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2021 SCC OnLine Mad 5729 : AIR 2022 Mad 211

In the High Court of Madras

(BEFORE V. PARTHIBAN, J.)

India Pistons Limited … Petitioner;

Versus
Ganapathi Chandrasekar … Respondent.
Arb.O.P. No. 10 of 2021
Decided on November 10, 2021, [Orders Reserved on : 01.11.2021]
Advocates who appeared in this case:
For petitioner : Mr. Bharadwa Ramasubramanianm R.
For respondent : M/s. Maimoona Badsha
Arbitration Original Petition filed under Section 11(6) of the Arbitration and
Conciliation Act, 1996 praying to appoint a Sole Arbitrator to resolve the dispute
between the petitioner and the respondent under Clause 17 of the Agreement, dated
August 28, 2014.
The Order of the Court was delivered by
V. PARTHIBAN, J.:— This Original Petition has been filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996, for appointment of a Sole Arbitrator to resolve
the dispute between the petitioner and the respondent under Clause 17 of the
Agreement, dated August 28, 2014.
2. Brief facts which gave rise to the filing of the above Original Petition are stated
hereunder:
(a) The petitioner-Company is incorporated under the Companies, Act, 1956 (for
short, ‘Act 1996’). The Company is in the business of manufacturing auto-parts
and automobile components. The Company, apart from the score of its business
operations, owns a cricket team by name India Pistons Cricket Club (for short,
‘IPCC’) and the IPCC plays in the divisional league within the State of Tamil
Nadu.
(b) The respondent is a professional cricket player.
(c) The petitioner-Company offered employment to the respondent in the rank of
Senior Executive-Finance and the offer letter was issued by the petitioner-
Company to the respondent on 01.06.2006. The respondent accepted the offer
letter and thereafter, he was appointed to the position of Senior Executive—
Finance in the Company's Market Sales Division at their Sembiam Plant. The
terms and conditions governing the employment of the respondent, were
stipulated in that offer letter. Apart from the terms and conditions referred to in
the offer letter, the respondent's employment was also governed by the other
Rules and Regulations of the Company.
(d) While being employed in the rank of an Executive, the respondent was
permitted to play for the IPCC in the First Division Matches under the aegis of
the Tamil Nadu Cricket Association.
(e) The respondent has also executed an agreement with the petitioner-Company
on 28.08.2014, accepting certain conditions imposed by the Company during the
subsistence of the respondent's employment with the Company. In terms of
Clause 17 of the said agreement, it was also stipulated that in the event of any
dispute or differences arising out of the agreement or in connection with the
interpretation of the agreement, the same shall be referred for ‘Arbitration” to be
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conducted by a sole Arbitrator, appointed by the Managing Director of the

employer under the provisions of the Arbitration and Conciliation Act, 1996.
(f) According to the petitioner-Company, the respondent had violated the terms and
conditions of the agreement, dated 28.08.2014, particularly, Clause 7 of the
agreement. The petitioner-Company was therefore constrained to terminate the
employment of the respondent, vide letter dated 23.3.2020, with effect from
01.04.2020. The respondent thereafter approached the Special Joint
Commissioner of Labour by filing an appeal in T.S.E. Appeal No. 1 of 2021, under
the provisions of the Tamil Nadu Shops and Establishments Act, 1947 (for short,
‘Act, 1947’), assailing the order of termination.
(g) However, according to the petitioner, in the face of the arbitration agreement
between the parties, the dispute not only is in relation to the termination of the
employment, but it transcends beyond that, as between the parties, which could
be settled only before the Arbitratl Tribunal duly appointed by this Court.
According to the petitioner-Company, a notice was issued to the respondent
under Section 21 of the Act, 1996, on 03.03.2021.
(h) Although the respondent has not denied the existence of a valid arbitration
agreement, however, did not choose to respond positively to the notice, but
called upon the petitioner-Company to withdraw the legal notice issued under
the provisions of the Act, 1996. Therefore, the petitioner-Company is constrained
to file the present Original Petition (for short, ‘O.P’) for appointment of a sole
Arbitrator to resolve the dispute between the parties, in terms of Clause 17 of
the agreement, dated 28.08.2014.
