Full Judgment Text
REPORTABLE
2026 INSC 5
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 36 of 2026
(@ Special Leave Petition (Civil) No. 5834 of 2025)
Motilal Oswal Financial
Services Limited …Appellant(s)
VERSUS
Santosh Cordeiro and Another …Respondent(s)
J U D G M E N T
K.V. Viswanathan, J.
1. Leave granted.
2. The present appeal calls in question the correctness of
the order dated 02.05.2024 passed by the Single Judge of the
High Court of Judicature at Bombay in Commercial Arbitration
Application No.9 of 2024. By the said order, the learned Single
Judge allowed the Section 11 Application filed by the
Signature Not Verified
respondent under the Arbitration & Conciliation Act, 1996 (for
Digitally signed by
CHANDRESH
Date: 2026.01.05
16:13:11 IST
Reason:
short “the A&C Act”) and appointed an arbitrator to
Page 1 of 31
adjudicate the dispute between the parties. The only
objection taken by the appellant herein was that the dispute is
non-arbitrable in view of Section 41 of the Presidency Small
Cause Courts Act, 1882 (for short “the 1882 Act”). The learned
Single Judge made a short shrift of the said objection by
holding that the place where the property in question, which
was the subject matter of the dispute, was situated, i.e. Malad,
was outside the jurisdiction of the Small Causes Court. This
finding has now turned out to be a damp squib, since parties
before us are ad idem that Malad area is covered under the
jurisdiction of the Small Causes Court. We could have rest
content by remanding the matter to the High Court for fresh
consideration. However, that will only prolong the dispute
and, hence, we have decided to answer the issues arising in
the case ourselves.
BRIEF FACTS OF THE CASE: -
3. With regard to the premises situated at Unit No.718,
th
admeasuring 2925 sq. ft., 7 Floor, Palm Spring Centre, Link
Road, Malad (West), Mumbai, the appellant entered into a
Page 2 of 31
Leave and License Agreement on 06.10.2017 with the
respondent. The period of the Leave and License was 60
months from 01.10.2017 to 30.10.2022. Though the appellant
terminated the said agreement on 31.12.2019, after exchange
of correspondence between the parties, the said termination
was reversed and an Addendum dated 13.03.2020 was
entered into extending the Leave and License period from 60
months to 96 months with a lock-in period of 72 months.
4. According to the appellant, due to COVID-19 pandemic,
they were unable to continue the arrangement and citing the
force majeure clause in the agreement, they handed over the
keys and vacant peaceful possession of the premises to the
respondent on 09.09.2020. According to the appellant, they
intimated the respondents about the same on 10.10.2020 by
writing an email. The appellant also sought refund of the
security deposit.
5. On 28.06.2023, the respondent No.1 called upon the
appellant to pay a sum of Rs.94,40,152/- along with interest @
24% towards the alleged arrears of license fees for the
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balance lock-in period i.e. from 01.09.2020 to 14.06.2023. The
appellants wrote back on 17.07.2023 denying any liability and
seeking refund of security deposit of Rs. 10 lakhs.
6. The appellant on 17.07.2023 received a notice dated
15.07.2023 issued by the respondent under Section 21 of the
A&C Act invoking Clause 33 of the arbitration agreement of
the Leave and License Agreement dated 06.10.2017 and
Addendum dated 13.03.2020. Clause 33 of the Leave and
License Agreement dated 06.10.2017 reads as under: -
“In the event of the any dispute or difference arising
between the Licensors and the Licensee hereto
concerning or relating to the interpretation of these
presents or the interpretation or effect of any provisions
thereof or relating to the liability or obligation on the part
of any of the parties hereto, the same shall be referred to
arbitration and Sole Arbitrator shall be appointed by the
mutual consent of the Parties. The award passed by the
sole arbitrator shall be binding on both the parties. The
arbitration shall be in Mumbai and in accordance with and
subject to the provisions of the Arbitration and
Conciliation Act, 1996 or any statutory modification or re-
enhancements thereof for the time being in force.”
This was followed by an application under Section 11 of the
A&C Act filed on 13.08.2023 by the respondent seeking
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appointment of a sole arbitrator in accordance with clause 33
set out above.
7. On 01.11.2023, the appellant filed its reply objecting to
the appointment of the arbitrator and specifically relied on
Section 41 of the 1882 Act and contended that only the Small
Causes Court would have exclusive jurisdiction to entertain
and try any suit or proceeding arising from the relationship
between a licensor and licensee and that since the said statute
is a special remedy, the dispute is not arbitrable. The High
Court, by its order dated 02.05.2024, allowed the application
and appointed the arbitrator.
8. Section 41 of the 1882 Act reads as under:-
“41 . Suits or Proceedings between licensors and
licensees or landlords and tenants for recovery of
possession of immovable property and license fees or
rent, except to those to which other Acts apply to lie in
Small Cause Court.- (1) Notwithstanding anything
contained elsewhere in this Act but subject to the
provisions of sub-section (2), the Court of Small Cause
shall have jurisdiction to entertain and try all suits and
proceedings between a licensor and licensee, or a
landlord and tenant, relating to the recovery of possession
of any immovable property situated in Greater Bombay,
or relating to the recovery of the licence fee or charges or
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rent therefor, irrespective of the value of the subject-
matter of such suits or proceedings.
(2) Nothing contained in sub-section (1) shall apply to
suits or proceedings for the recovery of possession of any
immovable property, or of licence fee for charges of rent
thereof, to which the provisions of the Bombay Rents,
Hotel and Lodging House Rates Control Act, 1947, the
Bombay Government Premises (Eviction) Act, 1955, the
Bombay Municipal Corporation Act, the Maharashtra
Housing and Area Development Act, 1976 or any other law
for the time being in force, apply.”
9. Proceedings before the arbitrator were carried on. On
03.06.2024, the appellant raised the ground of non-
arbitrability under Section 41 of the 1882 Act and filed a
Section 16 application under the A&C Act before the
arbitrator. On 11.10.2024, the arbitrator dismissed the Section
16 application by holding that the amount sought to be
recovered partakes the character of a ‘debt’ and is not a claim
for license fee for use and occupation. On 28.01.2025, the
Special Leave Petition was filed before this Court and this
Court, on 21.02.2025, stayed the impugned order. That is how
the matter presents itself before us.
Page 6 of 31
10. We have heard Mr. Chirag M. Shah, learned advocate,
for the appellant and Mr. Rishabh Shah, learned advocate for
the respondents. We have perused the records as well as
written submissions filed by the respective parties.
CONTENTIONS OF THE APPELLANT: -
11. The learned counsel for the appellant contends that in the
Section 11 application filed by the respondents, a clear case
for recovery of license fee was sought, and expressly it was
stated that the amount claimed did not partake the character
of damages; that the reliance on the judgment of the Division
Bench of the Bombay High Court in Globsport India Pvt. Ltd.
1
vs. Mayfair Housing Pvt. Ltd was untenable in view of the
Full Bench judgment of the Bombay High Court in Central
Warehousing Corporation, Mumbai v. Fortpoint Automotive
2
Pvt. Ltd., Mumbai ; that Central Warehousing ( supra ) clearly
holds that exclusive jurisdiction is conferred on the Court of
Small Causes to entertain and decide all suits and
1
(2015) OnLine Bom 4176
2
2009 SCC OnLine Bom 2023
Page 7 of 31
proceedings between a licensor and licensee or a landlord
and tenant relating to recovery of possession or recovery of
license fee/rent in respect of premises situated in Greater
Bombay; that this Court in Natraj Studios Private Limited . v.
3
Navrang Studios and Another , while interpreting a pari
materia provision held that the parties could not contract out
of a special legislation that conferred exclusive jurisdiction
over landlord-tenant disputes to the Small Causes Court; that
as long as the suit was between a licensor and licensee or a
landlord and tenant, concerning immovable property,
relating to recovery of possession or recovery of license fee,
charges or rent, it will lie only before the Small Causes Court
and the jurisdiction of all other courts is ousted; that the 1882
Act is a special legislation with a special purpose and grants
exclusive jurisdiction on special courts which have been set
up under such legislation and that in Booz Allen and Hamilton
4
Inc vs. SBI Home Finance Limited And Others , this Court
3
(1981) 1 SCC 523
4
(2011) 5 SCC 532
Page 8 of 31
held that tenancy/licensor/licensee disputes governed by
special statutes are not arbitrable.
CONTENTIONS OF THE RESPONDENT: -
12. The learned counsel for the respondent submitted the
5
only exclusion in Clause 35 of the agreement was that the
arbitrator was not to have power to interfere or arbitrate on
issue of vacating the premises on expiry of license period and
there was no bar to arbitrate on the obligation on the parties
to pay the license fee/rent/use and occupation charges; that
the dispute was only for payment of compensation for the
“balance lock-in period”; that the claim of the respondents is
neither for recovery of possession nor license fee; that the
respondents’ case is supported by the judgment in Globsport
( supra ) ; that the judgment in Vidya Drolia And Others vs.
