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IN

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.7023 OF 2019

(ARISING OUT OF SLP (CIVIL) NO. 8519 OF 2019)

M/S MAYAVTI TRADING PVT. LTD. APPELLANT(S)

VERSUS

PRADYUAT DEB BURMAN RESPONDENT(S)

JUDGMENT

R.F. Nariman, J.

1) Leave granted.

2) We have heard Mr. Mukul Rohatgi, learned Senior

Advocate appearing for the appellant and Mr. Shyam Divan,

learned Senior Advocate appearing for the respondent at

considerable length.

3) On the facts of this case, we do not propose to interfere

with the impugned decision of 12.03.2019 and, therefore, do not

find it necessary to exercise our extraordinary jurisdiction under

Signature Not Verified Article 136 of the Constitution of India.

Digitally signed by R
NATARAJAN
Date: 2019.09.11
16:48:00 IST
Reason:
4) Having said this, however, during the course of argument,

a recent decision of this Court was pointed out, namely, United

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India Insurance Company Limited vs. Antique Art Exports

Private Limited, (2019) 5 SCC 362. In this judgment, purportedly

following Duro Felguera, S.A. vs. Gangavaram Port Limited,

(2017) 9 SCC 729, this Court held:

“20. The submission of the learned counsel for the

respondent that after insertion of sub-section (6-A) to
Section 11 of the Amendment Act, 2015 the jurisdiction
of this Court is denuded and the limited mandate of the
Court is to examine the factum of existence of an
arbitration and relied on the judgment in Duro
Felguera, S.A. v. Gangavaram Port Ltd. [(2017) 9 SCC
729 : (2017) 4 SCC (Civ) 764] The exposition in this
decision is a general observation about the effect of
the amended provisions which came to be examined
under reference to six arbitrable agreements (five
agreements for works and one corporate guarantee)
and each agreement contains a provision for
arbitration and there was serious dispute between the
parties in reference to constitution of Arbitral Tribunal
whether there has to be Arbitral Tribunal pertaining to
each agreement. In the facts and circumstances, this
Court took note of sub-section (6-A) introduced by the
Amendment Act, 2015 to Section 11 of the Act and in
that context observed that the preliminary disputes are
to be examined by the arbitrator and are not for the
Court to be examined within the limited scope
available for appointment of arbitrator under Section
11(6) of the Act. Suffice it to say that appointment of
an arbitrator is a judicial power and is not a mere
administrative function leaving some degree of judicial
intervention; when it comes to the question to examine
the existence of a prima facie arbitration agreement, it
is always necessary to ensure that the dispute
resolution process does not become unnecessarily
protracted.

21. In the instant case, prima facie no dispute

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subsisted after the discharge voucher being signed by

the respondent without any demur or protest and claim
being finally settled with accord and satisfaction and
after 11 weeks of the settlement of claim a letter was
sent on 27-7-2016 for the first time raising a voice in
the form of protest that the discharge voucher was
signed under undue influence and coercion with no
supportive prima facie evidence being placed on
record in absence thereof, it must follow that the claim
had been settled with accord and satisfaction leaving
no arbitral dispute subsisting under the agreement to
be referred to the arbitrator for adjudication.”

5) Section 11 (6A) was added by the amendment Act of 2015

and states as follows:

“11. (6A) The Supreme Court or, as the case may be,
the High Court, while considering any application
under sub-section (4) or sub-section (5) or sub-section
(6), shall, notwithstanding any judgment, decree or
order of any Court, confine to the examination of the
existence of an arbitration agreement.”

6) Mr. Mukul Rohatgi, learned Senior Advocate, has pointed

out that by an amendment Act of 2019, which has since been

passed, this sub-section has now been omitted. Section 3 of the

amendment Act of 2019 insofar as it pertains to this omission has

not yet been brought into force. The omission is pursuant to a

High Level Committee Review regarding institutionalization of

arbitration in India, headed by Justice B. N. Srikrishna. The Report

given by this Committee is dated 30 th July, 2017. The omission of

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the sub-section is not so as to resuscitate the law that was

prevailing prior to the amendment Act of 2015. The reason for

omission of S. 11(6A) is given in the Report as follows:

“Thus, the 2015 amendments to section 11 are geared

towards facilitating speedy disposal of section 11
applications by: (a) enabling the designation of any
person or institution as an appointing authority for
arbitrators in addition to the High Court or Supreme
Court under section 11; (b) limiting challenges to the
decision made by the appointing authority; and (c)
requiring the expeditious disposal of section 11
applications, preferably within the prescribed 60-day
time period.

