Summary
The Supreme Court upheld the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 in a dispute over a Mumbai leave and licence agreement, holding that the referral court's inquiry is confined by Section 11(6A) to the existence of an arbitration agreement and that Section 41 of the Presidency Small Cause Courts Act, 1882 does not by its own force make the arbitration clause non-existent; arbitrability questions were left to the arbitrator.
Issues
- Whether the High Court rightly allowed the licensor's Section 11 application despite the licensee's objection that the dispute was non-arbitrable under Section 41 of the Presidency Small Cause Courts Act, 1882.
- Whether, in view of the Bombay High Court Full Bench in Central Warehousing Corporation, the arbitration clause in a leave and licence agreement for premises in Greater Bombay must be treated as non-existent at the Section 11 stage.
- Whether the referral court should decide if the claim for amounts for the balance lock-in period is a debt or a claim for licence fee within Section 41(1).
Provisions considered
- Section 11(6A), Arbitration and Conciliation Act, 1996Still in force because its omission has not been notified; following In re Interplay, the referral court only examines prima facie the existence of an arbitration agreement under Section 7 and does not hold a contested inquiry. (¶¶ 14, 15, 16, 17, 27)
- Section 16, Arbitration and Conciliation Act, 1996The arbitral tribunal rules on its own jurisdiction, including objections to the existence or validity of the arbitration agreement; the debt-versus-licence-fee and arbitrability questions were for the arbitrator. (¶¶ 9, 23, 24, 25)
- Section 41, Presidency Small Cause Courts Act, 1882Read as conferring jurisdiction on the Small Causes Court over licensor-licensee and landlord-tenant suits for possession and licence fee or rent in Greater Bombay; it does not by its own force neutralise arbitration clauses. (¶¶ 8, 19, 21)
- Section 28, Exceptions 1 and 2, Indian Contract Act, 1872Arbitration clauses are rooted in the exceptions to Section 28, which save agreements to refer disputes to arbitration; the Court noted this provision was missed in Central Warehousing. (¶ 21)
Held
- Under Section 11(6A), as explained in In re Interplay, the court only scrutinises the dealings between the parties to determine whether an arbitration agreement exists, without a laborious or contested inquiry; substantive questions of existence, validity and arbitrability are for the arbitral tribunal under Section 16. (¶¶ 16, 17, 25)
- Central Warehousing arose where the licensee was in possession and sued under Section 41; it does not govern the present monetary dispute over a security deposit and amounts claimed for the balance lock-in period after possession had been handed back. (¶ 21)
- Following Vidya Drolia (on points not diluted by In re Interplay), conferment of jurisdiction on a specific court or creation of a special forum is not decisive of implied non-arbitrability; Section 41 is a jurisdiction-conferring provision and does not of its own force neutralise arbitration clauses. (¶ 21)
- Whether the claim is a debt or a claim for recovery of licence fee within Section 41(1) is not for the court under Section 11 but for the arbitrator, and remedies against the arbitrator's Section 16 ruling are left open. (¶¶ 22, 23)
- Paragraph 40 of Central Warehousing cannot be read to mean that the arbitration clause had ceased to exist; an examination under Section 11(6A) shows an arbitration agreement exists. The Court expressly did not pronounce on the correctness of Central Warehousing, against which an appeal is pending. (¶¶ 26, 27)
Result
Appeal dismissed; arbitrator to proceed and conclude the proceedings within six months; all questions other than the Section 11(6A) issue left open; no costs.