MAGIC EYE DEVELOPERS PVT. LTD. versus M/S. GREEN EDGE INFRASTRUCTURE PVT. LTD. & ORS. ETC.

Citation: [2023] 5 S.C.R. 401 · Decided: 12-05-2023 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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401
MAGIC EYE DEVELOPERS PVT. LTD.
v.
M/S. GREEN EDGE INFRASTRUCTURE PVT. LTD. & ORS.
ETC.
(Civil Appeal Nos. 3634-37 of 2023)
MAY 12, 2023
[M. R. SHAH AND C. T. RAVIKUMAR, JJ.]
Arbitration and Conciliation Act, 1996 – Arbitration and
Conciliation Amendment Act, 2015 – s.11(6) – Pre-referral
jurisdiction – Before the High Court, appellant raised objection
with regard to the existence of an arbitration agreement – High
Court/referral court held that the issue of arbitrability of the dispute
can be addressed by Arbitral Tribunal – Thereafter, High Court
referred the disputes for arbitration and appointed a arbitrator –
On appeal, held: Pre-referral jurisdiction of the court u/s. 11(6) of
the Arbitration Act is very narrow and inheres two inquiries – The
primary inquiry is about the existence and the validity of an
arbitration agreement and the Secondary inquiry is with respect to
the non-arbitrability of the dispute – The issue of existence and the
validity of an arbitration agreement has to be to conclusively and
finally decided by the referral court at the referral stage itself and
the same should not be left to be determined by the Arbitral Tribunal
as it goes to the root of the matter – Furthermore, it is the duty of the
referral court to decide the said issue first conclusively to protect
the parties from being forced to arbitrate when there does not exist
any arbitration agreement and/or when there is no valid arbitration
agreement at all – In the instant case, the referral court (High Court)
has not decided the said issue conclusively and finally, which ought
to have been done by it and Court has left it to be decided by the
Arbitral Tribunal – Judgment of High Court quashed and set aside
– Matter remitted back to the High Court.
Allowing the appeals, the Court
HELD: 1. As per the settled position of law, pre-referral
jurisdiction of the court under Section 11(6) of the Arbitration
Act is very narrow and inheres two inquiries. The primary inquiry
is about the existence and the validity of an arbitration agreement,
[2023] 5 S.C.R. 401
401
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SUPREME COURT REPORTS
[2023] 5 S.C.R.
which also includes an inquiry as to the parties to the agreement
and the applicant’s privity to the said agreement. The said matter
requires a thorough examination by the referral court. The
Secondary inquiry that may arise at the reference stage itself is
with respect to the non-arbitrability of the dispute. Both are
different and distinct. So far as the first issue with respect to the
existence and the validity of an arbitration agreement is
concerned, as the same goes to the root of the matter, the same
has to be to conclusively decided by the referral court at the
referral stage itself. Now, so far as the non-arbitrability of the
dispute is concerned, even as per the law laid-down by this Court
in the case of Vidya Drolia, the court at prereferral stage and
while examining the jurisdiction under Section 11(6) of the Act
may even consider prima facie examining the arbitrability of
claims. As observed, the prima facie review at the reference stage
is to cut the deadwood and trim off the side branches in
straightforward cases where dismissal is barefaced and pellucid
and when on the facts and law the litigation must stop at the first
stage. However, so far as the dispute with respect to the existence
and validity of an arbitration agreement is concerned and when
the same is raised at pre-referral stage, the referral court has to
decide the said issue conclusively and finally and should not leave
the said issue to be determined by the arbitral tribunal. The reason
is that the issue with respect to the existence and validity of an
arbitration agreement goes to the root of the matter. If the dispute/
issue with respect to the existence and validity of an arbitration
agreement is not conclusively and finally decided by the referral
court while exercising the pre-referral jurisdiction under Section
11(6) and it is left to the arbitral tribunal, it will be contrary to
Section 11(6A) of the Arbitration Act. It is the duty of the referral
court to decide the said issue first conclusively to protect the
parties from being forced to arbitrate when there does not exist
any arbitration agreement and/or when there is no valid arbitration
agreement at all. [Para 5.3][407-C-H; 408-B-C]
2. The referral court has not decided the said issue
conclusively and finally and referral court has left it to be decided
by the arbit

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