6
Durga Trading Corporation , (hereinafter called Vidya Drolia
- II), makes it clear that mere conferral of jurisdiction on a
5
The reference to arbitration will in no way affect the obligation of the Licensee to vacate the licensed premises
on the expiry or earlier determination of the License period and the arbitrators shall have no power to interfere
with or arbitrate on issue of vacating the licensed premises on expiry of the licensed period.
6
(2021) 2 SCC 1
Page 9 of 31
specific court or creation of a public fora would not be
decisive to answer the issue of arbitrability or otherwise of a
dispute; and that no statutory protection under the
Maharashtra Rent Control Act was denied to the appellant.
QUESTION FOR CONSIDERATION: -
13. In the above background, the question for consideration
is whether the High Court has rightly allowed the application
filed by the respondent under Section 11 of the A&C Act?
ANALYSIS AND DISCUSSION: -
14. There is no dispute that the Leave and License agreement
of 06.10.2017, in Clause 33, contained an Arbitration clause. In
a proceeding under Section 11 of the A&C Act, the Court is to
confine the examination to the existence of an Arbitration
Agreement. Section 11 (6-A) which was brought into force
with effect from 23.10.2015, though omitted by Act 33 of 2019,
the omission has not yet been notified.
15. Section 11(6A) of the A&C Act is reproduced hereunder:-
“11. Appointment of arbitrators. —(1) xxx xxx .
(2) xxx xxx
(3) xxx xxx
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(4) xxx xxx
(5) xxx xxx
(6) xxx xxx
(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.”
16. A Seven Judge Bench of this Court in In re Interplay
Between Arbitration Agreements under Arbitration and
7
Conciliation Act, 1996 & Stamp Act, 1899 , (hereinafter called
as ‘In re-Interplay’) while dealing with the aspect of how Vidya
Drolia (Supra) proceeded on the assumption that Section
11(6-A) has been omitted, clarified the position thus:-
“62. A plain reading of Section 11(6-A) makes it evident that
it is referring to an arbitration agreement . Section 11(6-A)
provides that courts must confine themselves to an
examination of the existence of the arbitration agreement.
The word “confine” indicates the intention of the legislature
to limit the jurisdiction of the Courts at the stage of the
appointment of an arbitrator.
63. In Vidya Drolia [ Vidya Drolia v. Durga Trading Corpn. ,
(2021) 2 SCC 1], this Court held : (SCC p. 49, para 21)
“ 21 . The term “agreement” is not defined in the Arbitration
Act, albeit it is defined in Section 10 of the Contract Act, 1872
(for short “the Contract Act”), … as contracts made by free
7
(2024) 6 SCC 1
Page 11 of 31
consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are not thereby
expressly declared to be void. Section 10 of the Contract Act
also stipulates that aforesaid requirements shall not affect any
law in force in India (and not expressly repealed) by which a
contract is required to be made in writing, in presence of
witnesses or any law relating to registration of documents.
Thus, an arbitration agreement should satisfy the mandate of
Section 10 of the Contract Act, in addition to satisfying other
requirements stipulated in Section 7 of the Arbitration Act.”
64. The above observations are correct insofar as the
arbitration agreement must satisfy the requirements of the
Contract Act. However, the authority empowered to
adjudicate whether the requirements of the Contract Act are
satisfied is the Arbitral Tribunal, under Section 16 of the
Arbitration Act. This is addressed in greater detail in the
following segments.
163. We are of the opinion that the above premise of the
Court in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn.,
[(2021) 2 SCC 1] is erroneous because the omission of Section
11(6-A) has not been notified and, therefore, the said
provision continues to remain in full force. Since Section 11(6-
A) continues to remain in force, pending the notification of the
Central Government, it is incumbent upon this Court to give
true effect to the legislative intent.
164. The 2015 Amendment Act has laid down different
parameters for judicial review under Section 8 and
Section 11. Where Section 8 requires the Referral Court to
look into the prima facie existence of a valid arbitration
agreement, Section 11 confines the Court's jurisdiction to
the examination of the existence of an arbitration
agreement. Although the object and purpose behind both
Sections 8 and 11 is to compel parties to abide by their
contractual understanding, the scope of power of the
Page 12 of 31
Referral Courts under the said provisions is intended to
be different. The same is also evident from the fact that
Section 37 of the Arbitration Act allows an appeal from the
order of an Arbitral Tribunal refusing to refer the parties
to arbitration under Section 8, but not from Section 11.
Thus, the 2015 Amendment Act has legislatively
overruled the dictum of Patel Engg. [SBP & Co. v. Patel
Engg. Ltd., (2005) 8 SCC 618] where it was held that
Section 8 and Section 11 are complementary in nature.
Accordingly, the two provisions cannot be read as laying
down a similar standard.
165. The legislature confined the scope of reference
under Section 11(6-A) to the examination of the existence
of an arbitration agreement. The use of the term
“examination” in itself connotes that the scope of the
power is limited to a prima facie determination. Since the
Arbitration Act is a self-contained code, the requirement
of “existence” of an arbitration agreement draws effect
from Section 7 of the Arbitration Act. In Duro Felguera
[Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9
SCC 729, this Court held that the Referral Courts only
need to consider one aspect to determine the existence of
an arbitration agreement — whether the underlying
contract contains an arbitration agreement which
provides for arbitration pertaining to the disputes which
have arisen between the parties to the agreement.
Therefore, the scope of examination under Section 11(6-
A) should be confined to the existence of an arbitration
agreement on the basis of Section 7. Similarly, the
validity of an arbitration agreement, in view of Section 7,
should be restricted to the requirement of formal validity
such as the requirement that the agreement be in writing.
This interpretation also gives true effect to the doctrine of
competence-competence by leaving the issue of
substantive existence and validity of an arbitration
agreement to be decided by Arbitral Tribunal under
Page 13 of 31
Section 16. We accordingly clarify the position of law laid
down in Vidya Drolia [Vidya Drolia v. Durga Trading
Corpn., (2021) 2 SCC 1 in the context of Section 8 and
Section 11 of the Arbitration Act.
166 . The burden of proving the existence of arbitration
agreement generally lies on the party seeking to rely on such
agreement. In jurisdictions such as India, which accept the
doctrine of competence-competence, only prima facie proof
of the existence of an arbitration agreement must be adduced
before the Referral Court. The Referral Court is not the
appropriate forum to conduct a mini-trial by allowing the
parties to adduce the evidence in regard to the existence or
validity of an arbitration agreement. The determination of the
existence and validity of an arbitration agreement on the
basis of evidence ought to be left to the Arbitral Tribunal. This
position of law can also be gauged from the plain language of
the statute.
167. Section 11(6-A) uses the expression “examination of
the existence of an arbitration agreement”. The purport
of using the word “examination” connotes that the
legislature intends that the Referral Court has to inspect
or scrutinise the dealings between the parties for the
existence of an arbitration agreement. Moreover, the
expression “examination” does not connote or imply a
laborious or contested inquiry. [ P. Ramanatha Aiyar,
The Law Lexicon (2nd Edn., 1997) 666.] On the other hand,
Section 16 provides that the Arbitral Tribunal can “rule”
on its jurisdiction, including the existence and validity of
an arbitration agreement. A “ruling” connotes
adjudication of disputes after admitting evidence from
the parties. Therefore, it is evident that the Referral Court
is only required to examine the existence of arbitration
agreements, whereas the Arbitral Tribunal ought to rule
on its jurisdiction, including the issues pertaining to the
existence and validity of an arbitration agreement. A
Page 14 of 31
similar view was adopted by this Court in Shin-Etsu
Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC
234].
169. When the Referral Court renders a prima facie opinion,
neither the Arbitral Tribunal, nor the Court enforcing the
arbitral award will be bound by such a prima facie view. If a
prima facie view as to the existence of an arbitration
agreement is taken by the Referral Court, it still allows the
Arbitral Tribunal to examine the issue in depth. Such a legal
approach will help the Referral Court in weeding out prima
facie non-existent arbitration agreements. It will also protect
the jurisdictional competence of the Arbitral Tribunals to
decide on issues pertaining to the existence and validity of
an arbitration agreement.”
[Emphasis supplied]
17. Hence, it is very clear that our jurisdiction is only to
inspect or scrutinize the dealings between the parties for
determination about the existence of an Arbitration
Agreement. We are not to launch a laborious or a contested
inquiry.
