In a recent judgment delivered by the Supreme Court of India[ V.H Babu vs. PVN Rao and Others], the Apex Court has held that the High Court cannot appoint an arbitrator to adjudicate upon the dispute between the parties, where the existence of the arbitration agreement itself is denied by the Respondent. The validity of the arbitral clause cannot be left to be decided by the Arbitrator. The under mentioned discussion may be seen in this regard.
Where the intervention of the court is sought for appointment of an Arbitral Tribunal Under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. In that judgment, the Apex Court identified and segregated the preliminary issues that may arise for consideration in an application Under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.
The issues (first category) which the Chief Justice/his designate will have to decide are:
(a) Whether the party making the application has approached the appropriate High Court.
(b) Whether there is an arbitration agreement and whether the party who has applied Under Section 11 of the Act, is a party to such an agreement.
The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead (long-barred) claim or a live claim.
(b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection.
The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are:
(i) Whether a claim made falls within the arbitration Clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration).
(ii) Merits or any claim involved in the arbitration.
It is clear from the said two decisions that the question whether there is an arbitration agreement has to be decided only by the Chief Justice or his designate and should not be left to the decision of the Arbitral Tribunal. This is because the question whether there is an arbitration agreement is a jurisdictional issue and unless there is a valid arbitration agreement, the application Under Section 11 of the Act will not be maintainable and the Chief Justice or his designate will have no jurisdiction to appoint an arbitrator Under Section 11 of the Act. The Court held that only in regard to the issues shown in the second category, the Chief Justice or his designate has the choice of either deciding them or leaving them to the decision of the Arbitral Tribunal. Even in regard to the issues falling under the second category, the Court made it clear that where allegations of forgery or fabrication are made in regard to the documents, it would be appropriate for the Chief Justice or his designate to decide the issue.