In the matter at hand, Magic Eye Developers Ltd. v. Green Edge Infrastructure Ltd case involving the question of the Referral Court’s pre-referral authority under the 2015 Arbitration and Conciliation Amendment Act, which is governed by Section 11(6) of the Arbitration and Conciliation Act, 1996. The only arbitrator was chosen by the Delhi High Court, which had submitted the cases for arbitration. However, this was done without definitively determining the issue of the existence and legality of an arbitration agreement and instead left it up to the arbitral tribunal to determine. It also made the special observation that the arbitrability of the dispute brought in relation to the arbitration provision of the contract is a complicated matter that may be dealt with by the experienced arbitral panel.
Analysis of Court order
According to a divisional bench of the Supreme Court made up of Justices MR Shah and CT Ravikumar, it would be against Section 11(6A) of the Arbitration Act if the referral court did not decide the dispute regarding the existence and validity of an arbitration agreement conclusively and finally while exercising its pre-referral jurisdiction under Section 11(6).To prevent the parties from being forced into arbitration where there is no arbitration agreement that is legal and enforceable, it is the responsibility of the referral court to resolve the aforementioned question first and definitively.
According to the Supreme Court, the reference court failed to definitively determine whether an arbitration agreement existed and was legal, as it was required to do. The Court stated that at the referral stage, the reference court must take the disagreement over whether an arbitration agreement exists. The court further remarked that, in accordance with the decision made in Vidya Drolia (supra), the non-arbitrability of the dispute might be assessed prima facie under Section 11(6) of the Arbitration Act.
The Supreme Court concluded that in the case of a dispute regarding the existence and legality of an arbitration agreement, which is brought up at the pre-referral stage, the referral court is required to render a final, conclusive decision on the matter and should not leave it up to the arbitral tribunal. The rationale is that the core of the dispute is the question of whether an arbitration agreement is real and legitimate. The Delhi High Court’s impugned judgment was therefore overturned by the Court, and the matter was returned to the Delhi High Court for further consideration of the existence and legality of the arbitration agreement.