of debatable and disputable facts, and good reasonable arguable case, etc., the court would force the parties to abide by the arbitration agreement as the arbitral tribunal has primary jurisdiction and authority to decide the disputes including the question of jurisdiction and non-arbitrability. 96. Discussion under the heading 'Who decides Arbitrability?' can be crystallized as under: (a) Ratio of the decision in Patel Engineering Ltd. 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 09.08.2019), 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Arbitral Tribunal has rejected the objection to the Tribunal's jurisdiction. In this view, the Petitioner is at liberty to pursue the remedy available Under Section 34 of the Arbitration Act. Special Leave Petition (Civil) No. 11877 of 2020 In view of the fact that the Arbitral Tribunal is hearing the matter, we leave the issue of arbitrability to the Tribunal to decide and come to a conclusion on the same. Further, the parties are at liberty to challenge the award if they are not satisfied with the same in this regard. N.V. Ramana, J. 99. I have had the advantage of reading in advance the opinion of my learned Brother Justice Sanjiv Khanna. The present matters deal with a very important aspect in the arbitration jurisprudence in this country, which necessitate a separate opinion. 100. Recently, Mr. Fali S. Nariman, in one of his lectures had alluded that the development of arbitration in India is not attributable to the success in arbitration, rather to the failures of the Court. This reflects an uncomfortable relationship which arbitration has had with litigation all these days. The judicial hesitancy of the courts to be more accommodative towards the tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises, and which needs to be authoritatively decided by a Bench of three learned Judges, is whether the word existence would include weeding-out arbitration clauses in agreements which indicate that the subject-matter is incapable of arbitration... x x x x x x x x x x 30. In this view of the matter, this case is referred to a Bench of three Hon'ble Judges. 31. Given the facts of this case and the fact that 18 hearings have been held, the stay that has been granted to the arbitral proceedings by our order dated 13.08.2018 is lifted, and the proceedings may go on and culminate in an award. The award cannot be executed without applying to this Court. The appeal is disposed of accordingly. 104. The reference order primarily indicates that there are two substantive issues to be settled by this Court herein, namely: I. To what extent does the Court decide the question of non-arbitrability Under Section 11 of the Act? II. Whether tenancy disputes are capable of being resolved through arbitration? 105. Before we analyze the issue, we need to observe arguments canvassed by the counsel appearing for the parties, who set the tone for these cases. 106. Learned S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt does not convert the judicial power conferred in Section 11(6) into an administrative power. The decision in Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC 714 is inapplicable. 110. Learned Counsel, Mr. Sourav Agarwal on behalf of the Respondent in Civil Appeal No. 2402 of 2019, contended that: the Court Under Section 8 and 11 of the Act, does not act as a mere post-office. this is a case in which the Appellants have participated in the arbitral proceedings. Relying upon various judgments, including certain High Court judgments that were passed after the judgment in Himangni Enterprises (supra) to state that, on facts, Himangni Enterprises (supra) was wholly distinguishable as it did not apply to a situation of a lease expiring by efflux of time. certain High Court judgments had, after the judgment in Himangni Enterprises (supra), distinguished the said judgment on this and other grounds. As an alternative submission, he said that, in any case, Himangni Enterprises (supra) would require reconsideration as it did not state the law correctly. 111. We answer the two questions in seriatim. 112. Arbitration is a creature of consensus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in-- (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration Clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration Clause part of the contract. 117. Section 5 emphasizes a very important principle, that judicial interference in arbitral proceedings should be minimum and should be limited to instances where it is specifically provided for under the Act. Although the provision envisages a wide amplitude, various judgments of this Court have restricted the utility of same. [ICICI Bank Ltd. v. Sidco Leathers Ltd., (2006) 10 SCC 452] 118. Section 8 of the Act in its present and earlier form, are extracted below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inued and an arbitral award made 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 shall file such application along with a copy of the arbitration agreement and a petition prayi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority at the pre-reference stage. The court would be required to make a prima facie determination as to whether there is valid arbitration agreement.29 We must state that we are partly in agreement with the aforesaid, wherein the judicial authorities have been given a clear mandate for interference at the pre-reference stage, however, the threshold standard is worded differently, as pointed herein. 120. Section 11 of the Act in its present and earlier forms, are extracted below: Section 11 prior to Act 3 of 2016 Section 11 after Act 3 of 2016 Section 11 after Act 33 of 2019 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) or Sub-section (6) to him. (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, the Chief Justice or his 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 (10) arise in an international commercial arbitration, the reference to Chief Justice in those Sub-sections shall be construed as a reference to the Chief Justice of India (b) Where the matters referred to in Sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to Chief Justice in those Sub-sections shall be construed as a reference to the Chief Justice of the High Court within 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 the Chief Justice of that High Court. Appointment of arbitrators.