Delhi High Court Clarifies Limits on Arbitrability in Dispute Resolution
The Delhi High Court recently reaffirmed that it cannot determine the arbitrability of a dispute while exercising its limited powers under Section 11(6) of the Arbitration and Conciliation Act, 1996. This ruling emerged from a case involving PayU Payments Private Limited, which sought the appointment of an arbitrator to resolve a dispute with New India Assurance Company.
Justice C Hari Shankar emphasized that the court’s jurisdiction in such matters is restricted to appointing an arbitrator and does not extend to assessing whether the dispute can be referred to arbitration. The insurance company challenged PayU’s request, arguing that the dispute was not arbitrable.
Citing the Supreme Court’s ruling in SBI General Insurance Co Ltd v Krish Spinning, Justice Shankar noted that any questions regarding arbitrability must be addressed by the arbitral tribunal, not the court. He reiterated that a Section 11 court is only responsible for examining the prima facie existence of an arbitration agreement, without delving into the merits of the dispute.
The underlying issue arose when PayU claimed reimbursement for losses exceeding ₹8 crores due to fraudulent transactions covered under two insurance policies—one for ₹20 crores and another for ₹6.5 crores. New India Assurance denied the claim, prompting PayU to seek arbitration.
In court, the insurance company maintained that no arbitrable dispute existed because it had rightfully repudiated the claim. However, the High Court refrained from making any determination on this matter, leaving it for the arbitral tribunal to resolve.
The court permitted the parties to appoint two members of a three-member arbitral tribunal, with the appointed members tasked to select the third. It concluded that all questions of fact and law, including the issue of arbitrability, would be open for consideration by the tribunal.
Senior Advocate Rajeeve Mehra represented PayU, while Advocate Dr. Amit George appeared for the insurance company.
(With inputs from agency)
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