KluwerArbitration
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Publication
Asian International
Arbitration Journal
Jurisdiction
India
Bibliographic
reference
Sai Anukaran, 'Scope of
Arbitrability of Disputes
from the Indian
Perspective', in Lawrence
Boo and Gary B. Born (eds),
Asian International
Arbitration Journal,
(© Kluwer Law
International; Kluwer Law
International 2018, Volume
14 Issue 1) pp. 71 - 88
© 2023 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
Scope of Arbitrability of Disputes from the Indian
Perspective
Sai Anukaran
(*)
Arbitration essentially involves ouster of jurisdiction of civil courts by mutual consent of the
parties in lieu of jurisdiction conferred upon a specific set of persons known as arbitrators to
adjudicate the dispute. International Arbitral Standards require the states to keep their
National Arbitral Legislation open-ended without limiting the scope of arbitrability of
disputes, providing grounds only for setting aside of arbitral awards in violation of the
Public Policy of the country. Thus, the interpretation of ‘Scope of arbitrability’ is left to the
determination of the courts. The instant article explores the meaning of term ‘arbitrability
of disputes’ and discusses the ‘Scope of arbitrability of disputes’ in Indian Perspective. The
article critically analyses the case of Booz Allen and Hamilton Inc. v. SBI Home Finance
Ltd., wherein the Supreme court for the first time evolved test of arbitrability of disputes and
further enumerated an illustrative list of disputes, which are incapable of being decided by
arbitration. The article then maps the evolution of tests of arbitrability by various courts
based on the Judgement of the Supreme Court and critically analyses them.
A. Introduction
In the recent times, India has witnessed a rapid growth in the use of arbitration as a
mode of dispute resolution. From 2008 to 2011, India saw a 200% growth in the number of
disputes that have been referred for arbitration. (1) This pattern of growth is attributable
P 72 to the efforts of the government to improve the arbitral legislation in the form of 2015
amendments and the stance taken by the Indian Judiciary to minimize judicial
intervention in arbitral proceedings, giving impetus to the parties’ agreement to
arbitrate. The courts have over the course of past few years, have reiterated India’s Pro-
arbitration stance through a plethora of judgments such as, BALCO v. Kaiser Aluminium,
where the judiciary declared that Indian courts have no power to intervene in a foreign-
seated arbitration; (2) Shri Lal Mahal Ltd. v. Progetto Grano Spa, where the Court
significantly narrowed down the ‘public policy’ exception as a ground for review of a
foreign arbitral award; (3) Enercon (India) Ltd. v. Enercon Gmbh, where the Indian Courts
infused life into a nearly unworkable arbitration clause; (4) HSBC Pl Holdings (Mauritius)
Ltd. v. Avitel Post Studioz Ltd. (5) and World Sports Group (Mauritius) Ltd. v. MSM Satellite
(Singapore) Pte Ltd., where the courts established a change in past precedent by allowing
arbitration to proceed when the dispute involved allegations of fraud simpliciter. (6)
However, despite all of this, India is still considered an arbitration agnostic state,
unfavourable as a seat of arbitration. This conception primarily is due to the cloud of
uncertainty that surrounds arbitral scenario in India. The arbitrability of various disputes
such as Anti-trust, Securities/Investment, Shareholders’ disputes is uncertain and
ambiguous. Thus, the parties are often wary of choosing India as their seat of arbitration.
‘Arbitrability of disputes’ refers to the question, whether a particular dispute can be
referred to arbitration. Arbitrability is one of the issues where the contractual and
jurisdictional natures of international commercial arbitration meet head-on. (7) The
arbitrability of disputes should not be confused with the question of what disputes fall
within the terms of a particular arbitration agreement (the scope of the arbitration
agreement). (8) However, the courts in India have dealt the question of the scope of
arbitrability in an erratic manner, often narrowing down the scope of arbitrability of
disputes by evolving tests to adjudicate the arbitrability of disputes. The current article
sheds light on the Scope of arbitrability of Disputes in India by undertaking an analysis of
P 73 the judgments of the various courts laying down Test for arbitrability of disputes.
Further, the article seeks to highlight the problems with the conflicting and uncertain
tests of arbitrability and suggests a remedy for the same.
B. ‘Scope of Arbitrability’ of Disputes
National laws often impose restrictions or limitations on what matters can be referred to
and resolved by arbitration. For example, states or state entities may not be allowed to
enter into arbitration agreements at all or may require a special authorization to do so.
This is ‘subjective arbitrability’. More important than the restrictions relating to the
parties are limitations based on the subject matter in issue. This is ‘objective
arbitrability’. (9) For the sake of the instant article, arbitrability means ‘objective
arbitrability’ of disputes in India.
Thus, the scope of arbitrability of disputes deals with the scope of party autonomy to
refer a dispute to arbitration. National Laws impose restrictions on the objective
arbitrability of disputes. This restriction on party autonomy is justified to the extent that
arbitrability is a manifestation of national or international public policy. Consequently,
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 arbitration agreements covering such matters which are against the public policy will, in
general, not be considered valid, will not establish the jurisdiction of the arbitrators and
the subsequent award may not be enforced.
Simply put, the concept of ‘arbitrability’ encapsulates three aspects, (1) whether the
disputes, having regard to their nature, could be resolved by a private arbitral forum or
whether they are exclusively reserved for public fora or courts (Objective arbitrability);
(2) whether the disputes are covered by the arbitration agreement and (3) whether the
parties have referred the disputes to arbitration. (10)
However the last two questions do not raise public policy concerns and are specific to
the facts of each case, thus this article deals with only the first question of objective
arbitrability.
The Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘The Act’) does not
specifically exclude any category of disputes as being not arbitrable. Sections 34(2)(b)
and 48(2) of the Act, however, make it clear that an arbitral award will be set aside if the
court finds that ‘the subject-matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force’. (11) Further, the Arbitration and
Conciliation Act, 1996 has been amended in 2015. Section 8 (1) of the amended act
P 74 provides that:

A judicial authority, before which an action is brought in a matter which is the

subject of an arbitration agreement shall, if a party to the arbitration agreement
or any person claiming through or under him, so applies … . notwithstanding any
judgment, decree or order of the supreme court or any court, … refer the parties
to arbitration unless it finds that prima facie no valid arbitration agreement
exists.
Thus, the amended section 8 requires only the consideration of the validity of arbitration
agreement, before referring the parties to the arbitration. Thus, in absence of any
standards in the arbitral legislation, it has been left to the courts to determine the scope
of arbitrability. This, however, raises the question as to who has the mandate to
determine the scope of arbitrability, i.e. the national courts or the arbitrators.

C. Mandate to Decide the Objection with Respect to the Scope of

Arbitrability
A pertinent question that arises is whether the arbitrators themselves have the power
vide the principle of Competence-Competence, to determine the scope arbitrability or
whether such question is to be solely decided by the courts.
The aforesaid principle of competence-competence was recognized in India in the
landmark case of Renusagar Power Co. Ltd. v. General Electric Co. and Anr, (12) where the
Supreme Court while considering the relevant provisions of the Foreign Awards
(Recognition and Enforcement) Act, 1961, held that the arbitrator or umpire is competent
to provisionally decide his own jurisdiction, if the arbitration agreement so provides,
however, subject to final determination by a competent court. (13) It was further
enumerated in the case of S.B.P & Co. v. Patel Engineering Ltd. (14) that the Competence-
Competence principle gives power to the arbitrators to adjudicate their own jurisdiction.
(15) Thus, going by this principle the arbitrators have the power to decide upon the scope
of arbitrability of dispute within the ambit of the Lex Arbitri, i.e. the law of arbitration.
The Supreme Court in the case of the landmark case of Booz Allen & Hamilton Inc. v. SBI
Home Finance Ltd. & Ors, (16) while deciding the question of Scope of Arbitrability
observed that the nature and scope of issues arising for consideration in an application
P 75 under section 11 of the Act for appointment of arbitrators, are far narrower than those
arising in an application under section 8 of the Act, seeking reference of the parties to a
suit to arbitration. While considering an application under section 11 of the Act, the Chief
Justice or his designate would not embark upon an examination of the issue of
`arbitrability’ or appropriateness of adjudication by a private forum, once he finds that
there was an arbitration agreement between or among the parties, and would leave the
issue of arbitrability for the decision of the Arbitral Tribunal. If the arbitrator wrongly
holds that the dispute is arbitrable, the aggrieved party will have to challenge the award
by filing an application under section 34 (2)(b). But where the issue of `arbitrability’
arises in the context of an application under section 8 of the Act in a pending suit, all
aspects of arbitrability have to be decided by the court seized of the suit, and cannot be
left to the decision of the Arbitrator. Even if there is an arbitration agreement between
the parties, and even if the dispute is covered by the arbitration agreement, the court
where the civil suit is pending, will refuse an application under section 8 of the Act, to
refer the parties to arbitration, if the subject matter of the suit is capable of adjudication
only by a public forum or the relief claimed can only be granted by a special court or
Tribunal, (17) i.e. the disputes are not arbitrable. Thus, the dictum in Booz Allen indicates
that the while the question of jurisdiction is to be decided by the courts where an
application is made under section 8, however, the question of jurisdiction is to be
decided by the arbitral tribunal where an application is made under section 11.
The 2015 amendment to section 8 of the Act has, however, created uncertainty with