-- (1) A person of any nationality may be an arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 take 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 arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed for determination of fees as per the rules of an arbitral institution. 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.(3A) The Supreme Court and the High Court shall have the power to designate, arbitral institutions, from time to time, which have been graded by the Council Under Section 43-I, for the purposes of this Act: Provided that in respect of those High Court jurisdictions, where no graded arbitral institution are available, then, the Chief Justice of the concerned High Court may maintain a panel of arbitrators for discharging the functions and duties of arbitral institution and any reference to the arbitrator shall be deemed to be an arbitral institution for the purposes of this section and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitrator, 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 arbitral institution designated by the Supreme Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. (11) Where more than one request has been made under Sub-section (4) or Sub-section (5) or Sub-section (6) to different arbitral institutions, the arbitral institution to which the request has been first made under the relevant Sub-section shall be competent to appoint. (12) Where the matter referred to in Sub-sections (4), (5), (6) and (8) arise in an international commercial arbitration or any other arbitration, the reference to the arbitral institution in those Sub-sections shall be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or validity of the arbitration agreement, and for that purpose,-- (a) an arbitration Clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the Arbitral Tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. 123. Section 34 of the Act is as under: Section 34 prior to Act 3 of 2016 Section 34 after Act 3 of 2016 Section 34 after Act 33 of 2019 Application for setting aside arbitral award.-(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3). (2) An arbitral award may be set aside by the Court only if - (a) the party making the application furnishes proof that-(i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l will eliminate the grounds for setting aside the arbitral award. Application for setting aside arbitral award. --(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3). (2) An arbitral award may be set aside by the Court only if-- (a) the party making the application furnishes proof that-- (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. (5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in Sub-section (5) is served upon the other party. Application for setting aside arbitral award. (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3). (2) An arbitral award may be set aside by the Court only if-- (a) the party making the application establishes on the basis of the record of the arbitral tribunal that-- (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us application of the law or by reappreciation of evidence. (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made Under Section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. (4) On receipt of an application under Sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. (5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it prima facie finds that the said agreement is null and void, inoperative or incapable of being performed. 125. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shows that the Arbitral Tribunal's authority Under Section 16 is not confined to the width of its jurisdiction, as was submitted by learned Counsel for the Appellants, but goes to the very root of its jurisdiction. There would, therefore, be no impediment in contending before the Arbitral Tribunal that it had been wrongly constituted by reason of the fact that the Chief Justice or his designate had nominated an arbitrator although the period of thirty days had not expired and that, therefore, it had no jurisdiction. (emphasis supplied) 128. Again, the aforesaid decision came to be referred to a seven-Judge Bench in SBP Co. v. Patel Engineering Ltd., (2005) 8 SCC 618, wherein majority was penned by Justice P.K. Balasubramanyan and the minority dissent was by Justice C.K. Thakker. 129. The majority opinion, concluded that the power of reference Under Section 11 is a judicial function for the following reasons: First, the Sub-section (7) of Section 11 makes the adjudication by the Chief Justice, final. Such final determination in usual course would be a judicial determination. Second, the reason for delegating the power to the highest judicial authority in the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Justice Y.K. Sabharwal, as he then was, held in his opinion that a judicial forum seized of the matter should fully Rule on the validity and existence of the agreement, before referring the same to the arbitration. The prima facie standard, which the Court found to be gaining popularity across the globe, could not be applied as the statutory language of Section 45, as it existed, did not support such a standard. It may be necessary to observe certain passage from Justice Sabharwal's opinion: 55. I may also deal with the contention urged on behalf of the Appellant that only a prima facie finding is required to be given on a combined reading of Sections 45, 48 and 50 from which it can be culled out that a party who has suffered an award can always challenge the same Under Section 48 on the ground that the arbitration agreement is null and void. This read in conjunction with the right of appeal given Under Section 50 