18. Our task would have been much simpler but for the
reliance placed by the learned counsel for the appellant on
the Full Bench judgment of the Bombay High Court in Central
Warehousing ( supra ). Central Warehousing (supra)
Page 15 of 31
8
examined the question whether in view of Section 5 of the
A&C Act, if in any agreement between licensor and licensee
an arbitration clause exists, the jurisdiction of the Small
Causes Court under the Presidency Small Causes Court Act,
1882, would be ousted.
19. While answering the said question, the Full Bench traced
the legislative history of Section 41(2) of the Act of 1882. It
found that the object of introducing Section 41 in the amended
form, was to avoid multiplicity of proceedings in different
Courts and consequent waste of public time and money and to
avoid unnecessary delay and hardship to the suitors. The Full
Bench found that the objective was to have uniformity of the
procedure so that all suits and proceedings between a
landlord and tenant or a licensor and licensee for recovery of
possession of premises or for recovery of rent or license fee,
irrespective of the value of the subject matter, should go to
and be disposed of by Small Causes Court. The Full Bench
8
Extent of judicial intervention.- Notwithstanding anything contained in any other law for the time being in
force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this
Part.
Page 16 of 31
found that the provision vested exclusive jurisdiction of the
Court of Small Causes to entertain such suits. Ultimately, for
the purpose of our case we only need to deal with the
operative portion set out in Para 40 of the said judgment which
reads as under: -
“40. In summation, we would hold that section 41(1) of the
Act of 1882 is a special law which in turn has constituted
special Courts for adjudication of disputes specified therein
between the licensor and licensee or a landlord and tenant.
The effect of section 41(2) of the Act of 1882 is only the suits
or proceedings for recovery of possession of immovable
property or of licence fee thereof, to which, the provisions
of specified Acts or any other law for the time being in force
apply, have been excepted from the application of non-
obstante clause contained in section 41(1) of the Act. The
expression “or any other law for the time being in force”
appearing in section 41(2) will have to be construed to mean
that such law should provide for resolution of disputes
between licensor and licensee or a landlord and tenant in
relation to immovable property or licence fee thereof, to
which immovable property, the provisions of that Act are
applicable. The Act of 1996 is not covered within the ambit
of section 41(2) in particular the expression “or any other
law for the time being in force” contained therein. The
question whether the exclusive jurisdiction of the Small
Causes Court vested in terms of section 41 of the Act of 1882
is ousted, if an agreement between the licensor and licensee
contains a clause for arbitration, the same will have to be
answered in the negative. For, section 5 of the Act of 1996 in
that sense is not an absolute non-obstante clause. Section 5
of the Act of 1996 cannot affect the laws for the time being in
force by virtue of which certain disputes may not be
Page 17 of 31
submitted to arbitration, as stipulated in section 2(3) of the
Act of 1996. We hold that section 41 of the Act of 1882 falls
within the ambit of section 2(3) of the Act of 1996. As a
result of which, even if the Licence Agreement contains
Arbitration Agreement, the exclusive jurisdiction of the
Courts of Small Causes under section 41 of the Act of
1882 is not affected in any manner. Whereas, Arbitration
Agreement in such cases would be invalid and
inoperative on the principle that it would be against
public policy to allow the parties to contract out of the
exclusive jurisdiction of the Small Causes Courts by
virtue of section 41 of the Act of 1882. ”
[Emphasis supplied]
20. The appellant relies on the above paragraph which holds
that the Arbitration Agreement in the situation referred to in
the paragraph would be invalid and inoperative on the
principle that it would be against public policy to allow the
parties to contract out of the exclusive jurisdiction of Small
Causes Court by virtue of Section 41 of the Act of 1882.
21. The learned counsel for the appellant submits that in view
of this holding, even while examining within the contours of
Section 11(6-A) this Court will be obliged to conclude that no
arbitration agreement existed. We are not able to
countenance the submission of the learned counsel for the
appellant for the following reasons: -
Page 18 of 31
I. (a). Firstly, Central Warehousing ( supra ) has to be
understood in the context in which it came to be
decided. The said context does not obtain here. In
Central Warehousing (supra) , the petitioner therein,
issued termination notices terminating the storage
warehouse facilities of the respondent therein – FAP
Limited. In response thereto, the respondent therein
FAP Limited invoked the arbitration clause.
Respondent-FAP Limited thereafter, filed a suit under
Section 41 of the Act of 1882 for a declaration that the
agreement providing storage facility was subsisting
and obtained interim orders restraining the petitioner
therein from giving effect to the termination notices.
The petitioner therein - Central Warehousing raised
an objection based on the provisions of Section 8 of the
A&C Act. The preliminary objection was overruled.
Aggrieved, Central Warehousing approached the
High Court under Article 227 of the Constitution of
India. What is significant to notice is that the
Page 19 of 31
respondent therein FAP Limited was in possession of
the premises.
(b). In the present case, it is undisputed by both
parties that possession had been handed over by the
appellant to the respondents in September 2020. The
dispute between the parties is with regard to a
monetary claim with the appellant asserting that the
security deposit should be repaid by the respondents
and the respondents claiming sums of money towards
alleged arrears of amounts payable for the balance
lock-in period. This aspect is set out only for
explaining the context of the present case and
contrasting with the context in Central Warehousing
(supra) .
II. (a). Secondly, pursuant to a reference made to a three-
Judge Bench in Vidya Drolia and Others v. Durga
9
Trading Corporation ., (hereinafter called Vidya
9
(2019) 20 SCC 406
Page 20 of 31
Drolia-I), this Court pronounced the judgment in
Vidya Drolia–II ( supra ) . Though the judgment in re -
Interplay ( supra ) corrected Vidya Drolia-II on the
aspect of the continuance of Section 11(6-A) in the
statute and the interpretation of the said sub-section,
the other aspects in Vidya Drolia-II have not been
diluted in re - Interplay ( supra ).
(b). Vidya Drolia-II was actually occasioned due to
another judgment of this Court in Himangni
10
Enterprises v. Kamaljeet Singh Ahluwalia , which
had treated cases of ejectment under the Transfer of
Property Act similar to cases of eviction under the Rent
Control Act of the State. The Bench in Vidya Drolia-I
doubted the said judgment and in a detailed referral
order distinguished the applicability of the prior
judgments of this Court in Natraj Studios ( supra ) and
10
(2017) 10 SCC 706
Page 21 of 31
Booz Allen ( supra ) to ejectment suits under the
Transfer of Property Act.
(c) . While dealing with the aspect of implied bars on
arbitrability, Vidya Drolia-II made the following
pertinent observations: -
“53. Dhulabhai case [ Dhulabhai v. State of M.P. , (1968) 3
SCR 662 : AIR 1969 SC 78] is not directly applicable as it
relates to exclusion of jurisdiction of civil courts, albeit we
respectfully agree with the order of reference [ Vidya
Drolia v. Durga Trading Corpn. , (2019) 20 SCC 406] that
Condition 2 is apposite while examining the question of
non-arbitrability. Implied legislative intention to exclude
arbitration can be seen if it appears that the statute
creates a special right or a liability and provides for
determination of the right and liability to be dealt with by
the specified courts or the tribunals specially constituted
in that behalf and further lays down that all questions
about the said right and liability shall be determined by
the court or tribunals so empowered and vested with
Therefore, mere creation of a
exclusive jurisdiction.
specific forum as a substitute for civil court or
specifying the civil court, may not be enough to
accept the inference of implicit non-arbitrability.
Conferment of jurisdiction on a specific court or
creation of a public forum though eminently
significant, may not be the decisive test to answer and
decide whether arbitrability is impliedly barred. ”
[Emphasis supplied]
What is crucial to notice is that this Court clearly
emphasized that creation of a specific forum as a
Page 22 of 31
substitute for Civil Court or specifying the Civil Court
may not be enough to accept the inference of implicit
non-arbitrability. Conferment of jurisdiction on a
specific court or creation of a public forum though
eminently significant, may not be the decisive test to
answer and decide whether arbitrability is impliedly
barred.
