Arbitration and Conciliation Act 1996 : s. 11(6) – Constitution of arbitral tribunal – Arbitiability of the dispute – Contract between the parties – Successful completion of work by SPML and issuance of completion certificate by NTPC – NTPC released the final payment – However, NTPC withheld SPML’s Bank Guarantees with respect to other projects – In turn, SPML raised a claim against NTPC, and thereafter, filed writ petition seeking release the Bank Guarantees – During pendency, the parties arrived at a Settlement Agreement and in compliance thereof, NTPC released the Bank Guarantees and SPML withdrew the writ petition – After one month, SPML filed the arbitration petition u/s. 11(6) alleging coercion and economic duress in the execution of the Settlement Agreement – High Court allowed the same – On appeal held: No allegations of coercion or economic duress compelling SPML to withdraw any pending claims under the subject contract as a condition for the return of the Bank Guarantees – Only allegation by SPML was with respect to NTPC’s illegal action of interlinking the release of the Bank Guarantees with some other contracts –Allegations of coercion and economic duress not bona fide, and that there were no pending claims between the parties for submission to arbitration – Claim of SPML was an attempt to initiate ex facie meritless, frivolous and dishonest litigation – High Court should have exercised the prima facie test to screen and strike down the ex-facie meritless and dishonest litigation – It should have exercised the restricted and limited review to check and protect parties from being forced to arbitrate – High Court erred in allowing the application u/s. 11(6), thus, the decision of the High Court set aside.

s. 11(6) – Pre-referral jurisdiction of the courts u/s. 11(6) – Scope of – Held: Is very narrow and inheres two inquiries – Primary inquiry is about the existence and the validity of an arbitration agreement and the secondary inquiry is with respect to the non-arbitrability of the dispute at the reference stage – Standard of scrutiny to examine the non-arbitrability of a claim is only prima facie – Limited scrutiny, through the eye of the needle, is necessary and compelling – If this duty within the limited extent is not exercised, and the Court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the Court – Thus, this Court or a High Court, while exercising jurisdiction u/s. 11(6) not expected to act mechanically merely to refer a purported dispute raised by an applicant to the chosen arbitrator.