M/S Karan Engineers vs Union Of India And Others on 10 March, 2026

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    Punjab-Haryana High Court

    M/S Karan Engineers vs Union Of India And Others on 10 March, 2026

    Author: Jasgurpreet Singh Puri

    Bench: Jasgurpreet Singh Puri

    ARB-45-2026 (O&M)                                                             -1-
    286
               IN THE HIGH COURT OF PUNJAB & HARYANA
                           AT CHANDIGARH
                                          ***
                                 ARB-45-2026 (O&M)
                              Date of Decision: 10.03.2026
    
    M/s Karan Engineers                                                   .... Applicant
    
                                          Versus
    
    Union of India and others                                          ..... Respondents
    
    CORAM: HON'BLE MR. JUSTICE JASGURPREET SINGH PURI
    
    Present:      Mr. Pawandeep Singh, Advocate for
                  Mr. Anand Vardhan Khanna, Advocate,
                  for the applicant.
    
                  Mr. Brijeshwar Singh Kanwar, Senior Panel Counsel,
                  for the respondents-UOI.
    
                                ****
    JASGURPREET SINGH PURI, J. (ORAL)
    

    CM-3207-CII-2026

    For the reasons mentioned in the application, the same is allowed

    SPONSORED

    and written statement filed on behalf of the respondents is taken on record, subject

    to all just exceptions.

    CM-3208-CII-2026

    For the reasons mentioned in the application, the same is allowed

    and the documents as Annexures R-1 to R-13 are taken on record, subject to all

    just exceptions.

    Main Case:

    1. The present application has been filed under Section 11(5) of

    the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the

    Act’) praying for appointment of an independent Sole Arbitrator to adjudicate

    upon the disputes and differences which have arisen between the parties.

    2. Learned counsel for the applicant submitted that there was a

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    Contract executed between the applicant and the respondents vide Annexure

    P-1, which contains a valid arbitration clause and the same is reflected at

    Page No.36 of the paperbook. The aforesaid clause stipulates that it was

    agreed between the parties that the general conditions of contract including

    condition No.70 pertaining to the settlement of disputes by Arbitration, form

    part of this agreement. He referred to the aforesaid general condition of the

    contract annexed at Page No.131 of the paperbook wherein Condition 70

    provides that all the disputes and differences between the parties to the

    Contract (other than those for which the decision of the C.W.E. or any other

    person is by the Contract expressed to be final and binding) shall, after

    written notice by either party to the Contract, be referred to the Sole

    Arbitrator. He further submitted that a dispute arose between the parties and

    initially the applicant had filed a writ petition bearing No.CWP-21657-2025

    before this Court which was dismissed as withdrawn since the petitioner had

    so submitted that he is entitled to interest on the delayed refund as well as

    damages and he intends to invoke the arbitration clause for the said purpose

    and it was in view of the aforesaid that the permission was granted to the

    petitioner to withdraw the petition with liberty as aforesaid. He submitted

    that the dispute still exists between the parties and hence, a notice under

    Section 21 of the Act was issued to the respondents for invoking the

    aforesaid arbitration clause vide Annexure P-31 on 05.12.2025. However, no

    response was received from the respondent in this regard. In view of the

    same, he prays that any independent Sole Arbitrator may be appointed by

    this Court.

    3. On the other hand, learned counsel for the respondents-UOI has

    submitted that there is no dispute with regard to existence of the aforesaid

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    clause in the Contract (Annexure P-1) and the invocation of the said clause

    by issuing a notice to the respondents under Section 21 of the Act vide

    Annexure P-31. He however submitted that the respondents have two-fold

    objections. Firstly, the applicant had filed a writ petition which he had

    withdrawn and hence, he cannot file an application under Section 11 of the

    Act. Secondly, the claim sought to be referred by the applicant is a stale

    claim and barred by limitation and therefore, this Court cannot appoint an

    Arbitrator.

    4. I have heard learned counsels for the parties.

    5. The existence of an agreement between the parties containing

    an arbitration clause is not disputed by learned counsel for the respondents.

    The invocation thereof by the applicant by issuing notice under Section 21

    of the Act to the respondents is also not in dispute. However, the aforesaid

    two-fold objections which the learned counsel for the respondents have

    raised, are required to be considered by this Court. First objection which was

    taken by learned counsel for the respondents was that earlier a writ petition

    was filed by the applicant before this Court which was dismissed as

    withdrawn vide Annexure P-30 dated 13.10.2025. The aforesaid order is

    reproduced as under:-

    “1. At the outset, counsel for the petitioner submits
    that during the pendency of the instant petition, payment
    has been released. He however, submits that petitioner is
    entitled to interest on the delayed refund as well as
    damages and he intends to invoke the arbitration clause
    for the said purpose.

    2. In view of the above development, he seeks and is
    granted permission to withdraw the writ petition with
    liberty as aforesaid.

