Vikram Jamnadas Kothari v. Barclays Wealth Trustees (India) Pvt. Ltd.

8. To obviate any ambiguity and scope for varying interpretation by Barclays, the Escrow Agreement provided for explicit pre-agreed formats for communications between the parties. In short, the only activity the parties envisaged for one another, to be administered through Barclays as a trusted escrow agent, was to undertake the pre-agreed actions upon receipt of the pre-agreed communications. The Dosti Group and the Kotharis were only meant to be intimated about such sale within two business days after the sale. The Escrow Agreement came first (on August 12, 2010) and the arrangement was tied down four days before the SPA was formally executed (on August 16, 2010).

9. It is the case of the Kotharis that the Dosti Group simply refrained from intimating them about the receipt of the requisite threshold of consents from tenants on the property. The Kotharis contend that such consents had been received in 2017, but this was not communicated to the Kotharis, who would learn about it much later by a letter dated November 25, 2021 from the Dosti Group’s lawyers, in response to the Kotharis’ lawyers’ notices dated February 10, 2021 and May 27, 2021.

10. Matters took an ugly turn. The Dosti Group lodged a criminal complaint with the Economic Offences Wing of the Mumbai Police (“EOW”) on April 28, 2021 alleging cheating and fraud. The EOW closed the preliminary inquiry on August 2, 2021. The parties have taken multiple steps in litigation, which must be noticed.

11. Arbitration was invoked by the Kotharis on March 11, 2022 by issuing a notice under Section 21 of the Arbitration Act. Under that provision, this is the date on which arbitration proceedings commenced.

12. None of the parties to the Escrow Agreement other than Barclays replied to the invocation notice. Barclays communicated that evidently disputes and differences had broken out among the parties to the SPA and that Barclays would abide by whatever decision a competent judicial forum or arbitral tribunal may direct. In other words, Barclays took a hands-off stance of maintaining status quo on the escrowed property, without acting on the same as contracted under the Escrow Agreement, purporting to await a judicial direction.

13. Exactly a month after the invocation notice (the statutory time frame to reply to an invocation notice for constituting an arbitral tribunal), on April 11, 2022, the Dosti Group chose to file Suit (L) NO. 11926 of 2022 (“Dosti Suit”) seeking a declaration that the Dosti Group had no liability any more to pay the Kotharis under the SPA. One of the prayers in the Dosti Suit was that the Sun Pharma shares lying in escrow must be released. Dosti Group’s claims include alleged misrepresentation about prior claim on the Target Company’s property; the Target Company owning lesser area than envisaged; and the parties purportedly having reach an agreement that nothing more need be paid to the Kotharis.

14. Since there was no response from the parties to the Escrow Agreement other than from Barclays, the Kotharis filed a Section 11 Application on April 26, 2022 seeking constitution of and reference to an arbitral tribunal for purposes of adjudicating the disputes under the Escrow Agreement.

15. On the same date (April 26, 2022), the Kotharis also filed Suit (L) No. 13947 of 2022 (“Kothari Suit”), claiming interest on the sum of Rs. 10 crores due and owing from the Dosti Group to the Kotharis that was meant to be released under the Escrow Agreement. It is the Kotharis’ case that since the Escrow Agreement does not provide for a claim for interest, thereby falling outside the subject matter of the arbitration agreement contained therein, the Kothari Suit was necessitated.

16. On June 27, 2022, the Kotharis filed a reply to an interim application in the Dosti Suit. The Dosti Group would treat this as a statement on the substance of the dispute, resulting in the deadline for filing an application under Section 8 of the Arbitration Act (objecting to the jurisdiction of the judicial forum) being missed.

17. In the Dosti Suit, a Learned Single Judge of this Court had occasion to consider grant of ad-interim reliefs. By an order dated December 2, 2022, noticing that on June 27, 2022, with consent of parties, ad-interim reliefs had originally been granted for a period of two weeks, restraining Barclays from altering the status quo over the Sun Pharma shares lying in escrow, a Learned Single Judge ruled that, without expressing an opinion on merits, such arrangement would continue. It was expressly clarified by the Learned Signal Judge that such arrangement was without prejudice to all the rights and contentions of the parties – especially the Kotharis in their application under Section 11 (seeking constitution of an arbitral tribunal to decide disputes and differences under the Escrow Agreement) as indeed, the Section 9 Petition (which inter alia relates to securing the very same Sun Pharma shares), which were to be decided on their own merits, uninfluenced by the said order. It was also clarified by the Learned Single Judge that his order was subject to any order that may be passed in disposal of the Section 11 Application and the Section 9 Petition i.e. the captioned proceedings. Contentions of the Parties:

18. It is against the aforesaid factual matrix, that the parties were heard. The key issue that falls for consideration is whether the parties ought to be referred to an arbitral tribunal – a proposition trenchantly opposed by the Dosti Group and insistently canvassed by the Kotharis.