(d) . Further for the completion of record, it is also
mentioned herein that Vidya Drolia-II expressly
overruled Himangni ( supra ) and held as under: -
“ 79 . Landlord-tenant disputes governed by the Transfer
of Property Act are arbitrable as they are not actions in
rem but pertain to subordinate rights in personam that
arise from rights in rem. Such actions normally [Ed. :
Certainly in those cases where the dispute only affects the
parties to the arbitration clause, third-party rights would
not be affected, as in the facts of the present case. It is in
such cases that “such actions under the TPA normally
would not affect third-party rights or have erga omnes
effect”. However, one may consider cases for instance,
where a sub-tenancy exists or where the head lessee has
taken a mortgage on the lease, and the landlord invokes
the arbitration clause against the head lessee seeking to
terminate the head lease, can the sub-tenant or
mortgagee of the head lessee seek to be impleaded in the
arbitration proceedings? For termination of the head
lease would also extinguish the rights of the sub-tenant
Page 23 of 31
and the mortgagee of the head lessee. The situations
posited are relatively simple ones. Often there are
numerous prior and subsequent transferees who might
be affected by the result of a dispute between a landlord
and tenant, or even between other transferees. In such
complex situations involving prior and subsequent
transfers, it would appear that the matter would be non-
arbitrable as it would appear to satisfy the first two tests
of non-arbitrability laid down herein—see Shortnotes B
and C. In a case where the mortgagee is covered by the
RDB Act and the Sarfaesi Act, it might be rendered non-
arbitrable by virtue of the fourth test as well—see
Shortnotes E and G.] would not affect third-party rights or
have erga omnes effect or require centralised
adjudication. An award passed deciding landlord-tenant
disputes can be executed and enforced like a decree of
the civil court. Landlord-tenant disputes do not relate to
inalienable and sovereign functions of the State. The
provisions of the Transfer of Property Act do not
expressly or by necessary implication bar arbitration.
The Transfer of Property Act, like all other Acts, has a
public purpose, that is, to regulate landlord-tenant
relationships and the arbitrator would be bound by the
provisions, including provisions which enure and protect
the tenants.
80 . In view of the aforesaid, we overrule the ratio laid
down in Himangni Enterprises [Himangni Enterprises v.
Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 : (2018) 1
SCC (Civ) 82] and hold that landlord-tenant disputes are
arbitrable as the Transfer of Property Act does not forbid
or foreclose arbitration. However, landlord-tenant
disputes covered and governed by rent control
legislation would not be arbitrable when specific court or
forum has been given exclusive jurisdiction to apply and
decide special rights and obligations. Such rights and
Page 24 of 31
obligations can only be adjudicated and enforced by the
specified court/forum, and not through arbitration.”
III. Thirdly, if in this context, Section 41 is appreciated, it
will be clear that Section 41 is a provision conferring
jurisdiction on the Small Causes Court for certain
types of disputes and cannot be interpreted to mean
that ex proprio vigore (by its own force), it neutralizes
arbitration clauses in agreements.
IV. Fourthly, Arbitration clauses have their roots in
Section 28 of the Contract Act, 1872, a provision
completely missed in Central Warehousing (Supra) .
Section 28 which speaks of agreements in restraint of
legal proceeding being void, has two important
exceptions. Relevant part of Section 28 and exceptions
are extracted hereinbelow.
“ 28. Agreements in restraint of legal proceedings,
void.— Every agreement,— (a) by which any party thereto
is restricted absolutely from enforcing his rights under or
in respect of any contract, by the usual legal proceedings
in the ordinary tribunals, or which limits the time within
which he may thus enforce his rights; or (b) which
extinguishes the rights of any party thereto, or discharges
any party thereto, from any liability, under or in respect of
Page 25 of 31
any contract on the expiry of a specified period so as to
restrict any party from enforcing his rights, is void to the
extent.”
Exception 1.— Saving of contract to refer to arbitration
dispute that may arise.— This section shall not render
illegal a contract, by which two or more persons agree that
any dispute which may arise between them in respect of
any subject or class of subjects shall be referred to
arbitration, and that only the amount awarded in such
arbitration shall be recoverable in respect of the dispute so
referred.
Exception 2.- Saving of contract to refer questions that
have already arisen.- Nor shall this section render illegal
any contract in writing, by which two or more persons
agree to refer to arbitration any question between them
which has already arisen, or affect any provision of any law
in force for the time being as to references to arbitration.”
It will be clear that when two or more persons agree to refer a
matter to arbitration, Section 28 will not render that agreement
invalid.
22. Considerable arguments were advanced both in the oral
submissions and in the written note about whether the nature
of the claim is in the form of debt or whether it pertains to a
matter covered by the ambit of Section 41(1). Arguments were
also advanced on the issue as to how the dispute between the
Page 26 of 31
parties is a dispute in personam (as contended by the
respondent) pertaining only to the recovery of a debt as
opposed to the appellant contending that it is a dispute
relating to the recovery of the license fee or charges or rent,
covered under Section 41(1) of the 1882 Act. Reliance was
placed on Natraj Studios ( supra ) and Booz Allen ( supra ) by
the appellant and Globsport ( supra ) by the respondents.
23. In exercise of our jurisdiction under Section 11, we are
not concerned with the said dispute. That will be for the
arbitrator to decide. We have been told that the Arbitrator has
taken a decision on the Section 16 application. If that be so,
parties have to work out their remedies in accordance with
law. As and when such remedies are resorted to, they will be
decided uninfluenced by any of the observations made
herein. All questions between the parties other than the one
answered herein based on Section 11(6-A) of the A&C Act are
left open.
Page 27 of 31
24. Section 16 of the A&C Act reads as under: -
“ 16. Competence of arbitral tribunal to rule on its
jurisdiction.— (1) The arbitral tribunal may rule on its
own jurisdiction, including ruling on any objections with
respect to the existence or validity of the arbitration
agreement, and for that purpose,—
(a) an arbitration clause which forms part of a contract
shall be treated as an agreement independent of the other
terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is
null and void shall not entail ipso jure the invalidity of the
arbitration clause.
(2) A plea that the arbitral tribunal does not have
jurisdiction shall be raised not later than the submission
of the statement of defence; however, a party shall not be
precluded from raising such a plea merely because that
he has appointed, or participated in the appointment of,
an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope
of its authority shall be raised as soon as the matter
alleged to be beyond the scope of its authority is raised
during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases
referred to in sub-section (2) or sub-section (3), admit a
later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to
in sub-section (2) or sub-section (3) and, where the
arbitral tribunal takes a decision rejecting the plea,
continue with the arbitral proceedings and make an
arbitral award.
(6) A party aggrieved by such an arbitral award may
make an application for setting aside such an arbitral
award in accordance with section 34.”
Page 28 of 31
25. In re Interplay (supra), this Court held as follows: -
“123. The doctrine of kompetenz-kompetenz (also known
as competence-competence), as originally developed in
Germany, was traditionally understood to imply that
arbitrators are empowered to make a final ruling on their
own jurisdiction, with no subsequent judicial review of the
decision by any court. [ Fouchard, Gaillard, Goldman on
International Commercial Arbitration , Emmanuel Gaillard
and John Savage (Eds.), (1999) 396.] However, many
jurisdictions allow an Arbitral Tribunal to render a decision
on its jurisdiction, subject to substantive judicial review.
[Gary Born, International Arbitration Law and Practice (3rd
Edn., 2021) 1143.]
124. It is a well-recognised principle of public
international law that a legal authority possessing
adjudicatory powers has the right to decide its own
jurisdiction. [ Interpretation of the Greco-Turkish Agreement
of December 1st, 1926, In re , 1928 SCC OnLine PCIJ 5]
Similarly, it is a general rule of international arbitration law
that an Arbitral Tribunal has the power to determine its own
jurisdiction. The ability of an Arbitral Tribunal to determine
its own jurisdiction is an important facet of arbitration
jurisprudence because it gives effect to the separability
presumption. The separability presumption insulates the
arbitration agreement from the defects of the underlying
contract, and thereby ensures the sustenance of the
tribunal's jurisdiction over the substantive rights and
obligations of the parties under the underlying contract
even after such a contract is put to an end. The doctrine of
competence-competence allows the tribunal to decide on
all substantive issues arising out of the underlying contract,
including the existence and validity of the arbitration
agreement.”
Page 29 of 31
26. For the reasons set out hereinabove, paragraph 40 of
Central Warehousing (Supra) cannot be understood on the
facts of the present case to mean that Clause 33 of the Leave
and License Agreement has ceased to exist.
27. We have been constrained to deal with the judgement in
Central Warehousing ( supra ) only to decipher whether on
account of the said judgement, Clause 33 of the Leave and
License Agreement dated 06.10.2017, in the present case,
containing the arbitration clause is non-existent. We hold that
it is not and that an examination under Section 11(6-A)
indicates that there exists an arbitration agreement between
the parties. We are conscious that an appeal is pending in this
Court against the judgement in Central Warehousing ( supra ).
That appeal may be decided on its own merits and we are not
to be taken to have pronounced on the correctness of Central
Warehousing ( supra ) one way or the other.
Page 30 of 31
28. The appeal is dismissed for the reasons stated above. No
order as to costs. The Arbitrator shall proceed with the
adjudication of the disputes and conclude the proceedings
within 6 months from today.
…….........................J.
[ J. B. PARDIWALA ]
……….........................J.
