AJAY MADHUSUDAN PATEL & ORS. versus JYOTRINDRA S. PATEL & ORS.

Citation: [2024] 9 S.C.R. 894 · Decided: 20-09-2024 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Appeal(s) allowed

Cited by 3 judgment(s) · cites 8 · see the full citation network in Lexace

Judgment (excerpt)

[2024] 9 S.C.R. 894 : 2024 INSC 710
Ajay Madhusudan Patel & Ors.  
v. 
Jyotrindra S. Patel & Ors.
(Arbitration Petition No. 19 of 2024)
20 September 2024
[Dr Dhananjaya Y Chandrachud, CJI,  
J.B. Pardiwala* and Manoj Misra, JJ.]
Issue for Consideration
What is the scope of jurisdiction of the referral court under 
Section 11(6) of the Arbitration and Conciliation Act, 1996; Whether 
in the instant case, on a prima facie view, the SRG Group being 
a non-signatory to the Family Arrangement Agreement (FAA), can 
be referred to arbitration.
Headnotes†
Arbitration and Conciliation Act, 1996 – s.11(6) – Appointment 
of arbitrators – Scope of jurisdiction of the referral Court:
Held: SBP & Co. case expanded the scope of the Court’s power 
under Section 11 while empowering the referral courts to decide 
several preliminary issues – Boghara Polyfab case went to the 
extent of identifying three categories of preliminary issues that 
may arise for consideration in an application under Section 11 – 
However, the insertion of Section 11(6A) through the 2015 
Amendment to the Act, 1996 stipulated that the Courts under 
Section 11 shall confine their examination to the ‘existence’ of 
an arbitration agreement – It legislatively overruled the decisions 
in SBP & Co. and Boghara Polyfab by virtue of its non-obstante 
clause – Duro Felguera case, in clear terms, clarified the effect 
of the change brought in by Section 11(6A) and stated that all 
that the Courts need to see is whether an arbitration agreement 
exists - nothing more, nothing less – Vidya Drolia case endorsed 
the prima facie test in examining the existence and validity of an 
arbitration agreement both under Sections 8 and 11 respectively – 
However, it was clarified that in cases of debatable and disputable 
facts and reasonably good arguable case, etc. the Court may 
refer the parties to arbitration since the arbitral tribunal has the 
* Author
[2024] 9 S.C.R. 
895
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
authority to decide disputes including the question of jurisdiction – 
It was further stated that jurisdictional issues concerning whether 
certain parties are bound by a particular arbitration under the 
group-company doctrine etc. in a multi-party arbitration raise 
complicated questions of fact which are best left to the tribunal to 
decide – In Re: Interplay Between Arbitration Agreements under 
Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, the 
position taken in Vidya Drolia case was clarified to state that the 
scope of examination under Section 11(6) should be confined to 
the “existence of the arbitration agreement” under Section 7 of 
the Act, 1996 and the “validity of an arbitration agreement” must 
be restricted to the requirement of formal validity such as the 
requirement that the agreement be in writing – Krish Spinning 
case cautioned that the Courts delving into the domain of the 
arbitral tribunal at the Section 11 stage run the risk of leaving the 
claimant remediless if the Section 11 application is rejected – The 
Cox and Kings case specifically dealt with the scope of inquiry 
under Section 11 when it comes to impleading the non-signatories 
in the arbitration proceedings – While saying that the referral 
court would be required to prima facie rule on the existence of 
the arbitration agreement and whether the non-signatory party is 
a veritable party to the arbitration agreement, it also said that in 
view of the complexity in such a determination, the arbitral tribunal 
would be the proper forum. [Para 65]
Arbitration and Conciliation Act, 1996 – Whether in the instant 
case, on a prima facie view, the SRG Group being a non-
signatory to the Family Arrangement Agreement (FAA), can 
be referred to arbitration:
Held: An important factor to be considered by the Courts 
and Tribunals is the participation of the non-signatory in the 
performance of the underlying contract – The intention of the 
parties to be bound by an arbitration agreement can be gauged 
from the circumstances that surround the participation of the non-
signatory party in the negotiation, performance, and termination of 
the underlying contract containing such an agreement – Further, 
when the conduct of the non-signatory is in harmony with the 
conduct of the others, it might lead the other party or parties to 
legitimately believe that the non-signatory was a veritable party 
to the contract containing the arbitration agreement – However, in 
o

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