While these amendments no doubt facilitate the

speedy disposal of section 11 applications to a large
extent, they do not go all the way in limiting court
interference. Pursuant to the amendments, the
appointment of arbitrators under section 11 may be
done: (a) by the Supreme Court or the High Court; or
(b) by a person or institution designated by such court
in exercise of an administrative power following
section 11(6B). In either case, the amendments still
require the Supreme Court / the High Court to examine
whether an arbitration agreement exists, which can
lead to delays in the arbitral process as extensive
evidence and arguments may be led on the same.

The Committee notes that the default procedure for

appointment of arbitrators in other jurisdictions do not
require extensive court involvement as in India.

For instance, in Singapore, the relevant provision of

the IAA provides that where the parties fail to agree on
the appointment of the third arbitrator, within 30 days
of the receipt of the first request by either party to
appoint the arbitrator, the appointment shall be made
by the appointing authority (the President of the SIAC)
by the request of the parties. (See section 9A(2) read
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with sections 2(1) and 8(2), IAA)

The arbitration legislation of Hong Kong incorporates

Article 11 of the UNCITRAL Model Law relating to the
appointment of arbitrators. Like in the case of
Singapore where the SIAC is the appointing authority
for arbitrators, the default appointment of arbitrator(s)
is done by the HKIAC. (Section 13(2) read with section
24, AO)

In the United Kingdom, in the case of default of one

party to appoint an arbitrator, the other party may
appoint his arbitrator as the sole arbitrator after giving
notice of 7 clear days to the former of his intention to
do so. (Section 17, AA) The defaulting party may apply
to the court to set aside the appointment. (Section
17(3), AA) In case of a failure of the appointment
procedure, any party may apply to the court to make
the appointment or give directions regarding the
making of an appointment. (Section 18(2), AA)

The Committee recommends the adoption of the

practice followed in Singapore and Hong Kong in the
Indian scenario — apart from avoiding delays at court
level, it may also give impetus to institutional
arbitration.

xxx xxx

Recommendations

1. In order to ensure speedy appointment of

arbitrators, section 11 may be amended to
provide that the appointment of arbitrator(s)
under the section shall only be done by arbitral
institution(s) designated by the Supreme Court (in
case of international commercial arbitrations) or
the High Court (in case of all other arbitrations)
for such purpose, without the Supreme Court or
High Courts being required to determine the
existence of an arbitration agreement.”

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Thus, it can be seen that after the amendment Act of 2019,

Section 11(6A) has been omitted because appointment of

arbitrators is to be done institutionally, in which case the Supreme

Court or the High Court under the old statutory regime are no longer

required to appoint arbitrators and consequently to determine

whether an arbitration agreement exists.

7) Prior to Section 11(6A), this Court in several judgments

beginning with SBP & Co. vs. Patel Engineering Ltd. and Anr.

(2005) 8 SCC 618 has held that at the stage of a Section 11(6)

application being filed, the Court need not merely confine itself to

the examination of the existence of an arbitration agreement but

could also go into certain preliminary questions such as stale

claims, accord and satisfaction having been reached etc.

8) In ONGC Mangalore Petrochemicals Limited vs. ANS

Constructions Limited and another, (2018) 3 SCC 373, this

Court in a case which arose before the insertion of Section 11(6A)

dismissed a Section 11 petition on the ground that accord and

satisfaction had taken place in the following terms: -

“31. Admittedly, no-dues certificate was submitted by

the contractee company on 21-9-2012 and on their
request completion certificate was issued by the
appellant contractor. The contractee, after a gap of
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one month, that is, on 24-10-2012, withdrew the no-

dues certificate on the grounds of coercion and duress
and the claim for losses incurred during execution of
the contract site was made vide letter dated 12-1-
2013, i.e. after a gap of 3 ½ (three-and-a-half) months
whereas the final bill was settled on 10-10-2012. When
the contractee accepted the final payment in full and
final satisfaction of all its claims, there is no point in
raising the claim for losses incurred during the
execution of the contract at a belated stage which
creates an iota of doubt as to why such claim was not
settled at the time of submitting final bills that too in the
absence of exercising duress or coercion on the
contractee by the appellant contractor. In our
considered view, the plea raised by the contractee
company is bereft of any details and particulars, and
cannot be anything but a bald assertion. In the
circumstances, there was full and final settlement of
the claim and there was really accord and satisfaction
and in our view no arbitrable dispute existed so as to
exercise power under Section 11 of the Act. The High
Court was not, therefore, justified in exercising power
under Section 11 of the Act.”

9) The 246th Law Commission Report dealt with some of

these judgments and felt that at the stage of a Section 11(6)

application, only “existence” of an arbitration agreement ought to

be looked at and not other preliminary issues. In a recent

judgment of this Court, namely, Garware Wall Ropes Ltd. vs.