[ K. V. VISWANATHAN ]
New Delhi;
th
5 January, 2026
Page 31 of 31
2026 INSC 5
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 36 of 2026
(@ Special Leave Petition (Civil) No. 5834 of 2025)
Motilal Oswal Financial
Services Limited …Appellant(s)
VERSUS
Santosh Cordeiro and Another …Respondent(s)
J U D G M E N T
K.V. Viswanathan, J.
1. Leave granted.
2. The present appeal calls in question the correctness of
the order dated 02.05.2024 passed by the Single Judge of the
High Court of Judicature at Bombay in Commercial Arbitration
Application No.9 of 2024. By the said order, the learned Single
Judge allowed the Section 11 Application filed by the
Signature Not Verified
respondent under the Arbitration & Conciliation Act, 1996 (for
Digitally signed by
CHANDRESH
Date: 2026.01.05
16:13:11 IST
Reason:
short “the A&C Act”) and appointed an arbitrator to
Page 1 of 31
adjudicate the dispute between the parties. The only
objection taken by the appellant herein was that the dispute is
non-arbitrable in view of Section 41 of the Presidency Small
Cause Courts Act, 1882 (for short “the 1882 Act”). The learned
Single Judge made a short shrift of the said objection by
holding that the place where the property in question, which
was the subject matter of the dispute, was situated, i.e. Malad,
was outside the jurisdiction of the Small Causes Court. This
finding has now turned out to be a damp squib, since parties
before us are ad idem that Malad area is covered under the
jurisdiction of the Small Causes Court. We could have rest
content by remanding the matter to the High Court for fresh
consideration. However, that will only prolong the dispute
and, hence, we have decided to answer the issues arising in
the case ourselves.
BRIEF FACTS OF THE CASE: -
3. With regard to the premises situated at Unit No.718,
th
admeasuring 2925 sq. ft., 7 Floor, Palm Spring Centre, Link
Road, Malad (West), Mumbai, the appellant entered into a
Page 2 of 31
Leave and License Agreement on 06.10.2017 with the
respondent. The period of the Leave and License was 60
months from 01.10.2017 to 30.10.2022. Though the appellant
terminated the said agreement on 31.12.2019, after exchange
of correspondence between the parties, the said termination
was reversed and an Addendum dated 13.03.2020 was
entered into extending the Leave and License period from 60
months to 96 months with a lock-in period of 72 months.
4. According to the appellant, due to COVID-19 pandemic,
they were unable to continue the arrangement and citing the
force majeure clause in the agreement, they handed over the
keys and vacant peaceful possession of the premises to the
respondent on 09.09.2020. According to the appellant, they
intimated the respondents about the same on 10.10.2020 by
writing an email. The appellant also sought refund of the
security deposit.
5. On 28.06.2023, the respondent No.1 called upon the
appellant to pay a sum of Rs.94,40,152/- along with interest @
24% towards the alleged arrears of license fees for the
Page 3 of 31
balance lock-in period i.e. from 01.09.2020 to 14.06.2023. The
appellants wrote back on 17.07.2023 denying any liability and
seeking refund of security deposit of Rs. 10 lakhs.
6. The appellant on 17.07.2023 received a notice dated
15.07.2023 issued by the respondent under Section 21 of the
A&C Act invoking Clause 33 of the arbitration agreement of
the Leave and License Agreement dated 06.10.2017 and
Addendum dated 13.03.2020. Clause 33 of the Leave and
License Agreement dated 06.10.2017 reads as under: -
“In the event of the any dispute or difference arising
between the Licensors and the Licensee hereto
concerning or relating to the interpretation of these
presents or the interpretation or effect of any provisions
thereof or relating to the liability or obligation on the part
of any of the parties hereto, the same shall be referred to
arbitration and Sole Arbitrator shall be appointed by the
mutual consent of the Parties. The award passed by the
sole arbitrator shall be binding on both the parties. The
arbitration shall be in Mumbai and in accordance with and
subject to the provisions of the Arbitration and
Conciliation Act, 1996 or any statutory modification or re-
enhancements thereof for the time being in force.”
This was followed by an application under Section 11 of the
A&C Act filed on 13.08.2023 by the respondent seeking
Page 4 of 31
appointment of a sole arbitrator in accordance with clause 33
set out above.
7. On 01.11.2023, the appellant filed its reply objecting to
the appointment of the arbitrator and specifically relied on
Section 41 of the 1882 Act and contended that only the Small
Causes Court would have exclusive jurisdiction to entertain
and try any suit or proceeding arising from the relationship
between a licensor and licensee and that since the said statute
is a special remedy, the dispute is not arbitrable. The High
Court, by its order dated 02.05.2024, allowed the application
and appointed the arbitrator.
8. Section 41 of the 1882 Act reads as under:-
“41 . Suits or Proceedings between licensors and
licensees or landlords and tenants for recovery of
possession of immovable property and license fees or
rent, except to those to which other Acts apply to lie in
Small Cause Court.- (1) Notwithstanding anything
contained elsewhere in this Act but subject to the
provisions of sub-section (2), the Court of Small Cause
shall have jurisdiction to entertain and try all suits and
proceedings between a licensor and licensee, or a
landlord and tenant, relating to the recovery of possession
of any immovable property situated in Greater Bombay,
or relating to the recovery of the licence fee or charges or
Page 5 of 31
rent therefor, irrespective of the value of the subject-
matter of such suits or proceedings.
(2) Nothing contained in sub-section (1) shall apply to
suits or proceedings for the recovery of possession of any
immovable property, or of licence fee for charges of rent
thereof, to which the provisions of the Bombay Rents,
Hotel and Lodging House Rates Control Act, 1947, the
Bombay Government Premises (Eviction) Act, 1955, the
Bombay Municipal Corporation Act, the Maharashtra
Housing and Area Development Act, 1976 or any other law
for the time being in force, apply.”
9. Proceedings before the arbitrator were carried on. On
03.06.2024, the appellant raised the ground of non-
arbitrability under Section 41 of the 1882 Act and filed a
Section 16 application under the A&C Act before the
arbitrator. On 11.10.2024, the arbitrator dismissed the Section
16 application by holding that the amount sought to be
recovered partakes the character of a ‘debt’ and is not a claim
for license fee for use and occupation. On 28.01.2025, the
Special Leave Petition was filed before this Court and this
Court, on 21.02.2025, stayed the impugned order. That is how
the matter presents itself before us.
Page 6 of 31
10. We have heard Mr. Chirag M. Shah, learned advocate,
for the appellant and Mr. Rishabh Shah, learned advocate for
the respondents. We have perused the records as well as
written submissions filed by the respective parties.
CONTENTIONS OF THE APPELLANT: -
11. The learned counsel for the appellant contends that in the
Section 11 application filed by the respondents, a clear case
for recovery of license fee was sought, and expressly it was
stated that the amount claimed did not partake the character
of damages; that the reliance on the judgment of the Division
Bench of the Bombay High Court in Globsport India Pvt. Ltd.
1
vs. Mayfair Housing Pvt. Ltd was untenable in view of the
Full Bench judgment of the Bombay High Court in Central
Warehousing Corporation, Mumbai v. Fortpoint Automotive
2
Pvt. Ltd., Mumbai ; that Central Warehousing ( supra ) clearly
holds that exclusive jurisdiction is conferred on the Court of
Small Causes to entertain and decide all suits and
1
(2015) OnLine Bom 4176
2
2009 SCC OnLine Bom 2023
Page 7 of 31
proceedings between a licensor and licensee or a landlord
and tenant relating to recovery of possession or recovery of
license fee/rent in respect of premises situated in Greater
Bombay; that this Court in Natraj Studios Private Limited . v.
3
Navrang Studios and Another , while interpreting a pari
materia provision held that the parties could not contract out
of a special legislation that conferred exclusive jurisdiction
over landlord-tenant disputes to the Small Causes Court; that
as long as the suit was between a licensor and licensee or a
landlord and tenant, concerning immovable property,
relating to recovery of possession or recovery of license fee,
charges or rent, it will lie only before the Small Causes Court
and the jurisdiction of all other courts is ousted; that the 1882
Act is a special legislation with a special purpose and grants
exclusive jurisdiction on special courts which have been set
up under such legislation and that in Booz Allen and Hamilton
4
Inc vs. SBI Home Finance Limited And Others , this Court
3
(1981) 1 SCC 523
4
(2011) 5 SCC 532
Page 8 of 31
held that tenancy/licensor/licensee disputes governed by
special statutes are not arbitrable.
CONTENTIONS OF THE RESPONDENT: -
12. The learned counsel for the respondent submitted the
5
only exclusion in Clause 35 of the agreement was that the
arbitrator was not to have power to interfere or arbitrate on
issue of vacating the premises on expiry of license period and
there was no bar to arbitrate on the obligation on the parties
to pay the license fee/rent/use and occupation charges; that
the dispute was only for payment of compensation for the
“balance lock-in period”; that the claim of the respondents is
neither for recovery of possession nor license fee; that the
respondents’ case is supported by the judgment in Globsport
( supra ) ; that the judgment in Vidya Drolia And Others vs.
