Section 11 Referral Court Scope is Limited to Examining Prima Facie Existence of Arbitration Agreement

The Applicant and Respondent, who are brothers and joint business partners, executed a Family Settlement Deed dated 15th November 2017 to distribute properties and partnership businesses

Clause 15 of said Deed provides for the resolution of disputes via a sole arbitrator

On 28th January 2026, the Applicant invoked arbitration under Section 21 of the Arbitration and Conciliation Act, 1996, following a failure to resolve property disputes

The Respondent opposed the application, alleging that: (a) the claim was barred by limitation as the transfer was to occur in 2018; (b) the Applicant had abandoned the arbitration clause by filing and withdrawing a Civil Suit in Amritsar in 2022 without seeking liberty to arbitrate; and (c) the original MoU had been physically destroyed

1. Whether the Referral Court under Section 11 can examine if the substantive claims under the arbitration agreement are barred by limitation.

2. Whether the filing of a Civil Suit and subsequent withdrawal amounts to an abandonment of the arbitration agreement that a court must decide at the Section 11 stage.

3. What is the scope of judicial interference regarding the existence and validity of an arbitration agreement following the Interplay and SBI General Insurance judgments.

The Court primarily applied Section 11(6-A) of the Arbitration and Conciliation Act, 1996, as interpreted by the Supreme Court in In Re: Interplay between Arbitration Agreements under the Arbitration Act and the Stamp Act and SBI General Insurance Company Ltd. v. Krish Spinning.

These precedents establish that the Referral Court’s jurisdiction is confined strictly to the examination of the prima facie existence of an arbitration agreement.

The Court also applied the principle from Arif Azim Co. Ltd. v. Aptech Ltd., which clarifies that for Section 11 purposes, the limitation period of three years (under Article 137 of the Limitation Act) commences only after the failure of a party to comply with a Section 21 invocation notice.

The Court reasoned that following the Seven-Judge Bench decision in Interplay, the "eye of the needle" and "accord and satisfaction" tests used to weed out stale or frivolous claims are no longer applicable at the Section 11 stage.

The Court clarified that its role is limited to checking the formal existence of the agreement (e.g., that it is in writing) and whether the Section 11 application itself was filed within three years of the Section 21 notice.

Regarding the Respondent’s claim of "abandonment" due to the prior Civil Suit, the Court held that such an inquiry travels beyond the scope of Section 11 and must be left to the Arbitral Tribunal.

Even the allegation that the document was destroyed is a matter of evidence to be adjudicated by the Tribunal, as the existence of the clause in the 2017 MoU was not fundamentally disputed.

The Court appointed Mr. Aseem Naphade as the Sole Arbitrator and directed that all contentions, including limitation and abandonment, remain open for the Tribunal's determination.

The Section 11 application was within time because it was filed shortly after the 2026 invocation notice, regardless of whether the underlying claims might be stale.