Court’s Role Under Section 11 Is Not to Conduct a Mini-Trial on Arbitrability: Punjab & Haryana High Court Appoints Sole Arbitrator in Shareholder Dispute

“Once Arbitration Clause Exists, Objections of Oppression, Mismanagement or Non-Arbitrability Must Be Left to the Arbitrator” – In a pivotal decision bolstering the ‘minimal judicial intervention’ doctrine under the Arbitration and Conciliation Act, Justice Jasgurpreet Singh Puri of the Punjab and Haryana High Court allowed a petition under Section 11(5) of the Arbitration and Conciliation Act, 1996, for appointment of a Sole Arbitrator in a dispute between shareholders and directors of K.P.H. Dream Cricket Private Limited.

The petition, filed by Karan Paul (petitioner), was resisted on the ground that the underlying dispute involved issues of oppression and mismanagement, and therefore was not arbitrable. The respondents also relied on prior proceedings under Sections 9 and Order VII Rule 11 CPC to argue that arbitration was not maintainable.

Rejecting these objections, the Court appointed Hon’ble Mr. Justice Harinder Singh Sidhu (Retd.), former Judge of the Punjab & Haryana High Court, as the Sole Arbitrator, holding that:

“At the reference stage under Section 11, the Court’s enquiry is confined to a prima facie assessment of the existence of an arbitration agreement. The arbitrability of the dispute is a matter exclusively within the domain of the arbitral tribunal.”

“Once Arbitration Clause Exists, Referral Court Must Stop at Prima Facie Scrutiny”

The parties, all shareholders/directors in the company, were governed by Clause 67 of the Articles of Association, which expressly provided that disputes “touching the affairs of the Company or construction of the Articles” shall be referred to sole arbitration.

The petitioner had invoked arbitration under Section 21, and the failure of mutual appointment led to this petition under Section 11(5).

The Court noted that:

“Existence of Clause 67 and the issuance of notice under Section 21 is not in dispute. The clause is wide enough to encompass disputes relating to the company’s internal affairs, including governance and management.” [Para 9]

Referring to the Supreme Court’s authoritative decisions in SBI General Insurance Co. Ltd. v. Krish Spinning (2024 SCC OnLine SC 1754), In Re: Interplay between Arbitration Act and Stamp Act (2024) 6 SCC 1, and Office for Alternative Architecture v. Ircon Infrastructure (2025 SCC OnLine SC 1098), Justice Puri observed: “The law is no longer res integra — the Court is not required to go into arbitrability or conduct a mini-trial. Such objections are to be raised before the Arbitral Tribunal.” [Paras 14–17]

“Oppression and Mismanagement Remedies Do Not Bar Arbitration Where Arbitration Clause Exists”

A key contention by the respondents was that the nature of the dispute—centering on the rotational appointment of the company Chairman and challenge to certain resolutions—amounted to oppression and mismanagement, which could only be adjudicated under company law jurisdiction.

Rejecting this, the Court held:

“Merely because a remedy is also available under the Companies Act does not mean the dispute is non-arbitrable. Whether it falls exclusively within the domain of the NCLT is a question for the arbitrator under Section 16.” [Paras 13–14]

The Court reaffirmed the principle of “Kompetenz-Kompetenz” embodied in Section 16, stating that the arbitral tribunal is empowered to rule on its own jurisdiction, including on the issue of arbitrability.

Prior Section 9 and Civil Suit Proceedings No Bar to Section 11 Petition

The respondents argued that a previous Section 9 application filed by the petitioner (seeking interim injunction against appointment of a director) had been dismissed, and an appeal disposed of on petitioner’s statement that the dispute no longer subsisted. They further pointed to a civil suit under Order VII Rule 11 CPC, filed by another respondent.

The Court clarified that: “The Division Bench, in disposing of the Section 9 appeal, specifically clarified that all rights and contentions regarding arbitrability were left open. Therefore, no estoppel arises.” [Paras 10–11]

Moreover, the civil suit filed by another respondent had a limited scope (appointment of a particular director), and could not preclude the petitioner from invoking arbitration for broader disputes related to governance, including rotation of Chairmanship.

Final Directions and Appointment of Arbitrator

Having found that all conditions under Section 11(5) were satisfied, and there was no valid agreement between the parties on appointment of the arbitrator, the Court exercised its default power and appointed:

Hon’ble Mr. Justice Harinder Singh Sidhu, Former Judge, Punjab & Haryana High Court, as the Sole Arbitrator.

Further directions issued: Arbitrator to comply with Section 12 (Disclosure of Independence/Impartiality).

• Arbitrator to fix fees under Section 31-A based on quantification of claim.

• Proceedings to be concluded as per timeline in Section 29-A.

• Parties directed to appear on the date fixed by the Arbitrator.

Referral Courts Must Stay Within Statutory Bounds — Arbitrability to Be Decided by the Arbitrator

This judgment reinforces the Supreme Court’s evolving jurisprudence post-2015 Amendment to the Arbitration Act, emphasizing speedy and minimalistic judicial intervention at the reference stage. It reiterates that prima facie existence of an arbitration agreement is sufficient to trigger the referral process, and all other substantive objections must be dealt with before the arbitral tribunal.

The Court’s decision provides crucial clarity for shareholder disputes, especially in closely-held companies with arbitration clauses embedded in Articles of Association, affirming that such internal company matters can be referred to arbitration unless expressly barred.

Date of Decision: 23.12.2025