3. As far as the legal position is concerned, the learned counsel for the petitioner
relied on the following decisions, in which, he also referred to specific paragraphs
which would be a guiding factor for this Court to take a call in the matter and the
same are extracted hereunder:
(i) (2021) 5 SCC 738 = 2021 SCC OnLine SC 207 : (Bharat Sanchar Nigam Ltd. v.
Nortel Networks India Pvt. Ltd.) : (SCC paras 30, 31, 32, 34, 35, 36 and 37):
“30. The amendments to Section 11 were brought in to legislatively overrule
the line of judgments including SBP & Co. [SBP & Co. v. Patel Engg. Ltd., (2005)
8 SCC 618], Boghara Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P)
Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117], Master Construction [Union of
India v. Master Construction Co., (2011) 12 SCC 349 : (2012) 2 SCC (Civ) 582],
etc., which had enlarged the scope of power of the appointing authority to decide
various issues at the pre-reference stage.
31. Sub-section (6-A) came up for consideration in Duro Felguera, S.A. v.
Gangavaram Port Ltd. [(2017) 9 SCC 729 : (2017) 4 SCC (Civ) 764], wherein
this Court held that the legislative policy was to minimise judicial intervention at
the appointment stage. In an application under Section 11, the Court should only
look into the existence of the arbitration agreement, before making the
reference. Post the 2015 Amendment, all that the courts are required to examine
is whether an arbitration agreement is in existence — nothing more, nothing
less : (SCC pp. 759 & 765, paras 48 & 59)
“48. Section 11(6-A) added by the 2015 Amendment, reads as follows:
‘11. (6-A) The Supreme Court or, as the case may be, the High Court,
while considering any application under sub-section (4) or sub-section (5) or
sub-section (6), shall, notwithstanding any judgment, decree or order of any
court, confine to the examination of the existence of an arbitration
agreement.’
From a reading of Section 11(6-A), the intention of the legislature is crystal clear
i.e. the court should and need only look into one aspect—the existence of an
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arbitration agreement. What are the factors for deciding as to whether there is an
arbitration agreement is the next question. The resolution to that is simple—it
needs to be seen if the agreement contains a clause which provides for arbitration
pertaining to the disputes which have arisen between the parties to the agreement.
* * *
59. The scope of the power under Section 11(6) of the 1996 Act was
considerably wide in view of the decisions in SBP & Co. [SBP & Co. v. Patel
Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co.
Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117].
This position continued till the amendment brought about in 2015. After the
amendment, all that the courts need to see is whether an arbitration
agreement exists— nothing more, nothing less. The legislative policy and
purpose is essentially to minimise the Court's intervention at the stage of
appointing the arbitrator and this intention as incorporated in Section 11(6-A)
ought to be respected.”
(emphasis in original and supplied)
32. In Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman [(2019) 8 SCC 714 :
(2019) 4 SCC (Civ) 441], a three-Judge Bench held that the scope of power of
the Court under Section 11(6-A) had to be construed in the narrow sense. In
para 10, it was opined as under : (SCC pp. 724-25)
“10. This being the position, it is clear that the law prior to the 2015
Amendment that has been laid down by this Court, which would have included
going into whether accord and satisfaction has taken place, has now been
legislatively overruled. This being the position, it is difficult to agree with the
reasoning contained in the aforesaid judgment [United India Insurance Co.
Ltd. v. Antique Art Exports (P) Ltd., (2019) 5 SCC 362 : (2019) 2 SCC (Civ)
785], as Section 11(6-A) is confined to the examination of the existence of an
arbitration agreement and is to be understood in the narrow sense as has
been laid down in the judgment in Duro Felguera, S.A. [Duro Felguera, S.A. v.
