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Arbitrability under Indian Law

Arbitrability is one of the issues where the contractual and jurisdictional facets of international commercial arbitration meet head on. It involves the simple question of what type of issues can and cannot be submitted to arbitration.

In Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. the Supreme Court discussed the 1) concept of arbitrability in detail and held that the term ‘arbitrability’ had different meanings in different contexts:

  1. disputes capable of being adjudicated through arbitration,
  2. disputes covered by the arbitration agreement,and
  3. disputes that parties have referred to arbitration.

It stated that in principle, any dispute than can be decided by a civil court can also be resolved through arbitration. However, certain disputes may, by necessary implication, stand excluded from resolution by a private forum. Such non-arbitrable disputes include:

  1. disputes relating to rights and liabilities which give rise to or arise out of criminal offences;
  2. matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, or child custody;
  3. guardianship matters;
  4. insolvency and winding up matters;
  5. testamentary matters (grant of probate, letters of administration and succession certificate); and
  6. eviction or tenancy matters governed by special statutes
  7. where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.

Also, the Supreme Court has held in N. Radhakrishnan v. M/S Maestro Engineers that, where 2) allegations of fraud and serious malpractices are alleged, the matter can only be settled by the court and such a situation cannot be referred to an arbitrator. The Supreme Court also observed that fraud, financial malpractice and collusion are allegations with criminal repercussions and as an arbitrator is a creature of the con- tract, he has limited jurisdiction. The courts are more equipped to adjudicate serious and complex allegations and are competent in offering a wider range of reliefs to the parties in dispute. But the Supreme Court in Swiss Timing Limited v. Organizing Committee, Commonwealth Games 2010, Delhi and World Sport Group (Mauritius) 3) Ltd. v. MSM Satellite (Singapore) Pte. Ltd.4) held that allegations of fraud are not a bar to refer par- ties to a foreign-seated arbitration and that the only bars to refer parties to foreign-seated arbitrations are those which are specified in Section 45 of Act. For cases where the arbitration agreement is either

  1. null and void; or
  2. inoperative; or
  3. incapable of being performed.

Thus, it seems that though allegations of fraud are not arbitrable in ICA’s with a seat in India the same bar would not apply to ICA’s with a foreign seat. Hence, there may be a certain degree of variance in the law of arbitrability in India when compared to other jurisdictions. The differential treatment of domestic and international commercial arbitration with regard to arbitrability of issues makes it important to determine whether the disputes referred to arbitration are arbitrable under law in arbitration involving Indian parties. Failure of the dispute being arbitrable may lead to the award being rendered unenforceable in India on grounds of contravention of public policy of India.

2011 (5) SCC 532
2010 (1) SCC 72
2014 (6) SCC 677
AIR 2014 SC 968

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