19. Mr. Snehal Shah, Learned Senior Advocate on behalf of the Dosti Group would contend at the threshold that the Kotharis have abandoned their right to arbitrate. He would submit that it was incumbent on the Kotharis to have filed an application under Section 8 of the Arbitration Act in the Dosti Suit. Instead, the Kotharis had joined issue on merits. Therefore, Mr. Shah would contend, as of June 27, 2022, the Kotharis had abandoned their right to arbitration.

20. The claim in question in the Dosti Suit would necessarily have implications for the Escrow Agreement, Mr. Shah would submit, indicating that the cause of action under the Escrow Agreement was subsumed in the litigation over the SPA. Mr. Shah would submit that adjudicating the Dosti Suit entails interpreting the SPA as well as the Escrow Agreement, and a Section 8 Application not having been filed, the abandonment of arbitration was complete.

21. Mr. Shah would contend that against such a factual backdrop, it would be completely open to the Section 11 Court to take judicial notice of what he would call an ex facie abandonment, and refuse to refer the parties to arbitration. According to him, it is entirely within the powers of this Court in exercise of its jurisdiction under Section 11 of the Arbitration Act, regardless of Section 11(6-A) of the Arbitration Act, to refuse to refer the parties to arbitration, since it is writ large on the face of the record that arbitrability has been completely abandoned by replying to an interim application in the Dosti Suit and by instituting the Kothari Suit.

22. Mr. Shah would place reliance on Vijaykumar Sharma[1] (decided on January 5, 2010) to draw this Court into ruling upon arbitrability of the dispute. Being a constitutional court, the High Court, he would contend, still has the power to refuse to refer parties to arbitration, if erosion of substantial existence of arbitrability is discernible as he would contend is apparent in this case. Therefore, Mr. Shah would submit, this Court must refuse to constitute an arbitral tribunal to refer the parties to arbitration.

23. In sharp contrast, Mr. Gaurav Joshi, Learned Senior Advocate and Mr. Kazan Shroff, Learned Advocate for the Kotharis, appearing on different dates, would submit that it is now trite law that the Section 11 Court must not at all embark upon an exercise of the nature canvassed by Mr. Shah. He would rely upon a series of Vijay Kumar Sharma alias Manu v. Raghunandan Sharma alias Baburam & Ors. – judgements, starting with Interplay[2] (decided on December 13, 2023) and would point to multiple decisions of the Supreme Court since then (after an initial misperception of a dilution in the law declared in Interplay), to indicate that the Section 11 Court must leave all questions and issues, such as ascertaining accord and satisfaction, failure of underlying consideration, and abandonment of arbitration, to the arbitral tribunal for its determination.

24. That apart, Mr. Joshi would contend that the Kotharis have been very conscious of which forum is available for which cause of action. He would submit that Barclays was in default of its obligation to take the actions it contracted in the Escrow Agreement. The Kotharis were entitled to have the escrowed property disposed of with the amounts owed to them being released to them. If the Dosti Group believed that the consideration had failed, it was for them to take up appropriate proceedings, but the breach of the Escrow Agreement is covered by the arbitration agreement and cannot form subject matter of a suit.

25. Likewise, Mr. Joshi would contend that the Kotharis have In Re: Interplay Between Arbitration Agreements Under Arbitration and Conciliation Act, 1996 & Stamp Act, 1899 – (2024) 6 SCC 1 filed the Kothari Suit for the limited and sole purpose of interest on the amount of Rs. 10 crores that is payable to them under the Escrow Agreement, which on its own does not provide for interest. He would submit that the parties had consciously contracted to arbitrate under the Escrow Agreement and it cannot be lightly presumed to have been abandoned, asserting that whether there has been an abandonment is a matter for the arbitral tribunal to adjudicate upon.