Gangavaram Port Ltd., (2017) 9 SCC 729 : (2017) 4 SCC (Civ) 764]”
(emphasis in original)
34. In view of the legislative mandate contained in the amended Section 11(6
-A), the Court is now required only to examine the existence of the arbitration
agreement. All other preliminary or threshold issues are left to be decided by the
arbitrator under Section 16, which enshrines the kompetenz-kompetenz
principle. The doctrine of kompetenz-kompetenz implies that the Arbitral
Tribunal is empowered, and has the competence to rule on its own jurisdiction,
including determination of all jurisdictional issues. This was intended to minimise
judicial intervention at the pre-reference stage, so that the arbitral process is not
thwarted at the threshold when a preliminary objection is raised by the parties.
The 2019 Amendment to Section 11:
35. Section 11 has been further amended by the Arbitration and Conciliation
(Amendment) Act, 2019 to promote institutionalisation of arbitration in India.
The 2019 Amendment Act has deleted sub-section (6-A) in Section 11. However,
the amendment to Section 11 is yet to be notified. Consequently, sub-section (6-
A) continues to remain on the statute book, and governs the scope of power
under Section 11 for the present. The notification giving effect to the provisions
of the 2019 Amendment Act which have been brought into force, reads as:
“MINISTRY OF LAW AND JUSTICE
(Department of Legal Affairs)
NOTIFICATION
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New Delhi, 30-8-2019

S.O. 3154(E).—In the exercise of the powers conferred by sub-section (2) of
Section 1 of the Arbitration and Conciliation (Amendment) Act, 2019 (33 of 2019),
the Central Government hereby appoints 30-8-2019 as the date on which the
provisions of the following sections of the said Act shall come into force:
(1) Section 1;
(2) Section 4 to Section 9 (both inclusive);
(3) Section 11 to Section 13 (both inclusive);
(4) Section 15.
[F. No. H-11018/2/2017-Admn.-III(LA)]
Dr. RAJIV MANI, Jt. Secy. and Legal Adviser”
36. The reference to “Section 11” in clause (3) of the Notification dated 30-8-
2019 pertains to Section 11 of the Amendment Act [and not the principal Act of
1996]. The amendment to Section 11 in the 2019 Amendment Act find place in
Section 3 of the 2019 Amendment Act, which reads as:
“3. Amendment of Section 11:—
In Section 11 of the principal Act-
(i)-(iv) * * *
(v) sub-section (6-A) and (7) shall be omitted;”
37. After the amendment by the 2019 Amendment to Section 11 is notified, it
will result in the deletion of sub-section (6-A), and the default power will be
exercised by arbitral institutions designated by the Supreme Court, or the High
Court, as the case may be.”
(ii) (2019) 8 SCC 714 = 2019 SCC OnLine SC 1164 (Mayavati Trading Private Ltd.
v. Pradyut Deb Bhurman : (SCC para 10):
“10. This being the position, it is clear that the law prior to the 2015
Amendment that has been laid down by this Court, which would have included
going into whether accord and satisfaction has taken place, has now been
legislatively overruled. This being the position, it is difficult to agree with the
reasoning contained in the aforesaid judgment [United India Insurance Co. Ltd.
v. Antique Art Exports (P) Ltd., (2019) 5 SCC 362 : (2019) 2 SCC (Civ) 785], as
Section 11(6-A) is confined to the examination of the existence of an arbitration
agreement and is to be understood in the narrow sense as has been laid down in
the judgment in Duro Felguera, SA [Duro Felguera, SA v. Gangavaram Port Ltd.,
(2017) 9 SCC 729 : (2017) 4 SCC (Civ) 764] — see paras 48 & 59 [Ed. : The
said paras 48 & 59 of Duro Felguera, SA v. Gangavaram Port Ltd., (2017) 9 SCC
729 : (2017) 4 SCC (Civ) 764, for ready reference, read as follows:
“48. Section 11(6-A) added by the 2015 Amendment, reads as follows:
“11.(6-A) The Supreme Court or, as the case may be, the High Court,
while considering any application under sub-section (4) or sub-section (5) or
subsection (6), shall, notwithstanding any judgment, decree or order of any
court, confine to the examination of the existence of an arbitration
agreement.”
