The Courts, while deciding a petition for appointment of Arbitrator, after the amendment of 2015, should restrict themselves to the question as to the existence of an arbitration clause and should not go into preliminary objections/ grounds.
The Hon’ble Supreme Court vide its order dated 05.09.2019, passed by three- judges Bench in M/s Mayavati Trading Pvt. Ltd. vs. Pradyuat Deb Burman bearing Civil Appeal No. 7023/2019, overruled the judgment in United India Insurance Company vs. Antique Art Exports Private Limited (2019) 5 SCC 362.
Challenge
The Hon’ble Supreme Court, vide this judgment, overruled the judgment in the United India Insurance Company (Supra) Case wherein the Division Bench of the Hon’ble Supreme Court while dealing with a petition for appointment of arbitrator, held that though Section 11 of the Arbitration and Conciliation Act, 1996 has been amended by 2015 amendment and sub- section 6A has been inserted in the Section, the Courts, while deciding a petition for appointment of arbitration, have judicial power and not a mere administrative power and they can go into certain preliminary objections such as stale claims, accord and satisfaction having been reached etc. to determine the existence of the arbitral clause so that the dispute Resolution process does not become unnecessarily protracted.
The Hon’ble Court, in this Judgment, looked into the 246th Law Commission Report, 2014 in order to understand the purpose of inserting sub-section (6A), wherein suggestion was made to insert sub-section (6A) to restrict the power of Courts to examine the “existence” of an arbitration agreement and not to entertain preliminary issues. After the above-mentioned recommendation of the Law Commission, Arbitration and Conciliation Act was amended in the year 2015, inter alia, inserting the sub- section (6A) in Section 11.
Held
The Hon’ble Supreme Court, after considering the 246th Law Commission Report, 2014 and the Judgment of the Hon’ble Supreme Court in Garware Wall Ropes Ltd. vs. Coastal Marine Constructions & Engineering Ltd. (2019) SCC OnLine SC 515 and Duro Felguera vs. Gangavaram Port Limited (2017) 9 SCC 729, held that the law prior to the 2015 Amendment, i.e. while entertaining Section 11 Petition for appointment of Arbitrator, which included going into preliminary objections has now been legislatively overruled by the 2015 Amendment Act and therefore, the Courts should now only look into whether there is an arbitration agreement or not, nothing more, nothing less.