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 respect to the court’s power to decide upon arbitrability of dispute at the pre-arbitration
stage. The amended section 8 introduces a non-obstante clause, which reads as follows:
notwithstanding any judgment, decree or order of the supreme court or any
other court, refer the parties to arbitration unless it finds that prima facie no
valid arbitration agreement exists.
In contrast, section 8 of the UNCITRAL Model Law, 2006 and section 45 of the Act provide
that:
unless it finds that the agreement is null and void, inoperative and incapable of
being performed.
This phrase, however, does not find its place in section 8 of the Act. Thus, a bare reading
of amended section 8 appears to have rendered nugatory the interpretation of courts
regarding the arbitrability of disputes at the stage of section 8. The amended section 8
suggests that the courts can only inquire the prima facie existence of a valid arbitration
P 76 agreement and leave the rest to be determined by the arbitral tribunal by virtue of the
principal of Komptenz-Komptenz as enshrined under section 16 of the Act. The courts only
have the power to set aside the arbitral award under sections 34(2)(b) or 48(2) of the Act
on the ground that the subject matter of the dispute is not arbitrable as per the public
policy of India.
The Supreme Court in the case of Ayyasamy v. A. Paramasivam & ors (18) (while dealing
with a reference with respect to an agreement entered into prior to the 2015 amendment,
have held in respect of section 8 of the Act that:
while mere allegation of fraud simplicitor will not confer jurisdiction on the
courts to assume jurisdiction, however, in case of serious allegations of fraud the
court can sidetrack the arbitration agreement
Thus, the Supreme Court has imposed a restriction on arbitrability on account of fraud.
However, the court in its judgment has not referred to the amended section 8 and it is not
clear whether the judgment was intended to be made applicable to the amended section
8. If that were the scenario the judgment would be per incuriam in light of the amended
section 8 of the Act.
However, an alternate argument could be that serious fraud and non-arbitrability of
dispute would in itself affect the validity of the arbitration agreement. Even in such a
case, it is doubtful if the court can undertake an in-depth analysis into the question of
arbitrability (even on account of serious fraud) since the amended section 8 of the Act
restricts the power of the court to undertake only a prima facie view of the validity of the
arbitration agreement. Thus, the decision in Ayyasamy is per incuriam, since the court
would have to delve into the merits of the dispute to determine degree of fraud.
The full bench of National Consumer Disputes Redressal Commission (NCDRC) in Aftab
Singh v. Emaar MGF Land Limited & Anr. (19) while rejecting the plea of the respondent-
builder to refer consumer disputes to arbitration, reiterated the view of Supreme Court in
Booz Allen and Ayyasami that disputes governed by statutory enactments creating
special tribunals (such as NCDRC) for specific public purpose cannot be mandatorily
referred to arbitration. The court further held that amendment to section 8 of the Act
does not intend to nullify erstwhile statutory interpretation of the Act by the courts and
P 77 the sole purpose of the amendment is to curtail wide enquiry by the courts.
The effect of the non-obstante clause on pre-arbitral jurisprudence by the courts is yet to
be determined by the Supreme Court. Once the parties to a dispute have agreed to
resolve their disputes through binding arbitration, the purpose of arbitration would be
defeated and precious time of the parties would be wasted in the determination of the
validity of arbitration agreement before the national courts. This apprehension was also
taken into account by Chandrachud, J. while delivering the judgment in the case of
Ayyasamy v. A. Paramasivam & ors. Therefore, the correct view would be that while non-
arbitrable disputes should not be referred to arbitration, the courts under section 8 have
only a limited scope of interference and cannot undertake an in-depth analysis into the
merits and arbitrability of disputes at a pre-arbitration stage. Further, a dispute should
be categorized as non-arbitrable only on the limited ground of compelling public
interest. (20)

D. Tests of Arbitrability
There has been a conflict of opinion amongst the courts on the scope of arbitrability in
India. Currently, there is no clear position as to the scope of arbitrability. The courts have
laid down the following tests to determine the scope of arbitrability of disputes in India:

1. ‘Nature of Legal Right’s’ Test

The Supreme Court in the case of Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. &
Ors. (21) held that the scope of arbitrability is to be adjudicated from the yardstick of the
nature of rights involved in the dispute. If the right is in nature of rights in rem, i.e. rights

