The Changing Dynamics of Judicial Enquiry: – Section 11

The Indian Arbitration system has been taking a forward approach for a decade now to make the Indian sub-continent a hub for Arbitration. The question and interpretation of the judicial enquiry under Section 11 have been a long-standing question, and the judiciary has, time and again, come forward to provide the narrow meaning of Section 11, which answers the only question about whether an arbitration agreement subsisted or not in the first place. This was the outlook of the judiciary so that its interference could be minimal as compared to the Arbitral tribunal, but as time passed, the judiciary came forward through various case laws and expanded the approach to the judicial enquiry. The Amendments here should also be mentioned, which contributed to the interpretation and change, with recent landmark judgement has expanded the scope and allowed the judiciary to use the Court’s mind in deciding the nature of dispute and nature of arbitration agreement and if they both don’t match then even after the acceptance by both the parties for Arbitration the Court can refuse to allow it. Hence, this interpretation is a move toward a stricter interpretation of the clause and a deeper interpretation of the intricacies of the section.

The Changing Dynamics

The purview of “Judicial inquiry” in accordance with the “Section 11 of the Act” has long been a thorny issue with no definitive answer. The scope of the investigation under Section 11 of the Act has primarily been restricted to the assessment of the presence of an arbitral agreement, according to the courts. The scope of Section 11 of the Act was limited to a prima facie tenacity as to whether or not an arbitral agreement subsists, creating it peremptory in character and needing the involved judicial authority to allude the dispute to arbitration, ultimately rendering the issue of the presence and plausibility of the arbitration agreement with the Arbitral Tribunal as under Section 16 of the Act, and offering superiority to the concept of kompetenz-kompetenz.

In Brightstar Telecommunications India Ltd. v. Iworld Digital Solutions Private Ltd., the Delhi High Court, based on the Duro Felguera decision, held that courts must analyse whether the arbitration clause offers for dispute resolution mechanism, i.e., arbitration of conflicts that have emerged among both the sides to the agreement, rather than just the presence of the arbitration agreement. It is essential to acknowledge that the Honourable Supreme Court rejected the appeal against the Delhi High Court’s decision.

Following that, in Vidya Drolia and Others v. Durga Trading Corporation, a three-judge bench of the Honourable Apex Court while holding that the extent of judicial review as well as the jurisdiction under Sections 8 and Section 11 of the Act is severely limited, clearly stated that (i) Courts do not conduct ministerial functions at the consultation stage; (ii) While a prima facie inspection does not imply a complete review, it is used to sieve out clearly and “ex facie; non-existent” and “null and void arbitration agreements” and the “non-arbitrable” conflicts; and (iii) while a prima facie inspection may necessitate a deeper examination in some cases, the Courts should “find the right amount and context when it would examine the prima facie case or exercise restraint.”  The Supreme Court went on to say that courts can’t be completely “hands-off” and that a restricted but successful intervention can only help the arbitration process. The Supreme Court further emphasized that restricted prima facie analysis does not conflict with the kompetenz-kompetenz and separation principles.

Despite these judgements, there was still a question about the scope of judicial review under Section 11 of Act, as well as the efficacy of the term “presence of arbitration agreement.” Section 11 of the Act  continued to be interpreted narrowly by the courts, limiting their jurisdiction to submit conflicts to arbitration.

The Supreme Court, in the case of DLF Home Developers Limited v. Rajapura Homes Private Limited & Anr. has now emphasised that courts are “not supposed to act mechanically just to deliver a supposed disagreement brought by an applicant to the designated Arbitrator’s door.” The courts are “required to apply their minds to the basic preliminary questions, although within the context of Section 11(6-A) of the Act,” according to the law. While such an assessment does not seek to usurp the Arbitral Tribunal’s jurisdiction, it does seek to streamline the arbitration process, according to the Supreme Court. As a result, “even if an arbitration agreement exists, the Court may refuse a prayer for reference if the dispute in question doesn’t really pertain to the aforementioned agreement. ”

The reach of Section 11 of the Act, however, has been unambiguously broadened by the Supreme Court’s recent ruling. The Supreme Court has now said unequivocally that courts must engage their brains to determine if the issue in question corresponds to the parties’ arbitration agreement, and if there is no link, the reference to arbitration might be denied, despite the parties’ agreement.

Author: Deeksha Dev Singh a student of DES Shri Navalmal Firodia Law College, Pune, in case of any queries please contact/write back to us via email chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

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