Coastal Marine Constructions & Engineering Ltd., (2019 SCC

OnLine SC 515), this Court adverted to the said Law Commission

Report and held: -

“14. The case law under Section 11(6) of the Arbitration

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Act, as it stood prior to the Amendment Act, 2015, has

had a chequered history. In Konkan Railway Corporation
Ltd. v. Mehul Construction Co., (2000) 7 SCC 201
[“Konkan Railway I”], it was held that the powers of the
Chief Justice under Section 11(6) of the 1996 Act are
administrative in nature, and that the Chief Justice or his
designate does not act as a judicial authority while
appointing an arbitrator. The same view was reiterated in
Konkan Railway Corporation Ltd. v. Rani Construction
(P) Ltd., (2002) 2 SCC 388 [“Konkan Railway II”].

15. However, in SBP & Co. (supra), a seven-Judge

Bench overruled this view and held that the power to
appoint an arbitrator under Section is judicial and not
administrative. The conclusions of the seven-Judge
Bench were summarised in paragraph 47 of the
aforesaid judgment. We are concerned directly with sub-
paragraphs (i), (iv), and (xii), which read as follows:

“(i) The power exercised by the Chief Justice of the

High Court or the Chief Justice of India under Section
11(6) of the Act is not an administrative power. It is a
judicial power.

xxx xxx xxx

(iv) The Chief Justice or the designated Judge will

have the right to decide the preliminary aspects as
indicated in the earlier part of this judgment. These will
be his own jurisdiction to entertain the request, the
existence of a valid arbitration agreement, the
existence or otherwise of a live claim, the existence of
the condition for the exercise of his power and on the
qualifications of the arbitrator or arbitrators. The Chief
Justice or the designated Judge would be entitled to
seek the opinion of an institution in the matter of
nominating an arbitrator qualified in terms of Section
11(8) of the Act if the need arises but the order
appointing the arbitrator could only be that of the Chief
Justice or the designated Judge.

xxx xxx xxx

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(xii) The decision in Konkan Rly. Corpn. Ltd. v. Rani

Construction (P) Ltd. [(2002) 2 SCC 388] is overruled.”

16. This position was further clarified in Boghara Polyfab

(supra) as follows:

“22. Where the intervention of the court is sought for

appointment of an Arbitral Tribunal under Section 11, the
duty of the Chief Justice or his designate is defined in
SBP & Co. [(2005) 8 SCC 618]. This Court identified and
segregated the preliminary issues that may arise for
consideration in an application under Section 11 of the
Act into three categories, that is, (i) issues which the
Chief Justice or his designate is bound to decide; (ii)
issues which he can also decide, that is, issues which he
may choose to decide; and (iii) issues which should be
left to the Arbitral Tribunal to decide.

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

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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.”

17. As a result of these judgments, the door was wide

open for the Chief Justice or his designate to decide a
large number of preliminary aspects which could
otherwise have been left to be decided by the arbitrator
under Section 16 of the 1996 Act. As a result, the Law
Commission of India, by its Report No. 246 submitted in
August 2014, suggested that various sweeping changes
be made in the 1996 Act. Insofar as SBP & Co. (supra)
and Boghara Polyfab (supra) are concerned, the Law
Commission examined the matter and recommended the
addition of a new sub-section, namely, sub-section (6A)
in Section 11. In so doing, the Law Commission
recommendations which are relevant and which led to
the introduction of Section 11(6A) are as follows:

“28. The Act recognizes situations where the

intervention of the Court is envisaged at the pre-arbitral
stage, i.e. prior to the constitution of the arbitral tribunal,
which includes sections 8, 9, 11 in the case of Part I
arbitrations 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
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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 a Court (Chief Justice) will consider
while deciding whether to appoint an arbitrator or not –
i.e. whether the arbitration agreement exists, whether
it is null and void, whether it is voidable etc.; and
which of these it should leave for decision of the
arbitral tribunal.

 the nature of such intervention – i.e. would the

Court (Chief Justice) consider the issues upon a
detailed trial and whether the same would be decided
finally or be left for determination of the arbitral
tribunal.

30. After a series of cases culminating in the decision

in SBP v. Patel Engineering, (2005) 8 SCC 618, the
Supreme Court held that the power to appoint an
arbitrator under section 11 is a “judicial” power. The
underlying issues in this judgment, relating to the scope
of intervention, were subsequently clarified by
RAVEENDRAN J in National Insurance Co. Ltd. v.
Boghara Polyfab Pvt. Ltd., (2009) 1 SCC 267, where the
Supreme Court laid down as follows –

“1. The issues (first category) which Chief Justice/his

designate will have to decide are:

(a) Whether the party making the application has

approached the appropriate High Court?