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 against the world at large then the disputes are not arbitrable. However, if the rights are
in nature of rights in Personam, i.e. Personal rights based on a contract or tort then the
dispute is arbitrable. The court further explained that the actions in personam refer to
actions determining the rights and interests of the parties themselves in the subject
matter of the case, whereas actions in rem refer to actions determining the title to
property and the rights of the parties, not merely among themselves but also against all
persons at any time claiming an interest in that property. The court concluded that,
P 78 generally and traditionally all disputes relating to rights in personam are considered to
be amenable to arbitration; and all disputes relating to rights in rem are required to
be adjudicated by courts and public tribunals, being unsuited for private arbitration but
clarified that this is not a rigid or inflexible rule, since disputes relating to subordinate
rights in personam arising from rights in rem have always been considered to be
arbitrable. The court took the support of Mustill and Boyd, (22) who observed thus:
Many commentaries treat it as axiomatic that ‘real’ rights, that is rights which
are valid as against the whole world, cannot be the subject of private arbitration,
although some acknowledge that subordinate rights in personam derived from
the real rights may be ruled upon by arbitrators. The conventional view is thus
that, for example, rights under a patent license may be arbitrated, but the
validity of the underlying patent may not. An arbitrator whose powers are
derived from a private agreement between A and B plainly has no jurisdiction to
bind anyone else by a decision on whether a patent is valid, for no-one else has
mandated him to make such a decision, and a decision which attempted to do so
would be useless. (23)
An example of the above exception would be the case of Eros v. Telemax, (24) where the
Mumbai High held that contractual rights relating to copyright are arbitrable. The court
observed that copyright is a right in rem and is to be granted only by the state, however,
the right to licence the copyright is of the nature of a right in personam arising from a
right in rem, thus it is arbitrable.
The court further referred to Russell on Arbitration (25) wherein it was observed in
reference to English Law on Arbitration that:
Not all matters are capable of being referred to arbitration. As a matter of
English law certain matters are reserved for the court alone and if a tribunal
purports to deal with them the resulting award will be unenforceable. These
include matters where the type of remedy required is not one which an arbitral
tribunal is empowered to give. (26)
However, the subsequent edition of Russell on arbitration (27) merely observes that
‘English law does recognize that there are matters, which cannot be decided by means of
arbitration.’ (28)
The court further referred to Mustill and Boyd, Law and Practice of Commercial
Arbitration in England, wherein it was observed:
In practice, therefore, the question has not been whether a particular dispute is
capable of settlement by arbitration, but whether it ought to be referred to
P 79 arbitration or whether it has given rise to an enforceable award. No doubt, for
this reason, English law has never arrived at a general theory for distinguishing
those disputes which may be settled by arbitration from those which may not.
Second, the types of remedies which the arbitrator can award are limited by
considerations of public policy and by the fact that he is appointed by the
parties and not by the state. For example, he cannot impose a fine or a term of
imprisonment, commit a person for contempt or issue a writ of subpoena; nor
can he make an award which is binding on third parties or affects the public at
large, such as a judgment in rem against a ship, an assessment of the rateable
value of land, a divorce decree, a winding-up order. (29)
The court further referred to the following cases to determine criteria for the arbitrability
of disputes:
(1) The court referred to the case of Haryana Telecom Limited v. Sterlite Industries India
Ltd., (30) wherein the Supreme Court held that the power to order winding up of a
company is contained under the Companies Act and is conferred on the court. Thus,
an arbitrator, notwithstanding any agreement between the parties, would have no
jurisdiction to order winding up of a company. (31)
(2) The court then referred to the judgment of Olympus Superstructures Pvt Ltd v. Meena
Vijay Khetan and Ors., (32) wherein a different perspective on the issue of
arbitrability is found. In this case, the Court considered whether an arbitrator has
the power and jurisdiction to grant specific performance of contracts relating to
immovable property. It was held that the right to specific performance of an
agreement of sale deals with contractual rights and it is certainly open to the
parties to agree with a view to shorten litigation in regular courts, to refer the issues
relating to specific performance to arbitration. There is no prohibition in the
Specific Relief Act, 1963 that issues relating to the specific performance of the

