Introduction
This Article targets a singular theme under the Arbitration and Conciliation Act, 1996 (“the Act”) – the permissible scope of judicial interference by a referral Court at the stage of Section 8 or 11 of the Act. Textually speaking, the statutory distinction is clear and well-defined. Section 8 of the Act allows Courts the liberty to block a referral if they find that “prima facie no valid arbitration agreement exists”, whereas Section 11 of the Act confines the Courts solely to the “existence of an arbitration agreement”, precluding the examination of its validity in an application seeking the appointment of an Arbitral Tribunal. However, questions on the meaning of these terms have forced Courts to define their contours, so as to avoid encroaching on the Arbitral Tribunal’s jurisdiction to deal with these issues on their merits. In addition to this, Courts have also ensured to clarify to what extent they can interfere with even illegal arbitration agreements and whether a referral would remain consistent with the broader purpose of the Act. Although earlier precedents have dealt with certain aspects of this tension, the collated judgments from primarily the Supreme Court, Bombay High Court, and Delhi High Court have not only reiterated the established law but have also offered a refined perspective on a persisting and evolving question in Arbitration.
Who are you? Examining whether non-signatories can file applications under Section 8 or 11 of the Act
Hindustan Petroleum Corporation Ltd. v. BCL Secure Premises Pvt. Ltd., Civil Appeal No. 14647 of 2025 [Supreme Court]
Brief Facts:
This appeal was preferred against an Order allowing an application filed by the Respondent under Section 11(4) of the Act. The Appellant had floated a tender and issued a purchase order in 2013 to AGC Networks Ltd (currently known as Black Box Ltd.). It is important to note that the tender expressly prohibited subcontracting to other parties without the Appellant’s written approval. In 2018, the Respondent had informed the Appellant that they were AGC’s sub- vendor and were entitled to 94% of the payments owed to AGC. The Appellant denied any contractual relationship with the Respondent. The Respondents had finally invoked arbitration in 2024, on the grounds that they were AGC’s assignee owing to a settlement dated 2023, wherein receivables due to AGC from the Appellant were assigned to the Respondent.
Holding:
The Apex Court had referred to the judgment of Cox and Kings[1] and observed that a referral Court should be prima facie satisfied that there existed an arbitration agreement, and as to whether the non-signatory is a veritable party to the contract and the arbitration agreement. This is mainly to ensure that strangers are not given the power to refer a dispute to Arbitration when the actual parties themselves have not initiated any action for the same.
Under Section 11 of the Act, a referral Court has the power to scrutinize the dealings between the parties, and would therefore be empowered to ascertain whether a non-signatory is in fact a veritable party.[2] As per the current facts, it was noted that the Appellant had no privity with the Respondent, and even in the settlement between AGC and the Respondent, the Appellant was not a party. There was also no written approval taken for the Respondent to operate as a sub-vendor of AGC. Due to these facts, the Supreme Court dismissed the application. However, it was held that even though the referral Court prima facie arrived at a conclusion that the Respondent was not a veritable party, the Arbitral Tribunal is not denuded of its jurisdiction to decide on whether they are.
The key aspect of this judgment stems from the fact that the Supreme Court encourages the judiciary to take a more proactive role while dealing with applications filed under Section 11, in order to ensure that the sanctity of the arbitration process is not misused. In Justice K.V. Viswanathan’s own words, the referral Court should not be relegated to the status of a “monotonous automation”.
Arbitrability as a shared responsibility: Instances in which a Court can intervene to determine Arbitrability
Capri Global Capital Limited v. M/s Divya Enterprise and Ors., Interim Application (L) No. 25700 of 2025 in Commercial Suit (L) No. 23360 of 2025 [Bombay H.C]
Brief Facts:
The Defendants had filed the present application under Section 8 of the Act for reference of the dispute to Arbitration. The Plaintiffs had extended various credit facilities to the Defendants, and the latter had created a mortgage in favour of the lenders. According to the Defendants, the Loan Agreements and the Indenture of Mortgage both contained an Arbitration Clause, based on which the current application was filed. The Plaintiffs had opposed this application by contending that no Arbitration would lie with respect to a dispute arising out of the enforcement of a mortgage, and such issues could only be adjudicated at the Civil Court.
Holding:
By referring to the Supreme Court decision in Booz Allen and Hamilton,[3] it was held that an enquiry under Section 11 of the Act is far narrower than the one under Section 8. This stemmed from the fact that post the 2015 Amendment, it was clear that the legislature intended to create a difference in powers exercisable by the Court regarding the scope of reference, and this has been discussed and upheld in several judgments, including the Interplay Between Arbitration Agreementsjudgment.[4] Due to this difference in powers, Section 8 of the Act allows for Courts to enquire into the issue of arbitrability of the subject matter of a dispute, unlike in an application under Section 11 of the same.
Keeping in mind the Court’s power to dwell on issues of arbitrability under Section 8 applications, the Bombay High Court held that since the enforcement of a mortgage is a right
in rem and not personam, the current application cannot be allowed as the dispute itself is non- arbitrable.
The legality of one Party’s choice to terminate: Fixing unilateral option clauses in Arbitration Agreements
Tata Capital Ltd. v. Vijay Devij Aiya & Anr., Commercial Arbitration Application No. 237 of 2024 with Commercial Arbitration Application No. 243 of 2024 [Bombay H.C]
Brief Facts:
In this matter, applications had been filed under Section 11 of the Act, seeking the appointment of an arbitrator in connection with disputes and differences arising between the parties under a Loan Agreement. It is important to note that the Arbitration Agreement contains a provision allowing the Applicant to opt out of Arbitration in the event that they become a beneficiary under the SARFAESI Act, 2002, and other debt recovery legislations referred to. No such opting-out provision was, however, provided to the Respondents.
