Newgen It Technologies Ltd Earlier Known As Vcare Infotech Solutions And Services Private Limited vs Newgen Software Technologies Ltd
- Court
- Delhi High Court
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 16 March 2026
Pronounced on: 01 July 2026
+ FAO (COMM) 112/2025 &CM APPL. 27327/2025
NEWGEN IT TECHNOLOGIES LTD EARLIER
KNOWN AS VCARE INFOTECH SOLUTIONS
AND SERVICES PRIVATE LIMITED .....Appellant
Through: Dr. Amit George, Ms. Aakashi
Lodha, Ms. Nishtha Jindal, Mr. Bhrigu A.
Pamidighantam, Mr. Vaibhav Gandhi,
Mr. Adhishwar Suri, Ms. Madhavi Bhatia,
Mr. Shivam Parashar, Mr. Rupam Jha and
Mr. Kartikey Puneesh, Advs.
versus
NEWGEN SOFTWARE TECHNOLOGIES LTD ...Respondent
Through: Mr. Sandeep Sethi and Mr.
Ankit Jain, Sr. Advs. with Mr. J.V. Abhay,
Mr. Dhruv Grover and Ms. Akshita Thapa,
Mr. Krishna Gambhir and Ms. Shreya Sethi,
Advs.
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
HON'BLE MR. JUSTICE OM PRAKASH SHUKLA
JUDGMENT
% 01.07.2026
C. HARI SHANKAR, J.
A. The lis
1. This appeal assails order dated 23 April 2025 passed by the
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learned District Judge (Commercial)-05 , South District, whereby an
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“the learned Commercial Court” hereinafter
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application, filed by the appellant under Section 8(1) of the
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Arbitration and Conciliation Act, 1996 , seeking reference of the
dispute between the appellant and the respondent to arbitration, has
been dismissed.
2. The application in question was filed by the appellant in CS
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(Comm) 102/2025 , which stands instituted by the respondent against
the appellant.
B. Facts
I. Case set up in the plaint
3. The case of the respondent, as the plaintiff in the suit, may be
set out thus.
4. The respondent is the proprietor of various registered trade
marks which incorporate “NEWGEN” as a dominant part thereof, in
various classes. The plaint refers to them as the “NEWGEN marks”
and so, too, will we. The respondent is also the registered proprietor
of the device mark
which it has been using since 1992.
The respondent was providing software services.
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8. Power to refer parties to arbitration where there is an arbitration agreement . –
(1) A judicial authority, before which an action is brought in a matter which is the subject of
an arbitration agreement shall, if a party to the arbitration agreement or any person claiming
through or under him, so applies not later than the date of submitting his first statement on the
substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court
or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration
agreement exists.
3
“the 1996 Act” hereinafter
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“the suit” hereinafter
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5. Figures representing the turnover from use of the NEWGEN
marks, the amount spent towards promotion and advertisement of the
marks, and other details, were provided in the plaint, to vouchsafe the
goodwill and reputation thereof. The NEWGEN marks are claimed,
in the plaint, to be a source identifier of the respondent.
6. The appellant-defendant was incorporated on 16 February 2016
under the name “VCARE INFOTECH SOLUTIONS & SERVICES
PRIVATE LIMITED”. The appellant was providing services identical
to those provided by the respondent.
7. On 12 July 2023, the appellant and respondent entered into a
Partner Agreement, in which the appellant recognized the respondent’s
rights in the NEWGEN mark and also agreed not to use the NEWGEN
marks otherwise than in accordance with the Agreement. The
following Articles of the Partner Agreement are of significance:
“ARTICLE 14 – Trademarks
(a) Newgen "Trademarks' means those trademarks, trade
names, slogans, tables, and other identifying symbols as are or
have been developed and used by Newgen and/or any of its
subsidiaries or affiliate companies anywhere in the world.
(b) Newgen authorizes VCARE INFOTECH SOLUTIONS
AND SERVICES PVT LTD to use only the trademarks as
approved by Newgen during the term of this agreement for the
purpose of the sale and distribution of Newgen Products. VCARE
INFOTECH SOLUTIONS AND SERVICES PVT LTD shall use
these trademarks only in such a manner as to preserve all right of
Newgen. VCARE INFOTECH SOLUTIONS AND SERVICES
PVT LTD acquires no right to any Newgen trademark by its use or
by the marketing, sale or servicing of products bearing such
trademarks and may consequently only use the specified
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trademarks for the duration of this agreement and to the extent
specified therein.
(c) VCARE INFOTECH SOLUTIONS AND SERVICES PVT
LTD shall not, without Newgen's prior written consent, remove,
alter, or modify serial No. or identifying symbols from Newgen
Products.
(d) VCARE INFOTECH SOLUTIONS AND SERVICES PVT
LTD recognizes and concedes for all purposes that Newgen
trademarks, whether or not registered, are valid and are the
exclusive property of Newgen and that VCARE INFOTECH
SOLUTIONS AND SERVICES PVT LTD's right to use any such
trademarks arises only out of this agreement.
(e) Newgen shall have the sole and exclusive right in its sole
discretion to bring legal action for trademark infringement with
respect to any of the Newgen trademarks, VCARE INFOTECH
SOLUTIONS AND SERVICES PVT LTD shall inform Newgen
too promptly of any such trademark infringements of which it has
knowledge and assist Newgen to bring charges against such
infringements. Newgen shall bear the cost of any legal action if
required against trademark infringements.
ARTICLE 15 – Intellectual Property Rights
License : No title to or ownership of any Software or any parts
thereof is transferred to Customer by any delivery of Software to
Customer hereunder. Newgen grants End Customer a non-
exclusive nontransferable license to utilize the Software. The
Software is licensed only for use with the Product unit with which
such Software is incorporated. The license fee may be induded
within the price of each Product unit or charged separately for use
with the Product
Newgen shall defend, indemnify, and hold VCARE INFOTECH
SOLUTIONS AND SERVICES PVT LTD and their employees
harmless from and against any claims, demand, action arising on
account of infringement of the Intellectual Property rights of its
product. Similarly, VCARE INFOTECH SOLUTIONS AND
SERVICES PVT LTD will defend, indemnify, and hold Newgen
and their employees harmless from and against any claims,
demands, action on account of any breach or default by VCARE
INFOTECH SOLUTIONS AND SERVICES PVT LTD in the
performance of its obligations to the Client.
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The End Customer may modify the Application Software with
respect to which a license is granted, as set forth in this paragraph,
provided such modifications are composed in consultation with
Newgen, at Newgen's direction, or relate solely to the adjustment
of product or process values using the safe parameters dictated by
the process manufacturer. Any other modifications to the
Application Software may at Newgen's discretion, void the
warranty, maintenance obligations and proprietary rights indemnity
provided by Newgen for such software or for the Newgen product.
Third party software provided by Newgen may be subject to a
separate license agreement and/or registration requirement,
including but not limited to, prohibitions on copying and
limitations on use.
Designs, Engineering Details, and Other Data : Newgen retains
for itself all of its intellectual property rights in and any supporting
documentation supplied hereunder, including but not limited to all
designs, engineering details, and other data or information
pertaining to any product sold except where such rights are
assigned under written agreement by a corporate officer of
Newgen.
THIS ARTICLE IS AN EXCLUSIVE STATEMENT OF ALL THE
DUTIES OF THE PARTIES RELATING TO INTELLECTUAL
PROPERTY RIGHTS AND DIRECT OR CONTRIBUTORY
INFRINGEMENT AND OF ALL THE REMEDIES OF
CUSTOMER RELATING TO ANY CLAIMS, SUITS, OR
PROCEEDINGS INVOLVING INTELLECTUAL PROPERTY
RIGHTS Compliance with this Article as provided herein shall
constitute fulfillment of all liabilities of the parties under the
Agreement with respect to intellectual property rights.”