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 contract relating to immovable property cannot be referred to arbitration. Nor is
there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as
contrasted with section 15 of the English Arbitration Act, 1950 or section 48(5)(b) of
the English Arbitration Act, 1996 which contained a prohibition relating to the
specific performance of contracts concerning immoveable property. Approving the
P 81 decision of the Calcutta High Court in Keventer Agro Ltd v. Seegram Comp. Ltd., (33)
the Court held that disputes relating to the specific performance of a contract
can be referred to arbitration and section 34(2)(b)(i) will not be attracted to set
aside such an award. The Supreme Court further clarified that while matters like
criminal offences and matrimonial disputes may not be a subject matter of
resolution by arbitration, matters incidental thereto may be referred to arbitration.
The court referred to the case of Keir v. Leeman, (34) wherein it was held that certain
disputes like criminal offences of a public nature, disputes arising out of illegal
agreements and disputes relating to status, such as divorce, which cannot be
referred to arbitration. However, if in respect of facts relating to a criminal matter,
like a physical injury, if there is a right to damages for personal injury, then such a
dispute can be referred to arbitration. (35) Similarly, it has been held that a
husband and wife may, refer to arbitration the terms on which they shall separate,
because they can make a valid agreement between themselves on that matter. (36)
(3) Finally, the court referred to the judgment in Chiranjilal Shrilal Goenka v. Jasjit Singh
and Ors., (37) wherein the Supreme court held that grant of probate is a judgment in
rem and is conclusive and binding not only the parties but also the entire world;
and therefore, courts alone will have exclusive jurisdiction to grant probate and an
arbitral tribunal will not have jurisdiction even if consented concluded to by the
parties to adjudicate upon the proof or validity of the will. (38)
The Supreme Court supported the aforesaid test by carving out an illustrative list of six
categories of cases, which are not capable for being decided by private arbitration under
the Arbitration Act even though parties agreed under the Arbitration Act even though
parties agreed to their settlement through private arbitration:
(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, child custody;
(3) Guardianship matters;
(4) Insolvency and winding up matters;
(5) Testamentary matters (grant of probate, letters of administration and succession
certificate);
(6) Eviction or tenancy matters governed by special statutes where the tenant enjoys
statutory protection against eviction (39)
Supreme Court of India in Shri Vimal Kishor Shah v. Jayesh Dinesh Shah & Ors (40) has
added one more category to the list, namely,
(7) Cases arising out of Trust Deed and the Trust Act.
A dispute, even if it is capable of being decided by arbitration and falling within the
scope of arbitration agreement, will not be ‘arbitrable’ if it is not enumerated in the joint
list of disputes referred to arbitration, or in the absence of such joint list of disputes,
does not form part of the disputes raised in the pleadings before the arbitral tribunal.
(41) However, the Booz Allen test approach, which uses the right relied upon by the
parties in the dispute, to classify it as arbitrable or not arbitrable, is untenable for three
reasons: Firstly, situations may occur such as in the case of Eros International where the
relief is, in essence, arbitrable rendering the ‘Nature of Legal Right’ test inadequate.
Secondly, the Booz-Allen test is too generic in its conception, as it does not address
issues such as whether lien over cargo, or rights in rem over moveable goods are
arbitrable. Lastly, the Supreme Court in the Booz Allen decision qualifies its test by
saying that it cannot be a hard and fast rule, thus casting a shadow of doubt over the
applicability of test. (42) However, The nature of legal right’s test is widely followed and
is currently considered to be India’s position on the scope of Arbitrability.

2. Adjudication of Disputes Test

Developing upon the judgment in Booz Allen, the Bombay High court in the case of
Kingfisher Airlines Limited v. Prithvi Malhotra Instructor, (43) the court laid down that the
test to be applied to the disputes of nature in the proceedings is not, whether, the action
therein is in rem or in personam. The test would be whether adjudication of such disputes
is reserved by the legislature exclusively for the public for as a matter of public policy.
The court placed a further restriction on arbitrability, whereby it was held that an action
in personam would not be non-arbitrable, if it has been reserved for resolution by a
public forum as a matter of public policy. This is not to suggest that creation of special
tribunal with respect to certain subject matter by itself precludes arbitration in that
P 83 subject matter. Instead, disputes would be considered non-arbitrable only where a
particular enactment creates special rights and obligations and gives special powers to
the Tribunals that are not enjoyed by civil courts. (44) The court observed in the context

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 of the Industrial Disputes Act 1947, that the Act confers certain special rights on workmen
which are not available under the general laws and provides industrial tribunals for the
adjudication of disputes involving these rights. An industrial dispute is not seen as a
private dispute between the employer and employee but seen as affecting the industry
as a whole. This implies that industrial disputes have been reserved by the legislature for
adjudication by the public forum as a matter of public policy and arbitration of such
disputes is not permissible. (45)
However, such an approach could frustrate arbitration, where ordinarily a civil court is
not be empowered to grant any relief but a specialized body is empowered to grant the
same. This is true for any of the disputes under the Competition Law, which are arbitrated
by specialized tribunals i.e. CCI. The Competition Act, 2002 does not have any provision
conferring statutory powers on the CCI to refer parties to any alternate means of dispute
resolution such as arbitration. The Indian jurisprudence on this issue is limited and the
question of arbitrability of competition law disputes still remains ambiguous and
uncertain. The only instance where the time Court had the opportunity to clarify this issue
was in the case of Competition Act was in Union of India v. Competition Commission of
India, (46) wherein the Delhi High court approached to decide upon the question of
maintainability of proceedings before the Competition Commission where an arbitration
agreement existed between the parties. The court held that matter notwithstanding a
valid arbitration clause, the proceedings before the arbitration commission are
maintainable since the scope and focus of CCI’s investigation and consideration is very
different from the scope of an inquiry before an Arbitral Tribunal. An arbitral tribunal
may not go into aspects of abuse of dominant position by one of the contracting parties.
Its focus is to examine the disputes in the light of the contractual clauses.
In another case Man Roland v. Multicolour Offset, (47) the Supreme Court in relation to the
Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act), which was the
predecessor of the Competition Act, held that the remedies available under the MRTP Act
are in addition to the remedies that may be available under contract law. The courts
would, therefore, continue to have jurisdiction despite the arbitration agreement
between the contractual parties. (48)
The aforementioned judgments provide an insight into the judicial mind-set towards
scope of arbitrability of competition law disputes. These, however, cannot be seen as a
blanket denial of arbitration for competition matters because while these judgments
establish that an arbitration clause does not take away the jurisdiction of the CCI to
adjudicate/investigate dispute, it is not clear whether an arbitral award would be invalid
on ground of it being violation of public policy, wherein both the parties have wilfully
submitted the dispute to arbitration. (49) Thus, the question arbitrability of disputes
subject to competition law remains open-ended.