Holding:
The Court held that provisions dealing with the unilateral appointments of arbitrators are illegal; however, rather than such clauses being rendered void ab initio, such illegality would be capable of being cured. To cure this, the Court would allow for the appointment of an independent and impartial arbitrator by eliminating the unilateral option. In the current case, the first part of the agreement referring the dispute to arbitration is legally tenable, and the second part governing the unilateral option will be deemed to be illegal. Both these parts operate independently, and the illegality of the second part does not have an eroding effect on the entire agreement.
This is a significant holding as the Court distinguished the current case from an earlier Delhi High Court precedent, in which an identical clause was held to be invalid as it violated the principle of mutuality.[5] In that case, the lenders had asserted their right to file a written statement, and once that was denied, they even filed an appeal for the same. And when the appeal was allowed in their favour, the lenders subsequently argued that no civil suit would lie. As observed in the current judgment, the Delhi High Court ruled by stressing the importance of mutuality due to the provocative nature of the lender’s conduct in forcing the borrowers to follow them to fora decided solely upon the lender’s convenience. However, the ruling on the illegality of such clauses was still relied upon by the Bombay High Court, although with the caveat that in case of such a defect, the Courts can salvage such Arbitration Agreements by removing the illegality.
One for all, All for one: Applicability of one Arbitration Agreement to multiple contracts
Om Swayambhu Siddhivinayak v. Harishchandra Dinkar Gaikwad and Ors, Arbitration Appeal No. 21 of 2025 [Bombay H.C.]
Brief Facts:
This matter was an Appeal filed under Section 37 of the Act, challenging an Order rejecting an application filed by the Appellant under Section 8 of the same. The Ld. District Court had rejected the application because even though the main ‘Development Agreement’ contained an Arbitration Clause (Clause 30), the Supplemental Agreement did not, and therefore, a dispute arising only out of the former would be arbitrable and not the latter.
Holding:
The Arbitral Clause in the Development Agreement clearly was wide enough to deal with disputes relating to the discharge of consideration. Since the Supplemental Agreement purported to record the discharge of consideration under the Development Agreement, it was conclusively held that the Supplemental Agreement did not need a separate arbitration clause and was squarely covered under the Arbitral Clause. There were also no provisions in the Development Agreement to exclude disputes arising out of the Supplementary Agreement from the scope of reference under the Development Agreement. Therefore, the entire dispute was referred to Arbitration as the Arbitration Clause was of wide import to include even disputes arising out of the Supplementary Agreement.
Another important aspect dwelt on by the Courts was the fact that there was another Clause (Clause 13) in the Development Agreement referring to disputes surrounding the developed area and that its resolution would be subject to a declaration from a Court. The Bombay High Court, however, noted that there was no carve-out in the Arbitration Clause allowing for the operation of Clause 13 for it to be an exclusion from Arbitration. Moreover, the applicability of Clause 13 also hinges on a particular developed area stipulated in the contract, whereas the dispute in the Suit is for the delivery of an area far removed in size from what was stipulated. This was another factor that led the Court to dismiss the relevance of Clause 13 to the current dispute.
Keeping in mind the fact that the Arbitration Clause was broad and that there was no carve-out for excluding disputes regarding the developed area, the Bombay High Court allowed the Application and referred the dispute arising out of the Supplemental Agreement to arbitration as per the clause incorporated in the Development Agreement.
Res Judicata strikes again: Dismissal of a Section 8 application bars filing of a Section 11 application
Surender Bajaj v. Dinesh Chand Gupta and Ors., ARB.P. 1076/2025 [Delhi H.C] Brief Facts:
An earlier application under Section 8 of the Act was filed by the Petitioner and dismissed. This dismissal was also appealed against, and the Appellate Court had rejected this appeal as well. The current application being filed is under Section 11 of the Act.
Holding:
The Court held that as long as the dismissal of the Section 8 application has been upheld, and that the Appellate Court’s order has not been interfered with, res judicata would apply. This is because the Section 11 application operates on a similar prayer as the earlier application.
Conclusion
The judgments analysed in this Article reflect a recent trend of Courts broadening their powers at the referral stage, and crucially, even while dealing with Applications filed under Section 11 of the Act. While most may welcome these new developments, it does raise concern as such interference, if taken long to adjudicate, may affect arbitration from being a speedy disposal process to a highly court-driven mechanism. The challenge, therefore, lies in ensuring that this trend does not erode the Arbitral Tribunal’s jurisdiction to the extent that it exercises coequal powers with the Courts. Along with this, Courts must also ensure that issues dwelt on at the pre-arbitral stage are dealt with expeditiously for the arbitration to proceed in a timely manner.
*Vyapak Desai, Counsel – International Disputes & Investigations, Vyapak Desai Law Chambers
**Ruben Zachariah, Student
[1] Cox and Kings Ltd. v. Sap India Private Ltd. and Anr., (2024) 4 SCC 1
[2] Para 167 of Interplay (supra).
[3] Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. and Ors., (2011) 5 SCC 532
[4] Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1995 and Stamp Act, 1899, (2024) 6 SCC 1
[5] Tata Capital Housing Finance Ltd. v. Shri Chand Construction & Apartments Pvt. Ltd., 2021 SCC OnLine Del 5091