26. Mr. Shroff on behalf of the Kotharis would point out that the intervenor, Mr. Prabodh Kothari has filed an Administration Suit NO. 694 of 2012 challenging the SPA, claiming that the late father had been fraudulently induced into agreeing to the SPA. Mr. Shroff would contend that subsequently, the intervenor also filed an interim application in the Administration Suit, dropping the Dosti Group from the array of parties; dropping his challenge to the completion of the SPA; and restricting his claim purely to his share of the consideration under the SPA.

27. In these circumstances, it was put to Mr. Navroz Seervai, Learned Senior Advocate for the intervenor that the intervention was unnecessary because, if the Kotharis were to succeed, the intervenor would have something more to claim – the residual consideration being claimed by the Kotharis. As such, there is no role for the intervenor in these proceedings.

28. Mr. Seervai was heard as an officer of the Court on the interpretation of Section 11 and Section 8 of the Arbitration Act. On the point of law, Mr. Seervai more than supportive of the submissions canvassed by Mr. Shah, namely, that this court as a Constitutional Court cannot shut its eyes to whether a claim is manifestly meritless. Analysis and Findings:

29. The real issue to be determined in this matter is whether this Court can get into examination of whether there has been an abandonment of the contracted right to arbitrate when considering a Section 11 Application. If this Court could invade into that realm, the next question would be whether an abandonment has in fact taken place. A related issue to consider, is the implication of the Kotharis not having filed a Section 8 Application in the Dosti Suit. March of the Law – Section 11:

30. The luring of the Section 11 Court with the temptation to rule on issues such as underlying consideration having failed, or the parties having abandoned a binding and validly executed arbitration agreement and the like, is precisely what Parliament consciously chose to interdict by inserting Section 11(6-A) of the Arbitration Act by legislating the Arbitration and Conciliation (Amendment) Act, 2015 (“2015 Amendment”). The aim was to ensure that parties to arbitration agreements indeed proceed to arbitration instead of keeping matters embroiled in pre-arbitration litigation under Section 11 of the Arbitration Act.

31. Under Section 11(6-A), the role of the referral court under Section 11 is explicitly restricted to an “examination” (not an adjudication) of the existence of an arbitration agreement. This has been interpreted by the Supreme Court to emphatically provide that such examination must be restricted to looking to formal existence of an arbitration agreement, leaving existential substance for the arbitral tribunal to adjudicate. The arbitral tribunal is fully empowered under Section 16 of the Arbitration Act to play this role. In other words, the 2015 Amendment was a conscious and carefully crafted design of the devolution of roles among the Courts and arbitral tribunals.

32. Section 11(6-A) was sought to be deleted by the amendments legislated in the Arbitration and Conciliation (Amendment) Act, 2019 (“2019 Amendment”). What is noteworthy is that the deletion of Section 11(6-A) was not at all a matter of Parliament having had second thoughts about restricting the role of the Section 11 Court. Instead, the 2019 Amendment entailed completely taking away the role of the Section 11 Court and substituting it with such role to be played by an “arbitral institution” to be set up by the High Court and the Supreme Court in their respective domains under Section 11. The appointment of an arbitral tribunal under Section 11(4) and Section 11(5) of the Arbitration Act was to be made by such arbitral institution and not by the High Court or the Supreme Court.

33. Since the very role of the Court to make arbitral appointments under Section 11 was meant to be taken away by the 2019 Amendment, Section 11(6-A) was meant to be rendered redundant. This is why the deletion of Section 11(6-A) was proposed – as a consequential amendment to address the redundancy of the provision. These elements of the 2019 Amendment – specifically, the shift in the design of Section 11 – were not brought into effect. With it, the deletion of Section 11(6-A) was also not brought into effect. Therefore, it is crystal clear that it was not even intended by Parliament to roll back the pruning of the scope of enquiry by the Section 11 Court.

34. Meanwhile, Courts have been drawn into pronouncing on a case-to-case basis about what the Courts perceived to be dead wood or non-arbitrable disputes, for which the Supreme Court permitted a highly restricted and narrow review “through the eye of a needle”. However, subsequently, how Section 11 must be interpreted has been extensively articulated by a seven-judge bench of the Supreme Court in Interplay, devoting a chapter to the subject. There were a few subsequent indications of a roll-back of the law declared in Interplay, but these were squarely and explicitly clarified by the Supreme Court as being misperceptions, and the role of the Section 11 Court has been iterated and reiterated multiple times by the Supreme Court.

