Summary
On a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, the Supreme Court appointed a sole arbitrator. None of the respondents' objections denied that the arbitration agreement existed, so the limited prima facie test at the referral stage was met. The Court left the respondents' other objections, and the question whether the non-signatory foreign parent company is bound by the arbitration agreement, to the arbitral tribunal.
Issues
- Whether the petition for appointment of an arbitrator under clause 15.7 of the GTC agreement should be allowed, given the respondents' objections that the claims were already pending before another tribunal, fell outside the clause, were time-barred and that the petition was not bona fide.
- Whether the referral court should decide if respondent no. 2, the non-signatory parent company, is bound by the arbitration agreement, or leave that question to the arbitral tribunal.
Provisions considered
- Section 11(6), Arbitration and Conciliation Act, 1996At the referral stage the court only examines, prima facie, whether an arbitration agreement exists. Because none of the respondents' objections questioned the existence of the arbitration agreement in clause 15.7, the requirement was met and an arbitrator was appointed. (¶¶ 28, 29, 30, 32, 35)
- Section 16, Arbitration and Conciliation Act, 1996Under the competence-competence principle, the arbitral tribunal is the preferred first authority on jurisdiction and arbitrability. The respondents' objections, including whether the non-signatory is a party to the arbitration agreement, were therefore left for the tribunal to decide. (¶¶ 29, 30, 31, 33, 34)
Held
- The referral court under Section 11(6) is confined to a prima facie examination of whether an arbitration agreement exists. Contested questions involving complex facts, arbitrability and jurisdiction are for the arbitral tribunal in the first instance. (¶¶ 28, 29, 30)
- The respondents objected that the claims were pending before another tribunal, fell outside the clause, were time-barred and that the petition was not bona fide. None of these objections denied the existence of the arbitration agreement, so the prima facie requirement under Section 11 was satisfied. The respondents may raise all objections available in law before the tribunal, which is to decide its preliminary objections before adjudicating the claims. (¶¶ 32, 33)
- Following the Constitution Bench in Cox and Kings Ltd. v. SAP India Pvt. Ltd., whether respondent no. 2, a non-signatory, is a party to the arbitration agreement is a complex question. The arbitral tribunal should decide it on the evidence and by applying the legal doctrine laid down in that decision. (¶¶ 31, 34)
Result
Petition allowed. Justice Mohit S. Shah, former Chief Justice of the Bombay High Court, was appointed sole arbitrator, with fees and other modalities to be fixed in consultation with the parties. All rights and contentions of the parties were left open before the arbitrator.