3. Remedies or Relief Sought Test

In subsequent decisions, however, the Bombay High Court in case of Rakesh Malhotra v.
Rajinder Malhotra (50) and Delhi High Court in case of HDFC Bank v. Satpal Singh (51)
although purporting to follow Booz Allen, set out a different, ‘remedies test’ to determine
arbitrability. According to these decisions, if the relief sought was in personam and is
one, which could be granted by an ordinary civil court, the dispute would be arbitrable.
Thus, though purporting to follow Booz Allen, it focuses on the remedy sought rather than
the subject matter of the suit.
This view has also been followed by the Bombay High court in the case Rakesh Malhotra v.
Rajinder Malhotra, wherein it was held that disputes relating to oppression and
mismanagement (shareholders’ claims against the company) under the Companies Act of
India are not arbitrable, subject to the condition that the oppression and
mismanagement petition must be found to be not mala fide, oppressive, vexatious and
an attempt at ‘dressing up’ to evade an arbitration clause. (52)
However, going by the Booz Allen test such disputes would be arbitrable since, these
disputes are typically rights in personam, being specific actions taken by the company
defeating the shareholders’ interest. However, the Bombay High Court held that in the
instant case, parts of the reliefs may be in rem and therefore, the nature of the reliefs
sought and powers invoked necessarily exclude arbitrability. As an illustration in that
very case, the Court held that the relief sought was under section 402 of the Companies
Act 1956, which allowed the company law board (a specialized tribunal) exclusive power
P 84 to regulate the affairs of a company. Such a power was not within the ordinary
remedies available to a Civil Court and hence the dispute was incapable of settlement by
arbitration. (53) Thus, distinguishing from the ‘Legal Right Test’ laid by the Supreme Court
in Booz Allen Hamilton, the Bombay High Court has sought to determine arbitrability
based on the ‘Relief sought’ by the parties, and not by the nature of the legal rights being
asserted.
The aforesaid principle was followed in the case of HDFC Bank v. Satpal Singh Bakshi, (54)
where the issue involved was whether a matter falling within the jurisdiction of the Debt
Recovery Tribunal) could be submitted to arbitration. The Delhi High Court observed that
the tribunal was not created to adjudicate on special rights created under the said
statute but for expeditious disposal of cases arising under the general law of the land

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 such as contract law (55) and therefore dispute falling within the jurisdiction of the Debt
Recovery Tribunal, can also be heard by an arbitral tribunal.
The relief sough or remedy test, improves upon the Legal Rights test by enhancing the
scope of arbitrability of disputes, thus making certain rights in rem to be arbitrable.
Despite the relative improvement of the relief test over the Booz Allen test, there are
certain practical problems faced in its application by the courts. The analysis in Rakesh
Kumar Malhtora case, wherein the court held that disputes relating to oppression and
mismanagement under the Companies Act of India are not arbitrable, subject to the
condition that the oppression and mismanagement petition must be found to be not
mala fide, oppressive, vexatious and an attempt at ‘dressing up’ to evade an arbitration
clause, (56) makes the determination of arbitrability, especially at the stage of
enforcement of the arbitration clause prior to pleading on the merits, difficult and
ambiguous. This would be against expectations of the parties, making it highly unfair to
justify such a burden, when the parties have already agreed to resolve their disputes via
arbitration. Also, such a view is contrary, to the view upheld by the Supreme Court in
Enercon v. Enercon GmBH, (57) that if the parties have agreed to arbitrate, then the
maximum effect should be given to the agreement.