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(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?

2. The issues (second category) which the Chief

Justice/his designate may choose to decide 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?

3. The issues (third category) which the Chief Justice/his

designate should leave exclusively to the arbitral tribunal
are:

(a) Whether a claim 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)?

(b) Merits of any claim involved in the arbitration.”

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.

32. In relation to the nature of intervention, the

exposition of the law is to be found in the decision of the
Supreme Court in Shin Etsu Chemicals Co. Ltd. v. Aksh
Optifibre, (2005) 7 SCC 234, (in the context of section 45
of the Act), where the Supreme Court has ruled in favour
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of looking at the issues/controversy only prima facie.

33. It is in this context, the Commission has

recommended amendments to sections 8 and 11 of the
Arbitration and Conciliation Act, 1996. The scope of the
judicial intervention is only restricted to situations where
the Court/Judicial Authority finds that the arbitration
agreement does not exist or is null and void. In so far as
the nature of intervention is concerned, it is
recommended that in the event the Court/Judicial
Authority is prima facie satisfied against the argument
challenging the arbitration agreement, it shall appoint the
arbitrator and/or refer the parties to arbitration, as the
case may be. The amendment envisages that the judicial
authority shall not refer the parties to arbitration only if it
finds that there does not exist an arbitration agreement
or that it is null and void. If the judicial authority is of the
opinion that prima facie the arbitration 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.”

18. Pursuant to the Law Commission recommendations,

Section 11(6A) was introduced first by Ordinance and
then by the Amendment Act, 2015. The Statement of
Objects and Reasons which were appended to the
Arbitration and Conciliation (Amendment) Bill, 2015
which introduced the Amendment Act, 2015 read as
follows:

“STATEMENT OF OBJECTS AND REASONS

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xxx xxx xxx

6. It is proposed to introduce the Arbitration and

Conciliation (Amendment) Bill, 2015, to replace the
Arbitration and Conciliation (Amendment) Ordinance,
2015, which inter alia, provides for the following,
namely:-

(i) to amend the definition of “Court” to provide that in

the case of international commercial arbitrations, the
Court should be the High Court;

(ii) to ensure that an Indian Court can exercise

jurisdiction to grant interim measures, etc., even where
the seat of the arbitration is outside India;

(iii) an application for appointment of an arbitrator shall

be disposed of by the High Court or Supreme Court,
as the case may be, as expeditiously as possible and
an endeavour should be made to dispose of the matter
within a period of sixty days;

(iv) to provide that while considering any application

for appointment of arbitrator, the High Court or the
Supreme Court shall examine the existence of a prima
facie arbitration agreement and not other issues;

(v) to provide that the arbitral tribunal shall make its

award within a period of twelve months from the date it
enters upon the reference and that the parties may,
however, extend such period up to six months, beyond
which period any extension can only be granted by the
Court, on sufficient cause;

(vi) to provide that a model fee Schedule on the basis

of which High Courts may frame rules for the purpose
of determination of fees of arbitral tribunal, where a
High Court appoints arbitrator in terms of section 11 of
the Act;

(vii) to provide that the parties to dispute may at any

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stage agree in writing that their dispute be resolved

through fast track procedure and the award in such
cases shall be made within a period of six months;

(viii) to provide for neutrality of arbitrators, when a

person is approached in connection with possible
appointment as an arbitrator;

(ix) to provide that application to challenge the award

is to be disposed of by the Court within one year.

7. The amendments proposed in the Bill will ensure that

arbitration process becomes more user-friendly, cost
effective and lead to expeditious disposal of cases.

xxx xxx xxx”

19. A reading of the Law Commission Report, together

with the Statement of Objects and Reasons, shows that
the Law Commission felt that the judgments in SBP &
Co. (supra) and Boghara Polyfab (supra) required a
relook, as a result of which, so far as Section 11 is
concerned, the Supreme Court or, as the case may be,
the High Court, while considering any application under
Section 11(4) to 11(6) is to confine itself to the
examination of the existence of an arbitration agreement
and leave all other preliminary issues to be decided by
the arbitrator.”

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(6A) is confined to the

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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 Duro Felguera, S.A. (supra) – see paras 48 & 59.

11) We, therefore, overrule the judgment in United India

Insurance Company Limited (supra) as not having laid down the

correct law but dismiss this appeal for the reason given in para 3

above.

12) Mr. Rohatgi now requests us for an extension of the status

quo order granted by the trial court for a period of one week from

today so that he may adopt other proceedings. This request is

granted.

………………........................... J.
(ROHINTON FALI NARIMAN)

………………........................... J.
(R. SUBHASH REDDY)

………………........................... J.
(SURYA KANT)
New Delhi;
September 05, 2019.

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