and the power of the arbitrator to Rule on his own jurisdiction clearly shows the intent of the legislature to avoid delay which would be inevitable if it has to be a final decision and it would defeat the object of soon placing all material before the Arbitral Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utmost respect to both of them, I am inclined to agree with the view expressed by learned Brother Srikrishna, J. but only with a rider and a partly different reason which may I state below: The main issue is regarding the scope of power of any judicial authority including a regular civil court Under Section 45 of the Act in making or refusing a reference of dispute arising from an international arbitration agreement governed by the provisions contained in Part III Chapter I of the Act of 1996. I respectfully agree with learned Brother Srikrishna, J. only to the extent that if on a prima facie examination of the documents and material on record including the arbitration agreement on which request for reference is made by one of the parties, the judicial authority or the court decides to make a reference, it may merely mention the submissions and contentions of the parties and summarily decide the objection if any raised on the alleged nullity, voidness, inoperativeness or incapability of the arbitration agreement. In case, however, on a prima facie view of the matter, which is required to be objectively taken on the basis of material and evidence produced by the parties on the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue on any such matter. If the Chief Justice does not, in the strict sense, decide the issue, in that event it is for him to locate such issue and record his satisfaction that such issue exists between the parties. It is only in that sense that the finding on a live issue is given. Even at the cost of repetition we must state that it is only for the purpose of finding out whether the arbitral procedure has to be started that the Chief Justice has to record satisfaction that there remains a live issue in between the parties. The same thing is about the limitation which is always a mixed question of law and fact. The Chief Justice only has to record his satisfaction that prima facie the issue has not become dead by the lapse of time or that any party to the agreement has not slept over its rights beyond the time permitted by law to agitate those issues covered by the agreement. It is for this reason that it was pointed out in the above para that it would be appropriate sometimes to leave the question regarding the live claim to be decided by the Arbitral Tribunal. All that he has to do is to record his satisfaction that the parties have not closed their rights and the matter has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied Under Section 11 of the Act, is a party to such an agreement. 22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are: (a) Whether the claim is a dead (long-barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. 22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are: (i) Whether a claim made falls within the arbitration Clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration. 23. It is clear from the scheme of the Act as explained by this Court in SBP Co. [ (2005) 8 SCC 618], that in regard to issues falling under the second category, if raised in any application Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conflict between Chloro Controls Case (supra) and SBP Case (supra), which the Court formulated in the following manner: 2. We have commenced our opinion with the aforesaid exposition of law as arguments have been canvassed by Mr. Ranjit Kumar, learned Senior Counsel for the Appellants, with innovative intellectual animation how a three-Judge Bench in Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641 has inappositely and incorrectly understood the principles stated in the major part of the decision rendered by a larger Bench in SBP Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 and, in resistance, Mr. Harish Salve and Dr A.M. Singhvi, learned Senior Counsel for the Respondent, while defending the view expressed later by the three-Judge Bench, have laid immense emphasis on consistency and certainty of law that garner public confidence, especially in the field of arbitration, regard being had to the globalisation of economy and stability of the jurisprudential concepts and pragmatic process of arbitration that sparkles the soul of commercial progress. We make it clear that we are not writing the grammar of arbitration but indubitably we intend, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approved by the three-Judge Bench in Chloro Controls India (P) Ltd. [Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641] and we respectfully concur with the same. We find no substance in the submission that the said decisions require reconsideration, for certain observations made in SBP [SBP Co. v. Patel Engg. Ltd., (2005) 8 SCC 618], were not noticed. We may hasten to add that the three-Judge Bench has been satisfied that the ratio decidendi of the judgment in SBP [SBP Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] is really inhered in para 39 of the judgment. 136. This Court in Duro Felguera, S.A. v. Gangavaram Port, (2017) 9 SCC 729, held as under: (Justice Banumathi) 20. ...Since the dispute between the parties arose in 2016, the amended provision of Sub-section (6-A) of Section 11 shall govern the issue, as per which the power of the Court is confined only to examine the existence of the arbitration agreement. (Justice Kurian Joseph) 59. The scope of the power Under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. [SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xecution of a discharge voucher and the settlement of the claim by accord and satisfaction. On finding the claim to have been settled by accord and satisfaction, the Court held that there was no dispute under the agreement to be referred to an arbitrator for adjudication. 