Ancillary agreement disputes are subject to the principal agreement's seat of arbitration and Section 11 judicial scrutiny.

The Petitioner approached the High Court of Delhi under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator based on Clause 32 of a Distributorship Agreement dated 06.12.2023

The dispute arose following a Section 21 notice alleging a breach of a separate "Confidentiality and Non-Use Agreement" executed on the same day

The Respondent challenged the petition’s maintainability, arguing that the Confidentiality Agreement did not specify a seat or venue and that no cause of action arose in Delhi

The Petitioner contended that the Confidentiality Agreement was merely ancillary to the principal Distributorship Agreement, which expressly designated New Delhi as the seat of arbitration

1. Whether a Section 11 petition is maintainable before the Delhi High Court when the underlying dispute pertains to an ancillary agreement that lacks a specific seat, but the principal agreement designates Delhi as the seat of arbitration?

2. What is the scope of judicial scrutiny by a Referral Court under Section 11(6) of the Act regarding objections to territorial jurisdiction and maintainability?

The Court primarily applied Section 11(6-A) of the Arbitration and Conciliation Act, 1996, which confines judicial examination strictly to the existence of an arbitration agreement

The Court relied on the seven-judge Bench decision in Interplay Between Arbitration Agreements under Arbitration Act, 1996 & Stamp Act, 1899, In re and the three-judge Bench decision in SBI General Insurance Co. Ltd. v. Krish Spinning, which established that the Referral Court should only conduct a prima facie scrutiny and avoid "laborious enquiry" into contested facts or "accord and satisfaction," leaving such "ruling" to the Arbitral Tribunal under Section 16

The Court observed that the Distributorship Agreement served as the "principal and umbrella agreement" governing the parties’ relationship

It reasoned that since the obligation of confidentiality (Clause 22) and non-compete (Clause 9) were integral to the original contract, any ancillary agreement dealing with these aspects must remain subservient to the principal agreement

Consequently, because the principal agreement designated Delhi as the seat, the Court found the petition maintainable

Applying the Krish Spinning standard, the Court held that its role is "facilitative and procedural"

It declined to delve into the merits of the jurisdictional or factual objections, noting that tests like "eye of the needle" are no longer in strict conformity with modern principles of arbitral autonomy

The court appointed Mr. Shashank Garg, Senior Advocate, as the Sole Arbitrator. It directed the arbitrator to file disclosures under Section 12(2) and clarified that all rights and contentions regarding the merits and jurisdiction remain open for the arbitrator's final adjudication