6
Durga Trading Corporation , (hereinafter called Vidya Drolia
- II), makes it clear that mere conferral of jurisdiction on a
5
The reference to arbitration will in no way affect the obligation of the Licensee to vacate the licensed premises
on the expiry or earlier determination of the License period and the arbitrators shall have no power to interfere
with or arbitrate on issue of vacating the licensed premises on expiry of the licensed period.
6
(2021) 2 SCC 1
Page 9 of 31
specific court or creation of a public fora would not be
decisive to answer the issue of arbitrability or otherwise of a
dispute; and that no statutory protection under the
Maharashtra Rent Control Act was denied to the appellant.
QUESTION FOR CONSIDERATION: -
13. In the above background, the question for consideration
is whether the High Court has rightly allowed the application
filed by the respondent under Section 11 of the A&C Act?
ANALYSIS AND DISCUSSION: -
14. There is no dispute that the Leave and License agreement
of 06.10.2017, in Clause 33, contained an Arbitration clause. In
a proceeding under Section 11 of the A&C Act, the Court is to
confine the examination to the existence of an Arbitration
Agreement. Section 11 (6-A) which was brought into force
with effect from 23.10.2015, though omitted by Act 33 of 2019,
the omission has not yet been notified.
15. Section 11(6A) of the A&C Act is reproduced hereunder:-
“11. Appointment of arbitrators. —(1) xxx xxx .
(2) xxx xxx
(3) xxx xxx
Page 10 of 31
(4) xxx xxx
(5) xxx xxx
(6) xxx xxx
(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.”
16. A Seven Judge Bench of this Court in In re Interplay
Between Arbitration Agreements under Arbitration and
7
Conciliation Act, 1996 & Stamp Act, 1899 , (hereinafter called
as ‘In re-Interplay’) while dealing with the aspect of how Vidya
Drolia (Supra) proceeded on the assumption that Section
11(6-A) has been omitted, clarified the position thus:-
“62. A plain reading of Section 11(6-A) makes it evident that
it is referring to an arbitration agreement . Section 11(6-A)
provides that courts must confine themselves to an
examination of the existence of the arbitration agreement.
The word “confine” indicates the intention of the legislature
to limit the jurisdiction of the Courts at the stage of the
appointment of an arbitrator.
63. In Vidya Drolia [ Vidya Drolia v. Durga Trading Corpn. ,
(2021) 2 SCC 1], this Court held : (SCC p. 49, para 21)
“ 21 . The term “agreement” is not defined in the Arbitration
Act, albeit it is defined in Section 10 of the Contract Act, 1872
(for short “the Contract Act”), … as contracts made by free
7
(2024) 6 SCC 1
Page 11 of 31
consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are not thereby
expressly declared to be void. Section 10 of the Contract Act
also stipulates that aforesaid requirements shall not affect any
law in force in India (and not expressly repealed) by which a
contract is required to be made in writing, in presence of
witnesses or any law relating to registration of documents.
Thus, an arbitration agreement should satisfy the mandate of
Section 10 of the Contract Act, in addition to satisfying other
requirements stipulated in Section 7 of the Arbitration Act.”
64. The above observations are correct insofar as the
arbitration agreement must satisfy the requirements of the
Contract Act. However, the authority empowered to
adjudicate whether the requirements of the Contract Act are
satisfied is the Arbitral Tribunal, under Section 16 of the
Arbitration Act. This is addressed in greater detail in the
following segments.
163. We are of the opinion that the above premise of the
Court in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn.,
[(2021) 2 SCC 1] is erroneous because the omission of Section
11(6-A) has not been notified and, therefore, the said
provision continues to remain in full force. Since Section 11(6-
A) continues to remain in force, pending the notification of the
Central Government, it is incumbent upon this Court to give
true effect to the legislative intent.
164. The 2015 Amendment Act has laid down different
parameters for judicial review under Section 8 and
Section 11. Where Section 8 requires the Referral Court to
look into the prima facie existence of a valid arbitration
agreement, Section 11 confines the Court's jurisdiction to
the examination of the existence of an arbitration
agreement. Although the object and purpose behind both
Sections 8 and 11 is to compel parties to abide by their
contractual understanding, the scope of power of the
Page 12 of 31
Referral Courts under the said provisions is intended to
be different. The same is also evident from the fact that
Section 37 of the Arbitration Act allows an appeal from the
order of an Arbitral Tribunal refusing to refer the parties
to arbitration under Section 8, but not from Section 11.
Thus, the 2015 Amendment Act has legislatively
overruled the dictum of Patel Engg. [SBP & Co. v. Patel
Engg. Ltd., (2005) 8 SCC 618] where it was held that
Section 8 and Section 11 are complementary in nature.
Accordingly, the two provisions cannot be read as laying
down a similar standard.
165. The legislature confined the scope of reference
under Section 11(6-A) to the examination of the existence
of an arbitration agreement. The use of the term
“examination” in itself connotes that the scope of the
power is limited to a prima facie determination. Since the
Arbitration Act is a self-contained code, the requirement
of “existence” of an arbitration agreement draws effect
from Section 7 of the Arbitration Act. In Duro Felguera
[Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9
SCC 729, this Court held that the Referral Courts only
need to consider one aspect to determine the existence of
an arbitration agreement — whether the underlying
contract contains an arbitration agreement which
provides for arbitration pertaining to the disputes which
have arisen between the parties to the agreement.
Therefore, the scope of examination under Section 11(6-
A) should be confined to the existence of an arbitration
agreement on the basis of Section 7. Similarly, the
validity of an arbitration agreement, in view of Section 7,
should be restricted to the requirement of formal validity
such as the requirement that the agreement be in writing.
This interpretation also gives true effect to the doctrine of
competence-competence by leaving the issue of
substantive existence and validity of an arbitration
agreement to be decided by Arbitral Tribunal under
Page 13 of 31
Section 16. We accordingly clarify the position of law laid
down in Vidya Drolia [Vidya Drolia v. Durga Trading
Corpn., (2021) 2 SCC 1 in the context of Section 8 and
Section 11 of the Arbitration Act.
166 . The burden of proving the existence of arbitration
agreement generally lies on the party seeking to rely on such
agreement. In jurisdictions such as India, which accept the
doctrine of competence-competence, only prima facie proof
of the existence of an arbitration agreement must be adduced
before the Referral Court. The Referral Court is not the
appropriate forum to conduct a mini-trial by allowing the
parties to adduce the evidence in regard to the existence or
validity of an arbitration agreement. The determination of the
existence and validity of an arbitration agreement on the
basis of evidence ought to be left to the Arbitral Tribunal. This
position of law can also be gauged from the plain language of
the statute.
167. Section 11(6-A) uses the expression “examination of
the existence of an arbitration agreement”. The purport
of using the word “examination” connotes that the
legislature intends that the Referral Court has to inspect
or scrutinise the dealings between the parties for the
existence of an arbitration agreement. Moreover, the
expression “examination” does not connote or imply a
laborious or contested inquiry. [ P. Ramanatha Aiyar,
The Law Lexicon (2nd Edn., 1997) 666.] On the other hand,
Section 16 provides that the Arbitral Tribunal can “rule”
on its jurisdiction, including the existence and validity of
an arbitration agreement. A “ruling” connotes
adjudication of disputes after admitting evidence from
the parties. Therefore, it is evident that the Referral Court
is only required to examine the existence of arbitration
agreements, whereas the Arbitral Tribunal ought to rule
on its jurisdiction, including the issues pertaining to the
existence and validity of an arbitration agreement. A
Page 14 of 31
similar view was adopted by this Court in Shin-Etsu
Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC
234].
169. When the Referral Court renders a prima facie opinion,
neither the Arbitral Tribunal, nor the Court enforcing the
arbitral award will be bound by such a prima facie view. If a
prima facie view as to the existence of an arbitration
agreement is taken by the Referral Court, it still allows the
Arbitral Tribunal to examine the issue in depth. Such a legal
approach will help the Referral Court in weeding out prima
facie non-existent arbitration agreements. It will also protect
the jurisdictional competence of the Arbitral Tribunals to
decide on issues pertaining to the existence and validity of
an arbitration agreement.”
[Emphasis supplied]
17. Hence, it is very clear that our jurisdiction is only to
inspect or scrutinize the dealings between the parties for
determination about the existence of an Arbitration
Agreement. We are not to launch a laborious or a contested
inquiry.