140. In Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC 714, a Bench of three Judges, while overruling the Antique Arts Case (supra), held as under: 10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgment [United India Insurance Co. Ltd. v. Antique Art Exports (P) Ltd., (2019) 5 SCC 362], as Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment in Duro Felguera, SA [Duro Felguera, SA v. Gangavaram Port Ltd., (2017) 9 SCC 729] -- see paras 48 59 [Ed.: The said paras 48 59 of Duro Fel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 142. Having observed the precedents holding the field in respect of Section 11, we now come to an analysis of Section 8. Section 8 of the Act applies, when a matter is brought by one of the parties before the Court, and the other party brings to the notice of the Court of existence of such arbitration agreement. Under these circumstances, the Court is obligated to refer a matter to arbitration, on satisfaction that a valid arbitration agreement exists between the parties. The 2015 amendment clarified that the test to be utilized by the Court is on a prima facie basis. 143. The primary reason for the same, is the negative effect of Kompetenz Kompetenz Under Section 16, which mandates that the arbitral tribunal is required to first look into any objections as to the jurisdiction of the tribunal itself. It is due to the fact that parties may abuse and protract the proceedings if there is no gatekeeping mechanism, that the legislature has found a balance, wherein the Court is required to examine the validity of an arbitration agreement on a prima facie basis. 144. In this context, we need to examine the meaning of 'validity of arbitration agreement' as occurring Unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the fact that monopolies of the State activities should not be subject matter of a private tribunal, as the concerns of the State cannot not be dealt effectively. Further, an award, which has an erga omnes effect on third parties, would not be in tune with the contractual nature of arbitration, which is binding on the consenting parties alone. However, this feature alone, does not explicitly mandate that the tribunal cannot first adjudicate a claim based on the public policy argument. 149. It is to be noted that whether a subject matter can or cannot be arbitrated should necessarily be dealt on a case to case basis, rather than a having a bold exposition that certain subject matters are incapable of arbitration. This case is one such example of over-broad ratio, expounded by this Court by laying that certain subject areas cannot be arbitrated per se. At this juncture, we may observe the case of The London Steamship Owners' Mutual Insurance Association Ltd. v. The Kingdom of Spain and The French State, [2015] EWCA Civ 333. The case relates to an oil spill off the coast of Spain and France from a vessel named 'The Prestige', which resulted in the Government of Spai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e so, it would be too early at the stage of reference to determine the same as it would require complete examination of the issue at hand, which is more suited to be first dealt by the Tribunal and thereafter be looked into at the stage of enforcement. 150. To this extent, even this Court in Avitel Post Studioz Limited v. HSBC PI Holdings (Mauritius) Limited, Civil Appeal No. 5145 of 2016 has held as under: 16. In the light of the aforesaid judgments, paragraph 27(vi) of Afcons [Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., (2010) 8 SCC 24] and paragraph 36(i) of Booz Allen [Booz Allen Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532, must now be read subject to the rider that the same set of facts may lead to civil and criminal proceedings and if it is clear that a civil dispute involves questions of fraud, misrepresentation, etc. which can be the subject matter of such proceeding Under Section 17 of the Contract Act, and/or the tort of deceit, the mere fact that criminal proceedings can or have been instituted in respect of the same subject matter would not lead to the conclusion that a dispute which is otherwise arbitrable, ceases to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. But where the issue of arbitrability arises in the context of an application Under Section 8 of the Act in a pending suit, all aspects of arbitrability will have to be decided by the court seized of the suit, and cannot be left to the decision of the arbitrator. Even if there is an arbitration agreement between the parties, and even if the dispute is covered by the arbitration agreement, the court where the civil suit is pending, will refuse an application Under Section 8 of the Act, to refer the parties to arbitration, if the subject-matter of the suit is capable of adjudication only by a public forum or the relief claimed can only be granted by a special court or Tribunal. X X X X X X 36. The well-recognised examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... privileges, which enure to the benefit of a citizen, by virtue of constitutional or legislative instrument, which may affect the arbitrability of a subject matter. 157. It may be noted that the Act itself does not exclude any category of disputes as being non-arbitrable. However, the Courts have used the 'public policy' reason to restrict arbitration with respect to certain subject matters. In line with the aforesaid proposition, the Courts have interfered with the subject matter arbitrability at the pre-reference stage. 