Referral Court’s Jurisdiction Under Section 11 is Confined to Prima Facie Examination of Arbitration Agreement’s Existence

The Petitioner, Axis Finance Limited, moved the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator

The dispute arose from a Personal Loan Agreement dated 12.10.2022, which contained an arbitration clause (Clause 14) providing for a sole arbitrator nominated by the lender and designating Delhi/Mumbai as the seat

The Petitioner invoked arbitration via a Section 21 notice dated 05.02.2024

Despite being duly served with notice of the present petition, the Respondent failed to appear or file a reply

1. Whether a Sole Arbitrator should be appointed under Section 11(6) given the Respondent's non-appearance and the existence of a valid arbitration agreement

2. What is the permissible scope of judicial scrutiny by a Referral Court at the Section 11 stage following recent Supreme Court precedents

Section 11(6) of the Arbitration and Conciliation Act, 1996, regarding the court's power to appoint arbitrators when the agreed procedure fails

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

Judicial interference under Section 11 is confined strictly to a prima facie examination of the "existence" of the arbitration agreement, leaving issues of "validity," "accord and satisfaction," or "frivolous claims" to the Arbitral Tribunal under the principle of competence-competence

The Court observed that the statutory requirements for appointing an arbitrator were satisfied as the Petitioner had duly served the Section 21 invocation notice and the Respondent had failed to participate in the constitution of the tribunal

Following the mandate in Krish Spinning, the Court limited its scrutiny to the existence of the arbitration agreement within the Loan Agreement

The Court reasoned that the court’s role is purely facilitative and procedural, intended to uphold the parties' original intent to arbitrate without embarking on a "laborious enquiry" into the merits or contested facts

Since a valid clause existed and the Respondent remained ex-parte, the Court found no legal impediment to referring the matter to arbitration

The Court held that since the valuation of the dispute was approximately Rs. 9 Lakhs, the arbitrator's fee shall be governed by the Fourth Schedule of the Act

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

All rights and contentions on merits were left open for the tribunal's determination