Two civil appeals were filed against an order passed by the High Court for the State of Telangana at Hyderabad u/s. 11(6) of the Arbitration and Conciliation Act, 1996 constituting an Arbitral Tribunal (AT) for resolution of dispute as per the arbitration clause 22.2 in General Conditions of Contract. The contest was on the ground that the first respondent, being one of the members of the Consortium, could not have invoked arbitration in its individual capacity. The question that arose was whether a member of a consortium can itself invoke Section 11 of the Arbitration and Conciliation Act, 1996.

A 2-Judges bench of the Supreme Court held –

“16. … Answer to that question will necessarily depend on enquiry into the terms of the principal contract, as well as the Consortium Agreement. The specific terms of the Consortium Agreement, parties to that agreement, and the nature of the rights and mutual obligations that the agreement creates will have to be examined in detail. Reference court will, however, confine its enquiry only to a prima facie satisfaction as to whether a member of a consortium qualifies as a “party” to the arbitration agreement. This prima facie satisfaction is sufficient for the referral court to constitute and refer the dispute to the AT. Thereafter, it is for the AT to undertake the detailed enquiry as to whether a member of the consortium is in fact a veritable party to the arbitration agreement or not.”.

The Bench further held – “Beyond the prima facie enquiry, it should be the discipline of the referral court to refrain from undertaking a detailed enquiry on basis of evidence to arrive at a finding of fact in the nature of a ‘proof’.”.

It was held –

“19. …Whether first respondent has validly invoked arbitration individually, whether the Consortium continues to exist, whether consent of other Consortium partners was necessary, and whether claims are maintainable after commencement of liquidation, are all matters which may legitimately be raised, contested and determined before the AT under Section 16. Entertaining these questions here amount to conducting a mini trial at the Section 11 stage, contrary to the settled principles of minimal judicial intervention and kompetenz kompetenz.”

The Bench opined that the High Court had not committed any error in constituting the AT in exercise of its powers under Sections 11(6) and 11(6-A) of the 1996 Act and the AT was directed to consider all questions including preliminary objections relating to maintainability of the arbitration on merits. The petitions were dismissed.