158. However, post the 2015 amendment, the structure of the Act was changed to bring it in tune with the pro-arbitration approach. Under the amended provision, the Court can only give prima facie opinion on the existence of a valid arbitration agreement. In line with the amended language and the statutory scheme, the examination of the subject matter arbitrability may not be appropriate at the stage of reference Under Section 8 of the Arbitration Act. It is more appropriate to be taken up by the Court at the stage of enforcement Under Section 34 of the Act. Having said so, in clear cases where the subject matter arbitrability is clearly barred, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions and Section 45 in the case of Part II arbitrations. Sections 8, 45 and also Section 11 relating to reference to arbitration and appointment of the Tribunal , directly affect the constitution of the Tribunal and functioning of the arbitral proceedings. Therefore, their operation has a direct and significant impact on the conduct of arbitrations. Section 9, being solely for the purpose of securing interim relief, although having the potential to affect the rights of parties, does not affect the conduct of the arbitration in the same way as these other provisions. It is in this context the Commission has examined and deliberated the working of these provisions and proposed certain amendments. 29. The Supreme Court has had occasion to deliberate upon the scope and nature of permissible pre-arbitral judicial intervention, especially in the context of Section 11 of the Act. Unfortunately, however, the question before the Supreme Court was framed in terms of whether such a power is a judicial or an administrative power -- which obfuscates the real issue underlying such nomenclature/description as to-- -- the scope of such powers -- i.e. the scope of arguments which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot exist, then the conclusion will be final and not prima facie. The amendment also envisages that there shall be a conclusive determination as to whether the arbitration agreement is null and void. In the event that the judicial authority refers the dispute to arbitration and/or appoints an arbitrator, Under Sections 8 and 11 respectively, such a decision will be final and non-appealable. An appeal can be maintained Under Section 37 only in the event of refusal to refer parties to arbitration, or refusal to appoint an arbitrator. (emphasis supplied) 163. The difference of statutory language provided under the amended Section 8, which states 'refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists' in comparison with the amended Section 11(6A), creates disparities which need to be ironed out. While the Court in the Shin-Etsu case (supra) and the Duro Felguera case (supra) recommended for finding a valid arbitration agreement on a prima facie basis qua Section 11, however, the negative language used under the amended Section 8 mandates for referring a matter to arbitration unless the Court prima facie finds that no valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suaded. 167. Having established the threshold standard for the Court to examine the extent of validity of the arbitration agreement, as a starting point, it is necessary to go back to Duro Felguera (supra), which laid down: 48.....From a reading of Section 11(6-A), the intention of the legislature is crystal clear i.e. the court should and need only look into one aspect--the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple --it needs to be seen if the agreement contains a Clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement. At first blush, the Court seems to have read the existence of the arbitration agreement by limiting the examination to an examination of its factual existence. However, that is not so, as the existence of arbitration agreement does not mean anything unless such agreement is contractually valid. This view is confirmed by the Duro Felguera case (supra), wherein the reference to the contractual aspect of arbitration agreement is ingrained under the Section 7 analy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Law Commission Report noted that: 31. The Commission is of the view that, in this context, the same test regarding scope and nature of judicial intervention, as applicable in the context of Section 11, should also apply to Sections 8 and 45 of the Act -- since the scope and nature of judicial intervention should not change upon whether a party (intending to defeat the arbitration agreement) refuses to appoint an arbitrator in terms of the arbitration agreement, or moves a proceeding before a judicial authority in the face of such an arbitration agreement. 171. We are cognizant of the fact that the statutory language of Section 8 and 11 are different, however materially they do not vary and both Sections provide for limited judicial interference at reference stage, as enunciated above. 172. In line with our holding on question No. 1, generally it would not have been appropriate for us to delve into the second question. However, considering that a question of law has been referred to us, we agree with the conclusions reached by our learned brother. 173. Before we part, the conclusions reached, with respect to question No. 1, are: a. Sections 8 and 11 of the Act have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration Act 6G.C. Cheshire P.M. North, Private International Law 12th ed. by North Fawcett (London: Butterworth's, 1992, p. 362 7Ibid 8G.C. Cheshire P.M. North, Private International Law 12th ed. by North Fawcett (London: Butterworth's, 1992 9Prof. Stavros Brekoulakis-'On Arbitrability: Persisting Misconceptions and New Areas of Concern' 10Ajar Raib-Defining Contours of the Public Policy Exception-A New Test for Arbitrability 11Common Cause v. Union of India, (1999) 6 SCC 667 and Agricultural Produce Market Committee v. Ashok Harikuni and Anr., (2000) 8 SCC 61. 12Jennifer L. Peresie, Reducing the Presumption of Arbitrability. 13A Second Look at Arbitrability: Approaches to Arbitration in the United States, Switzerland and Germany by Patrick M. Baron and Stefan Liniger 14(i) to (vi) from Prof. Stavros Brekoulakis-On Arbitrability: Persisting Misconceptions and New Area of Concern. 15(vii) from the preamble of the text of the bill of 2007 Arbitration Fairness Act as was written by the sponsor and submitted to the House for consideration 16Union of India v. Singh Builders Syndicate, (2009) 4 SCC 523. 17Mitsubishi Motors Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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