8. Article 18 of the Partner Agreement provided for resolution of
disputes by arbitration, and read thus:
“ARTICLE 18 – Arbitration
(a) All disputes or differences whatsoever arising between the
parties shall be settled by arbitration in accordance with the
proceedings as per the Arbitration and Conciliation Act 1996.
(b) The arbitrator shall be appointed mutually by Newgen &
VCARE INFOTECH SOLUTIONS AND SERVICES PVT LTD
and the arbitrator shall be based at New Delhi.
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(c) All disputes pertaining to arbitration or otherwise shall be
subject to the jurisdiction of the Laws of India and the venue shall
be Now Delhi.
(d) Any matter on which Newgen's decision is expressly stated
in these terms and conditions as final shall not be open to
arbitration.”
9. On 10 July 2024, the appellant changed its name to “NEWGEN
IT TECHNOLOGIES LIMITED”. This fact came to the notice of the
respondent on receipt, by it, of an e-mail dated 25 June 2024 from the
appellant, inviting the respondent to a get-together. On 16 July 2024,
the appellant wrote to the respondent, informing the respondent of the
change of its corporate name. Subsequently, the appellant also applied,
to the Registrar of Trade Marks, for registration of the marks
and,
though the marks have not been registered so
far.
10. Vide letter dated 15 September 2024, the respondent terminated
the Partner Agreement on the ground of illegal misappropriation, by
the appellant, of the respondent’s trade marks. The respondent also
called upon the applicant to cease and desist from using any of the
NEWGEN marks.
11. The appellant, by response dated 11 December 2025, refused to
comply.
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12. The respondent was, therefore aggrieved by the acts of the
appellant, which amounted to infringement of the respondent’s trade
marks as well as passing off of its goods as those of the respondent.
13. Based on the above assertions and allegations, the respondent,
in the suit, advanced the following prayers:
“In view of the facts and circumstances hereinbefore, it is
respectfully prayed that this Hon’ble Court may be pleased to:
a. Pass and pronounce a decree of permanent injunction
against infringement of the Plaintiff’s trade mark “
(among other variants) by restraining the Defendant, its
directors, partners, officers, managers, assigns, successors-
in-interest, licensees, sister concerns, representatives,
servants, agents, employees, etc. and/or any person or entity
acting for it from using the marks “NEWGEN”,
“NEWGEN IT”,
and the corporate name "NEWGEN IT TECHNOLOGIES
LIMITED" or any other mark similar to the Plaintiff's
NEWGEN Marks, singularly or in conjunction with any
other words or monogram/logo, as a trade mark, corporate
name, trade name, trading style, domain name, third-party
listings, website address, electronic mail identity or in any
other manner whatsoever; on or in relation to its
services/business including advertising, business papers,
etc.;
b. Pass and pronounce a decree of permanent
injunction against the Defendant, its directors, partners,
officers, managers, assigns, successors-in-interest,
licensees, affiliates, sister concerns, representatives,
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servants, agents, employees, etc., and/or any person or
entity acting for it from passing off its services/business as
or for the services/business of the Plaintiff by restraining it
from using the marks "NEWGEN", “NEWGEN IT”,
and the corporate name "NEWGEN IT TECHNOLOGIES
LIMITED" or any other mark similar to the Plaintiff's
"NEWGEN trade mark/name "NEWGEN", SOFTWARE",
"NEWGEN SOFTWARE TECHNOLOGIES LIMITED",
among other variants), singularly or in conjunction with
any other words or monogram/logo, as a trade mark,
corporate name, trade name, trading style, domain name,
third-party listings, website address, electronic mail identity
or in any other manner whatsoever; on or in its
services/business, including relation advertising, business
papers, etc.;
c. Pass and pronounce a decree of permanent
injunction restraining the Defendant, its directors, partners,
officers, managers, assigns, successors-in-interest,
licensees, franchisees, sister concerns, representatives,
servants, distributors, agents, family members, employees,
etc. and/or any person or entity acting for it from applying
for and/or obtaining registration from any competent body
or Government authority for the marks/name including the
marks “NEWGEN”, “NEWGEN IT”,
or any other mark similar to the Plaintiff's trade mark/name
"NEWGEN", "NEWGEN SOFTWARE", "NEWGEN
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SOFTWARE TECHNOLOGIES LIMITED”,
(among other variants), singularly or in conjunction with
any other words or monogram/logo/device in respect of any
trade mark, corporate name, trade name, third-party
listings, domain name/website address or copyright or in
any other manner whatsoever;
d. Pass and pronounce a decree directing the
Defendant and/or its directors, representatives, officers, etc.
to deliver-up to the Plaintiff for the purpose of
destruction/erasure all infringing materials including but
not limited to catalogues, pamphlets, brochures, billboards,
stationery, business cards, bill books, vouchers, letterheads,
signage, reprographic material bearing the marks
"NEWGEN", "NEWGEN IT",
and the corporate name "NEWGEN IT TECHNOLOGIES
LIMITED" or any other mark similar to the Plaintiff's trade
mark/name "NEWGEN", "NEWGEN SOFTWARE",
"NEWGEN SOFTWARE TECHNOLOGIES LIMITED”,
(among other variants), used in respect of advertising,
selling or marketing the Defendant's business/its services.
e. Pass a preliminary decree for rendition of account
directing the Defendant to produce before this Hon'ble
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Court or any person nominated/designated/appointed by
this Hon'bleCourt all accounts in general and invoices and
sales figures/revenues in particular;
f. Pass and pronounce a final money decree in favour
of Plaintiff for payment of damages in the sum of INR
3,01,000/- (Rupees Three Lakh and One Thousand only) or
any such higher sum as may be determined/ascertained
pursuant to the rendition of accounts;
g. Pass and pronounce an order for costs of the
proceedings; and
h. Pass and pronounce any further or other order or
directions, as this Hon'ble Court may deem fit or
appropriate in the facts and circumstances of the case in
favour of the Plaintiff and against the Defendant.”
II. Appellant’s Section 8 application
14. Consequent on receiving summons, the appellant filed an
application in the suit under Section 8 of the 1996 Act, seeking
reference of the disputes in the suit to arbitration in terms of Article 18
of the Partner Agreement. It was submitted, in the application, that the
Partner Agreement constituted the core of the lis between the parties.
Article 14 of the Partner Agreement specifically proscribed any
infringement, by the appellant, of the respondent’s NEWGEN
5
trademark. Inasmuch as Section 16(1) of the 1996 Act empowered
the Arbitral Tribunal to adjudicate on its jurisdiction, the appellant
submitted that Article 18 of the Partner Agreement required the
disputes to be referred to arbitration. Reliance was placed, in the
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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.
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application, on the judgment of this Court in Hero Electric Vehicles
6
Private Ltd v. Lectro E-Mobility Private Ltd . It was submitted that in
the said decision, as well as in Golden Tobie Private Ltd v. Golden
7
Tobacco Ltd , this Court has held that disputes relating to trademark
infringement were not ipso facto non-arbitrable in nature.
15. In these circumstances, the application, as already noted, sought
reference of the disputes raised in the suit to arbitration.
C. The Impugned Order
16. The learned Commercial Court has, by the impugned order
dated 23 April 2025, dismissed the application.
