Scope of Section 11 Inquiry Limited to Prima Facie Scrutiny of Arbitration Agreement’s Existence

The Petitioner 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 Loan Agreement dated 23.08.2024

Clause 8.2 of said agreement provides for arbitration in Delhi for any disputes arising out of the agreement

The Petitioner invoked arbitration via notice dated 03.01.2026

Despite being duly served and granted additional opportunities to appear by the Court on 05.05.2026, the Respondents failed to enter an appearance or file a reply

1. Whether a Sole Arbitrator should be appointed under Section 11 of the Act given the Respondents' non-appearance and the existence of an arbitration clause?

2. What is the scope of judicial scrutiny by a Referral Court at the stage of a Section 11 application?

Section 11(6) of the Arbitration and Conciliation Act, 1996, regarding the appointment of arbitrators

The Referral Court's jurisdiction is confined to a prima facie examination of the "existence" of an arbitration agreement under Section 7, rather than its validity or contested issues like "accord and satisfaction," which are reserved for the Arbitral Tribunal under the principle of competence-competence

SBI General Insurance Co. Ltd. v. Krish Spinning (2024), which incorporated the Seven-Judge Bench ruling in In re: Interplay Between Arbitration Agreements under Arbitration Act, 1996 & Stamp Act, 1899

The Court observed that all statutory requirements for invoking arbitration, including the Section 21 notice, were fulfilled

Applying the "facilitative and procedural" role defined in Krish Spinning, the Court noted that its intervention is limited to weeding out non-existent agreements and giving effect to the parties' original intent to arbitrate

Since the Respondents chose not to contest the proceedings and a valid arbitration clause (Clause 8.2) existed in the Loan Agreement, the Court found no legal impediment to referring the matter to arbitration

Matters of merit or frivolousness were explicitly left to the Arbitral Tribunal, as the Tribunal is better equipped to handle evidentiary appreciation

The Court directed that the arbitration be conducted under the aegis and rules of the Delhi International Arbitration Centre (DIAC)

The Court clarified that all rights and contentions on the merits remain open for the Arbitrator’s decision

The petition was disposed of with a direction to the Registry to notify the appointed Arbitrator