    
    
    
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     ARB-45-2026 (O&M)                                                          -4-
    
    

    3. Dismissed as withdrawn with liberty as aforesaid.”

    6. A perusal of the aforesaid would show that the petitioner had

    withdrawn the aforesaid writ petition bearing CWP-21657-2025 in order to

    invoke the arbitration clause and a Co-ordinate Bench of this Court had

    granted permission to withdraw the said writ petition with liberty aforesaid.

    Therefore, this Court is of the considered view that the aforesaid order

    cannot become a bar for appointment of an Arbitrator under Section 11 of

    the Act especially when all the conditions sine qua non for the purpose of

    appointment of an Arbitrator by reference Court stand fulfilled. Hence, the

    aforesaid objection raised by learned counsel for the respondents is not

    sustainable in law.

    7. So far as the second objection raised by learned counsel for the

    respondents regarding the claim being stale and time-barred is concerned,

    the same is also not sustainable in view of the settled law that such plea

    cannot be taken before a reference Court which is considering an application

    under Section 11 of the Act. It is a settled law that at the stage of reference

    under Section 11 of the Act, the Court is only to see prima facie existence of

    an arbitration clause in the agreement and its invocation under Section 21 of

    the Act. A plea of time-barred claim cannot be entertained at the time of

    reference stage. In this regard, a reference can be made to the judgments

    passed by Hon’ble Supreme Court in “Interplay Between Arbitration

    Agreements Under Arbitration and Conciliation Act, 1996 and Stamp Act,

    1899, in Re:”, (2024) 6 SCC 1 and in “SBI General Insurance Company

    Limited Vs. Krish Spinning”, 2024 SCC Online SC 1754 wherein it was so

    held that the scope of examination under Section 11(6-A) of the Act is

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    confined to the existence of an arbitration agreement on the basis of Section

    7 of the Act. The use of the term ‘examination’ under Section 11(6-A) as

    distinguished from the use of term ‘rule’ under Sectioln 16 of the Act

    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 and 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.

    8. A Seven Judge Constitution Bench of Hon’ble Supreme Court

    in Interplay Between Arbitration Agreements Under Arbitration and

    Conciliation Act, 1996 and Stamp Act, 1899, in Re: case (Supra) had

    observed that at the stage of reference under Section 11 of the Act, the Court

    has only to see prima facie existence of an arbitration clause and its

    invocation thereof. The relevant portion of the said judgment is reproduced

    as under:-

    “120. In view of the above discussion, we formulate our
    conclusions on this aspect. First, the separability
    presumption contained in Section 16 is applicable not
    only for the purpose of determining the jurisdiction of the
    Arbitral Tribunal. It encapsulates the general rule on the
    substantive independence of an arbitration agreement.
    Second, parties to an arbitration agreement mutually
    intend to confer jurisdiction on the Arbitral Tribunal to
    determine questions as to jurisdiction as well as
    substantive contractual disputes between them. The
    separability presumption gives effect to this by ensuring
    the validity of an arbitration agreement contained in an
    underlying contract, notwithstanding the invalidity,

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    illegality, or termination of such contract. Third, when
    the parties append their signatures to a contract
    containing an arbitration agreement, they are regarded
    in effect as independently appending their signatures to
    the arbitration agreement. The reason is that the parties
    intend to treat an arbitration agreement contained in an
    underlying contract as distinct from the other terms of
    the contract; and Fourth, the validity of an arbitration
    agreement, in the face of the invalidity of the underlying
    contract, allows the Arbitral Tribunal to assume
    jurisdiction and decide on its own jurisdiction by
    determining the existence and validity of the arbitration
    agreement. In the process, the separability presumption
    gives effect to the doctrine of competence-competence.

    xx xx xx

    165. The legislature confined the scope of reference
    under Section 11(6-A) to the examination of the existence
    of an arbitration agreement. The use of the term
    “examination” in itself connotes that the scope of the
    power is limited to a prima facie determination. Since the
    Arbitration Act is a self-contained code, the requirement
    of “existence” of an arbitration agreement draws effect
    from section 7 of the Arbitration Act. In Duro Felguera
    (supra), this Court held that the referral courts only need
    to consider one aspect to determine the existence of an
    arbitration agreement – whether the underlying contract
    contains an arbitration agreement which provides for
    arbitration pertaining to the disputes which have arisen
    between the parties to the agreement. Therefore, the
    scope of examination under Section 11(6-A) should be
    confined to the existence of an arbitration agreement on
    the basis of Section 7. Similarly, the validity of an
    arbitration agreement, in view of Section 7, should be
    restricted to the requirement of formal validity such as

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    the requirement that the agreement be in writing. This
    interpretation also gives true effect to the doctrine of
    competence-competence by leaving the issue of
    substantive existence and validity of an arbitration
    agreement to be decided by arbitral tribunal under
    Section 16. We accordingly clarify the position of law
    laid down in Vidya Drolia (supra) in the context of
    Section 8 and section 11 of the Arbitration Act.