35. The Section 11 Courts are obligated to abide by the law now emphatically declared by the Supreme Court. After Interplay, multiple other judgements, including Krish Spinning[3] (decided on July 18, 2024) and Patel[4] (decided on September 20, 2024), saw the Supreme Court iterating and further confirming that the Section 11 Court ought not to venture beyond examining the existence of an arbitration agreement that has been formally executed. Even questions of existential substance are a matter that fall squarely in the domain of the arbitral SBI General Insurance Co. Ltd. v. Krish Spinning – 2024 SCC OnLine SC 1754 Ajay Madhusudan Patel v. Jyotrindra S. Patel – 2024 SCC OnLine SC 2597 tribunal, in view of Section 16 of the Arbitration Act.

36. It is not necessary to indulge in a prolix reproduction from these multiple judgements now constituting trite law. However, an emphatic contention of Mr. Shah about Interplay must be considered. The contention is that the judgement had been rendered in the specific context of the interaction between the operation of the Arbitration Act and the Indian Stamp Act, 1899, and therefore, all the articulation in Interplay that are not really necessary to answer the question of such interaction, would partake the character of non-binding obiter dicta and would not constitute the ratio of the judgement.

37. This contention must only be stated to be rejected. First, Interplay itself makes it clear that the seven-judge bench took pains to declare the law and thereby gave guidance to the Section 11 Courts on what their role is and how “examination” is in itself a limiting phrase and how the Section 11 Courts should limit their role when approached for constituting the arbitral tribunals – consistent with the larger legislative objective of minimising Court’s interference.

38. Second, the Supreme Court has interpreted Interplay multiple times. The law declared by the Supreme Court has been interpreted in further declarations by the Supreme Court over and over again, and therefore the principles declared in it cannot be brushed aside as obiter dicta.

39. To quote from Interplay:

167. Section 11(6-A) uses the expression "examination of the existence of an arbitration agreement". The purport of using the word "examination" connotes that the legislature intends that the Referral Court has to inspect or scrutinise the dealings between the parties for the existence of an arbitration agreement. Moreover, the expression "examination" does not connote or imply a laborious or contested inquiry. On the other hand, Section 16 provides that the Arbitral Tribunal can "rule" on its jurisdiction, including the existence and validity of an arbitration agreement. A "ruling" connotes adjudication of disputes after admitting evidence from the parties. Therefore, it is evident that the Referral Court is only required to examine the existence of arbitration agreements, whereas the Arbitral Tribunal ought to rule on its jurisdiction, including the issues pertaining to the existence and validity of an arbitration agreement. A similar view was adopted by this Court in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd,(2005) 7 SCC 234.” [Emphasis Supplied]

40. Mr. Shah would seek to rely on Paragraphs 121, 136, 167, and 230 to 235 in Interplay to contend that the Section 11 Court does have the powers to go into whether the claims are ex facie meritless. This is not a tenable contention not just because of contending that the rest of the observations are obiter dicta. The law declared in Interplay is emphatic in its terms – that contentions on merits, of the nature sought to be raised by the Dosti Group, necessitating reviewing and analysing multiple strands of litigation between the parties and the underlying record, is not an exercise that is subsumed in the examination of the existence of a formally executed arbitration agreement. Such activity by the Section 11 Court is prohibited by the legislation (Section 11(6-A) of the Arbitration Act) and the law declared in Interplay.

41. Seven months later, the Supreme Court, in Krish Spinning reiterated the law as follows: “113. The scope of examination under Section 11(6-A) is confined to the existence of an arbitration agreement on the basis of Section 7. The examination of validity of the arbitration agreement is also limited to the requirement of formal validity such as the requirement that the agreement should be in writing.

114. The use of the term "examination" under Section 11(6-A) as distinguished from the use of the term "rule" under Section 16 implies that the scope of enquiry under Section 11(6-A) is limited to a prima facie scrutiny of the existence of the arbitration agreement, and does not include a contested or laborious enquiry, which is left for the Arbitral Tribunal to "rule" under Section 16. The prima facie view on existence of the arbitration agreement taken by the Referral Court does not bind either the Arbitral Tribunal or the Court enforcing the arbitral award.

115. The aforesaid approach serves a twofold purpose firstly, it allows the Referral Court to weed out non-existent arbitration agreements, and secondly, it protects the jurisdictional competence of the Arbitral Tribunal to rule on the issue of existence of the arbitration agreement in depth.”

