The Supreme Court reaffirmed that under Section 11(6A) of the Arbitration Act, a court’s role is prima facie confined to examining the existence of an arbitration agreement. All other contentious issues, including allegations of serious fraud and non-arbitrability, are jurisdictional matters that must be decided by the arbitral tribunal under Section 16.
Facts Of The Case:
The appellant, Bihar State Food and Civil Supplies Corporation, entered into agreements with various rice millers for the custom milling of paddy procured from farmers. The agreements contained an arbitration clause. When the millers allegedly failed to deliver the stipulated quantity of rice, the Corporation initiated recovery proceedings under the Bihar and Orissa Public Demands Recovery Act, 1914. The millers challenged these proceedings in the High Court, which directed them to pursue arbitration as per their agreement. Subsequently, a massive scam was uncovered, alleging a loss of over a thousand crores to the public exchequer. The Corporation filed approximately 1200 FIRs against the millers, and criminal proceedings for offences including cheating and criminal breach of trust were initiated. While these criminal cases were pending, the respondent millers filed applications under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator. The High Court allowed these applications, appointing arbitrators. The Corporation appealed to the Supreme Court, arguing that disputes involving such serious allegations of fraud and ongoing criminal proceedings were non-arbitrable.
Procedural History:
The procedural history commenced with the appellant-Corporation initiating certificate proceedings under the Bihar and Orissa Public Demands Recovery Act, 1914, against the respondent millers for alleged defaults. The millers challenged these proceedings through writ petitions under Article 226 of the Constitution before the Patna High Court. A Single Judge, and later a Division Bench, dismissed the petitions, upholding the alternative arbitration remedy under the agreement. Subsequently, the millers filed applications under Section 11 of the Arbitration and Conciliation Act, 1996, for appointment of an arbitrator. The Patna High Court, via the impugned order dated July 3, 2020, allowed these applications and appointed arbitrators. The Corporation then filed Special Leave Petitions before the Supreme Court, challenging the High Court’s order, which were granted leave, leading to the present civil appeals.
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Court Observation:
The Court observed that the scope of inquiry for a court under Section 11(6A) of the Arbitration Act is strictly confined to a prima facie examination of the existence of an arbitration agreement. It emphasized that the Arbitration Act is a self-contained code and that the doctrine of kompetenz-kompetenz empowers the arbitral tribunal to rule on its own jurisdiction, including any objections regarding the validity of the arbitration agreement or claims of non-arbitrability. The Court clarified that contentious issues such as allegations of serious fraud, criminality, or limitation are not to be conclusively adjudicated at the referral stage but are matters for the arbitral tribunal to decide under Section 16. Consequently, the High Court’s order appointing an arbitrator was upheld, leaving all other issues open for the tribunal’s consideration.
Final Decision & Judgement:
The Supreme Court dismissed the appeals and upheld the High Court’s decision to appoint an arbitrator. The final judgement affirmed that the limited scope of a court’s examination under Section 11(6A) of the Arbitration Act is only to ascertain the prima facie existence of an arbitration agreement. All other substantive issues, including the appellant’s objections on the grounds of serious fraud, criminality, limitation, and non-arbitrability, were left open to be raised as preliminary jurisdictional questions before the arbitral tribunal itself for a full adjudication under Section 16 of the Act.
Case Details:
Case Title: The Managing Director Bihar State Food and Civil Supply Corporation Limited & Anr. vs. Sanjay Kumar Citation: 2025 INSC 933 Civil Appeal No: (Arising out of SLP (C) No. 10455 of 2020) Date of Judgement: August 05, 2025 Judges/Justice Name: Justice Pamidighantam Sri Narasimha and Justice Manoj Misra
Download The Judgement Here