17. Unfortunately, the decision of the learned Commercial Court is
largely unreasoned. It merely reproduces the submissions of both sides
and holds that the judgments of the Supreme Court in P. Anand
8
Gajapathi Raju v. P.V.G. Raju , Uttarakhand Purv Sainik Kalyan
9
Nigam Limited v. Northern Coal Field Ltd and the judgment of the
10
High Court of Bombay in Jashu M. Patel v. Shivdatta , on which the
appellant placed reliance, were inapplicable to the issue. The learned
Commercial Court has also noted the reliance placed by learned
Counsel on the judgments of the Supreme Court in A. Ayyasamy v.
11 12
Paramasivam and Vidya Drolia v. Durga Trading Corporation as
6
2021 SCC OnLine Del 1058
7
2021 SCC OnLIne Del 3029
8
(2000) 4 SCC 539
9
(2020) 2 SCC 455
10
2003 (3) Mh.L.J. 487
11
(2016) 10 SCC 386
12
(2021) 2 SCC 1
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well as the judgment of this Court in Hero Electric Vehicles and
Golden Tobie, without expressing any opinion regarding the
applicability of the said decisions.
18. The only aspect on which any opinion, worth the name, may be
said to have been expressed by the learned Commercial Court is in the
following paragraph:
“It is the case of the Plaintiff since beginning that it was due to
defendant's illegal actions that the plaintiff was constrained to
terminate the contract and once the main contract itself was
recalled and terminated by the plaintiff, then there remained no
scope for applicability of Arbitration clause. Moreover, the
language of the agreement itself reveals that it was entered into
between the plaintiff and the said M/s VCARE Infotech Solutions
and Services Pvt. Ltd. and it did not provide anywhere that it would
either include or would be binding upon their successors, assignees,
agents or heirs etc., which essentially meant that with the change of
the name of the said M/s VCARE Infotech Solutions and Services
Pvt. Ltd., the agreement had come to an end by its natural death
and once the main agreement executed between the erstwhile
parties did not remain in existence, then the arbitration clause
contained therein had also lost its significance and validity.
Therefore, as on date, it could not be held with precision that their
existed any independent arbitration clause between the parties so as
to invoke the provisions of Section 8 of the Arbitration and
Conciliation Act.”
19. Thereafter, after referring to the various submissions advanced
before it, the learned Commercial Court proceeds in one line to
dismiss the application.
20. The impugned order could have been set aside even on the sole
ground that it is bereft of reasons. That, however, would require us to
remand the matter to the learned Commercial Court. Inasmuch as the
issue in controversy is short, we are not inclined to do so.
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D. Rival Contentions
21. We have heard Dr. Amit George, learned Counsel for the
appellant and Mr. Sandeep Sethi and Mr. Ankit Jain, learned Senior
Counsel appearing for the respondent at length.
I. Submissions of Dr. George
22. Dr. George submits that, in a Section 8 proceeding, the
applicant is only required to demonstrate the prima facie existence of
an arbitration agreement, for which purpose he places reliance on
paragraph 166 of In re, Interplay Between Arbitration Agreements
13
under Arbitration, 1996 and Stamp Act, 1899 . The appellant had
succeeded in doing so, in as much as (i) the dispute between the
parties arose out of an alleged breach of Article 14 of the Partner
Agreement, and (ii) Article 18 of the Partner Agreement specifically
envisaged settling of disputes arising out of the Partner Agreement by
arbitration. In such cases, Section 8, when invoked by one of the
parties, mandated the Court to refer the dispute to arbitration.
23. Dr. George submits that the learned Commercial Court is
clearly in error in holding that the mere change of name of the
appellant from VCARE INFOTECH SOLUTIONS & SERVICES
PRIVATE LIMITED to NEWGEN IT TECHNOLOGIES LIMITED
rendered the arbitration clause in the Partner Agreement inoperable. If
such an interpretation were to be accepted, any party to an arbitration
13
(2024) 6 SCC 1, hereinafter “ Interplay ”
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agreement could easily circumvent its obligations thereunder by
changing its corporate name.
24. In any case, submits Dr. George, in view of Section 16 of the
1996 Act, the Arbitral Tribunal was vested with complete power to
rule on its own jurisdiction and, therefore, that would be the
appropriate course of action to follow. Dr. George submits that the
dispute between the parties cannot be treated as a simpliciter in rem
trademark infringement dispute as would not be amenable to
resolution by arbitration. Reliance has been placed, in this context, on
the judgment of the Supreme Court in K. Mangayarkarasi v. N.J.
14
Sundaresan .
25. Dr. George further submits that termination of the Partner
Agreement did not extinguish the arbitration clause contained therein
and relies, for this purpose, on National Agricultural Coop.
15
Marketing Federation India Ltd. v. Gains Trading Ltd .
26. For all these reasons, submits Dr. George, the learned
Commercial Court was in error in refusing to refer the dispute
between the parties to arbitration as sought by the appellant in its
Section 8 application.
II. Submissions of Mr. Sethi
14
(2025) 8 SCC 299
15
(2007) 5 SCC 692
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27. Mr. Sethi emphatically refutes Dr. George’s contention that the
disputes between the parties arose out of the Partner Agreement. He
submits that the Partner Agreement was limited to channel-partner
activities and did not extend to enforcement or protection of
intellectual property rights. The dispute between the parties, he
submits, is a simpliciter trademark infringement dispute, which
constitutes an intellectual property dispute in rem and is, therefore, not
arbitrable in nature. He also submits that the appellant could not seek
to rely on the arbitration clause contained in the Partner Agreement
once the Partner Agreement itself was terminated on 15 September
2024.
28. Re-emphasizing the point that the dispute did not arise out of
the Partner Agreement, Mr. Sethi submits that reliance on the Partner
Agreement was placed by the respondent only to demonstrate prior
knowledge and acknowledgement, by the appellant, of the
respondent’s right in the NEWGEN marks. The dispute continued to
remain an in rem intellectual property dispute, which, applying the
law laid down in A. Ayyasamy v. A. Paramasivam and Emaar MGF
16
Land Ltd v. Aftab Singh , was not arbitrable.
29. Without prejudice, Mr. Sethi, submits that Article 14(e) of the
Partner Agreement reserved right with the respondent to sue for
trademark infringement and Article 18(d) excluded such matters from
arbitration.
16
(2019) 12 SCC 751
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30. It is further submitted that, having been filed after the filing of
an application in the suit under Order XXXIX Rule 4 of the CPC, as
well as an appeal before this Court, arising out of the order passed on
the said application, the appellant was barred from moving the
application under Section 8 of the 1996 Act, as the application was
statutorily required to be filed before the “submission of the first
statement on the substance of the dispute”. Relying on the judgment of
the Supreme Court in Rashtriya Ispat Nigam Limited v. Verma
17
Transport Company , it is contended that the “first statement on the
substance of the dispute” is not necessarily the written statement filed
by way of response to the plaint, and that the submissions contained in
the Order XXXIX Rule 4 of the CPC application and the appeal
preferred thereagainst would amount to submission of the first
statement on the substance of the dispute.
31. The judgments in Hero Electric Vehicles and Golden Tobie are
sought to be distinguished on the ground that they directly involved
breach of contract, whereas the present case is in the nature of a
simpliciter trademark infringement dispute.
32. Mr. Sethi submits that, therefore, the learned Commercial Court
has correctly rejected the appellant’s application under Section 8 of
the 1996 Act.
E. Analysis
I. Change of name of the appellant was irrelevant
17
(2006) 7 SCC 275
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33. In the first place, the observation, of the learned Commercial
Court that, as there was a change in the name of the appellant, the
arbitration agreement was no longer applicable, is obviously incorrect.