42. Mr. Shah would press into service Paragraphs 86, 87 to 92, 94 to 98 and 113 to 121 from Krish Spinning too to contend that this Court still has the power to examine if the disputes are meritless and are dead wood. However, such reliance loses sight of the wider context set out in the judgement. Paragraph 114 says it all in terms of what such “examination” (under Section 11(6-A) of the Arbitration Act) would entail and more so that the examination cannot be conflated with a “ruling” (under Section 16 of the Arbitration Act) by the arbitral tribunal.

43. Besides, as will be seen from the next judgement, what Krish Spinning has declared is best declared by the Supreme Court itself in Patel, rendered two months thereafter, reiterated the law yet again, in the following summary: “76. The position of law that emerges from the aforesaid discussion can be summarised as follows: 76.[1] SBP & Co. expanded the scope of the Court's power under Section 11 while empowering the referral courts to decide several preliminary issues. Boghara Polyfab went to the extent of identifying three categories of preliminary issues that may arise for consideration in an application under Section 11. Of these, in the first category which had to be mandatorily decided by the referral court, the question whether there was an arbitration agreement and whether the party who has applied under Section 11 of the 1996 Act is a party to such an agreement, was also included. 76.[2] The insertion of Section 11(6-A) through the 2015 Amendment to the 1996 Act stipulated that the courts under Section 11 shall confine their examination to the "existence" of an arbitration agreement. It legislatively overruled the decisions in SBP & Co. and Boghara Polyfab by virtue of its non obstante clause.

76.3. Duro Felguera, in clear terms, clarified the effect of the change brought in by Section 11(6-A) and stated that all that the courts need to see is whether an arbitration agreement exists nothing more, nothing less.

76.4. Vidya Drolia endorsed the prima facie test in examining the existence and validity of an arbitration agreement both under Sections 8 and 11, respectively. However, it was clarified that in cases of debatable and disputable facts and reasonably good arguable case, etc. the Court may refer the parties to arbitration since the Arbitral Tribunal has the authority to decide disputes including the question of jurisdiction. It was further stated that jurisdictional issues concerning whether certain parties are bound by a particular arbitration under the group-company doctrine, etc. in a multi-party arbitration raise complicated questions of fact which are best left to the tribunal to decide.

76.5. In Interplay, In re the position taken in Vidya Drolia was clarified to state that the scope of examination under Section 11(6) should be confined to the "existence of the arbitration agreement" under Section 7 of the 1996 Act and the "validity of an arbitration agreement must be restricted to the requirement of formal validity such as the requirement that the agreement be in writing. Therefore, substantive objections pertaining to existence and validity on the basis of evidence must be left to the Arbitral Tribunal since it can "rule" on its own jurisdiction.

76.6. Krish Spg. cautioned that the courts delving into the domain of the Arbitral Tribunal at the Section 11 stage run the risk of leaving the claimant remediless if the Section 11 application is rejected. Further, it was stated that a detailed examination by the courts at the Section 11 stage would be counterproductive to the objective of expeditious disposal of Section 11 application and simplification of pleadings at that stage.

76.7. Cox & Kings specifically dealt with the scope of inquiry under Section 11 when it comes to impleading the non-signatories in the arbitration proceedings. While saying that the referral court would be required to prima facie rule on the existence of the arbitration agreement and whether the non-signatory party is a veritable party to the arbitration agreement, it also said that in view of the complexity in such a determination, the Arbitral Tribunal would be the proper forum. It was further stated that the issue of determining parties to an arbitration agreement goes to the very root of the jurisdictional competence of the Arbitral Tribunal and can be decided under its jurisdiction under Section 16.”

44. Two more months later, in Aslam Ismail[5] (decided on November 7, 2024), the Supreme Court once again declared the “nothing-more-nothing-less” standard in the following words: “51. It is now well-settled law that, at the stage of Section 11 application, the referral Courts need only to examine whether the arbitration agreement exists nothing more, nothing less. This approach upholds the intention of the parties, at the time of entering into the agreement, to refer all disputes arising between themselves to arbitration. However, some parties might take undue advantage of such a limited scope of judicial interference of the referral Courts and force other parties to the agreement into participating in a timeconsuming and costly arbitration process. This is especially possible in instances, including but not limited to, where the claimant canvasses Aslam Ismail Khan Deshmukh vs. ASAP Fluids (P) Ltd. – (2025) 1 SCC 502 either ex facie time-barred claims or claims which have been discharged through "accord and satisfaction", or cases where the impleadment of a non-signatory to the arbitration agreement is sought, etc.”