(emphasis supplied)
From a reading of Section 11(6-A), the intention of the legislature is crystal
clear i.e. the court should and need only look into one aspect—the existence of
an arbitration agreement. What are the factors for deciding as to whether there is
an arbitration agreement is the next question. The resolution to that is simple —
it needs to be seen if the agreement contains a clause which provides for
arbitration pertaining to the disputes which have arisen between the parties to
the agreement.
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* * *
59. The scope of the power under Section 11(6) of the 1996 Act was
considerably wide in view of the decisions in SBP & Co. v. Patel Engg. Ltd.,
(2005) 8 SCC 618 and National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd.,
(2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117. This position continued till the
amendment brought about in 2015. After the amendment, all that the courts
need to see is whether an arbitration agreement exists—nothing more, nothing
less. The legislative policy and purpose is essentially to minimise the Court's
intervention at the stage of appointing the arbitrator and this intention as
incorporated in Section 11(6-A) ought to be respected.”].
(iii) (2017) 9 SCC 729 = 2017 SCC OnLine SC 1233 (Duro Felguera, S.A. v.
Gangavaram Port Limited) : (SCC para 59):
“59. The scope of the power under Section 11(6) of the 1996 Act was
considerably wide in view of the decisions in SBP and Co. [SBP and Co. v. Patel
Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co. Ltd.
v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117]. This
position continued till the amendment brought about in 2015. After the
amendment, all that the courts need to see is whether an arbitration agreement
exists—nothing more, nothing less. The legislative policy and purpose is
essentially to minimise the Court's intervention at the stage of appointing the
arbitrator and this intention as incorporated in Section 11(6-A) ought to be
respected.”
(iv) (2021) 5 SCC 671 = 2021 SCC OnLine SC 190 (Pravin Electricals Private Ltd. v.
Galaxy Infra and Engineering Private Ltd.) : (SCC paras 18, 23 and 29):
“18. The Bench finally concluded : (Vidya Drolia case [Vidya Drolia v. Durga
Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549], SCC pp. 120-21,
paras 153-55):
“153. Accordingly, we hold that the expression “existence of an arbitration
agreement” in Section 11 of the Arbitration Act, would include aspect of validity
of an arbitration agreement, albeit the court at the referral stage would apply the
prima facie test on the basis of principles set out in this judgment. In cases of
debatable and disputable facts, and good reasonable arguable case, etc. the
court would force the parties to abide by the arbitration agreement as the
Arbitral Tribunal has primary jurisdiction and authority to decide the disputes
including the question of jurisdiction and nonarbitrability.
154. Discussion under the heading “Who Decides Arbitrability?” can be
crystallised as under:
154.1. Ratio of the decision in Patel Engg. Ltd. [SBP & Company v. Patel
Engg. Ltd., (2005) 8 SCC 618] on the scope of judicial review by the court
while deciding an application under Sections 8 or 11 of the Arbitration Act,
post the amendments by Act 3 of 2016 (with retrospective effect from 23-10-
2015) and even post the amendments vide Act 33 of 2019 (with effect from 9
-8-2019), is no longer applicable.
154.2. Scope of judicial review and jurisdiction of the court under Sections
8 and 11 of the Arbitration Act is identical but extremely limited and
restricted.
154.3. The general rule and principle, in view of the legislative mandate
clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability
and competence-competence, is that the Arbitral Tribunal is the preferred first
authority to determine and decide all questions of nonarbitrability. The court
has been conferred power of “second look” on aspects of nonarbitrability post
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the award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-
clause (i) of Section 34(2)(b) of the Arbitration Act.
