Section 11 Inquiry Is Confined to the Prima Facie Existence of an Arbitration Agreement.

HDFC Bank filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996.

The respondent, appearing on advance notice, did not oppose the appointment of an arbitrator and proposed mediation to explore settlement.

The parties agreed that, if mediation failed, their disputes could be referred to arbitration under Clause 38 of the Loan-Cum-Hypothecation Agreement dated 26 June 2023.

The Court referred the parties to the Delhi High Court Mediation and Conciliation Centre for three weeks and addressed the appointment of an arbitrator in the event settlement was unsuccessful.

1. Whether the Court could appoint a sole arbitrator under Section 11(6) where the parties did not dispute the existence of a valid arbitration agreement and agreed to arbitration if mediation failed.

2. Whether the disputes should first be referred to mediation and, if mediation failed, proceed to arbitration.

Under Section 11 of the Arbitration and Conciliation Act, 1996, the Court’s enquiry is confined to examining the prima facie existence of an arbitration agreement, applying SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 SCC OnLine SC 1754.

Clause 38 of the parties’ agreement provided for reference to arbitration by a sole arbitrator where the dispute fell below the pecuniary jurisdiction limit of the Debts Recovery Tribunals.

The appointed arbitrator was required to furnish the disclosures contemplated by Section 12(2), and the arbitration was to be conducted under the rules and aegis of DIAC.

The Court found no dispute regarding the existence of a valid arbitration agreement, satisfying the prima facie enquiry required under Section 11.

As the respondent proposed mediation and the parties were ad idem on arbitration if settlement failed, the Court referred them to mediation while providing for the arbitration to proceed upon failure of settlement.

The parties remained free to raise arbitrability, jurisdiction, limitation, and other pleas before the arbitrator.

If mediation failed, Mr. Sarvan Kumar was appointed sole arbitrator, to enter upon the reference within three weeks of the mediation failure report; the arbitration was to proceed under DIAC rules and subject to the required disclosures.

The arbitrator was to decide the disputes independently, uninfluenced by the Court’s observations.