Punjab & Haryana High Court Appoints Sole Arbitrator in Shareholder Dispute Despite Objections of Non-Arbitrability; Reiterates Minimal Judicial Intervention at Section 11 Stage

Case Name: Karan Paul v. K.P.H. Dream Cricket Private Limited and Others

Date of Judgment: 23 December 2025

Citation: ARB-327-2025

Bench: Hon’ble Mr. Justice Jasgurpreet Singh Puri

Held: The Punjab and Haryana High Court allowed a petition under Section 11(5) of the Arbitration and Conciliation Act, 1996, and appointed a Sole Arbitrator to adjudicate disputes arising between shareholders and directors of a private company. The Court held that at the stage of appointment of an arbitrator, the judicial enquiry is confined strictly to the prima facie existence of an arbitration agreement. Objections relating to non-arbitrability, oppression and mismanagement, or availability of alternative remedies under the Companies Act were held to be matters falling within the jurisdiction of the arbitral tribunal under Section 16 of the Act.

Summary: The petition was filed seeking appointment of an independent Sole Arbitrator in terms of Clause 67 of the Articles of Association of the respondent company, which provided for reference of disputes between the company and its members, or inter se between members, to arbitration. The petitioner contended that disputes had arisen regarding corporate governance issues, including rotation of chairmanship and internal management decisions, and that despite invocation of arbitration by issuance of notice under Section 21 of the Act, the respondents had refused to consent to appointment of an arbitrator.

The respondents opposed the petition on multiple grounds. It was argued that the disputes raised were inherently non-arbitrable, being in the nature of oppression and mismanagement, and that the appropriate remedy lay under the Companies Act. Reliance was also placed on earlier proceedings under Section 9 of the Act and a civil suit involving appointment of a director, contending that the petitioner had taken inconsistent positions and that the arbitration clause could not be invoked.

The High Court rejected these objections and undertook a detailed analysis of the scope of judicial scrutiny under Section 11 of the Act. Relying on authoritative pronouncements of the Supreme Court, including SBI General Insurance Co. Ltd. v. Krish Spinning, Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Stamp Act, 1899 (In Re), and Office for Alternative Architecture v. IRCON Infrastructure, the Court reiterated that the referral court is not required to conduct a mini-trial or decide issues of arbitrability, accord and satisfaction, or excepted matters at the reference stage.

The Court noted that the existence of the arbitration clause and its invocation were undisputed. It further held that earlier proceedings under Section 9 of the Act did not foreclose the petitioner’s right to seek appointment of an arbitrator, particularly when a Division Bench of the Court had expressly clarified that questions of arbitrability were left open for adjudication at the appropriate stage. Objections based on parallel remedies or prior litigation were held to be irrelevant for the limited enquiry mandated under Section 11.

Emphasising the doctrine of competence-competence and the principle of separability, the Court held that all objections raised by the respondents could be urged before the arbitral tribunal, which alone was competent to rule on its own jurisdiction.

Decision: The petition was allowed. Hon’ble Mr. Justice Harinder Singh Sidhu (Retd.), former Judge of the Punjab and Haryana High Court, was appointed as the Sole Arbitrator, subject to compliance with statutory requirements under the Arbitration and Conciliation Act, 1996. The Arbitrator was directed to fix his fee in accordance with law and to endeavour to conclude the proceedings within the time prescribed under Section 29-A of the Act.