The mere change in the corporate name of one of the parties does not
bring the contract between them to an end. Dr. George is correct in his
submission that, if this were so, a party to a contract could, by merely
changing its corporate name, stand excused of its liabilities under the
contract. The finding of the learned Commercial Court is, therefore, ex
facie unsustainable in law and on facts.
34. Beyond this, the learned Commercial Court has not embarked
on any discussion on the merits of the Section 8 application filed by
the appellant. We, therefore, are constrained to do so.
II. The observations and findings in Interplay
35. A Constitution Bench of seven Judges of the Supreme Court
has, in Interplay , addressed all the issues which arise for consideration
in the present case, and with a degree of finality. So detailed, indeed,
is the said decision that the need to refer to earlier decisions of the
Supreme Court on these aspects stands effectively obviated. The
Constitution Bench has, in Interplay , dealt seriatim with the various
issues which arose for consideration before it. Among the aspects
which have been individually addressed by the Constitution Bench are
(i) the separability of the arbitration agreement from the rest of the
contract, (ii) the doctrine of kompetenz-kompetenz and Section 16 of
the 1996 Act and (iii) the scope and ambit of Sections 8 and 11 of the
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1996 Act. We may straightaway reproduce the relevant paragraphs
from the decision in Interplay apropos these aspects, thus:
(i) Re. Separability of the arbitration agreement
“(i) Separability of the arbitration agreement
98. The concept of separability or severability of an
arbitration agreement from the underlying contract is a
legal fiction which acknowledges the separate nature of an
arbitration agreement. The separate nature of the
arbitration agreement from the underlying contract is one
of the cornerstones of arbitration law . As Redfern and
Hunter explain, an arbitration agreement is juridically
independent from the underlying contract in which it is
contained. [Redfern and Hunter on International
Arbitration (7th Edn., Oxford University Press, 2023) 81.]
The concept of separability reflects the presumptive
intention of the parties to distinguish the underlying
contract, which captures the substantive rights and
obligations of the parties, from an arbitration agreement
which provides a procedural framework to resolve the
disputes arising out of the underlying contract . This
presumption has various consequences in theory and
practice, the most important being that an arbitration
agreement survives the invalidity or termination of the
underlying contract .
99. Schwebel, Sobota and Manton explain in a book on
International Arbitration that the separability presumption
[Stephen Schwebel, Luke Sobota, and Ryan
Manton, International Arbitration : Three Salient
Problems (Cambridge University Press, 2nd Edn., 2020) 4.]
is based on four factors : first, the intention of the parties to
require arbitration of any dispute arising between them,
including disputes over the validity of the contract ; second,
preventing an unwilling party from avoiding its earlier
commitment by alleging the invalidity of the underlying
contract; third, since the arbitration agreement and the
underlying contract are considered as two separate
agreements, the insufficiency in fulfilling formalities in the
underlying contract would not result in the invalidity of the
arbitration agreement; and fourth, if the separability
presumption is discarded, courts will have to rule on the
merits of the disputes instead of the Arbitral Tribunals.
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100. The rationale for the separability presumption lies in
the contractual freedom of the parties to an arbitration
agreement to settle their disputes by proceedings before an
Arbitral Tribunal to the exclusion of courts. According to
the common grain of business understanding and
expectation, the parties intend all their disputes over
substantive rights and obligations under the underlying
contract to be resolved by the Arbitral Tribunal. [ Mulheim
18
Pipecoatings GmbH v. Welspun Fintrade Ltd . ]
Therefore, the separability presumption ensures that an
arbitration agreement survives a termination, repudiation,
or frustration of a contract to give effect to the true
intention of the parties and ensure sanctity of the arbitral
proceedings .
*
114. The separability presumption, as incorporated under
Article 16(1) of the Model Law, as well as Section 16 of the
Arbitration Act, is qualified by the expression “for that
purpose”. A plain reading may suggest that Section 16 has
incorporated the separability presumption only for the
particular purpose of allocation of competence over
jurisdictional disputes. However, the Digest of Case Laws
on Uncitral Model Law states that:
“the language used in the second sentence does not
prevent the application of the separability
presumption when a jurisdictional question is raised
before a court.” [ Ibid .]
Gary Born suggests that the better view is that the
separability presumption contained in Article 16(1) states a
general rule of contractual validity “which is applicable for
all purposes.” [Gary Born, International Arbitration Law
and Practice (3rd Edn., 2021) 403.] The judicial view that
emerges from the Indian courts also seems to suggest that
an arbitration agreement is treated as distinct and separate
from the underlying contract as a general rule of
substantive validity .
*
120. In view of the above discussion, we formulate our
conclusions on this aspect. First, the separability
presumption contained in Section 16 is applicable not only
for the purpose of determining the jurisdiction of the
Arbitral Tribunal. It encapsulates the general rule on the
18
2013 SCC OnLine Bom 1048
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substantive independence of an arbitration agreement .
Second, parties to an arbitration agreement mutually intend
to confer jurisdiction on the Arbitral Tribunal to determine
questions as to jurisdiction as well as substantive
contractual disputes between them. The separability
presumption gives effect to this by ensuring the validity of
an arbitration agreement contained in an underlying
contract, notwithstanding the invalidity, illegality, or
termination of such contract . Third, when the parties
append their signatures to a contract containing an
arbitration agreement, they are regarded in effect as
independently appending their signatures to the arbitration
agreement. The reason is that the parties intend to treat an
arbitration agreement contained in an underlying contract
as distinct from the other terms of the contract; and Fourth,
the validity of an arbitration agreement, in the face of the
invalidity of the underlying contract, allows the Arbitral
Tribunal to assume jurisdiction and decide on its own
jurisdiction by determining the existence and validity of the
arbitration agreement. In the process, the separability
presumption gives effect to the doctrine of competence-
competence .”
(emphasis supplied)
(ii) The doctrine of kompetenz-kompetenz and Section 16 of
the 1996 Act
“G. The doctrine of competence-competence
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.]
*
130. This position has now undergone a complete
metamorphosis in the present legislation. Section 16 of the
Arbitration Act, which is based on Article 16 of the Model
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Law, recognises the doctrine of competence-competence in
Indian arbitration law.
131. Section 16 empowers the Arbitral Tribunal to rule
on its own jurisdiction, including ruling on any objections
with respect to the existence or validity of arbitration
agreement . Importantly, the parties have a right under
19 20
Sections 16(2) and 16(3) to challenge the jurisdiction of
the Arbitral Tribunal on grounds such as the non-existence
or invalidity of the arbitration agreement. The Arbitral
Tribunal is obligated to decide on the challenge to its
jurisdiction, and where it rejects the challenge, it can
proceed with the arbitral proceedings and make an arbitral
award . It is the principle of procedural competence-
competence which recognises the power of an Arbitral
Tribunal to hear and decide challenges to its jurisdiction.
Once the Arbitral Tribunal makes an arbitral award, Section
21
16(6) allows the aggrieved party to make an application
for setting aside the award under Section 34. Sections
22
16(5) and 16(6) further show that Parliament has
completely ousted the jurisdiction of Courts to interfere
during the arbitral proceedings — courts can intervene only
after the tribunal has made an award. Thus, Section 16 is
intended to give full effect to the procedural and substantive
aspects of the doctrine of competence-competence .
*
136. In view of the above discussion, the issue that
comes up for our consideration is whether an issue of
stamping is a jurisdictional issue. Jurisdiction is generally
defined as the power of a court or tribunal to hear and
determine a cause, and to adjudicate or exercise any
judicial power in relation to such cause . [ Sukh Lal
23
Sheikh v. Tara Chand Ta ] Jurisdiction refers to the
authority of a court or tribunal to decide matters that are
litigated before it or to take cognizance of matters presented
before it in a formal way for its decision. In Official
24
Trustee v. Sachindra Nath Chatterjee , this Court held
19
(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.