45. On the same day, in Goqii[6] (decided on November 7, 2024), the Supreme Court declared: “ 21. Before we conclude, we must clarify that the limited jurisdiction of the referral courts under Section 11 must not be misused by parties in order to force other parties to the arbitration agreement to participate in a time consuming and costly arbitration process. This is possible in instances, including but not limited to, where the claimant canvasses the adjudication of non-existent and mala fide claims through arbitration.

22. With a view to balance the limited scope of judicial interference of the referral courts with the interests of the parties who might be constrained to participate in the arbitration proceedings, the Arbitral Tribunal may direct that the costs of the arbitration shall be borne by the party which the Tribunal ultimately finds to have abused the process of law and caused unnecessary harassment to the other party to the arbitration. Having said that, it is clarified that the aforesaid is not to be construed as a determination of the merits of the matter before us, which the Arbitral Tribunal will rightfully be equipped to determine”.

46. It will therefore be seen that the Supreme Court stated the check and balance against abuse was the consideration of imposition of costs by the arbitral tribunal. Yet again, as recently as on May 9, 2025, Goqii Technologies (P) Ltd. Vs. Sokrati Technologies (P) Ltd. – ( 2025) 2 SCC 192 in Mangayarkarasi[7], the Supreme Court declared thus: “23. Once there is an arbitration agreement between the parties, a judicial authority before whom an action is brought covering the subject-matter of the arbitration agreement is under a positive obligation to refer parties to arbitration by enforcing the terms of the contract. There is no element of discretion left in the court or judicial authority to obviate the legislative mandate of compelling parties to seek recourse to arbitration.”

47. Therefore, there is no manner of doubt that the law now declared, iterated and reiterated by the Supreme Court is that the Section 11 Court must resist the allure of its higher constitutional status being appealed to, in a bid to tempt it to rule upon claims of abandonment and failure of underlying consideration at the Section 11 stage. Such a ruling involves a degree of scrutiny far greater than the limited scope of examination of the existence of a formally executed arbitration agreement. The Section 11 Court must not wade into the territory earmarked for the arbitral tribunals in the careful allocation of roles under the Arbitration Act.

48. Even when noticing that there could be some scope to allege abuse of the arbitral process, the Supreme Court has ruled that the arbitral tribunal has powers to impose costs for abuse, in much the same

49. In the instant case, the Dosti Group’s contention is that there is an abandonment of the arbitration agreement. Applying the principles extracted above, whether there has been an abandonment is an issue that is meant to be squarely presented to the arbitral tribunal, and which can be adjudicated by the tribunal. The reliance upon case law rendered before the emphatic declarations of the law starting with seven-judge declaration in Interplay, are of no assistance to hold otherwise. The law has marched onwards in a direction diametrically opposite to the direction to which Mr. Shah would point on behalf of the Dosti Group.

50. When the parties executed the Escrow Agreement, they intended that there should be no scope for any ifs and buts in the closing of the SPA and payments of the amounts owed. Pre-agreed draft notices were also contracted. That arrangement was consciously agreed to be subjected to arbitration. Whether Barclays can simply raise its hands claiming that there is a dispute, or whether Barclays has failed in discharging the role envisaged precisely in situations of disputes, is a matter of appreciation of evidence and it is the arbitral tribunal that has to adjudicate that facet. Barclays is not a party to the SPA. The arbitration agreement has been consciously contracted by the Dosti Group and Barclays with the Kotharis. That commitment in a binding arbitration agreement cannot be wished away summarily at the Section 11 stage, on the premise of an abandonment.

51. Needless to say, I express no view on whether there has been or there has not been, an abandonment of the arbitration agreement. This can truly be presented as a jurisdictional question under Section 16 of the Arbitration Act. The Dosti Group’s contentions are but submissions on the existence of jurisdiction-ousting facts that are purported to have wiped out the substratum of the arbitral jurisdiction. This is a matter of a detailed scrutiny, which the Supreme Court has clearly declared must only be undertaken by the arbitral tribunal and not the Section 11 Court. Implications of Section 8:

52. This brings me to the final element canvassed by the Dosti Group – implications of the Kotharis not filing a Section 8 Application in the Dosti Suit. The provisions of Section 8 must be noticed and are extracted below:- "8. Power to refer parties to arbitration where there is an arbitration agreement.-(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. (3) Notwithstanding that an application has been made under subsection (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."

53. Even a plain reading of the foregoing would indicate that a party to an arbitration agreement has the right to file an application under Section 8 of the Arbitration Act. Such a right must be exercised before filing of the written statement on the substance of the dispute. Such a right to file an application under Section 8 of the Arbitration Act cannot be converted into an obligation to file it.

