Supreme Court reiterates the Patel Engineering ruling on Competence - Competence

On 25th August, the Supreme Court, in Bharat Rasiklal Ashra vs Gautam Rasiklal Ashra reiterated its previous position on what issues are to be considered by the Chief Justice or his designate in disposing an application under Section 11 of the Arbitration and Conciliation Act and what questions are to be left to the arbitrators to decide.

Relying on its previous decisions in S.B.P. & Co. vs. Patel Engineering Ltd. [2005 (8) SCC 618] and  National Insurance Co. Ltd. vs. Boghara Polyfab Pvt. Ltd. [2009 (1) SCC 267] the Court arrived at the following conclusions:

1. Issues to be necessarily decided by the Chief Justice or his designate before appointing arbitrators under Section 11:

(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.

2. Additional issues that may be decided by the Chief Justice or his designate:

(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.

3. Issues that are to be necessarily left to the consideration of the arbitrators:

(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.