20
(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.
21
(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.
22
(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.
23
(1905) 2 Cri LJ 618 (FB)
24
AIR 1969 SC 823
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that for a court to have jurisdiction to decide a particular
matter, it must not only have jurisdiction to try the suit
brought but must also have the authority to pass the orders
25
sought. In NTPC Ltd. v. Siemens Atkeingesellschaft , this
Court observed that any refusal to go into the merits of a
claim may be in the realm of jurisdiction. Accordingly, it
was observed that the issue of limitation goes to jurisdiction
because if a claim is barred by limitation, a tribunal can
refuse to exercise its jurisdiction .
*
(iii) Negative competence-competence
139. The international arbitration law as well as
domestic law prioritize the Arbitral Tribunal by permitting
them to initially decide challenges to their authority instead
of the Courts . The policy consideration behind this
approach is two-fold : first, to recognize the mutual
intention of the parties of choosing the arbitrator to resolve
all their disputes about the substantive rights and
obligations arising out of contract; and second, to prevent
parties from initiating parallel proceedings before courts
and delaying the arbitral process. This is the positive
aspect of the doctrine of competence-competence .
140. The negative aspect, in contrast, speaks to the
national courts. It instructs the Courts to limit their
interference at the referral stage by deferring to the
jurisdiction of the Arbitral Tribunal in issues pertaining to
the existence and validity of an arbitration agreement. Thus,
the negative aspect of the doctrine of competence-
competence suggests that the Courts should refrain from
entertaining challenge to the jurisdiction of the Arbitral
Tribunal before the arbitrators themselves have had an
opportunity to do so . [George A. Bermann, “The
“Gateway” Problem in International Commercial
Arbitration”, (2012) 37 Yale Journal of International Law 1,
16.] Allowing Arbitral Tribunals to first rule on their own
jurisdiction and later allowing the Courts to determine if
the tribunal exercised its powers properly safeguards both
the power and authority of the Arbitral Tribunal as well as
the Courts . The negative aspect of the doctrine has been
expressly recognised by Indian courts. Considering both the
positive and negative facets, the principle can be defined as
a rule whereby arbitrators must have the first opportunity
to hear challenges relating to their jurisdiction, which is
subject to subsequent review by courts . [Fouchard,
25
(2007) 4 SCC 451
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Gaillard, Goldman on International Commercial
Arbitration, Emmanuel Gaillard and John Savage (Eds.),
(1999) 401.]
*
143. In ArcelorMittal Nippon Steel (India) Ltd. v. Essar
26
Bulk Terminal Ltd. this Court held that negative
competence-competence prohibits courts from hearing
disputes which the parties have mutually intended to submit
to the jurisdiction of Arbitral Tribunal. As held in the
preceding sections, the issue of stamping is a jurisdictional
issue. The principle of negative competence-competence
requires the Courts to leave the issue of stamping to be
decided by the Arbitral Tribunal in the first instance .”
(Emphasis supplied)
(iii) The difference between Sections 8 and 11 of the 1996 Act
“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 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
27
of Patel Engg. 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.”
(emphasis supplied)
III. Re. finding that, with the termination of the Partner Agreement,
Article 18 thereof ceased to apply
26
(2022) 1 SCC 712
27
SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618
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36. Paras 98 to 100, 114 and 120 of the decision in Interplay clearly
hold that the arbitration agreement – which is but another expression
for the arbitration clause in the agreement between the parties – is
distinct from the rest of the agreement and has its own independent
existence, which survives the end of the parent agreement. Whereas
the agreement essentially captures substantive rights and obligations
of the parties, the arbitration clause provides the procedural
framework to resolve disputes arising out of the substantive
agreement/underlying contract. The very purpose of according a
separate and independent existence to the arbitration clause is to
underscore the intent of the parties to have all disputes between them,
arising from the agreement, resolved through arbitration. These,
therefore, would also include disputes relating to repudiation,
frustration or termination of the agreement itself. It is for this reason,
holds the Constitution Bench, that the arbitration clause has its own
substantive existence independent of the main or underlying contract.
This existence is agnostic of the invalidity, illegality or termination of
the contract .
37. Para 120 of the decision in Interplay sets out four justifications
for the principle that an arbitration clause in a contract would have its
own existence independent of the underlying contract. Of these, the
fourth is of greatest significance for our purpose. The fourth reason
cited by the Supreme Court in para 120 of Interplay , for treating the
arbitration clause as having its own independent existence, agnostic of
the underlying contract, is that, even if the underlying contract is
invalid, the validity of the arbitration clause allows the Arbitral
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Tribunal to assume jurisdiction and decide on its own jurisdiction by
determining existence and validity of the arbitration agreement. This
has been recognized to be a statutory avatar of the kompetenz-
kompetenz principle.
38. Moreover, particularly in the context of the power of the
Arbitral Tribunal to rule on its own jurisdiction, clause (a) of Section
16 of the 1996 Act statutorily treats the arbitration clause, forming part
of the contract, as independent of the other terms of the contract.
39. Thus, the submission of Mr. Sethi, as also advanced before the
learned Commercial Court, that, as the Partner Agreement stood
terminated on 15 September 2024, Article 18 of the Partner
Agreement also ceased to have effect, is clearly unsustainable in law,
being directly contrary to the afore-extracted paragraphs from
Interplay as well as other decisions on the point. It is, accordingly,
rejected.
IV. Section 8 or Section 16?
40. This issue, particularly in the facts of the present case, stands
answered not only by Interplay but also by the judgment of the
Supreme Court in K. Mangayarkarasi .
IV.A Two preliminary aspects
41. Two apparent ingredients of Sections 8 and 16 of the 1996 Act,
which stand out on a bare reading thereof, may be noted at the outset.
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42. Section 16 expressly empowers an Arbitral Tribunal to rule on
its own jurisdiction, including ruling on any objections with respect to
the existence or validity of the arbitration agreement. The fact that
Section 16 expressly refers to the power of the Arbitral Tribunal to
rule on the existence or validity of the arbitration agreement, needless
to say, does not derogate from the width of the earlier part of the
provision, which empowers the Arbitral Tribunal to rule on its own
jurisdiction.
43. Para 136 of Interplay explains the concept of “jurisdiction” in
clear terms, referencing, for the purpose, the judgment of the Supreme
Court in Sachindra Nath Chatterjee and NTPC and of the High Court
of Calcutta in Sukh Lal Sheikh . Applying the understanding of the
expression “jurisdiction” in para 136 of Interplay , it is clear that the
aspect of whether the dispute between the appellant and the
respondent, forming subject matter of the lis in the suit is, or is not,
amenable to arbitration, is a jurisdictional issue. Clearly, therefore, the
Arbitral Tribunal is empowered under Section 16 to decide on the
issue of whether it is competent to adjudicate on the controversy
raised in the suit.
44. Here, the second aspect of the statute, relating to Section 8,
becomes relevant.
45. Section 8 envisages the Court, exercising power under the said
provision, only addressing itself on the issue of whether there is a
prima facie valid arbitration agreement i.e. a prima facie valid
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arbitration clause in the contract between the parties. As plainly read,
therefore, Section 8 does not envisage any inquiry by a Court beyond
the prima facie existence of a valid arbitration agreement. This aspect
has also been noticed by the Constitution Bench in para 164 of the
judgment of the Constitution Bench of the Supreme Court in
Interplay , reproduced supra .
