Supreme Court Holds Arbitration Clause in Leave and Licence Agreement Survives Despite Section 41 of Presidency Small Cause Courts Act; Section 11 Court Must Confine Inquiry to Existence of Arbitration Agreement

Case Name: Motilal Oswal Financial Services Limited v. Santosh Cordeiro & Another
Citation: 2026 INSC 5
Date of Judgment/Order: 05 January 2026
Bench: J.B. Pardiwala, J.; K.V. Viswanathan, J.

Held: The Supreme Court held that the High Court correctly appointed an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, as the arbitration clause contained in the Leave and Licence Agreement continued to exist notwithstanding the objection based on Section 41 of the Presidency Small Cause Courts Act, 1882. The Court ruled that Section 11(6A) mandates a limited inquiry confined to the existence of an arbitration agreement, and questions relating to arbitrability, including whether the claim pertains to recovery of licence fee or constitutes a non-arbitrable category under special statutes, must be left to the arbitral tribunal under Section 16 of the Act.

Summary: The appellant-licensee entered into a Leave and Licence Agreement with the respondents for commercial premises in Mumbai, containing an arbitration clause. Following disputes arising out of early termination during the COVID-19 period, the respondents invoked arbitration seeking recovery of amounts allegedly payable for the lock-in period. The appellant opposed the Section 11 application, contending that the dispute was non-arbitrable due to the exclusive jurisdiction conferred on the Small Causes Court under Section 41 of the 1882 Act. The Bombay High Court rejected the objection and appointed an arbitrator. Before the Supreme Court, the appellant relied heavily on the Full Bench judgment in Central Warehousing Corporation v. Fortpoint Automotive Pvt. Ltd. and on precedents such as Natraj Studios and Booz Allen. The Supreme Court analysed Section 11(6A), the doctrine of kompetenz–kompetenz, and the law laid down in Vidya Drolia and In re: Interplay between Arbitration Agreements and the Stamp Act. It distinguished Central Warehousing on facts and held that conferment of exclusive jurisdiction on a special court does not, by itself, annihilate an arbitration clause at the threshold stage.

Decision: The Supreme Court dismissed the appeal, upheld the High Court’s order appointing the arbitrator, and directed that the arbitral proceedings be concluded expeditiously within six months. The Court clarified that all issues relating to arbitrability and the nature of the claims were left open to be decided by the arbitral tribunal or in appropriate post-award proceedings. No order as to costs was made.