18. Our task would have been much simpler but for the
reliance placed by the learned counsel for the appellant on
the Full Bench judgment of the Bombay High Court in Central
Warehousing ( supra ). Central Warehousing (supra)
Page 15 of 31
8
examined the question whether in view of Section 5 of the
A&C Act, if in any agreement between licensor and licensee
an arbitration clause exists, the jurisdiction of the Small
Causes Court under the Presidency Small Causes Court Act,
1882, would be ousted.
19. While answering the said question, the Full Bench traced
the legislative history of Section 41(2) of the Act of 1882. It
found that the object of introducing Section 41 in the amended
form, was to avoid multiplicity of proceedings in different
Courts and consequent waste of public time and money and to
avoid unnecessary delay and hardship to the suitors. The Full
Bench found that the objective was to have uniformity of the
procedure so that all suits and proceedings between a
landlord and tenant or a licensor and licensee for recovery of
possession of premises or for recovery of rent or license fee,
irrespective of the value of the subject matter, should go to
and be disposed of by Small Causes Court. The Full Bench
8
Extent of judicial intervention.- Notwithstanding anything contained in any other law for the time being in
force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this
Part.
Page 16 of 31
found that the provision vested exclusive jurisdiction of the
Court of Small Causes to entertain such suits. Ultimately, for
the purpose of our case we only need to deal with the
operative portion set out in Para 40 of the said judgment which
reads as under: -
“40. In summation, we would hold that section 41(1) of the
Act of 1882 is a special law which in turn has constituted
special Courts for adjudication of disputes specified therein
between the licensor and licensee or a landlord and tenant.
The effect of section 41(2) of the Act of 1882 is only the suits
or proceedings for recovery of possession of immovable
property or of licence fee thereof, to which, the provisions
of specified Acts or any other law for the time being in force
apply, have been excepted from the application of non-
obstante clause contained in section 41(1) of the Act. The
expression “or any other law for the time being in force”
appearing in section 41(2) will have to be construed to mean
that such law should provide for resolution of disputes
between licensor and licensee or a landlord and tenant in
relation to immovable property or licence fee thereof, to
which immovable property, the provisions of that Act are
applicable. The Act of 1996 is not covered within the ambit
of section 41(2) in particular the expression “or any other
law for the time being in force” contained therein. The
question whether the exclusive jurisdiction of the Small
Causes Court vested in terms of section 41 of the Act of 1882
is ousted, if an agreement between the licensor and licensee
contains a clause for arbitration, the same will have to be
answered in the negative. For, section 5 of the Act of 1996 in
that sense is not an absolute non-obstante clause. Section 5
of the Act of 1996 cannot affect the laws for the time being in
force by virtue of which certain disputes may not be
Page 17 of 31
submitted to arbitration, as stipulated in section 2(3) of the
Act of 1996. We hold that section 41 of the Act of 1882 falls
within the ambit of section 2(3) of the Act of 1996. As a
result of which, even if the Licence Agreement contains
Arbitration Agreement, the exclusive jurisdiction of the
Courts of Small Causes under section 41 of the Act of
1882 is not affected in any manner. Whereas, Arbitration
Agreement in such cases would be invalid and
inoperative on the principle that it would be against
public policy to allow the parties to contract out of the
exclusive jurisdiction of the Small Causes Courts by
virtue of section 41 of the Act of 1882. ”
[Emphasis supplied]
20. The appellant relies on the above paragraph which holds
that the Arbitration Agreement in the situation referred to in
the paragraph would be invalid and inoperative on the
principle that it would be against public policy to allow the
parties to contract out of the exclusive jurisdiction of Small
Causes Court by virtue of Section 41 of the Act of 1882.
21. The learned counsel for the appellant submits that in view
of this holding, even while examining within the contours of
Section 11(6-A) this Court will be obliged to conclude that no
arbitration agreement existed. We are not able to
countenance the submission of the learned counsel for the
appellant for the following reasons: -
Page 18 of 31
I. (a). Firstly, Central Warehousing ( supra ) has to be
understood in the context in which it came to be
decided. The said context does not obtain here. In
Central Warehousing (supra) , the petitioner therein,
issued termination notices terminating the storage
warehouse facilities of the respondent therein – FAP
Limited. In response thereto, the respondent therein
FAP Limited invoked the arbitration clause.
Respondent-FAP Limited thereafter, filed a suit under
Section 41 of the Act of 1882 for a declaration that the
agreement providing storage facility was subsisting
and obtained interim orders restraining the petitioner
therein from giving effect to the termination notices.
The petitioner therein - Central Warehousing raised
an objection based on the provisions of Section 8 of the
A&C Act. The preliminary objection was overruled.
Aggrieved, Central Warehousing approached the
High Court under Article 227 of the Constitution of
India. What is significant to notice is that the
Page 19 of 31
respondent therein FAP Limited was in possession of
the premises.
(b). In the present case, it is undisputed by both
parties that possession had been handed over by the
appellant to the respondents in September 2020. The
dispute between the parties is with regard to a
monetary claim with the appellant asserting that the
security deposit should be repaid by the respondents
and the respondents claiming sums of money towards
alleged arrears of amounts payable for the balance
lock-in period. This aspect is set out only for
explaining the context of the present case and
contrasting with the context in Central Warehousing
(supra) .
II. (a). Secondly, pursuant to a reference made to a three-
Judge Bench in Vidya Drolia and Others v. Durga
9
Trading Corporation ., (hereinafter called Vidya
9
(2019) 20 SCC 406
Page 20 of 31
Drolia-I), this Court pronounced the judgment in
Vidya Drolia–II ( supra ) . Though the judgment in re -
Interplay ( supra ) corrected Vidya Drolia-II on the
aspect of the continuance of Section 11(6-A) in the
statute and the interpretation of the said sub-section,
the other aspects in Vidya Drolia-II have not been
diluted in re - Interplay ( supra ).
(b). Vidya Drolia-II was actually occasioned due to
another judgment of this Court in Himangni
10
Enterprises v. Kamaljeet Singh Ahluwalia , which
had treated cases of ejectment under the Transfer of
Property Act similar to cases of eviction under the Rent
Control Act of the State. The Bench in Vidya Drolia-I
doubted the said judgment and in a detailed referral
order distinguished the applicability of the prior
judgments of this Court in Natraj Studios ( supra ) and
10
(2017) 10 SCC 706
Page 21 of 31
Booz Allen ( supra ) to ejectment suits under the
Transfer of Property Act.
(c) . While dealing with the aspect of implied bars on
arbitrability, Vidya Drolia-II made the following
pertinent observations: -
“53. Dhulabhai case [ Dhulabhai v. State of M.P. , (1968) 3
SCR 662 : AIR 1969 SC 78] is not directly applicable as it
relates to exclusion of jurisdiction of civil courts, albeit we
respectfully agree with the order of reference [ Vidya
Drolia v. Durga Trading Corpn. , (2019) 20 SCC 406] that
Condition 2 is apposite while examining the question of
non-arbitrability. Implied legislative intention to exclude
arbitration can be seen if it appears that the statute
creates a special right or a liability and provides for
determination of the right and liability to be dealt with by
the specified courts or the tribunals specially constituted
in that behalf and further lays down that all questions
about the said right and liability shall be determined by
the court or tribunals so empowered and vested with
Therefore, mere creation of a
exclusive jurisdiction.
specific forum as a substitute for civil court or
specifying the civil court, may not be enough to
accept the inference of implicit non-arbitrability.
Conferment of jurisdiction on a specific court or
creation of a public forum though eminently
significant, may not be the decisive test to answer and
decide whether arbitrability is impliedly barred. ”
[Emphasis supplied]
What is crucial to notice is that this Court clearly
emphasized that creation of a specific forum as a
Page 22 of 31
substitute for Civil Court or specifying the Civil Court
may not be enough to accept the inference of implicit
non-arbitrability. Conferment of jurisdiction on a
specific court or creation of a public forum though
eminently significant, may not be the decisive test to
answer and decide whether arbitrability is impliedly
barred.