46. In this backdrop, a reading of paragraphs 123, 130, 131, 136,
139, 140 and 143 of Interplay, reproduced supra , clearly hold that the
concept of kompetenz-kompetenz has a positive as well as a negative
connotation, and that the negative aspect of the doctrine envisages the
Arbitral Tribunal being, in the first instance, permitted to rule on the
aspect of jurisdiction, before the Court pronounces on it.
47. Clearly, the aspect of jurisdiction is one on which the Court, as
well as the Arbitral Tribunal, are empowered to pronounce. In other
words, whether the disputes between the parties are arbitrable or non-
arbitrable is an aspect which, jurisprudentially, can be addressed both
by the Court as well as by the Arbitral Tribunal. Even in a case in
which the dispute is ex facie non-arbitrable, it is open to the Court, as
well as the Arbitral Tribunal, to so hold. In the present case, for
example, the submission of the respondent is that the dispute between
the parties is in the nature of a simpliciter trademark infringement suit,
which is ex facie non-arbitrable, as it relates to rights in rem . A
pronouncement to this effect can as well be made by the Arbitral
Tribunal as by the Court. The question is as to whether when the
Court, if approached under Section 8, it should straightaway rule on
this aspect or should allow the Arbitral Tribunal an opportunity to take
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a view thereon – in view of Section 16 – before addressing the issue
on its own.
48. It has, therefore, to be decided whether, despite the Arbitral
Tribunal having statutorily been conferred the power to adjudicate on
its jurisdiction to adjudicate on the dispute before it, the Court, when
moved under Section 8, should pronounce on the issue, without
allowing the Arbitral Tribunal to do so in the first instance.
IV.B Answering the issue – Interplay and Mangayarkarasi
49. Paragraph 140 of Interplay clearly holds, while explaining the
negative aspect of the kompetenz-kompetenz doctrine, that Court
should refrain from entertaining challenges to the jurisdiction of an
Arbitral Tribunal before the Tribunal has itself had an opportunity to
do so. This, as the Courts holds, properly safeguards the power and
authority of the Arbitral Tribunal as well as the Court. The principle
has, in the concluding sentence in paragraph 140 of Interplay, been
explained “as a rule whereby arbitrators must have the first
opportunity to hear challenges relating to their jurisdiction, which is
subject to subsequent review by courts”.
50. Paragraph 143 of Interplay is even more explicit on the issue.
After holding that the aspect of whether the agreement between the
parties has or has not been properly stamped is a jurisdictional issue,
the court holds that the principle of negative kompetenz-kompetenz
requires the court to leave this issue to be decided by the Arbitral
Tribunal in the first instance.
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51. This principle – i.e., that issues of jurisdiction should, in the
first instance, be left to the Arbitral Tribunal, before the court
addresses it – is, to our mind, innocent of Section 8 and 11. It applies
universally, irrespective of whether the court is exercising jurisdiction
under Section 11 or Section 8.
52. Applying the principle enunciated in paragraphs 140 and 143 of
Interplay to the case before us, the sequitur would be that, as the issue
of whether the dispute forming subject matter of controversy in the
suit instituted by the respondent against the appellant is, or is not,
arbitrable, is an issue of jurisdiction, it has, in the first instance, to be
left to the Arbitral Tribunal to decide.
53. The decision in Mangayarkarasi, which reiterates the above
principles is, in fact, similar to the case before us even on facts.
54. The dispute, as in the case before us, dealt with a trade mark
infringement. Asserting trademark rights, Mangayarkarasi, as the
plaintiff in the original suit, sought an injunction against Sundaresan
from using the marks “SRI ANGANNAN BIRIYANI HOTEL” or
“ABH SRI ANGANNAN HOTEL”, Sundaresan filed an application
under Section 8 of the 1996 Act, seeking reference of the dispute to
arbitration. The Supreme Court dealt with the aspect thus:
“8. The law on the subject is no longer res integra. When the
Arbitral Tribunal is constituted at the instance of one of the parties
and other party takes up the position that such proceedings are not
valid in law then what is the court expected to do in law has been
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explained very succinctly by this Court in Kvaerner Cementation
28
(India) Ltd. v. Bajranglal Agarwal , as under:
“3. There cannot be any dispute that in the absence of
any arbitration clause in the agreement, no dispute could be
referred for arbitration to an Arbitral Tribunal. But, bearing
in mind the very object with which the Arbitration and
Conciliation Act, 1996 has been enacted and the provisions
thereof contained in Section 16 conferring the power on the
Arbitral Tribunal to rule on its own jurisdiction, including
ruling on any objection with respect to existence or validity
of the arbitration agreement, we have no doubt in our mind
that the civil court cannot have jurisdiction to go into that
question.
4. A bare reading of Section 16 makes it explicitly
clear that the Arbitral Tribunal has the power to rule on its
own jurisdiction even when any objection with respect to
existence or validity of the arbitration agreement is raised,
and a conjoint reading of sub-sections (2), (4) and (6) of
Section 16 would make it clear that such a decision would
be amenable to be assailed within the ambit of Section 34
of the Act.
5. In this view of the matter, we see no infirmity in the
impugned order so as to be interfered with by this Court.
The petitioner, who is a party to the arbitral proceedings
may raise the question of jurisdiction of the arbitrator as
well as the objection on the ground of non-existence of any
arbitration agreement in the so-called dispute in question,
and on such an objection being raised, the arbitrator would
do well in disposing of the same as a preliminary issue so
that it may not be necessary to go into the entire gamut of
arbitration proceedings.”
9. What would be the position in case a suit is filed by the
plaintiff and in the said suit, the defendant files an application
under Section 8 of the 1996 Act questioning the maintainability of
the suit on the ground that the party had agreed to settle the
disputes through the means of arbitration having regard to the
existence of an arbitration agreement between them?
10. This has been very elaborately explained by this Court in A.
Ayyasamy v. A. Paramasivam . The Court held as under:
28
(2012) 5 SCC 214
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“13. … Obviously, in such a case, the court is to pronounce
upon arbitrability or non-arbitrability of the disputes.
14. In the instant case, there is no dispute about the
arbitration agreement inasmuch as there is a specific
arbitration clause in the partnership deed. However, the
question is as to whether the dispute raised by the
respondent in the suit is incapable of settlement through
arbitration. As pointed out above, the Act does not make
any provision excluding any category of disputes treating
them as non-arbitrable. Notwithstanding the above, the
courts have held that certain kinds of disputes may not be
capable of adjudication through the means of arbitration.
The courts have held that certain disputes like criminal
offences of a public nature, disputes arising out of illegal
agreements and disputes relating to status, such as divorce,
cannot be referred to arbitration [See O.P. Malhotra on The
Law and Practice of Arbitration and Conciliation 3rd Edn.,
authored by Indu Malhotra. See also note 10 ibid .] :
(i) patent, trade marks and copyright;
(ii) anti-trust/competition laws;
(iii) insolvency/winding up;
(iv) bribery/corruption;
(v) fraud;
(vi) criminal matters.
Fraud is one such category spelled out by the decisions of
this Court where disputes would be considered as non-
arbitrable.
15. “Fraud” is a knowing misrepresentation of the truth
or concealment of a material fact to induce another to act to
his detriment. Fraud can be of different forms and hues. Its
ingredients are an intention to deceive, use of unfair means,
deliberate concealment of material facts, or abuse of
position of confidence. The Black's Law Dictionary defines
“fraud” as a concealment or false representation through a
statement or conduct that injures another who relies on
29
it [See Ramesh Kumar v. Furu Ram (a decision rendered
under the Arbitration Act, 1940)] . However, the moot
question here which has to be addressed would be as to
whether mere allegation of fraud by one party against the
other would be sufficient to exclude the subject-matter of
29
(2011) 8 SCC 613
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dispute from arbitration and decision thereof necessary by
the civil court.”