54. The sequence and chronology of events in the instant case are noteworthy. Arbitration proceedings commenced on March 11, 2022 with the invocation notice being issued. Section 21 is explicit in its terms that the invocation signals the commencement of the arbitration proceedings. The invocation notice, by law is a 30-day notice. The Dosti Group did not reply to the invocation notice at all, but exactly 30 days later, the Dosti Group filed the Dosti Suit and now expects that the Kotharis ought to have filed an application under Section 8 opposing the Dosti Suit.

55. The Kotharis contend that the Dosti Suit is primarily under the SPA while the arbitration agreement contained in the Escrow Agreement mandates arbitration. Evidently, the Kotharis cast the first stone in commencing arbitration proceedings. Arguably, it is for the Dosti Group to file a Section 16 Application in the arbitration proceedings, which they can do even now. Prima facie, it appears that the scheme of the law to solve the conundrum about which party should use which platform – between Section 8 of the Arbitration Act before the other forum, and Section 16 of the Arbitration Act before the arbitral tribunal – could be best answered by examining which proceedings commenced first. If a suit is filed first, it would prima facie stand to reason that the party opposing jurisdiction of the court would need to file a Section 8 Application. If the arbitration commences first, it would prima facie stand to reason that the party objecting to jurisdiction of the arbitral tribunal would need to file a Section 16 Application.

56. However, the matter in hand is even more complex. It is the Kotharis’ case that both the suit and the arbitration may go on since the Dosti Suit seeks declaration about the underlying transaction of the SPA while the arbitration proceedings seek specific performance of the Escrow Agreement, which is meant to be blind to the existence of disputes under the SPA, leaving the parties to their devices on resolving the disputes under the SPA but ensuring that the activities envisaged in the Escrow Agreement running their course.

57. These nuances are for the arbitral tribunal to be presented with, for being thrashed out in that forum. The limited point being made here is that once proceedings of a certain nature have commenced, it would be reasonable to expect the party claiming that such forum is inappropriate to demonstrate to that forum that it is not the appropriate forum. The Act enables all forums other than the arbitral tribunal to be presented with this contention under Section 8, and also enables the arbitral forum to be presented with such a contention under Section 16.

58. It is precisely this complexity that would necessitate a close scrutiny of what the two contractual instruments are, how they interoperate, whether the Escrow Agreement would insulate the parties from implications of the dispute under the SPA, and the like. This falls in the domain of the arbitral tribunal and not in the scope of examination of existence of arbitration agreement, that falls in the domain of the Section 11 Court.

59. Suffice it to say, Section 8 of the Arbitration Act contains an inherent pointer. Section 8(3) provides that even if an application has been filed under Section 8(1) and remains pending, arbitration may be commenced, proceeded with and concluded with an award being made. Therefore, the right to file an application under Section 8(1) cannot be simplistically converted into an absolute obligation to file such an application, even where the institution of the suit is subsequent to the commencement of the arbitration proceedings.

60. The use of the non-obstante language in Section 8(3) would indicate that regardless of the pendency of an application under Section 8(1), when parties have agreed to arbitrate, the arbitration proceedings may be commenced, conducted and concluded. The use of the word “commenced” in Section 8(3) and the word “commence” in Section 21, also make it clear that the once invoked, arbitration proceedings commence, and an invocation notice could be issued even when a Section 8 Application is pending. In this case, the arbitration proceedings commenced first. Instead of replying to the notice, the Dosti Suit was instituted on the thirtieth day of the commencement of arbitration proceedings. To then call upon the Section 11 Court to examine the question of abandonment owing to a reply to an interim application in the Dosti Suit is not tenable.

61. I refrain from further analysis beyond the aforesaid prima facie observations in the light of the declared law on the scope of jurisdiction of the Section 11 Court. Suffice it to say, the material on record does not lend itself to an interpretation that the Kothari’s claim is manifestly meritless or “dead wood”. Whether such contentions are borne out, is a matter for the arbitral tribunal to decide on the objection of the Dosti Group that the Kotharis have purportedly abandoned the arbitration agreement. Conclusions and Directions:

62. For the aforesaid reasons, the Section 11 Application deserves to be allowed. No basis exists to refuse to constitute an arbitral tribunal and to refer the disputes under the Escrow Agreement to arbitration. Considering the expanse of litigation and the length of the period for which these proceedings have continued, and factoring in the request of Learned Senior Advocates for both sides to bear in mind that the dispute is for only Rs. 10 crores, I feel that appointing an arbitrator who has not had past representation or association or other conflicts with any of the multiple parties would prove difficult. If conflicts are found with the arbitration nominated by the Court, it would prolong the commencement of arbitration even further.