(d) . Further for the completion of record, it is also
mentioned herein that Vidya Drolia-II expressly
overruled Himangni ( supra ) and held as under: -
“ 79 . Landlord-tenant disputes governed by the Transfer
of Property Act are arbitrable as they are not actions in
rem but pertain to subordinate rights in personam that
arise from rights in rem. Such actions normally [Ed. :
Certainly in those cases where the dispute only affects the
parties to the arbitration clause, third-party rights would
not be affected, as in the facts of the present case. It is in
such cases that “such actions under the TPA normally
would not affect third-party rights or have erga omnes
effect”. However, one may consider cases for instance,
where a sub-tenancy exists or where the head lessee has
taken a mortgage on the lease, and the landlord invokes
the arbitration clause against the head lessee seeking to
terminate the head lease, can the sub-tenant or
mortgagee of the head lessee seek to be impleaded in the
arbitration proceedings? For termination of the head
lease would also extinguish the rights of the sub-tenant
Page 23 of 31
and the mortgagee of the head lessee. The situations
posited are relatively simple ones. Often there are
numerous prior and subsequent transferees who might
be affected by the result of a dispute between a landlord
and tenant, or even between other transferees. In such
complex situations involving prior and subsequent
transfers, it would appear that the matter would be non-
arbitrable as it would appear to satisfy the first two tests
of non-arbitrability laid down herein—see Shortnotes B
and C. In a case where the mortgagee is covered by the
RDB Act and the Sarfaesi Act, it might be rendered non-
arbitrable by virtue of the fourth test as well—see
Shortnotes E and G.] would not affect third-party rights or
have erga omnes effect or require centralised
adjudication. An award passed deciding landlord-tenant
disputes can be executed and enforced like a decree of
the civil court. Landlord-tenant disputes do not relate to
inalienable and sovereign functions of the State. The
provisions of the Transfer of Property Act do not
expressly or by necessary implication bar arbitration.
The Transfer of Property Act, like all other Acts, has a
public purpose, that is, to regulate landlord-tenant
relationships and the arbitrator would be bound by the
provisions, including provisions which enure and protect
the tenants.
80 . In view of the aforesaid, we overrule the ratio laid
down in Himangni Enterprises [Himangni Enterprises v.
Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 : (2018) 1
SCC (Civ) 82] and hold that landlord-tenant disputes are
arbitrable as the Transfer of Property Act does not forbid
or foreclose arbitration. However, landlord-tenant
disputes covered and governed by rent control
legislation would not be arbitrable when specific court or
forum has been given exclusive jurisdiction to apply and
decide special rights and obligations. Such rights and
Page 24 of 31
obligations can only be adjudicated and enforced by the
specified court/forum, and not through arbitration.”
III. Thirdly, if in this context, Section 41 is appreciated, it
will be clear that Section 41 is a provision conferring
jurisdiction on the Small Causes Court for certain
types of disputes and cannot be interpreted to mean
that ex proprio vigore (by its own force), it neutralizes
arbitration clauses in agreements.
IV. Fourthly, Arbitration clauses have their roots in
Section 28 of the Contract Act, 1872, a provision
completely missed in Central Warehousing (Supra) .
Section 28 which speaks of agreements in restraint of
legal proceeding being void, has two important
exceptions. Relevant part of Section 28 and exceptions
are extracted hereinbelow.
“ 28. Agreements in restraint of legal proceedings,
void.— Every agreement,— (a) by which any party thereto
is restricted absolutely from enforcing his rights under or
in respect of any contract, by the usual legal proceedings
in the ordinary tribunals, or which limits the time within
which he may thus enforce his rights; or (b) which
extinguishes the rights of any party thereto, or discharges
any party thereto, from any liability, under or in respect of
Page 25 of 31
any contract on the expiry of a specified period so as to
restrict any party from enforcing his rights, is void to the
extent.”
Exception 1.— Saving of contract to refer to arbitration
dispute that may arise.— This section shall not render
illegal a contract, by which two or more persons agree that
any dispute which may arise between them in respect of
any subject or class of subjects shall be referred to
arbitration, and that only the amount awarded in such
arbitration shall be recoverable in respect of the dispute so
referred.
Exception 2.- Saving of contract to refer questions that
have already arisen.- Nor shall this section render illegal
any contract in writing, by which two or more persons
agree to refer to arbitration any question between them
which has already arisen, or affect any provision of any law
in force for the time being as to references to arbitration.”
It will be clear that when two or more persons agree to refer a
matter to arbitration, Section 28 will not render that agreement
invalid.
22. Considerable arguments were advanced both in the oral
submissions and in the written note about whether the nature
of the claim is in the form of debt or whether it pertains to a
matter covered by the ambit of Section 41(1). Arguments were
also advanced on the issue as to how the dispute between the
Page 26 of 31
parties is a dispute in personam (as contended by the
respondent) pertaining only to the recovery of a debt as
opposed to the appellant contending that it is a dispute
relating to the recovery of the license fee or charges or rent,
covered under Section 41(1) of the 1882 Act. Reliance was
placed on Natraj Studios ( supra ) and Booz Allen ( supra ) by
the appellant and Globsport ( supra ) by the respondents.
23. In exercise of our jurisdiction under Section 11, we are
not concerned with the said dispute. That will be for the
arbitrator to decide. We have been told that the Arbitrator has
taken a decision on the Section 16 application. If that be so,
parties have to work out their remedies in accordance with
law. As and when such remedies are resorted to, they will be
decided uninfluenced by any of the observations made
herein. All questions between the parties other than the one
answered herein based on Section 11(6-A) of the A&C Act are
left open.
Page 27 of 31
24. Section 16 of the A&C Act reads as under: -
“ 16. Competence of arbitral tribunal to rule on its
jurisdiction.— (1) The arbitral tribunal may rule on its
own jurisdiction, including ruling on any objections with
respect to the existence or validity of the arbitration
agreement, and for that purpose,—
(a) an arbitration clause which forms part of a contract
shall be treated as an agreement independent of the other
terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is
null and void shall not entail ipso jure the invalidity of the
arbitration clause.
(2) A plea that the arbitral tribunal does not have
jurisdiction shall be raised not later than the submission
of the statement of defence; however, a party shall not be
precluded from raising such a plea merely because that
he has appointed, or participated in the appointment of,
an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope
of its authority shall be raised as soon as the matter
alleged to be beyond the scope of its authority is raised
during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases
referred to in sub-section (2) or sub-section (3), admit a
later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to
in sub-section (2) or sub-section (3) and, where the
arbitral tribunal takes a decision rejecting the plea,
continue with the arbitral proceedings and make an
arbitral award.
(6) A party aggrieved by such an arbitral award may
make an application for setting aside such an arbitral
award in accordance with section 34.”
Page 28 of 31
25. In re Interplay (supra), this Court held as follows: -
“123. The doctrine of kompetenz-kompetenz (also known
as competence-competence), as originally developed in
Germany, was traditionally understood to imply that
arbitrators are empowered to make a final ruling on their
own jurisdiction, with no subsequent judicial review of the
decision by any court. [ Fouchard, Gaillard, Goldman on
International Commercial Arbitration , Emmanuel Gaillard
and John Savage (Eds.), (1999) 396.] However, many
jurisdictions allow an Arbitral Tribunal to render a decision
on its jurisdiction, subject to substantive judicial review.
[Gary Born, International Arbitration Law and Practice (3rd
Edn., 2021) 1143.]
124. It is a well-recognised principle of public
international law that a legal authority possessing
adjudicatory powers has the right to decide its own
jurisdiction. [ Interpretation of the Greco-Turkish Agreement
of December 1st, 1926, In re , 1928 SCC OnLine PCIJ 5]
Similarly, it is a general rule of international arbitration law
that an Arbitral Tribunal has the power to determine its own
jurisdiction. The ability of an Arbitral Tribunal to determine
its own jurisdiction is an important facet of arbitration
jurisprudence because it gives effect to the separability
presumption. The separability presumption insulates the
arbitration agreement from the defects of the underlying
contract, and thereby ensures the sustenance of the
tribunal's jurisdiction over the substantive rights and
obligations of the parties under the underlying contract
even after such a contract is put to an end. The doctrine of
competence-competence allows the tribunal to decide on
all substantive issues arising out of the underlying contract,
including the existence and validity of the arbitration
agreement.”
Page 29 of 31
26. For the reasons set out hereinabove, paragraph 40 of
Central Warehousing (Supra) cannot be understood on the
facts of the present case to mean that Clause 33 of the Leave
and License Agreement has ceased to exist.
27. We have been constrained to deal with the judgement in
Central Warehousing ( supra ) only to decipher whether on
account of the said judgement, Clause 33 of the Leave and
License Agreement dated 06.10.2017, in the present case,
containing the arbitration clause is non-existent. We hold that
it is not and that an examination under Section 11(6-A)
indicates that there exists an arbitration agreement between
the parties. We are conscious that an appeal is pending in this
Court against the judgement in Central Warehousing ( supra ).
That appeal may be decided on its own merits and we are not
to be taken to have pronounced on the correctness of Central
Warehousing ( supra ) one way or the other.
Page 30 of 31
28. The appeal is dismissed for the reasons stated above. No
order as to costs. The Arbitrator shall proceed with the
adjudication of the disputes and conclude the proceedings
within 6 months from today.
…….........................J.
[ J. B. PARDIWALA ]
……….........................J.
[ K. V. VISWANATHAN ]
New Delhi;
th
5 January, 2026
Page 31 of 31