11. In Booz Allen & Hamilton Inc. v. SBI Home Finance
30
Ltd. , this Court in the context of Section 8 of the 1996 Act
considered the question as to whether the subject-matter was
“arbitrable” i.e. arbitrable by private forum (Arbitral Tribunal). In
this context, the Court discussed the term “arbitrability” by
pointing out three facets thereof, namely:
(1) whether the disputes are capable of adjudication and
settlement by arbitration?
(2) whether the disputes are covered by the arbitration
agreement?
(3) whether the parties have referred the disputes to
arbitration?
12. The Court held as under:
“35. The Arbitral Tribunals are private fora chosen
voluntarily by the parties to the dispute, to adjudicate their
disputes in place of courts and tribunals which are public
fora constituted under the laws of the country. Every civil
or commercial dispute, either contractual or non-
contractual, which can be decided by a court, is in principle
capable of being adjudicated and resolved by arbitration
unless the jurisdiction of the Arbitral Tribunals is excluded
either expressly or by necessary implication. Adjudication
of certain categories of proceedings are reserved by the
legislature exclusively for public fora as a matter of public
policy. Certain other categories of cases, though not
expressly reserved for adjudication by public fora (courts
and tribunals), may by necessary implication stand
excluded from the purview of private fora. Consequently,
where the cause/dispute is inarbitrable, the court where a
suit is pending, will refuse to refer the parties to arbitration,
under Section 8 of the Act, even if the parties might have
agreed upon arbitration as the forum for settlement of such
disputes.
36. The well-recognised examples of non-arbitrable
disputes are: (i) disputes relating to rights and liabilities
which give rise to or arise out of criminal offences; (ii)
matrimonial disputes relating to divorce, judicial
separation, restitution of conjugal rights, child custody; (iii)
guardianship matters; (iv) insolvency and winding-up
30
(2011) 5 SCC 532
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matters; (v) testamentary matters (grant of probate, letters
of administration and succession certificate); and (vi)
eviction or tenancy matters governed by special statutes
where the tenant enjoys statutory protection against
eviction and only the specified courts are conferred
jurisdiction to grant eviction or decide the disputes.
37. It may be noticed that the cases referred to above
relate to actions in rem. A right in rem is a right exercisable
against the world at large, as contrasted from a right in
personam which is an interest protected solely against
specific individuals. Actions in personam refer to actions
determining the rights and interests of the parties
themselves in the subject-matter of the case, whereas
actions in rem refer to actions determining the title to
property and the rights of the parties, not merely among
themselves but also against all persons at any time claiming
an interest in that property. Correspondingly, a judgment in
personam refers to a judgment against a person as
distinguished from a judgment against a thing, right or
status and a judgment in rem refers to a judgment that
determines the status or condition of property which
operates directly on the property itself. (Vide Black's Law
Dictionary.)
38. Generally and traditionally all disputes relating to
rights in personam are considered to be amenable to
arbitration; and all disputes relating to rights in rem are
required to be adjudicated by courts and public tribunals,
being unsuited for private arbitration. This is not however a
rigid or inflexible rule. Disputes relating to subordinate
rights in personam arising from rights in rem have always
been considered to be arbitrable .”
13. In Vidya Drolia v. Durga Trading Corpn ., this Court held
that the grant and issue of patents and registration of trade marks
are matters that fall within the sovereign or government functions
and have erga omnes effect. Prima facie , the nature of disputes
sought to be raised by the petitioners cannot be considered as
actions in rem .
14. The assumption that all matters relating to trade marks are
outside the scope of arbitration is plainly erroneous. There may be
disputes that may arise from subordinate rights such as licences
granted by the proprietor of a registered trade mark. Undisputedly,
these disputes, although, involving the right to use trade marks, are
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arbitrable as they relate to rights and obligations inter se the
parties to a licence agreement .
15. At this juncture, we would like to refer to the recent
decision of this Court in SBI General Insurance Co. Ltd. v. Krish
31
Spinning , wherein one of us, J.B. Pardiwala, J., was a part of the
Bench, which considered, inter alia , the issue as to whether a party
could seek referral of a matter to arbitration, having previously
executed a discharge voucher as the full and final settlement of all
pending dues.
16. Referring to the position of law elucidated in National
32
Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd. , the Court
observed that the aspect of full and final settlement having been
obtained by fraud or coercion itself gives rise to an arbitrable issue
and thus does not act as a bar to arbitration.
17. The relevant paragraphs are reproduced hereinbelow:
“59. The position that emerges from the aforesaid
discussion is that there is no rule of an absolute kind which
precludes arbitration in cases where a full and final
settlement has been arrived at. In Boghara Polyfab ,
discussing in the context of a case similar to the one at
hand, wherein the discharge voucher was alleged to have
been obtained on ground of coercion, it was observed that
the discharge of a contract by full and final settlement by
issuance of a discharge voucher or a no-dues certificate
extends only to those vouchers or certificates which are
validly and voluntarily executed. Thus, if the party said to
have executed the discharge voucher or the no-dues
certificate alleges that the execution was on account of
fraud, coercion or undue influence exercised by the other
party and is able to establish such an allegation, then the
discharge of the contract by virtue of issuance of such a
discharge voucher or no-dues certificate is rendered void
and cannot be acted upon.
60. It was further held in Boghara Polyfab that the
mere execution of a full and final settlement receipt or a
discharge voucher would not by itself operate as a bar to
arbitration when the validity of such a receipt or voucher is
challenged by the claimant on the ground of fraud, coercion
or undue influence. In other words, where the parties are
31
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32
(2009) 1 SCC 267
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not ad idem over accepting the execution of the no-claim
certificate or the discharge voucher, such disputed
discharge voucher may itself give rise to an arbitrable
dispute.”
18. Further, referring to the time-sensitive nature of arbitration
proceedings and the broad jurisdiction of Arbitral Tribunals under
Section 16 of the 1996 Act, the Court observed that the aspects like
full and final settlement, frivolity or dishonesty in litigation, etc.
were well within the domain of the Arbitral Tribunal to consider
and the courts, acting under Section 11 of the 1996 Act must limit
their scope of examination merely to ascertaining the existence of
the arbitration agreement. The approach taken by this Court
in Krish Spg. not only furthers the interpretation adopted by this
Court in its previous decisions in Mayavati Trading (P)
33
Ltd. v. Pradyuat Deb Burman and Interplay Between
Arbitration Agreements under Arbitration & Conciliation Act,
1996 & Stamp Act, 1899, In re , but also gives meaningful effect to
the change brought about by the 2015 Amendment to the 1996 Act.
19. The relevant paragraphs are reproduced hereinbelow:
“126. The power available to the referral courts has to be
construed in the light of the fact that no right to appeal is
available against any order passed by the referral court
under Section 11 for either appointing or refusing to
appoint an arbitrator. Thus, by delving into the domain of
the Arbitral Tribunal at the nascent stage of Section 11, the
referral courts also run the risk of leaving the claimant in a
situation wherein it does not have any forum to approach
for the adjudication of its claims, if its Section 11
application is rejected.
127. Section 11 also envisages a time-bound and
expeditious disposal of the application for appointment of
arbitrator. One of the reasons for this is also the fact that
unlike Section 8, once an application under Section 11 is
filed, arbitration cannot commence until the Arbitral
Tribunal is constituted by the referral court. This Court, on
various occasions, has given directions to the High Courts
for expeditious disposal of pending Section 11 applications.