154.4. Rarely as a demurrer the court may interfere at Section 8 or 11
stage when it is manifestly and ex facie certain that the arbitration agreement
is non-existent, invalid or the disputes are non-arbitrable, though the nature
and facet of nonarbitrability would, to some extent, determine the level and
nature of judicial scrutiny. The restricted and limited review is to check and
protect parties from being forced to arbitrate when the matter is demonstrably
“non-arbitrable” and to cut off the deadwood. The court by default would refer
the matter when contentions relating to non-arbitrability are plainly arguable;
when consideration in summary proceedings would be insufficient and
inconclusive; when facts are contested; when the party opposing arbitration
adopts delaying tactics or impairs conduct of arbitration proceedings. This is
not the stage for the court to enter into a mini trial or elaborate review so as
to usurp the jurisdiction of the Arbitral Tribunal but to affirm and uphold
integrity and efficacy of arbitration as an alternative dispute resolution
mechanism.
155. Reference is, accordingly, answered.”
23. However, by a process of judicial interpretation, Vidya Drolia [Vidya Drolia
v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] has now
read the “prima facie test” into Section 11(6-A) so as to bring the provisions of
Sections 8(1) and 11(6) read with Section 11(6-A) on a par. Considering that
Section 11(7) and Section 37 have not been amended, an anomaly thus arises.
Whereas in cases decided under Section 8, a refusal to refer parties to arbitration
is appealable under Section 37(1)(a), a similar refusal to refer parties to
arbitration under Section 11(6) read with Sections 6(A) and 7 is not appealable.
In the light of what has been decided in Vidya Drolia [Vidya Drolia v. Durga
Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549], Parliament may need
to have a re-look at Section 11(7) and Section 37 so that orders made under
Sections 8 and 11 are brought on a par qua appealability as well.
29. The facts of this case remind one of Alice in Wonderland. In Chapter II of
Lewis Carroll's classic, after little Alice had gone down the rabbit hole, she
exclaims “Curiouser and curiouser!” and Lewis Carroll states “(she was so much
surprised, that for the moment she quite forgot how to speak good English)”.
This is a case which eminently cries for the truth to come out between the
parties through documentary evidence and cross-examination. Large pieces of
the jigsaw puzzle that form the documentary evidence between the parties in
this case remained unfilled. The emails dated 22-7-2014 and 25-7-2014
produced here for the first time as well as certain correspondence between
SBPDCL and the respondent do show that there is some dealing between the
appellant and the respondent qua a tender floated by SBPDCL, but that is not
sufficient to conclude that there is a concluded contract between the parties,
which contains an arbitration clause. Given the inconclusive nature of the finding
by CFSL together with the signing of the agreement in Haryana by parties whose
registered offices are at Bombay and Bihar qua works to be executed in Bihar;
given the fact that the Notary who signed the agreement was not authorised to
do so and various other conundrums that arise on the facts of this case, it is
unsafe to conclude, one way or the other, that an arbitration agreement exists
between the parties. The prima facie review spoken of in Vidya Drolia [Vidya
Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] can
lead to only one conclusion on the facts of this case — that a deeper
consideration of whether an arbitration agreement exists between the parties
must be left to an arbitrator who is to examine the documentary evidence
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produced before him in detail after witnesses are cross-examined on the same.”
4. On behalf of the respondent, a detailed counter affidavit has been filed, denying
the various allegations as contained in the O.P. The learned counsel for the
respondent, at the outset, submitted that the present O.P. is not maintainable, in view
of the fact that already the dispute of the termination of the respondent is before the
Special Joint Commissioner of Labour, under the provisions of the Act, 1947. The
respondent having availed of the statutory remedy, cannot be compelled to go before
the Arbitral Tribunal.
5. The learned counsel further submitted that the petitioner-Company being
arrayed as respondent in the proceedings before the Joint Commissioner of Labour,
and having participated in the proceedings, has issued pre-arbitral notice under
Section 21 of the Act, 1996, after a period of one year from the date of the termination
of the respondent. The notice issued thus is nothing but a counter-blast to the
proceedings initiated by the respondent before the Labour authority.
6. Apart from that, the learned counsel for the respondent also contended that the
invocation of Arbitral Clause in the agreement, was not in good faith, but was intended
to avoid the liability to pay the back-wages and to wriggle out from the consequences
of the illegal termination.