63. Therefore, it would be appropriate to refer the arbitration to the Mumbai Court of International Arbitration (“MCIA”) to appoint and to conduct the arbitral proceedings. Therefore, the Section 11 Application is disposed of in the following terms: a) The disputes and differences covered by this Application is hereby referred to the Mumbai Centre for International Arbitration (https://mcia.org.in), in terms of its Institutional Arbitration Rules, to appoint an appropriate arbitrator to adjudicate upon the disputes and differences between the parties arising out of and in connection with the Agreements referred to above, and to administer the arbitration; b) A copy of this Order will be communicated to the Mumbai Centre for International Arbitration by the Advocates for the Applicants within a period of one week from the date on which this order is uploaded on the website of this Court. The Applicants shall provide the contact and communication particulars of the parties to the Centre along with a copy of this Order; c) The Learned Sole Arbitrator is requested to forward the statutory Statement of Disclosure under Section 11(8) read with Section 12(1) of the Act to the Advocates for the Applicants so as to enable them to file the same in the Registry of this Court. The Registry of this Court shall retain the said Statement on the file of this Petition and a copy of the same shall be furnished by the Advocates for the Applicants to the Respondents; d) The parties shall appear before the Learned Sole Arbitrator on such date and at such place as indicated, to obtain appropriate directions with regard to conduct of the arbitration including fixing a schedule for pleadings, examination of witnesses, if any, schedule of hearings etc. At such meeting, the parties shall provide a valid and functional email address along with mobile and landline numbers of the respective Advocates of the parties to the Arbitral Tribunal. Communications to such email addresses shall constitute valid service of correspondence in connection with the arbitration; and e) All arbitral costs and fees of the Arbitral Tribunal shall be borne by the parties equally in the first instance, and shall be subject to any final Award that may be passed by the Tribunal in relation to costs.

64. Needless to say, nothing contained in this order is an expression of an opinion on merits of the matter or the relative strength of the parties on the merits of their respective positions. All issues on merits are expressly kept open to be agitated before the arbitral tribunal appointed hereby.

65. The Section 9 Petition is hereby converted into an application under Section 17 of the Arbitration Act, and is disposed of, adopting and continuing the pro tem arrangement of status quo flowing from the interim order dated December 2, 2022 passed by the Learned Single Judge of this Court as pro tem measure. It is for the Learned Arbitral Tribunal appointed pursuant to this judgement to consider what instructions to issue to Barclays including liquidating a portion of the Sun Pharma shares for the limited amount covered by the dispute and releasing the rest.

66. Given the length of time for which this litigation has been dragged on, with the Section 11 Application remaining pending for three years, with lengthy pleadings by the parties, the shares lying in escrow would have appreciated in value. What interlocutory arrangements would best preserve the subject matter of the arbitration agreement is for the Learned Arbitral Tribunal to decide.

67. The Section 11 Petition and the Section 9 Petition are finally disposed of in the aforesaid terms. In view of such disposal, all interim applications including Intervention Application would not survive and are also disposed of. Costs:

68. This being a commercial dispute, this Court is duty-bound to consider whether costs must follow the event. In the teeth of a binding arbitration agreement, the conduct of arbitration has been effectively frustrated for a sustained period of over three years.

69. Considering the scale of legal resources deployed in the matter, a reasonable token estimation of costs is made in the sum of Rs. 2.[5] lakhs in the disposal of the Section 11 Application. It is made clear that since the parties have had an agreed standstill in the Dosti Suit, which is adopted in the Section 9 Petition, no costs are being imposed in disposal of the Section 9 Petition.

70. Respondents No. 3 to 6 i.e. the Dosti Group and Respondent No. 2 i.e. Lakshdeep, the owner of the Sun Pharma shares shall be jointly and severally liable to pay the aforesaid sum of costs to the Kotharis, within a period of four weeks from the delivery of this judgement. The Learned Arbitral Tribunal shall factor in this sum of costs when assessing costs in the arbitral proceedings.

71. All actions required to be taken pursuant to this order, shall be taken upon receipt of a downloaded copy as available on this Court’s website. [SOMASEKHAR SUNDARESAN, J.]