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by Admin
18 December 2025 9:13 AM
"Referral Court Must Not Conduct Mini-Trials on Capacity or Consortium Structure – All Such Questions Fall to Arbitral Tribunal Under Section 16", In a significant pronouncement reaffirming the doctrine of minimal judicial intervention in arbitration, the Supreme Court of India dismissed two civil appeals and upheld the appointment of an Arbitral Tribunal (AT) under Section 11(6) of the Arbitration and Conciliation Act, 1996, in a dispute arising from a consortium-based EPC contract.
The two-judge Bench of Justices Pamidighantam Sri Narasimha and Atul S. Chandurkar ruled that even an individual member of a consortium may prima facie invoke arbitration, and that disputed issues of party status, capacity, or consortium structure must be left for adjudication by the Arbitral Tribunal under Section 16.
“Referral Court Only Needs Prima Facie Satisfaction of Arbitration Agreement’s Existence – Not Party Status or Validity”
The core legal issue was whether M/s Tecpro Systems Ltd., a member (and former lead member) of a consortium, could individually invoke the arbitration clause contained in the General Conditions of Contract (Clause 22.2), even after it ceased to be the lead member and was admitted into corporate insolvency proceedings.
The appellant, APGENCO, objected that only the Consortium as a whole could invoke arbitration, not an individual member. The Court, however, rejected this as a question not to be decided at the Section 11 stage, holding:
“Referral court will, however, confine its enquiry only to a prima facie satisfaction as to whether a member of a consortium qualifies as a ‘party’ to the arbitration agreement. This prima facie satisfaction is sufficient…” [Para 16]
Referring to the constitutional bench decision in Interplay Between Arbitration and Stamp Act (2024) and Cox & Kings Ltd. v. SAP India Pvt. Ltd., the Court observed:
“The burden of proving the existence of arbitration agreement generally lies on the party seeking to rely on such agreement… Only prima facie proof is required. The referral court is not the appropriate forum to conduct a mini-trial.” [Para 17]
“Whether Consortium Continues or Member Can Invoke Arbitration Is Matter for Section 16 Determination”
The Court further emphasized that issues relating to the existence or dissolution of the consortium, capacity of the claimant, and objections by other consortium members, all fall squarely within the jurisdiction of the Arbitral Tribunal under Section 16:
“Whether the Consortium continues to exist, whether consent of other partners was necessary, and whether claims are maintainable after liquidation — are all matters for the Arbitral Tribunal.” [Para 19]
Rejecting the appellant’s insistence on denying the referral due to Tecpro's insolvency and loss of leadership, the Court clarified:
“The expiry of the Consortium Agreement will result in each party being represented by themselves or their legal successors.” [Para 11.4]
“A consortium or joint venture, unless incorporated, is neither a juristic person nor a separate legal entity distinct from its members.” [Para 11.5]
This reinforced the respondent’s claim that an individual member retained an independent contractual interest and enforceable rights, even after dissolution of the consortium.
“Arbitration Clause Validly Incorporated Despite Jurisdiction Clauses in Purchase Orders”
A related contention by APGENCO was that the Purchase Orders (POs)—the main contractual instruments—contained exclusive jurisdiction clauses in favour of civil courts, and did not refer to arbitration.
However, the Supreme Court held that the arbitration clause in the General Conditions of Contract (GCC), which was expressly incorporated into the POs, continued to govern the dispute resolution mechanism.
“The arbitration clause stands validly incorporated by reference into the Purchase Orders… The jurisdiction clause is not inconsistent, and merely indicates Hyderabad as juridical seat.” [Para 11.2]
This approach followed well-established precedents including M.R. Engineers v. Som Datt Builders (2009) and NBCC v. Zillion Infraprojects (2024).
“Referral Courts Must Not Deny Arbitration Based on Party’s Insolvency or Opposition From Co-Consortium Members”
Responding to the argument that Tecpro Systems, being under liquidation and opposed by other consortium members, had no authority to initiate arbitration, the Supreme Court drew a sharp boundary:
“Such objections concern the entitlement to invoke arbitration, not the existence of the arbitration agreement… These fall squarely within Section 16 jurisdiction.” [Para 11.8]
The Court made it clear that insolvency, consortium leadership changes, or opposition from other members are not valid reasons to prevent referral to arbitration at the Section 11 stage.
Judicial Consistency Upheld: Reference Made Earlier in Telangana Counterpart Case
The Court also relied on its earlier reference order dated 29 November 2021, in a parallel dispute involving Telangana State Power Generation Corporation Ltd. (TSPGCL), which was carved out of APGENCO post-bifurcation.
There too, identical objections were raised, and the Supreme Court had appointed a sole arbitrator to resolve all claims under the same contractual framework. The Court remarked:
“No reason to adopt a contrary view when consortium and contract structure are materially the same.” [Para 20]
This highlights the importance of judicial consistency in arbitration matters, especially where parties and contractual terms overlap.
Referral Courts Must Uphold the Kompetenz-Kompetenz Doctrine and Avoid Mini-Trials
In conclusion, the Supreme Court dismissed both civil appeals and upheld the High Court’s appointment of the Arbitral Tribunal, firmly restating the limited role of referral courts under Section 11(6-A) of the Arbitration and Conciliation Act, 1996.
“The High Court has not committed any error in constituting the AT… The AT will consider all questions including preliminary objections relating to maintainability…” [Para 21]
The decision strengthens the arbitration regime by reinforcing two key doctrines:
Minimal Judicial Intervention at Referral Stage
Kompetenz-Kompetenz (Tribunal’s Power to Rule on Own Jurisdiction)
It ensures that arbitral autonomy is not defeated by premature judicial scrutiny into disputed facts, complex contract structures, or consortium dynamics.
Date of Decision: 17 December 2025
