Judicial Scrutiny Under Section 11 is Confined to Prima Facie Examination of Arbitration Agreement Existence

The Petitioner (Hero Fincorp) filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator to resolve disputes arising from a Facility Agreement dated 30.05.2024

Clause 20.1 of said Agreement provided for dispute resolution via arbitration with the seat in New Delhi

The Petitioner invoked the arbitration clause via a Legal Notice dated 06.11.2024 as per Section 21

The Respondent did not object to the reference but noted that a previous unilateral appointment by the Petitioner had resulted in the arbitrator’s recusal

1. Whether the Court should appoint a Sole Arbitrator under Section 11 of the Act given the existence of an arbitration agreement and compliance with Section 21

2. What is the scope of judicial scrutiny at the referral stage under Section 11(6) of the Act

The Court applied Section 11(6) of the Arbitration and Conciliation Act, 1996

It relied heavily on the precedent set by the three-judge bench in SBI General Insurance Co. Ltd. v. Krish Spinning (2024), which followed the seven-judge bench ruling in Interplay Between Arbitration Agreements under Arbitration Act, 1996 & Stamp Act, 1899, In re

These cases established that judicial intervention under Section 11 is confined strictly to a prima facie examination of the existence of the arbitration agreement, leaving issues such as "accord and satisfaction" or the validity of claims to the Arbitral Tribunal under the principle of competence-competence

The Court observed that its jurisdiction is extremely circumscribed and facilitative

It noted that the Facility Agreement contained a valid arbitration clause and the Petitioner had fulfilled the statutory requirement of the Section 21 notice

Following the Krish Spinning mandate, the Court refrained from adjudicating any contentious factual or legal issues, stating that the Referral Court must only "weed out non-existent arbitration agreements"

Since both parties were ad idem (in agreement) regarding the reference of disputes to a Sole Arbitrator and a prima facie agreement existed, the Court determined there was no impediment to making the appointment

the court’s role is limited to verifying the existence of the agreement

It directed the arbitration to be conducted under the aegis of the Delhi International Arbitration Centre (DIAC) in accordance with its rules and fee schedule

The Arbitrator was directed to file the mandatory disclosure under Section 12(2) within one week

All rights and contentions on merits were left open for the Tribunal's adjudication