7. This Court considered the submissions of the learned counsels appearing for the
parties, perused the pleadings and the materials placed on record.
8. As far as the legal position as on date is concerned, after the amendment to the
Act of 1996, in 2015, particularly, with reference to insertion of sub-clause (6-A) in
Section 11, the role of the Court under Section 11 is restricted to examine as to
whether there is any arbitration agreement between the parties or not? The
Honourable Supreme Court has held in the above decisions, that the new Legislative
Policy (Amendment 2015) and purpose is essentially to minimise the Court's
intervention at the stage of appointing the Arbitrator, as reflected in Section 11(6-A)
of the Act.
9. It is not in dispute that there is an arbitration clause between the parties in the
agreement. But the only point of opposition against invocation of the arbitration clause
is the pendency of the appeal before the Special Joint Commissioner of Labour under
the provisions of the Act, 1947.
10. Be that as it may, in the framework of the Scheme of the Act, 1996, it is always
open to the Arbitrator to rule on his own jurisdiction and also to render a finding as to
whether there is any arbitral issue open to arbitration or not. Correspondingly, it is
always within the right of the respondent herein to go before the Arbitral Tribunal and
raise whatever objections he may think valid and proper, as to the maintainability of
the proceedings, particularly, with reference to the pending Shop Act Appeal before
the Labour Authority.
11. In terms of the legal position as prevailing today, this Court cannot conduct a
detailed adjudication and pronounce as to the validity of the invocation of the
arbitration clause by the parties. Such consideration is entirely to be left within the
domain of the Arbitral Tribunal under the provisions of the Act, 1996.
12. The above case laws of the Honourable Supreme Court and the relevant
portions which have been extracted supra, leave no iota of doubt for this Court to
come to an inexorable conclusion that the objections against allowing the O.P., are to
be rejected and the O.P. is liable to be allowed.
13. At this, the learned counsel for the respondent requested this Court to observe
that the reference to the Arbitration under Section 11 of the Act, 1996, shall not be
treated any way prejudicial to the right or claim of the respondent in the proceedings
pending before the Special Joint Commissioner of Labour, Chennai, in T.S.E. Appeal
No. 1 of 2021.
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14. This Court makes it clear that the reference to the Arbitrator should not be
construed to be affecting the statutory right of the respondent herein to avail any legal
remedy open to him. It is always open to the Arbitral Tribunal (i.e. sole Arbitrator) to
take into consideration the pendency of the said Appeal filed under the Act, 1947,
while ruling on his jurisdiction in respect of the dispute herein.
15. In the above circumstances, the Original Petition is allowed:
(a) Mr. V. Vijay Shankar, Advocate, having office at No. 67, Law Chambers, High
Court buildings, Madras, (Cell No. 94440 01404 and 80729 71816) is hereby
appointed as Sole Arbitrator to enter upon the reference and adjudicate upon the
dispute inter-se parties.
(b) The above said learned Arbitrator, shall, after issuing notice to the parties and
upon hearing them, pass an order as expeditiously as possible, preferably within
a period of six months from the date of receipt of a copy of this order.
(c) The learned Arbitrator is at liberty to fix his remuneration and other incidental
expenses thereto, as per the provisions of the Act, 1996.
(d) The expenses incurred for arbitration shall be borne by the respective parties.
(e) The arbitral proceedings shall be conducted under the aegis of the Arbitration
Centre of the Madras High Court, High Court Buildings, Chennai and in
accordance with the Madras High Court Arbitration Rules.
(f) It is made clear that the parties are at liberty to raise preliminary objection as to
the maintainability of the arbitration before the learned Arbitrator, who shall
decide the issue on its validity before proceeding further with the arbitration on
merits.
(g) The Arbitrator shall be required to rule on his own jurisdiction in terms of
Section 16 of the Arbitration and Conciliation Act, 1996 and in case the Arbitrator
takes a decision to reject the plea, he shall continue with the arbitral proceedings
and make an Arbitral Award.
(h) There shall be no order as to costs in the present O.P.
———
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