The Supreme Court, in the case of Pravin Electricals Pvt. Ltd. v. Galaxy Infra and Engineering Pvt. Ltd, held that the Parliament might need to have a re-look at Section 11(7) and Section 37 so that orders made under Sections 8 and 11 are brought on par qua appealability as well.
Sections 8 and 11 were amended according to a detailed Law Commission Report being the 246th Law Commission Report on Arbitration. Shedding light on the legislative history of the provisions in question, the Court said that when Parliament enacted the 2015 amendment according to the Law Commission Report, it followed the Scheme of the Law Commission’s Report qua Section 8 and Section 37 by enacting the words “….. unless it finds that prima facie no valid arbitration agreement exists……” in Section 8(1) and the insertion of sub-clause (a) in Section 37(1) providing an appeal in an order made under Section 8, which refuses to refer 44 parties to the arbitration. However, so far as Section 11(6) and Section 11(6A) are concerned, what was recommended by the Law Commission was not incorporated.
“Section 11(6A) merely confined examination of the Court to the existence of an arbitration agreement. Section 11(7) was retained, by which no appeal could be filed under an order made under Section 11(6) read with Section 11(6A), whether the Court’s determination led to a finding that the arbitration agreement existed or did not exist on the facts of a given case. Concomitantly, no amendment was made to Section 37(1), as recommended by the Law Commission.”
“An agreement evidenced in writing has no meaning unless the parties can be compelled to adhere and abide by the terms. A party cannot sue and claim rights based on an unenforceable document. Thus, there are good reasons to hold that an arbitration agreement exists only when it is valid and legal. A void and unenforceable understanding is no agreement to do anything. Existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law.”
On the question of who decides arbitrability, the Court held that the court's scope of judicial review and jurisdiction under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted. Further, the general rule and principle, because of the legislative mandate clear from the amendments to the of the Arbitration and Conciliation Act, 1996 by Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence-competence, is that the arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred the power of “second look” on aspects of non-arbitrability post the award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act.
Since, by process of judicial interpretation, Vidya Drolia has now read the “prima facie test” into Section 11(6A) to bring the provisions of Sections 8(1) and 11(6) r/w 11(6A) on par and considering that Section 11(7) and Section 37 have not been amended, an anomaly thus arises.
“Whereas in cases decided under Section 8, a refusal to refer parties to arbitration is appealable under Section 37(1)(a), a similar refusal to refer parties to arbitration under Section 11(6) read with Sections 6(A) and 7 is not appealable.”
 2021 SCC OnLine SC 190.
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