    166. The burden of proving the existence of arbitration
    agreement generally lies on the party seeking to rely on
    such agreement. In jurisdictions such as India, which
    accept the doctrine of competence-competence, only
    prima facie proof of the existence of an arbitration
    agreement must be adduced before the referral court.
    The referral court is not the appropriate forum to
    conduct a minitrial by allowing the parties to adduce the
    evidence in regard to the existence or validity of an
    arbitration agreement. The determination of the existence
    and validity of an arbitration agreement on the basis of
    evidence ought to be left to the arbitral tribunal. This
    position of law can also be gauged from the plain
    language of the statute.”

    9. The relevant portion of the judgment passed by Hon’ble

    Supreme Court in SBI General Insurance Company Limited’s case (Supra)

    is also reproduced as under:-

    “110. 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.

    111. The use of the term ‘examination’ under Section

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    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.

    112. The aforesaid approach serves a two-fold 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.

    113. Referring to the Statement of Objects and Reasons
    of the Arbitration and Conciliation (Amendment) Act,
    2015, it was observed in In Re: Interplay (supra) that the
    High Court and the Supreme Court at the stage of
    appointment of arbitrator shall examine the existence of
    a prima facie arbitration agreement and not any other
    issues. The relevant observations are extracted
    hereinbelow:

    “209. The above extract indicates that the
    Supreme Court or High Court at the stage of the
    appointment of an arbitrator shall “examine the
    existence of a prima facie arbitration agreement
    and not other issues”. These other issues not only
    pertain to the validity of the arbitration
    agreement, but also include any other issues
    which are a consequence of unnecessary judicial
    interference in the arbitration proceedings.
    Accordingly, the “other issues” also include
    examination and impounding of an unstamped
    instrument by the referral court at the Section 8 or
    Section 11 stage. The process of examination,
    impounding, and dealing with an unstamped
    instrument under the Stamp Act is not a

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    timebound process, and therefore does not align
    with the stated goal of the Arbitration Act to
    ensure expeditious and time-bound appointment
    of arbitrators.[…]
    (Emphasis supplied)

    114. In view of the observations made by this Court in In
    Re: Interplay (supra), it is clear that the scope of enquiry
    at the stage of appointment of arbitrator is limited to the
    scrutiny of prima facie existence of the arbitration
    agreement, and nothing else. For this reason, we find it
    difficult to hold that the observations made in Vidya
    Drolia (supra) and adopted in NTPC v. SPML (supra)
    that the jurisdiction of the referral court when dealing
    with the issue of “accord and satisfaction” under Section
    11
    extends to weeding out ex-facie non-arbitrable and
    frivolous disputes would continue to apply despite the
    subsequent decision in In Re: Interplay (supra).

    115. The dispute pertaining to the “accord and
    satisfaction” of claims is not one which attacks or
    questions the existence of the arbitration agreement in
    any way. As held by us in the preceding parts of this
    judgment, the arbitration agreement, being separate and
    independent from the underlying substantive contract in
    which it is contained, continues to remain in existence
    even after the original contract stands discharged by
    “accord and satisfaction”

    116. The question of “accord and satisfaction”, being a
    mixed question of law and fact, comes within the
    exclusive jurisdiction of the arbitral tribunal, if not
    otherwise agreed upon between the parties. Thus, the
    negative effect of competence-competence would require
    that the matter falling within the exclusive domain of the
    arbitral tribunal, should not be looked into by the
    referral court, even for a prima facie determination,
    before the arbitral tribunal first has had the opportunity

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    of looking into it.”

    10. In this way, the second objection taken by leaned counsel for

    the respondents is also unsustainable in law being contrary to the settled law.

    11. In view of the aforesaid facts and circumstances, the present

    application is allowed. Mr. Chanchal K. Singla, Senior Advocate, resident of

    (1) House No.544, Sector 109, Mohali Hills, SAS Nagar, Punjab (2) SCO

    40-41, Level III, Sector-17 A, Chandigarh, Mobile No.9888345677, Email

    ID: [email protected], is nominated as the Sole Arbitrator to

    adjudicate the dispute between the parties, subject to compliance of statutory

    provisions including Section 12 of the Act.

    12. Parties are directed to appear before the learned Arbitrator on

    date, time and place to be fixed and communicated by the learned Arbitrator

    at her convenience.

    13. Fee shall be paid to the learned Arbitrator in accordance with

    the Fourth Schedule of the Arbitration Act, as amended.

    14. Learned Arbitrator is also requested to complete the

    proceedings as per the time limit prescribed under Section 29-A of the Act.

    15. A request letter alongwith a copy of the order be sent to Mr.

    Chanchal K. Singla, Senior Advocate.

    
    
    
    
    10.03.2026                                  (JASGURPREET SINGH PURI)
    Bhumika                                             JUDGE
                1. Whether speaking/reasoned:      Yes/No
                2. Whether reportable:             Yes/No
    
    
    
    
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