Referral Court Scrutiny Under Section 11 of the Arbitration Act Is Confined Solely to the Prima Facie Existence of an Arbitration Agreement

The Petitioner and Respondents entered into a Loan Agreement dated 02.04.2024, which contained an arbitration clause (Clause 8.2) providing for a sole arbitrator to settle disputes in Delhi.

Following a dispute involving a valuation of approximately Rs. 70 Lakhs, the Petitioner served a statutory notice under Section 21 of the Arbitration and Conciliation Act, 1996, on 03.09.2025.

Despite being duly served with the petition, the Respondents failed to appear or file a reply.

Consequently, the Petitioner approached the High Court under Section 11 of the Act seeking the appointment of an arbitrator.

1. Whether the court should appoint a sole arbitrator under Section 11 of the Act when the existence of a valid arbitration agreement is prima facie established and the respondent fails to participate.

2. Whether the scope of judicial scrutiny under Section 11(6) is limited solely to the examination of the existence of the arbitration agreement.

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

The court relied extensively on the Three-Judge Bench decision 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 precedents established that the referral court must adopt a "facilitative" role, avoiding "laborious enquiry" into contested facts like "accord and satisfaction," which are reserved for the Arbitral Tribunal under the principle of competence-competence.

The court observed that all statutory requirements under Section 11 were fulfilled: a written arbitration agreement existed in the Loan Agreement, and the Section 21 notice had been duly served.

Applying the standard of "prima facie examination" laid down in Krish Spinning, the court held that its role was limited to weeding out non-existent agreements rather than adjudicating the merits.

Since the Respondents chose not to contest the proceedings despite service, there was no impediment to the referral.

The court emphasized that by appointing an arbitrator, it was upholding arbitral autonomy and ensuring the claimant was not left without a forum, as no appeal lies against a refusal to appoint under Section 11.

The court allowed the petition and appointed Ms. Saumya Tandon, Advocate, as the Sole Arbitrator.

The arbitrator’s fee is to be governed by the Fourth Schedule of the Act; the court directed the arbitrator to file a disclosure under Section 12(2) and clarified that all rights and contentions on the merits remain open for adjudication by the tribunal.