Supreme Court Holds Referral Court Must Decide Existence of Arbitration Agreement in Pre-Referral Jurisdiction

Supreme Court of India clarified the jurisdiction of referral courts in pre-referral stage matters concerning the existence and validity of arbitration agreements. The bench comprising Justices M.R. Shah and C.T. Ravikumar delivered the judgment, setting aside the impugned order of the High Court of Delhi.

The case, Magic Eye Developers Pvt. Ltd. v. M/s. Green Edge Infrastructure Pvt. Ltd. & Ors., revolved around the issue of whether the court should decide the existence and validity of an arbitration agreement at the pre-referral stage or leave it to the arbitral tribunal.

 The appellant contended that Section 11(6A) of the Arbitration Act, as inserted by the Arbitration and Conciliation Amendment Act, 2015, requires the referral court to conclusively determine the existence and validity of the arbitration agreement. They argued that the issue goes to the root of the matter and should not be left to the arbitral tribunal.

 The respondents, on the other hand, contended that the agreements in question were interconnected, and therefore, the presence of an arbitration clause in one agreement necessitated the consideration of all agreements collectively.

 Examining the provisions of Section 11(6A) of the Arbitration Act, the Supreme Court held that the jurisdiction of the court under Section 11(6) is limited to examining the existence of an arbitration agreement. Post the 2015 amendment, the court's role is confined to determining the existence and not the validity of the arbitration agreement.

 The Court further clarified that while the court can prima facie examine the non-arbitrability of a dispute, the issue of the existence and validity of the arbitration agreement must be conclusively decided by the referral court at the pre-referral stage.

 he Supreme Court found that the referral court had failed to decide conclusively on the existence and validity of the arbitration agreement, as observed in the impugned order. Therefore, the Court set aside the order and remitted the case back to the referral court for fresh consideration, directing it to conclusively decide the issue within three months.

 The judgment provides significant guidance on the jurisdiction of referral courts in pre-referral stage matters related to the existence and validity of arbitration agreements. It ensures that the referral court's role is focused on conclusively deciding the issue of existence and leaves the non-arbitrability of disputes to be examined by the arbitral tribunal.

Date of Decision: May 12, 2023

Magic Eye Developers Pvt. Ltd.   VS M/s. Green Edge Infrastructure Pvt. Ltd. & Ors. Etc.