4. Nature of Claim (Legal Rights and Remedies) Test

The Bombay High Court in the case of Eros v. Telemax (58) held that contractual rights
P 85 relating to copyright to be arbitrable. However, strictly applying the Booz Allen test, it
would seem that the dispute was non-arbitrable, as the basis for the claim was a right in
rem i.e. copyright. The court, in addition to the ‘rights’ test, also applied the ‘remedies’
test, unlike the decisions of the Bombay and Delhi High Courts, where the courts had
solely applied the ‘remedies test’. The facts of the case are that Telemax and Eros
entered into an agreement for exclusive licensing of copyrighted material belonging to
Eros. The agreement contained an arbitration clause referring ‘any dispute or difference
arising out of or in connection with’ the agreement to arbitration. Subsequently, Eros
alleged that Telemax had infringed Eros’ copyright. It filed a civil suit for infringement in
the Bombay High Court. On the other hand, Telemax requested the Court to refer the
matter to arbitration on the basis of the arbitration agreement. (59)
The Court observed that normally where the Parties had agreed to arbitrate their
disputes, they should ordinarily be referred to arbitration. The Court held that
arbitrability of the dispute was to be decided on the basis of the ‘nature of the claim’.
The Court directed the Parties to arbitrate their disputes for two broad reasons. First, the
right being asserted by Eros was a right in personam, since any finding of infringement (or
the lack thereof) by Telemax of Eros’ copyright would be valid only as against Telemax,
and not any third party. Where there are matters of commercial disputes and parties
have consciously decided to refer these disputes arising from that contract to a private
forum, no question arises of those disputes being non-arbitrable. Such actions are always
actions in personam, one party seeking a specific particularized relief against a
particular defined party, not against the world at large. Secondly, the relief is of the
nature that can be granted by an arbitrator. Thus, the court laid down the nature of claim
test, wherein both the Legal right’s sought and remedy claimed are to be considered by
the court while deciding the arbitrability of a particular dispute.
Further, for the purposes of arbitrability, the Court effectively applied the distinction
between rights in rem i.e. the entitlement to the copyright or registration of a trademark
and the subordinate rights flowing from such entitlement (i.e. the right against
infringement of copyright or trademark. This distinction has also been made by Mustill
and Boyd and quoted in the Booz Allen judgment. (60)
The decision is a positive development for arbitration in India since the Court gave full
effect to the Parties’ arbitration agreement. Also, the analysis of the Court ensured that
purely contractual disputes are not rendered non-arbitrable simply because they involve
a consideration of rights in rem, including intellectual property rights. Thus, Eros v.
P 86 Telemax decision makes the disputes concerning infringement of intellectual property
rights arbitrable.
However, the position regarding arbitrability in India remains uncertain. For instance, in
an action alleging infringement, a counterclaim may be made contesting the entitlement
to the copyright or the registration of a trademark. In such a scenario, if the right and
relief sort are right in rem, then counterclaim would not be arbitrable, and the parties
would have to turn to the relevant forum for resolution of that claim. It is not clear what
effect this would have on the arbitral tribunal hearing the infringement action. While
some have argued that it would render the entire dispute non-arbitrable, a better
solution may be for the tribunal to stay the infringement action, until the forum decides
on the validity of the copyright/trademark in question. This is, however, far from ideal as
it would delay the arbitration and substantially increase costs. (61)

E. Conclusion
International arbitral standards require that the National Arbitral Legislation remains
open-ended, giving impetus to the parties to refer their disputes to arbitration, subject

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 only to the limitation of setting aside of arbitral award on violation of public policy of the
country. Thus, the no such restriction on the scope of arbitrability should be made in the
National Arbitral Legislation. Therefore, the impetus to clarify the arbitral legislation
remains with the national courts.
However, despite the attempts of the courts in India to lay down a uniform standard to
determine the arbitrability of disputes, the Indian position on the scope of arbitrability
remains uncertain. The applicability of the overlapping scope of arbitrability tests
remains ambiguous, and none of the tests demarcate the boundaries of arbitrability in
India. The tests of arbitrability have left many grey areas in the interpretation of
arbitrability of various disputes such as Competition Law, Shareholders’ Dispute etc.
Further, the determination of arbitrability is left to the interpretation of the court on a
case-to-case basis, adding unto the uncertainty of arbitration as a mode of dispute
resolution.
International standards of arbitrability require the process of arbitration to be free from
the whims of the local courts. Normally, all disputes are to be referred to arbitration
P 87 without the interference of the court. However, this approach allows the courts to go
into the question of arbitrability of dispute, thus rendering the arbitral clause ineffective.
Such an apprehension has been anticipated in the Rakesh Kumar Malhtora case where
the court states that the petition for relief must not be ‘mala fide, oppressive, vexatious
and an attempt at “dressing up” to evade an arbitration clause’.
Therefore, a possible solution would be allowing the parties to arbitrate their disputes,
with minimal court interference, subject to the limitation of setting aside of arbitral
award by the court on the violation of public policy. Further, the arbitrator by the virtue
of principal of komptenz-komptenz can rule on his own jurisdiction and the courts ought
to refrain from exercising jurisdiction beyond ‘prima facie’ view while referring parties to
arbitration.
Therefore, even in cases where the effect of referring parties to arbitration would render
infructuous legislation by the parliament or would defeat the public policy of India, the
court at the stage of section 8, should have the mandate to refuse arbitrability only by
undertaking a prima facie view of the case. The courts under no circumstances should
have the mandate to undertake an analysis beyond prima facie view in the facts and
P 87 circumstances of the case to decide upon arbitrability.

