I. Introduction One of the most crucial proceedings under the Arbitration and Conciliation Act, 1996 (“Act”) is the appointment of arbitrators by courts for the resolution of disputes where the parties fail to agree. The scope of the jurisdiction of courts in such proceedings has long been a point of contention. In 2015, for settling […]

I. Introduction

One of the most crucial proceedings under the Arbitration and Conciliation Act, 1996 (“Act”) is the appointment of arbitrators by courts for the resolution of disputes where the parties fail to agree. The scope of the jurisdiction of courts in such proceedings has long been a point of contention. In 2015, for settling issues related to the jurisdiction of courts in such proceedings, the legislature amended the Act to provide that the courts are only required to examine the existence of arbitration agreements.

This change was in conformity with several decisions of the Supreme Court, and the legislative was to avoid delay in the appointment of arbitrators, which undermines the speedy disposal of arbitration cases. Despite this legislative intervention, courts in India, in some cases, ended exercising expansive jurisdiction at the stage of appointment of an arbitrator. This trend was observed in the recent decision of the Supreme Court in Indian Oil Corporation v. NCC Limited, wherein the court went into the question of arbitrability of the disputes with respect to the scope of the arbitration agreement. Even though the legislature in 2019 amended the Act and omitted Section 11(6-A) from the Act, since these provisions are yet not notified, the decision in Indian Oil Corporation will govern the law on the appointment of the arbitrator. Therefore, these merits an analysis of the major decisions rendered by the Supreme Court on this issue and the manner in which Indian Oil Corporation deviates from these decisions. 

II.Major decisions on the jurisdiction of the courts while appointing arbitrators

The insertion of Section 11(6-A) by the Amendment Act 2015 narrows the scope of intervention by the Judicial Courts. This section confined the powers of courts only to the extent of examining whether there exists a valid arbitration agreement. This provision was omitted in 2019. Thereafter, a decision of United India Insurance Co. Ltd. v. Antique Art Exports (P) Ltd was rendered by the Hon’ble Supreme Court, wherein it was held that the court should not blindly refer the matter to the arbitration. Instead, it should oversee whether there is any dispute subsisting between the parties. In this case, it was held since the matter was already settled between the parties, and therefore there is no pending dispute between the parties which could be referred to the arbitrator. 

Thereafter many conflicting decisions were given on the extent of courts’ intervention at the stage of Section 11 by various High Courts  and even the Hon’ble Supreme Court. Still, the issue was finally settled by a three-Judge bench of the Hon’ble Supreme Court in the case of Mayawati Trading Private Limited v. Pradyuat Deb Burman. In Mayavati Trading, the Hon’ble Supreme Court, after analysing the 246th Law Commission Report, which was regarding the institutionalisation of arbitration in India, held that post-2015, the power of courts at the stage of appointment of an arbitrator is restricted to examination of the existence of the arbitration agreement. 

The decision of Mayawati Trading was followed by the Supreme Court in  VidyaDrolia v. Durga Trading. In Vidya Drolia, the Hon’ble Supreme opened the horizon for judicial intervention at the referral stage. It held that “the existence of arbitration agreement” would include the aspect of the validity of an arbitration agreement, and the court at the reference stage could apply the prima facie test. It was held that issues of non-arbitrability relating to the inquiry, whether the dispute is governed by the arbitration clause, can be examined by the courts at the reference stage and may not be left for the arbitral tribunal. However, it was held that disputed and debatable issues, good reasonable or arguable cases, etc., should be referred to the arbitral tribunal. It was observed that the arbitral tribunal has the primary jurisdiction and authority to decide the disputes, including the question of jurisdiction and arbitrability. The court’s intention should be to protect the parties from being forced to arbitrate when the matter is clearly “non-arbitrable” to cut off the dead wood.

The Hon’ble Supreme Court, in the case DLF Home Developers Limited v. Rajapura Homes Private Limited and Another, again had the occasion to adjudicate the said issue. The Hon’ble Supreme Court, following the Judgement of Vidya Drolia (Supra), observed that the court has very limited jurisdiction at the reference stage. It was held that the court should primarily check whether there exists an arbitration agreement and whether the party has made out a prima facie reasonable case. It was further observed that the limited jurisdiction did not restrict the courts from looking beyond the existence of arbitration agreements to cut out the dead wood. The Hon’ble Supreme Court again got the opportunity to consider the case of Vidya Drolia  in the case of BSNL v. Nortel Networks India Pvt. Ltd. wherein it was observed that even if there is the slightest doubt about the claim being time-barred or the dispute being non-arbitrable, the rule is to refer the matter to the arbitration and only in exceptional circumstances where the claim is ex facie time-barred or that there is no subsisting dispute, the Hon’ble Court may refuse to refer the matter to the arbitral tribunal. 

III.Observations in the Judgement of Indian Oil Corporation.

In the recent judgement, the Hon’ble, after relying on the above-cited judgements, had observed that it is not correct that at the stage of Section 11 Petition, the scope of inquiry of the courts is limited to ascertaining whether or not an Arbitration Agreement exists qua the parties. It was further observed that though the arbitral tribunal has the jurisdiction to decide the question of jurisdiction and non-arbitrability, the same will not preclude the courts, considering a section 11 application, from deciding the said issue. The condition is that facts should be very clear and glaring concerning the non-arbitrability of the disputes, given an arbitration agreement between the parties.

Further, while making the above-said observation, the Supreme Court held that as an arbitration agreement is executed between two parties, the Courts should not interpret the same on the basis of equity. Where the arbitration agreement is unambiguous, it should be given strict interpretation. For example, if it only lists certain disputes to be referred to the arbitration, then the arbitration agreement will cover only those disputes and not all or any other disputes arising out of the Arbitration Agreement. 

The said judgement has again widened the gates for the judicial intervention of the Hon’ble Courts at the referral stage. Mayawati Trading laid more emphasis upon the existence of the Arbitration Agreement. A slight leeway was given to the courts in Vidya Drolia, wherein the Courts were given the discretion to conduct a prima facie review and not to refer to the dispute in cases where it is very clear that the dispute is not arbitrable on the ground of undisputed facts. Following the Judgement of Vidya Drolia, even in the case of Nortel Networks, it was held only in a very limited category of cases where there is not even a vestige of doubt that the claim is ex-facie barred or that the dispute is non-arbitrable then the court may decline to make the reference. It was further held that even in case of the slightest of doubt, the rule is to refer the matter to arbitration. 


The Indian Oil Corporation case has one step ahead of the discretion given at the stage of Section11. The case of Vidya Drolia and Nortel Networks, had in very explicit terms, held only in exceptional cases where there is no factual dispute, the court should deny referring the disputes. In the instant case, the reference was denied on the ground of the matter being settled between parties when such settlement was itself denied on it being based on coercion. It was further argued that the Appellant has not even abided by the settlement terms and has unanimously made payment. All these questions are questions of fact that the court should not have decided at that stage, and the same should be left for the tribunal to decide. 

By not referring the matter to the arbitral tribunal and deciding a question of factwhile appointing an arbitrator, the Supreme Court may have opened a pandora’s box of objections based on factual issues. This may increase the time taken to appoint an arbitration and delay the commencement of arbitration proceedings same. In practice, while considering a petition for appointment of arbitrators, the courts should serve the intent to arbitrate from the issue of scope or conditions for invoking an arbitration clause. The latter is an issue of arbitrability of disputes. It requires consideration of question of fact which arbitral tribunal is competent to decide. Where the intent to arbitrate is established between the parties, the court should appoint the arbitrator and refer all such objections to the arbitral tribunal.