It has also directed the litigating parties to refrain from
filing bulky pleadings in matters pertaining to Section
11. Seen thus, if the referral courts go into the details of
issues pertaining to “accord and satisfaction” and the like,
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(2019) 8 SCC 714
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then it would become rather difficult to achieve the
objective of expediency and simplification of pleadings.
128. We are also of the view that ex-facie frivolity and
dishonesty in litigation is an aspect which the Arbitral
Tribunal is equally, if not more, capable to decide upon the
appreciation of the evidence adduced by the parties. We say
so because the Arbitral Tribunal has the benefit of going
through all the relevant evidence and pleadings in much
more detail than the referral court. If the referral court is
able to see the frivolity in the litigation on the basis of bare
minimum pleadings, then it would be incorrect to doubt that
the Arbitral Tribunal would not be able to arrive at the
same inference, most likely in the first few hearings itself,
with the benefit of extensive pleadings and evidentiary
material.”
20. The law is well settled that allegations of fraud or criminal
wrongdoing or of statutory violation would not detract from the
jurisdiction of the Arbitral Tribunal to resolve a dispute arising out
of a civil or contractual relationship on the basis of the jurisdiction
conferred by the arbitration agreement.
21. Once an application in due compliance with Section 8 of
the 1996 Act is filed, the approach of the civil court should be not
to see whether the court has jurisdiction. It should be to see
whether its jurisdiction has been ousted . There is a lot of difference
between the two approaches.
22. Once it is brought to the notice of the court that its
jurisdiction has been taken away in terms of the procedure
prescribed under a special statute, the civil court should first see
whether there is ouster of jurisdiction in terms or compliance with
the procedure under the special statute. The general law should
yield to the special law — generalia specialibus non derogant . In
such a situation, the approach shall not be to see whether there is
still jurisdiction in the civil court under the general law . Such
approaches would only delay the resolution of disputes and
complicate the redressal of grievance and of course unnecessarily
increase the pendency in the court.
23. Once there is an arbitration agreement between the parties,
a judicial authority before whom an action is brought covering the
subject-matter of the arbitration agreement is under a positive
obligation to refer parties to arbitration by enforcing the terms of
the contract. There is no element of discretion left in the court or
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judicial authority to obviate the legislative mandate of compelling
parties to seek recourse to arbitration.
24. In view of the foregoing, we are of the view that no error,
not to speak of any error of law, could be said to have been
committed by the High Court in passing the impugned judgment
and order.
25. The special leave petition stands, accordingly, dismissed.
Pending application(s), if any, stands disposed of.”
(Emphasis supplied)
55. Thus, in a case where Section 8 applies, the Court is left with no
discretion in the matter, and reference of the disputes to arbitration is
the inexorable rule.
56. An interesting feature of the discussion in the above paragraphs
from Mangayarkarasi is that, even while dealing with Section 8 of the
1996 Act, the Supreme Court has relied on decisions, including Krish
Spinning , rendered in the context of Section 11. Indeed, though there
is, facially, a distinction between the two provisions, the distinction is
more one of degree than of substance. As has been held in para 164 of
Interplay and reiterated in Mangayarkarasi , a Section 8 Court “looks
into the prima facie existence of a valid arbitration agreement”
whereas a Section 11 Court “(examines) the existence of an arbitration
agreement”. How far this is a distinction of substance, to our mind,
may be debatable.
57. We need not, however, venture into that somewhat thorny
thicket, as the observations and findings of the Supreme Court in
Mangayarkarasi practically cover the present case on facts as well as
in law. In fact, in that case, even while holding that the disputes
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relating to infringement of trademark, in which injunction was sought,
were, generally speaking, non-arbitrable in nature, the Supreme Court
held that, once there was a contract between the parties which
contained an arbitration clause, and the dispute fell within the four
corners of the contract, the decision in this regard had to be left in the
first instance to the Arbitral Tribunal.
58. As in the present case, there was a pre-existing agreement
between the parties. Mr. Sethi’s contention that the Partner Agreement
was not intended to protect intellectual property stands belied by
Articles 14 and 15 thereof, already extracted earlier. In fact, the
Partner Agreement was self-contained and complete with respect to
preservation of the intellectual property rights of the respondent. The
plea of trademark infringement was specifically pleaded to be a direct
breach of Article 14 of the Partner Agreement. The link between the
cause of action for instituting the suit and the Partner Agreement is,
therefore, live and palpable.
59. The observation, in para 14 of Mangayarkarasi, to the effect
that, though the dispute sought an injunction against the use by
Sundaresan, of specified trademarks, the dispute nonetheless remained
arbitrable as it related to the rights and obligations inter se to a license
agreement would apply, therefore, to the present case on facts.
60. In paras 21 to 24 of Mangayarkarasi , the Supreme Court has
clearly held that the overarching principle, in a case where there was
an agreement between the parties containing an arbitration clause, and
the suit court was approached under Section 8 of the 1996 Act, would
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not be to see whether it has jurisdiction to proceed with the matter, but
to see whether its jurisdiction stood ousted. Ouster of jurisdiction
would take place only where the jurisdiction of the court stood
divested by a special statute. In applying this principle, the Court had
to proceed on the basis of the maximum generalia specialibus non
derogant . Keeping these principles in mind, the Supreme Court has
observed that, where there was an arbitration agreement between the
parties, and the disputes between the parties covered the subject
matter of the arbitration agreement, the court was under a positive
obligation to refer the parties to arbitration.
61. In these circumstances, the Supreme Court upheld the decision
of the High Court to allow the Section 8 application filed by the
defendant and refer the disputes to arbitration.
V. The sequitur
62. There can be no quarrel, on facts, with the proposition that the
dispute forming subject matter of the suit instituted by the respondent
against the appellant is clearly relatable to the Partner Agreement.
The Partner Agreement was specifically executed to confer a right on
the appellant to use the NEWGEN mark. The agreement also
prohibited the use of the NEWGEN mark only in furtherance of the
business of the respondent. The Partner Agreement also specifically
proscribed use, by the appellant, of the NEWGEN mark in any
manner as would infringe the registered trademarks of the respondent.
The specific allegation of the respondent against the appellant in the
suit, as is also obvious from the prayers in the suit is that, by changing
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its corporate name to NEWGEN IT TECHNOLOGIES LIMITED, the
appellant had breached the Partner Agreement and had effectively
infringed the registered NEWGEN trademarks of the respondent.
63. Prima facie , therefore, the dispute in the suit was squarely
relatable to the subject matter of the Partner Agreement between the
parties.
64. Whether, despite this, the dispute between the parties would be
nonetheless non-arbitrable, to our mind, is an aspect which, given the
law in that regard and the scope of Section 16 of the 1996 Act, ought
to be left for decision, in the first instance at least, by the Arbitral
Tribunal.
65. Ergo, keeping in mind the law laid down by the Supreme Court
in Interplay and Mangayarkarasi as well as in view of the very
structure of Sections 8 and 16 of the 1996 Act, the court would be
bound to refer the disputes between the parties to arbitration in terms
of Article 18 of the Partner Agreement.
F. Conclusion
66. Accordingly, we quash and set aside the impugned order dated
23 April 2025 passed by learned Commercial Court on the Section 8
application filed by the appellant. The application would stand
allowed and the disputes between the parties referred to arbitration.
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67. The parties would be at liberty to take appropriate steps, in
accordance with law and the provisions of the 1996 Act, to invoke and
set the arbitral process in motion.
68. The appeal stands allowed accordingly with no orders as to
costs.
C. HARI SHANKAR, J.
OM PRAKASH SHUKLA, J.
JULY 01, 2026 /aky/yg
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