References
*) B.A.LL.B. (Hons.) Email: saianukaran@gmail.com
1) Arpinder Singh, Emerging Trends in Arbitration in India: A study by Fraud Investigation
& Dispute Services, Ernst & Young (2013),
http://www.ey.com/Publication/vwLUAssets/EY-FIDS-Emerging-trends-in-
arbitration-in-India/$FILE/EY-Em....
2) BALCO v. Kaiser Aluminium [2012] 9 SCC 552.
3) Shri Lal Mahal Ltd. v. Progetto Grano Spa [2014] 2 SCC 433.
4) HSBC Pl Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd., Appeal No. 196 of 2014 in
Arbitration Petition No. 1062 of 2012, High Court of Bombay.
5) Enercon (India) Ltd. v. Enercon Gmbh [2014] 5 SCC 1.
6) World Sports Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte Ltd., AIR 2014 SC
968.
7) Julian D. M. Lew, Loukas A. Mistelis & Stefan Krö ll, Comparative International
Commercial Arbitration 187 (1d ed., 2003).
8) Russell on Arbitration, at 14 (23rd ed., 2007).
9) Lew, Mistelis & Krö ll, supra n. 7, at 188.
10) Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. [2011] 5 SCC 532, para. 21.
11) Supra n. 10, para. 24.
12) Renusagar Power Co. Ltd. v. General Electric Co. and Anr [1985] SCR (1) 432.
13) Ibid.
14) S.B.P & Co. v. Patel Engineering Ltd. [2005] (8) SCC 618.
15) Ibid.
16) Supra n. 10.
17) Supra n. 10, para. 20.
18) Ayyasamy v. A. Paramasivam & ors, Civil Appeal Nos. 8245-8246 of 2016, Decided on
04 Oct. 2016.
19) Aftab Singh v. Emaar MGF Land Limited & Anr, Consumer Case No. 701 OF 2015, Order
Dated 13 July 2017.
20) Sai Anukaran, ‘Notwithstanding the Non-obstante Clause’ Can the Courts Refuse to
Refer Non-Arbitrable Disputes to Arbitration?, Kluwer Arbitration Blog,
http://arbitrationblog.kluwerarbitration.com/2017/10/19/confusion-indian-law-
concerning-exercise-aut... (accessed 19 Oct. 2017).
21) Ibid.
22) Mustill & Boyd, Commercial Arbitration 73 (2d ed., 2001).
23) Supra n. 10, para. 25.

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 24) Eros v. Telemax, Suit No 331 of 2013, Bombay HC, Decided on 12 Apr. 2016.
25) Russell on Arbitration, at 28 (22nd ed., 2005).
26) Ibid.
27) Supra n. 8, at 470.
28) Ibid.
29) Mustill & Boyd, Law and Practice of Commercial Arbitration in England (2d ed., 1989).
30) Haryana Telecom Limited v. Sterlite Industries India Ltd. [1999] (5) SCC 688.
31) Ibid.
32) Olympus Superstructures Pvt Ltd v. Meena Vijay Khetan and ors. [1999] (5) SCC 651.
33) Keventer Agro Ltd v. Seegram Comp. Ltd, Appeal No. 498 of 1997 etc.
34) Keir v. Leeman [1846] 9 Q.B, 371.
35) Ibid.
36) Supra n. 10.
37) Chiranjilal Shrilal Goenka v. Jasjit Singh and Ors. [1993] (2) SCC 507.
38) Ibid.
39) Supra n. 10, para. 25.
40) Shri Vimal Kishor Shah v. Jayesh Dinesh Shah & Ors, Civil Appeal No. 8614 of 2016 (SC).
41) Supra n. 10, para. 21.
42) Arthad Kurlekar, A False Start – Uncertainty in the Determination of Arbitrability in
India, Kluwer Arbitration Blog (16 June 2016),
http://kluwerarbitrationblog.com/2016/06/16/a-false-start-uncertainty-in-the-
determination-of-arbitr... (accessed 5 Jun. 2017).
43) Kingfisher Airlines Limited v. Prithvi Malhotra Instructor [2013] (7) Bom CR 738.
44) Ibid.
45) Ibid.
46) Union of India v. Competition Commission of India, AIR 2012 Del 66.
47) Man Roland v. Multicolour Offset [2004] 7 SCC 447.
48) Ibid.
49) Anubha Dhulia, Arbitrability of Competition Matter: With Special Reference to India,
Competition Law Reports (2012).
50) Rakesh Malhotra v. Rajinder Malhotra, MANU/MH/1309/2014.
51) HDFC Bank v. Satpal Singh [2013] (134) DRJ 566 (FB).
52) Supra n. 50.
53) Ibid.
54) Supra n. 51.
55) Ibid., para. 14.
56) Supra n. 50.
57) Supra n. 5.
58) Supra n. 25.
59) Ibid.
60) Supra n. 10.
61) Rahul Donde & Sharad Bansal, Arbitrability of Intellectual Property Disputes: Setting
the Scene? http://lk-k.com/wp-content/uploads/2016/03/Rahul-Donde-Sharad-
Bansal-Arbitrability-of-intellectual-p... (accessed 5 Jun. 2017).

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